Co esponding au ho : Riku o Shi aishi; O cid: 0009-0008-3938-6939
Copy igh © 2025 Au ho (s) e ain he copy igh o his a icle. This a icle is published unde he e ms o he C ea i e Commons A ibu ion License 4.0.
Valua ion complexi ies in he ene gy ansi ion: A compa a i e s udy o adi ional s.
G een Ene gy Fi ms in M&A T ansac ions
Riku o Shi aishi 1, * and Munashe Naph ali Mupa 2
1 Hul In e na ional Business School, Finance MBA, Uni ed S a es.
2 Ins i u e o Ene gy Managemen o A ica, Me ge s & Acquisi ions, Sou h A ica.
Wo ld Jou nal o Ad anced Resea ch and Re iews, 2025, 26(02), 767-774
Publica ion his o y: Recei ed on 27 Ma ch 2025; e ised on 03 May 2025; accep ed on 06 May 2025
A icle DOI: h ps://doi.o g/10.30574/wja .2025.26.2.1652
Abs ac
Me ge s and acquisi ions (M&A) alua ion has unde gone a d ama ic shi in he global ene gy ansi ion, pa icula ly
as he indus y ans o ms om a con en ional hyd oca bon-based epoch o clean o g een ene gy pa adigms.
Compa ed he complexi ies o alua ions in M&A ansac ions as hey ela e o con en ional s. g een ene gy i ms. One
o he sho comings o adi ional alua ion me hodologies such as Discoun ed Cash Flow (DCF) and ma ke mul iples
is hei inabili y o ully alue g een ene gy companies wi h hea y emphasis on in angible asse s, policy sensi i i y, and
unce ain u u e cash low. The s udy e eals he ad an ages o scena io-based DCF, eal op ions analysis, and ESG-
adjus ed me ics o aluing enewable ene gy. The esea ch also u he in es iga es he impac o en i onmen al,
social, and go e nance (ESG) ac o s, as well as in angible asse s like pa en s and egula o y licenses, on i m alua ions
and in es men choices. U ilizing quali a i e case s udies and hema ic analysis, he esea ch emphasizes p og ession
in M&A in bo h sec o s, demons a ing a signi ican dicho omy be ween esou ce con ol in adi ional i ms e sus
inno a ion acquisi ion in g een i ms. This sugges s ha analys s and in es o s need be e ools o unde s and he
e ol ing ene gy ma ke , which can be achie ed h ough hyb id models based on bo h insigh om he economics o
in es ing in he ma ke as well as in he b oade en i onmen o egula ion and sus ainabili y.
Keywo ds: Acquisi ions; Complexi ies; Ene gy; Me ge s; Valua ions; T ansi ion
1. In oduc ion
Cu en ly, he global ene gy sec o is ans o ma ional due o he likelihood o clima e change, changes in he egula o y
en i onmen , in es o s' eques s o sus ainabili y, and ad anced echnology. Adewumi e al. (2024) sa es ha his shi
om ossil uels o low-ca bon and enewable ene gy sou ces has b ough abou new dynamics in he M&A, pa icula ly
in he alua ion o ene gy i ms in he ansac ion. His o ically, I&G companies led he M&A ansac ions and we e
backed up by hei la ge-cap equipmen , speci ic cash lows, and capi al-in ensi e ope a ions (Nguyen, 2021). These
cha ac e is ics made hem sui able o employing con en ional models in Valua ions such as Discoun ed Cash Flow
(DCF) and he Va ious Mul iple Models.
No ably, Lin and an (2021) posi s ha he eme gence o new oil p oduc ion o ms, such as g een ene gy o ms, such as
sola , wind, ca bon cap u e, and s o age, has aken a new app oach o de e mining he alua ions. These o ganiza ions
ha e ela i ely low in e es in angible asse s, unp edic able egula ion, and inno a i e g ow h s a egies ha make
inancial p edic ions somewha unp edic able. The e o e, applying he con en ional alua ion me hods could hus no
be e ec i e in pulling ou a ull measu e o hei s a egic and inhe en alues.
