energy market investigation: analysis of cost of capital ... · ,qwurgxfwlrq 7kh dssurdfk wr...
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© Crown copyright 2015
You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence.
To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected].
The Competition and Markets Authority has excluded from this published version of the working paper information which the Inquiry Group considers should be
excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure).
The omissions are indicated by [].
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Contents Page
Introduction ................................................................................................................ 2
General approach to estimating the WACC ............................................................... 3
CMA estimation of WACC .......................................................................................... 5
Interpretation of WACC ............................................................................................ 27
Appendix A: Firms’ submissions on their cost of capital ........................................... 30
Appendix B: Corporate tax rates .............................................................................. 35
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Maturity (years)
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0.67
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Shar
e pr
ice
(reb
ased
to 1
00)
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stand-alone energy business (whether vertically integrated, or operating either in generation or in retail supply) would require a size premium. In the first instance, we note that the majority of the energy firms active in GB are generally very large businesses. Second, it is not clear that these businesses would necessarily share any (unknown) general characteristics of small firms that increase their cost of capital due to higher risk. Our current view, therefore, is that it is not appropriate to reflect a size or value premium. This is in line with previous CMA (and CC) decisions in both market investigations and price determinations, such as private healthcare and Bristol Water.
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Appendix B: Corporate tax rates
Corporate tax rates
Country 2007 2008 2009 2010 2011 2012 2013 Average
UK 30.00 30.00 28.00 28.00 26.00 24.00 23.00 27.00 France 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 Germany 38.36 29.51 29.44 29.41 29.37 29.48 29.55 30.70 Australia 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 Hong Kong 17.50 16.50 16.50 16.50 16.50 16.50 16.50 16.60 Spain 32.50 30.00 30.00 30.00 30.00 30.00 30.00 30.40 Italy 37.25 31.40 31.40 31.40 31.40 31.40 31.40 32.20 Austria 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 Greece 25.00 25.00 25.00 24.00 20.00 20.00 26.00 23.60 Canada 36.10 33.50 33.00 31.00 28.00 26.00 26.00 30.50 Finland 26.00 26.00 26.00 26.00 26.00 24.50 24.50 25.60 US 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 NZ 33.00 30.00 30.00 30.00 28.00 28.00 28.00 29.60
Source: KPMG global tax rates.