Comparative Analysis of Determining the Risk-Adequate Cost of Capital for Regulated Network Operators in Network Industries

Ulrike Stopka

Chapter 6 in Modern Finance and Risk Management:Festschrift in Honour of Hermann Locarek-Junge, 2022, pp 103-135 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Even years after liberalisation, network industries such as electricity, telecommunications and railways are characterised by the existence of essential facilities that cannot be easily duplicated by new market entrants. Regulation must therefore ensure non-discriminatory, fair-priced access for all competitors to these facilities. The article considers the approaches to tariff regulation applied by the Bundesnetzagentur in the three sectors. The focus is on the comparison of the methodological framework for determining the eligible cost of capital. The estimation of the input parameters for CAPM and the results for the eligible rate of return on equity are discussed. There are considerable particularities in the electricity sector. Then, the determination of the eligible total costs of capital is addressed. In the telecommunications and railway sectors, this is done via the WACC method while in the electricity sector different approaches are used.

Keywords: Finance; Risk Management; Commodities; Energy Finance; Risk; Cryptocurrencies; Asset Management; Banking; Behavioral Finance; Behavioural Finance; Markowitz; Portfolio Selection; Asset Allocation; Crowdfunding; COVID; Pandemic; Corona; Investment Strategies; Low-Risk Investments; Social Banks; Excess Liquidity; Cost of Capital; Utilities; Network Industries; Private Equity; Small and Medium-Sized Enterprises; Black Swan; Statistical Inference; Maximum Likelihood; Bayesian Methods; Tail Risks; Conditional Value-at-Risk; Tail Nonlinearly Transformed Risk; Capital Constraints; Bank Regulation; Subjective Risk Assessment; Expert Knowledge; Model Risk; Risk Factors; Option Pricing; Volatility; Resilience; Supply Chains; Disruption; Systemic Risk; Oil; Renewable Energies; Corporate Risk Management; Power Purchase Agreements; Gold; Precious Metals; Dynamic Correlation; Mixed Data Sampling (search for similar items in EconPapers)
JEL-codes: G11 G3 G32 G4 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9781800611917_0006 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9781800611917_0006 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9781800611917_0006

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().