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This esea ch in es iga es he impac o he selec ed alua ion complexi ies on M&A ansac ions, especially in he
adi ional and g een ene gy indus ies. I is cen e ed on de e mining he e ec i eness and d awbacks o s anda d
app oaches o alua ion, de e mining he majo ac o s ha a ec ansac ion alue, and analyzing he ising
p ominence o ESG ac o s. Also, i aises he ques ion o he ole o in angible asse s in g een-ene gy ansac ions and
how alue concep s a e changing. This is o enligh en he alua ion p ac ices ha a e accu a e and ele an o he new
ends in he ene gy indus y.
Objec i es
• To in es iga e he e ec i eness and limi a ions o con en ional alua ion me hodologies when applied o g een
ene gy i ms
• To analyze he s a egic a ionales ha d i e M&A decisions in adi ional and g een ene gy sec o s
• To c i ically e alua e he impac o En i onmen al, Social, and Go e nance (ESG) ac o s and in angible asse s
on M&A alua ion ou comes.
2. Li e a u e Re iew
In pa icula , Me ge s &Acquisi ions in he ene gy sec o has used sound alua ion me hods o help in he decision-
making p ocess, s a egic planning, in es men , and he whole p ocess o me ging/acqui ing he wo en i ies (Acasio,
2023). This emains he basis o any M&A deal as i o ms a link be ween he s a egy and inancial ope a ion by
assessing he alue o a a ge i m. Among he mos popula me hods used in his domain, wo can be dis inguished:
he Discoun ed Cash Flow (DCF) and ma ke mul iples. Al hough hese app oaches a e commonly used in de ined
speci ic indus ies such as adi ional oil and gas, whe e asse s play he cen al ole, hei applica ion o g een ene gy
companies and hei sou ces o alue aces some challenges.
Based on he heo y o he ime alue o money, he DCF model aims o de e mine ee cash lows in he u u e and
discoun s hem o hei p esen alues using he app op ia e cos o capi al (B ezas, 2022). I is pa icula ly sui able
wi h he adi ional playe s in he ene gy sec o , cha ac e ized by long-li e physical in as uc u e, ela i ely s able
ope a ing cash low, and mainly o al isk. Acco ding o Shang (2021), es ablishing indus ies wi h high angible asse s
and consis en ea nings, DCF is sui able o indus ies because o he c edibili y and accu acy o he o ecas ing. Fo oil
and gas i ms, o ins ance, he u u e annual e enue lows a e calcula ed using he o mula o p o ed ese es, p o ed
p oducing ese es, yea ly p oduc ion a es, and expec ed long- e m oil and gas p ices.
Howe e , Zhang and Kong (2022) g een ene gy i ms di e om adi ional i ms in se e al ways wi h a de ini i e
challenge. These i ms a e mainly ound in indus ies wi h high egula o y isk and low his o ical pe o mance and place
a business ocus on as g ow h in de eloping ma ke s. Mendes e al. (2022) opine ha inhe en sys ems o DCF a e
i ele an o such i ms i no o he in eg a ion o scena io-based o ecas me hods. Some g een ene gy in es men
a enues a e highly policy sensi i e, ely hea ily on ma ke s o ca bon c edi s, and a e echnology- unded, whe e
op ionali y and a iabili y o u u e cash lows a e expec ed. Scena io-based DCF asce ains a wide ange o possible
alues ha may come wi h he i m's policies, ma ke s, and echnologies by conduc ing sensi i i y analyses; all hese
o m pa o he de ini ude as a sub- ype o DCF.
The e o e, i ms in he g een sec o ace some peculia i ies, such as he s uc u e o e enues, mos o which esul om
speci ic p ojec s and a e usually wi h ex ended ime ho izons. Fo ins ance, cash lows om sola and wind p ojec s a e
ea ned om he Powe Pu chase Ag eemen , las ing 15–25 yea s, wi h a s uc u e no mally pegged on egula o y
suppo . These causes in oduce long- e m ce ain y bu bea h ee signi ican isks, namely, poli ical and o he
economic changes. Unlike he adi ional DCF app oaches, he e a e s aigh -line posi i e o nega i e ou comes wi h no
comp omise. The e o e, as he op ion o hold an asse wi h an op ion alue and i s associa ed isks becomes mo e
e iden , ad anced me hods and echniques such as he eal op ions analysis and Mon e Ca lo me hods a e deemed
app op ia e o aluing he eal op ion in enewable ene gy asse s (Niskanen, 2022).
