Author(s)

L. M. Gitelman

Abstract

The purpose of this research is to create a concept hierarchical model demonstrating the levels of value-based management in power companies. Basic determinants and conditions are taken into account, the most important ones being the long-term \“rules of the game” set by the state for the electric power industry. The next tier identifies factors that make up the intrinsic (fundamental) value of a company. The following are viewed as priority areas: strategic activities that take account of the owners’ interests; implementation of effective investment programmes; building a suitable evaluation system for managerial decisions; transformation of the management structure with business units being established that focus on making value-based decisions. No less important is the \“superstructure” of a company’s intrinsic value that is determined by the stock market situation. This tier is the most volatile in terms of business valuation, but it also provides for a set of actions to be taken in order to meet investors‘ interests in higher market capitalization. The impact of the identified factors on the effectiveness of value-based management was tested within the framework of the designed model in a number of energy companies between 2000 and 2013. Keywords: electric power companies, investment appeal, conceptual model of value-based management. 1 Introduction As a result of reforms and further operation, newly established Russian electric power companies have turned from being blue chips into second-tier ones, i.e., have lost in price and liquidity. Private investors owning shares in the restructured companies have now started to sell them off, even at a loss. Thus the electricity sector is becoming less attractive to investors and, consequently, is losing the chance to develop on a new technological platform. Energy Production and Management in the 21st Century, Vol. 1 55 www.witpress.com, ISSN 1743-3541 (on-line) WIT Transactions on Ecology and The Environment, Vol 190, © 2014 WIT Press doi:10.2495/EQ140071

Keywords

electric power companies, investment appeal, conceptual model of value-based management.