Valuation of Scatec Solar ASA

Gard Rune Osmundsen & Ola Strand Jahnsen

Student thesis: Master thesis


Scatec Solar ASA is a fully integrated independent solar power producer. The company was ocially founded in 2007 and listed on the Oslo Stock Exchange in 2014. Scatec Solar is present in all stages of the value chain except for the production of solar panels. Through their integrated business model, the company is able to collect a piece of the revenue in every stage of the power generation process. Currently the company has 12 solar plants in five countries, with a capacity of 322 megawatts. With an ambition of having 1.3-1.5 gigawatts in capacity by 2018, Scatec Solar is hoping to become a significant player in the solar energy industry. This industry has experienced exceptional growth in the last 15 years. Between 2001 and 2016 the global installed capacity has increased from being virtually zero to 300 gigawatts, a result of cost reductions and government initiatives. Between now and 2020, it is expected that the total capacity could double, much due to the increased focus on renewable energy and the resulting Paris Agreement of 2016. In recent years, solar energy has become more cost competitive, and it is expected that it will obtain a larger share of the global energy sector. The purpose of the thesis is to estimate an intrinsic value of Scatec Solar’s common equity as of March 31, 2017. This is done through the use of two approaches to the discounted cash flow model, where the initial valuation is meant to estimate a core value using a FCFF model, supplemented by a sensitivity analysis. Further, a sum-of-the-parts approach (SOTP) is used to incorporate the company’s focus on its segments’ cash flows to equity, and used in both the sensitivity analysis and a separate scenario analysis, implementing the FCFE model. As the analysis revealed some uncertainty regarding the future of Scatec Solar’s project portfolio, the combination of the two approaches is meant to provide an estimated interval of the company’s share price. The result of the core valuation was a share price NOK 48.92 as of March 31, 2017. This estimate proved to be highly sensitive to both profit margin and pre-tax cost of debt, with the latter explained by the company’s high financial leverage. The scenario analysis included both a potential upside and downside, resulting in a range between NOK 31.61 and NOK 63.45. Based on the results from the di↵erent approaches, and the findings from the strategic and financial analysis, the estimated interval of Scatec Solar’s share was estimated to be between NOK 33.23 and NOK 51.14. As of March 31, 2017, the company’s share traded at NOK 38.30.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2017
Number of pages141