Ma ke mul iples a e ano he widely-used alua ion me hod, o mo e speci ically, compa a i e o ela i e me hod. Such
mul iples a e common ones like En e p ise Value o EBITDA (EV/EBITDA), P ice o Ea nings (P/E), and speci ic
mul iples like En e p ise Value o Megawa -hou (EV/MWh). These mul iples p o ide ease and con enience in
benchma king, especially in compa a i ely ma u e sec o s wi h simila business models and accoun ing ea men s. In
adi ional ene gy companies, EBIT DA is much mo e consis en and compa able, so he alue o slo EV/EBITDA is
alid. I ensu es ha he in es o s and po en ial acqui e s can make co ec assump ions and in e ences om he pee
g oup compa isons.
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None heless, when analyzing g een ene gy i ms, such mul iples may no be as e ec i e in p o iding sa is ac o y esul s.
Cu en ly, mos g een i ms ha e e y low o e en nega i e EBITDA ma gins, especially du ing he i s s ages ha
equi e massi e in es men s and when he e enues a e no la ge enough and uns able. In such cases, i can p o ide
dis o ed o misleading in o ma ion when a company employs EV/EBITDA. Acco ding o McKinsey & Company (2021),
i is e iden ha o wa d mul iples Smoo h wi h ei he e enue o he nex yea o , mo e commonly, adjus ed EBITDA
o he nex wel e mon hs, o he e a e g owing endencies o include ESG-adjus ed measu es in he alue models.
These me ics e lec sus ainabili y, ca bon oo p in , and de elopmen al capabili ies, which p o ide a be e
unde s anding o i m alue in an e ol ing ene gy en i onmen .
A mo e signi ican c i ical ac o discussed wi hin he li e a u e is he inculca ion o En i onmen al, Social, and
Go e nance componen s in o he company's e alua ion. Once, ESG conside a ions we e deemed an addi ional aspec o
in es men decisions and no a co e c i e ion as i is oday. Wei and Zheng (2024) poin s o iew is ha ESG pe o mance
is now ac o ed in o he ma ke alue, and in es o capi al is shi ing mo e owa d o ganiza ions ha epo high-
in ensi y sus ainabili y. In es o ac i ism, egula o y equi emen s, and socie al expec a ions o change in he co po a e
wo ld ca alyze his change. Consequen ly, companies wi h low ESG sco es may ge lowe alua ions because in es o s
conside hem isky and cos ly, ha ing poo access o g een unding.
Al hough ESG is gaining weigh in he cu en business en i onmen and mo e companies a e implemen ing ESG
conside a ions in o hei ac i i ies, i is s ill challenging o inco po a e hese ac o s in o classical alua ion app oaches.
While bo h s anda d DCF and ma ke mul iple models ha e hei limi a ions in modeling a i m's e minal alue, he
la e does no inco po a e quali a i e ESG pe o mance o p o ides o handling egula o y isks o u u e pe iods
(Mupa, 2024). Fo example, exposu e o high ca bon emissions may lead o inc eased compliance cos s, legal isks, and
loss o epu a ion, which may impac he company's cash lows and isks. Howe e , hese impac s a e usually le ou in
mos inancial unde s anding models. To his end, wo models inco po a e ESG ac o s: he ESG-adjus ed discoun a es
o he ESG-adjus ed cash low es ima es by sus ainabili y, ca bon, o go e nance sco es (Ina d, 2023).
Fu he mo e, i was also ealized ha in angible asse s ha e a much bigge impac on a g een ene gy i m's alua ion.
