Kreidle, John R.
M.S. (Master of Science)
Department of Business Administration
Although the processes for determining a value for an existing enterprise have long been recognized, detailed information on the elements of valuation unique in the municipal electric industry have not been revealed and summarized. This investigation seeks to gather and properly classify the elements that must be considered in the value determination process of a municipal electric utility. A major portion of the study emphasizes the various problem areas within the valuation process unique to this industry. Attention is also directed to the existing valuation processes and a case study using some of these processes is developed. Data for the study has been procured by circulating two questionnaires to various municipal electric utilities located in Illinois and four neighboring states. In addition, statistical information has been obtained from the American Public Power Association and the Federal Power Commission. Following are the major conclusions drawn regarding the value determination process of a municipal electric utility: (1) The asset approach is not directly applicable to the value determination process of a municipal electric utility. The prospective purchasers are only interested in the electrical distribution system of the municipal utility and would not, therefore, base a purchase offer on the dollar value of the total assets of the utility. (2) Market -value Is generally determined by prior sales of Items of like type* quality, and quantity. Municipal electric utilities are not sold on a regular basis and are not usually of like size and structure. Therefore, the market value approach is not applicable to the value determination process of a municipal electric utility. (3) Earnings remain as the only applicable basis upon which to approach the value determination process of a municipal electric utility. The capitalized earnings approaches generally use net earnings as a basis for the determination of value. Free electrical services and benefits, however, actually constitute additional earnings to the municipality. The capitalization of earnings, then, will yield reliable valuation figures If the dollar value of these benefits is added to the annual net earnings of the utility.
Anderson, Henry R., "A study to determine the elements essential to the value determination process of a municipal electric utility" (1966). Graduate Research Theses & Dissertations. 809.
iii, 73 pages
Northern Illinois University
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