Rethinking Valuation Techniques for Energy Investments

Find out why traditional valuation methodologies may not be appropriate for new technologies and/or early-stage private equity energy investments.

James Hanson, Opportune
Rethinking Valuation Techniques for Energy Investments

With the recent boom in alternative energy investments and the “energy transition,” private equity clients are especially spending more time looking at earlier and earlier stage investments. (Source: Shutterstock.com)

As a leading provider of valuation services to the energy industry, we spend most of our time focusing on the nuances around traditional valuation techniques and how to best apply them to the various subsectors of the energy sector. However, with the recent boom in alternative energy investments and the “energy transition,” our private equity clients are especially spending more time looking at earlier and earlier stage investments. Most early-stage energy investments fall into two categories: new technologies and early-stage project financings.

When most people think of traditional valuation techniques, they think of the “Big Three”:

  1. Discounted Cash Flow (DCF)
  2. Comparable Public Company Multiples (Public Comps)
  3. Comparable Transaction Multiples (Transaction Comps)
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