Compa ed o adi ional OGRC companies ha ha e es ed hei alue in angible asse s, mos g een ene gy i ms d aw
hei alue om licenses, b and names, digi al in e aces, p op ie a y adema ks, pa en s, and special pe mi s. Fo
ins ance, i ms in he ca bon cap u e echnologies sec o can possess exclusi e igh s o echniques ha could gene a e
eno mous e enues in he u u e e en i such po en ial does no e lec in he cu en e enues. Simila ly, e-de elope s
o RESs wi h good pe missions o access o he g id and s ong allowing bases may gain subs an ial p emiums. Howe e ,
quan i ying hese in angible asse s is equally challenging and could be subjec i e, equi ing eal op ions, p obabili y-
weigh ed scena io analysis, o inno a ion-adjus ed e enue mul iples, as Le and Gu (2016) ecommended.
3. Me hodology
This esea ch employs a quali a i e compa a i e case s udy me hodology o analyze he alua ion issues in ene gy
sec o M&A. The echnique used in he s udy in ol es iden i ying pa icula me ged/acqui ed companies om bo h
con en ional and g een ene gy indus ies and hen analyzing he kinds o alua ion employed. The ollowing sou ces
a e seconda y da a: he annual balance shee and p o i and loss accoun s, in es o ela ions and media publica ions,
o mal ilings wi h egula o y bodies, and alua ions by o he p o essionals. The in e p e i e esea ch app oach ocuses
on he indings om he iden i ied ansac ion s uc u e, key assump ions, and he ma ke s' ac ions.
The me hodology also in ol es analyzing he hema ic ela ion be ween s a egic d i e s and ESG and he impac o
hese ac o s on alua ion esul s. This me hod o analysis ensu es compa abili y o esul s while enabling sec o s'
peculia i ies o be cap u ed because di e en analy ical amewo ks a e applied o each case. The con en o he analysis
is based on ou majo ca ego ies: (1) he me hods o alua ion, (2) hings ha in angible asse s o a company ep esen ,
(3) he e ec o ESG ac o s, and (4) he s a egic mo i es o M&As.
This mul i-dimensional lens p o ides a comp ehensi e unde s anding o he alua ion landscape amid he ene gy
ansi ion.
3.1. Valua ion Me hodologies Analysis
Valua ion concep s a e undamen al o business, no ably alua ion in M&A, bu exis ing app oaches a e unde p essu e
om he di e ences be ween he old economy and g een ene gy companies (Ray,2022). T adi ional i ms ha e he
backing o well-known alua ion no ms. DCF analysis hono ing p edic able cash lows and e minal alue in le e aged
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buyou s is pa icula ly app op ia e o i ms wi h endowed ese es and in as uc u e. Indus y a e ages ypically
apply ma ke mul iples like EV/EBITDA and P/E.
Ne e heless, C a o (2023) s a es ha hese models mus be applied wi h modi ica ions o he g een ene gy i ms.
Conce ning he me hods, DCF alua ion has uns able cash low p oblems due o echnological a iables, policy changes,
and new demand. To es ima e WACC, he discoun a e o en needs o be inc eased due o he highe isk speci ic o he
p ojec s; in he e minal alue, he e ec o he new egula ion and clima e policy scena ios mus be conside ed.
Sensi i i y analysis and Mon e Ca lo simula ions can gene a e mo e accu a e o ecas s unde di e en assump ions
(Ginocchi, 2021).
Ma ke mul iples also ace cons ain s. In i s ea ly s ages, a g een i m may no be p o i able, so he EV/EBITDA mul iple
is ine ec i e. Whe eas alues like o wa d PE, o wa d PEG, o ea lie ailing mul iples such as P/B, P/S, P/C S, e c.,
emain less app op ia e unless a eam wi h ESG-adjus ed mul iples like EV/Re enue o EV/MW is ins alled. Real op ions
analysis some imes cap u es he alue o echnology oll-up and u u e policies.
The use o ESG ac o s in alua ion has become e y impo an in ecen yea s. Acco ding o Banel e al. (2021) Mos
exis ing business alua ion me hods do no conside sus ainabili y issues associa ed wi h ce ain isks o oppo uni ies.
