Transition from DONG Energy to Ørsted

Simon Bekker Michelsen & Anders Kjærsgaard

Student thesis: Master thesis


This thesis’ purpose is to evaluate the financial effect of the strategic decision to change from DONG Energy to Ørsted. The transition included selling the business unit Oil & Gas and focus on renewable energy – primarily offshore wind power. This financial effect will be measured by valuating both companies as per 01.02.2018 as separate companies and compare the results. The official closing price of the Ørsted stock on 01.02.2018 was DKK 371.30. The valuation is on a strategic analysis and a financial analysis of historic performances of both DONG Energy and Ørsted. The strategic analysis will include a PESTEL, Porter’s Five Forces, and a VRIO which will end out in a SWOT analysis. This strategic analysis will ultimately tell us the profitability of the companies’ going forward. The financial analysis will include reformulation of balance, income statement, and cash flow statement which will tell us the historical profitability of the companies’. The strategic analysis shows that both companies are on profitable markets, but are highly exposed to politics that are increasingly pro renewable energy. Potential changes in legislation may have large influences on future profits. Wind Power is both companies’ biggest activity measured on revenue and it is a market with great potential for growth. The financial analysis shows that DONG Energy’s historical financial performance is highly affected by impairments of the Oil & Gas business unit due to falling oil prices. When these impairments are taken into account their performance is significantly improved and the trend is higher growing EBIT and profit margins from previous period since 2012. Using the residual income model the value of DONG Energy the estimated market value of DONG Energy DKK 162.65bn while Ørsteds value is estimated market value is DKK 174,54bn. This gives an estimated DONG Energy stock price of DKK 387.11 and an Ørsted stock price of DKK 415.42. The strategic decision to change from DONG Energy to Ørsted has had a positive effect on the value of the company by DKK 11,90bn. The main reason for the increased value of Ørsted is due to the estimated EBIT margins which are slightly higher than DONG Energy’s due to the expected decrease in revenues from Oil & Gas and increased costs of maintenance of the business unit.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2018
Number of pages145