Fo ins ance, wi h DCF models, he o ganiza ion may p o ide no b eakdown o he ca bon p icing impac s, egula o y
ines, o he in luence esul ing om in es o in lows due o hei i m's ESG s a us. An e icien g een i m should ob ain
be e ESG sco es han i s compe i o s, hus sugges ing ha he i m may a ain a lowe cos o capi al, which in u n
boos s p esen alue. On he o he hand, in he con ex o li iga ion o en i onmen al isks, he adi ional i m will
expe ience he e ec o discoun s (Mupa, 2024). To add ess i , alua ion models mus inco po a e ESG isk adjus men s
and de elop clima ic sensi iza ion o e alua e exposu es.
3.2. S a egic D i e s and ESG Impac
The s a egic in en s behind M&A ope a ions a ec he idea o alua ion in a signi ican way. In he adi ional con ex
o ene gy, M&A is mo i a ed by subs an ial isks, con ol o esou ces, and he ma ke . All o e s a e assessed in e ms
o syne gy ealiza ion, inc ease in p o ed ese es, imp o emen in he in as uc u e, and any o he measu e o alue
inc ease (Mupa, 2024). Fo ins ance, ExxonMobil's acquisi ion o XTO Ene gy was o g ow he company's shale gas
capaci y, and a way o ope a ing e icien ly.
On he o he hand, g een ene gy M&A is cons uc ed as s a egy-mo i a ed by he abili y o access inno a ion, in eg a e
inno a i e echnologies, and espond o egula o y changes. Bidde s aim o a ge i ms ha ha e well-de eloped skills
in he esea ch and de elopmen depa men , sus ainable ma e ial, o a b and-new ma ke ha consis s o enewable
ing edien s. An example o his app oach is To alEne gies' acquisi ion o Di ec Ene gie o an inc ease in enewables
and digi al ansi ion.
The ollowing ESG ac o s ha e come ou as sus ainabili y's d i e s and hedges. Fi ms ac oss he g een en i onmen
equen ly end o ha e alua ion p emia gi en he ma ke 's p e e ence, a o able egula ion s a us, and he lis ing
wi hin he ESG- ocused indexes. The au ho s P ien and Gabellone (2024) also show a posi i e ela ionship be ween high
ESG a ings and he high alue o he s ocks. On he o he side, he adi ional i ms wi h low ESG sco es may ace capi al
ligh , educed access o sus ainable inance and high cos o equi y.
Sus ainabili y-linked inance simila ly exace ba es hese ou comes. G een bonds and ESG-linked loans a e
ad an ageous in p o iding p e e en ial a es which dec ease he capi al cos and inc ease he i m's alue. Ö s ed's
issuance o g een bonds has also educed i s WACC and, consequen ly, he alue o DCF. Lagga d's ESG ansi ions could
ad e sely impac he alua ion compe i i eness as he cos o deb and equi y inc eases.
Also, Pa y e al. (2022), he egula o y impac s like ca bon axes, emission ading, and enewable manda es a y. Feed-
in a i s, ax c edi s, and policies also inc ease he p ojec ed e enue o g een i ms. Despi e his, i is suscep ible o
policy isks and he e o e equi es using a egula o y isk model in alua ion. T adi ional o m businesses a e p essu ed
o inc ease compliance cos s and may expe ience asse s anding, which equi es alua ion discoun s and impai men
indica ions (Mupa, 2024).
4. Case S udies
While he e a e signi ican di e ences in he alua ion me hod ac oss each ene gy M&A, Che on's acquisi ion o Noble
Ene gy in 2020 is an a che ypal deal ocused on asse base, in eg a ed in en o y, and cos -cu ing (Hanley, 203). The
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ocus o assess he companies was made based on he p o ed hyd oca bon ese es and he u u e cash low po en ial
using con en ional ela i i ies such as DCF and EV/EBITDA.
On he o he hand, he cu en example e ealing he g een pa adigm is Macqua ie's acquisi ion o G een In es men
G oup (GIG) asse s. This was done based on he pipeline o p ospec i e p ojec s, egula o y isk, and sus ainabili y
issues. Policy isk-adjus ed ESG p emiums inco po a ing SB-DCFs we e used o alue he concep .
Ibe d ola's acquisi ion o Aal o Powe p o ides ano he example o he speci ics o he g een alua ion (Luis, 2024).
Ano he eason o eaching such a alue was ocusing no on Aal o's cu en cash lows bu on i s sophis ica ed
de elopmen pipeline and PPAs. Regula o y scena io analysis, wind esou ce modeling, and ca bon p icing sensi i i y
we e used o place a alue on he deal. Howe e , he acquisi ion made by BP o BHP's shale asse s in 2018 e e s o a
con en ional olume-based me hod ha e alua ed BP's scale and b eak-e en p icing.
The Shell Company's acquisi ion o Sonnen p esen s a good example o hyb id alua ion issues. Ups eam ese es
ypically gi e alue o Shell; howe e , o Sonnen's ba e y segmen , i was necessa y o e alua e chu n, scalabili y o
he echnology, and o e all alue c ea ion h ough he pla o m. I e ec i ely included con en ional alua ion and he
concep o alua ion ha we see being adop ed by s a -ups, which was a pa adigm shi in he p ocess.
5. Discussion
By compa ing he change ha he ansi ion has b ough , i indica es ha change has p omp ed a new way o hinking
abou alua ion p ac ices. I is no ewo hy ha con en ional app oaches based on angible esou ces s ill ha e
ele ance bu a e inadequa e ega ding he alue assessmen o g een ene gy i ms. This aligns wi h he changes
de ining alue c ea ion in oday's ene gy sec o , whe eby ac o s such as in angible esou ces, ESG ac o s, and
egula o y capabili ies de ine i m alue. I is, he e o e, pe inen o he discussion o dig deepe in o how hese
a iables eo ien he basic ounda ions o alua ion, he eby dis up ing he idolizing o inancial models.
Sma al. (2023) posi s ha mos incumben i ms in he adi ional ene gy sec o , mainly in eg a ed in ups eam and
downs eam ope a ions, deployed asse -based alua ion models. These models ocus on key aspec s such as he amoun ,
a ailabili y, and cos o ese e, p oduc ion, and manu ac u ing capabili y. Ved om he ela i e s abili y o u u e cash
lows backed by in es men in angible asse s and a p e y s able commodi ies ma ke , Discoun ed Cash Flow be e ,
known as DCF and En e p ise Value o EBITDA, EV/EBITDA me hods a e ele an (Aa osin e al, 2022). The eby, he
changing ou look on he con ex s o ope a ions o he global economy, pa icula ly in he d i e o deca bona e di e en
sec o s, has b ough long e m unce ain y in o he u u e o adi ional i ms. A new c ea ion o isks, including ca bon
p ices, emission es ic ions, and ossil uel boyco s, combine o possibly educe u u e ea nings and he alue o asse s.
Hence, elying on his o y and balance shee igu es may some imes lead o concealing dange s.
G een ene gy companies ope a e in much mo e compe i i e and inno a i e en i onmen s, especially in sola , wind
powe gene a ion, ba e ies, and ca bon cap u e. Such i ms o en do no ha e la ge sunk in es men s in angible asse s
like con en ional u ili y i ms and ins ead depend on IP, egula o y licenses, long- e m con ac s, such as PPAs, and
b and equi y. Also, g een ene gy i ms may con ain p ojec inancing, and mos a e s ill unde de elopmen , hus ha ing
minimum o e en ha m ul EBITDA le els. This is a alua ion challenge since many adi ional mul iples, such as
EV/EBITDA, do no hold any signi icance.
This di e gence also e lec s he di e en objec i es o sha eholde s and s akeholde s o Zapa a Co po a ion. The
adi ional i m's in es o s ha e adi ionally alued nea - e m money cash lows, cu en yields, and a sa e secu i y o
hei in es men s. None heless, such a conse a i e s ance is g adually shi ing because o clima e isks, inancial
s a emen s, ansi ion isks, and epu a ion (Mupa, 2024). On he o he hand, he in es o s in g een ene gy accep
luc ua ion in he sho e m because hey eye on he long- e m gains, sus ainable and esponsible in es men , and,
mos impo an ly, he policies ha will be pu in place o suppo g een ene gy. This in es o dis inc ion is bes seen in
alua ion me ics whe e g een i ms a e ading a p emiums despi e sho o no ea nings eco ds.
Based on hese con as ing eali ies, M&A ancho s ha e he ask o achie ing sho - e m inancial esul s wi h mo e
s a egic posi ioning (Mupa, 2024). Al hough buying a adi ional i m could inc ease immedia e e enues, i pu s he
acqui e a isk o s anding asse s in he long un. Pu chasing a g een i m has he consequences opposi e o he i s
by dilu ing sho - e m inancial pe o mance indica o s bu p o iding much be e i o he i m o u u e ene gy
s uc u es. As such, wha is needed a e alua ion models ha cap u e he cu en alue and u u e lexibili y.
Wo ld Jou nal o Ad anced Resea ch and Re iews, 2025, 26(02), 767-774
772
To sol e hese challenges, mixed app oaches o alua ion ha e isen as a iable al e na i e and ha e been de ined. These
models inco po a e bo h inancial me hods ha we e p e iously desc ibed and s a egic and sus ainabili y aspec s.
Such a iables can include sus ainabili y ac o s in he ESG cul u e in ESG-adjus ed DCF models, o example, by applying
ESG adjus men s o he cash low es ima es and he discoun ing a e. Real op ions analysis o e s a me hod o
inco po a e he op ion alue o manage s in unce ain condi ions—highly applicable in he g een echnology indus y,
gi en he egula o y change. Policy and cos scena ios can be accommoda ed by es ablishing policy ajec o ies and
subsidy landscapes in he alua ion esul s. These ools p o ide a mo e ealis ic and b oade alua ion o he i ms in
he ansi ioning ene gy indus y.
In addi ion, public companies should wo k owa ds de eloping uni e sal ESG me ics and be e disclosu e s anda ds
o acili a e he de elopmen o be e compa ing alua ion and c edibili y (Singhania and Saini, 2023). The cu en ESG
epo ing is s ill disc ee , and me hodologies o pe o ming he exe cise a e no s anda dized ac oss indus ies and
companies. This hinde s he ESG isk and oppo uni y o be app op ia ely p iced by in es o s and acqui e s. Some
ini ia i es isible now a e he Task Fo ce on Clima e- ela ed inancial disclose s and ' he Eu opean Union's Co po a e
Sus ainabili y Repo ing Di ec i e o he CSRD; howe e , he adop ion o such amewo k is no uni o m.
6. Conclusion and Recommenda ions
In conclusion, he implica ion o he alua ion o adi ional e sus g een ene gy i ms in M&A ansac ions p o ides an
unde s anding o he challenges and changes an ene gy ansi ion globaliza ion occasioned. La ge and adi ional
ene gy companies mos ly used con en ional alua ion models ha ollowed he oil and gas business models elian on
angible asse s, se cash lows, and s anda d business models. They a e backed up by la ge a i med esou ces and long-
e m con ac s o supply and in as uc u e; hence, hey a e bes alued by applying adi ional me hodologies,
including DCF and ma ke ading mul iples such as EV/EBITDA and P/E. Ne e heless, his has no been so s able
anymo e; ac o s such as clima e egula ions, in es o di es men , and socie al p essu e o econside long- e m alue
c ea ion ha e become signi ican ac o s ha ques ion s akeholde s' s abili y.
Howe e , G een ene gy i ms had li le o o ecas hei u u e ea nings ends like he s able and angible asse s on
which he con en ional models o alua ion ely. They will, he e o e, likely de i e alue om g ow h p ospec s,
policies, ech and ESG, and p ojec s – all ac o s a less conc e e and s able. As such, hei alua ion canno bea such a
s ic and his o ical measu e o he same ex en as ees anding egional banks. Hence, scena io-based DCFs, eal
op ions alua ion, and ESG-in eg a ed inancial modeling a e mo e c ucial o modeling he isk and ewa d a ached o
hese i ms. These models enable he in oduc ion o change in policy, echnology, and he beha io o cus ome s ha
de ine he ansi ion o cleane powe .
A a s a egic le el, he mo i a ion ac o s owa ds M&A di e be ween he wo sec o s. He explained ha adi ional
i ms use he acquisi ion s a egy o ge a la ge size and e iciency o o gain access o new ese es o ma ke s. These
ansac ions no mally occu o achie e ope a ional ad an ages and educe cos s. On he o he hand, g een ene gy M&A
occu s p ima ily because o inno a ion cap u e, echnology acquisi ion, deca boniza ion, and en y o new segmen s in
he low-ca bon space. These di e en s a egic impe a i es also ha e implica ions on he so s o hings ha a e alued
in he deals. Fo ins ance, g een ene gy i ms p esen ly ha e low p o i s, bu nume ous u u e p ojec s o pa en s will
ha e high alua ions based on po en ial.
I is wo h no ing ha ESG ac o s a e as becoming in luen ial in decision making especially ega ding alua ion.
P op ie a y i ms wi h low ESG a ings su e ma ke penal ies by ecei ing lowe mul iples, highe capi al cos s, and
limi ed ma ke access. On he o he hand, g een i ms wi h be e alignmen wi h ESG may be alued highly due o
in es o s' conside a ion om an ESG pe spec i e, igh s o access ins umen s such as g een bonds, and pe cei ed by
s akeholde s in high es eem. Howe e , such a di e en ia ion based on ESG conside a ions is di icul o achie e. The
p oblem o lack o clea ESG de ini ions, da a issues and g eenwashing make he applica ion o ESG in o he inancial
models challenging. Ne e heless, one has o no ice ha he end is e iden : he ESG indica o s' pe o mance is no
longe an op ional ex a bu an in insic pa o he alua ion.
Fu he mo e, he inc eased demand o sus ainabili y- ela ed p oduc s had a signi ican posi i e impac on he inancial
impo ance o ESG. G een i ms a ail cheape capi al h ough g een bonds o ESG-linked loans; hence, hey imp o e
hei WACC and inc ease hei DCF alues. T adi ional companies know hey a e unde emendous p essu e om
ins i u ional in es o s o p o ide ealis ic ansi ion plans and clima e isk epo s. The e a e also changes in egula ion,
ca bon p ice, epo ing, and clima e isk and oppo uni y disclosu e amewo ks a e some ac o s ha in luence he
en e p ise alue.
Wo ld Jou nal o Ad anced Resea ch and Re iews, 2025, 26(02), 767-774
773
Gi en his landscape o emendous change in he ene gy sec o , he alue s, in es o s, analys s, and s a egis s mus
be able o adap o such changes. S icking o s anda d me hodologies means asse misp icing and ina en ion o essen ial
isks and oppo uni ies. Ins ead, he alua ion now has o be done wi h much mo e ocus on he non- inancial aspec s.
Also, i has o be capable o changing equen ly in esponse o ma ke and/o egula o y en i onmen changes. Some
a e p obabilis ic models, Mon e Ca lo simula ions, and in eg a ed ESG- inancial dashboa ds.
The e o e, in he p ocess o u he esea ch and p ac ical implemen a ion, mo e wo k should be de o ed o c ea ing
hyb id alua ion me hods ha combine he ea u es o he quan i i e and s a egic app oaches. They should also be
able o conside bo h – inancial and non- inancial ac o s and he dynamics o sus ainabili y and p o ide a link be ween
con en ional and sus ainable in es men s. Finally, alua ion is an analy ical calcula ion and a i al ac i i y ha speaks
o he i m's managemen o he ene gy ansi ion pe iod
Compliance wi h e hical s anda ds
Disclosu e o con lic o in e es
No con lic o in e es o be disclosed.
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