Determinants of Return-on-Equity (ROE) of Biogas Plants Operating in Poland

Dariusz Kusz (), Iwona Bąk, Beata Szczecińska, Ludwik Wicki and Bożena Kusz
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Dariusz Kusz: Department of Computer Engineering in Management, The Faculty of Management, Rzeszow University of Technology, Al. Powstańców Warszawy 12, 35-959 Rzeszow, Poland
Iwona Bąk: Department of Applied Mathematics in Economy, Faculty of Economics, West Pomeranian University of Technology, Janickiego Street 31, 71-270 Szczecin, Poland
Beata Szczecińska: Department of System Analysis and Marketing, Faculty of Economics, West Pomeranian University of Technology, Janickiego Street 31, 71-270 Szczecin, Poland
Ludwik Wicki: Institute of Economics and Finance, Warsaw University of Life Sciences-SGGW, 166 Nowoursynowska Str., 02-787 Warsaw, Poland
Bożena Kusz: Department of Computer Engineering in Management, The Faculty of Management, Rzeszow University of Technology, Al. Powstańców Warszawy 12, 35-959 Rzeszow, Poland

Energies, 2022, vol. 16, issue 1, 1-22

Abstract: Poland has a large potential for biogas production from agricultural sources and food waste. This potential is still poorly used. There are many reasons for this state of affairs. We can indicate both the policy of the state towards renewable energy sources (RES) with a small amount of energy from biogas contracted at auctions, investment risk, and especially low return on investment in the absence of investment support. An important reason is also the limited state budget. The purpose of this work was to determine the endogenous factors that determine ROE, the direction of the impact of these factors, as well as the strategy of biogas plants in shaping the ROE level. The DuPont model was used in the analysis of ROE changes. We used the deviation method to determine the impact of the various factors on ROE. Against the background of the energy sector in Poland, the value of ROE in the examined biogas plants should be considered satisfactory, and in 2020 it was, on average, 13.9%. The decrease from 17.2% in 2019 occurred despite the increase in energy prices and the increase in the net profit margin (NPM). It resulted from the reduction of ROE’s financial leverage through external capital. A high level of debt characterized the examined biogas plants, and the pursuit of risk reduction and debt reduction negatively impacts on ROE. This may indicate the need for state investment support at the plant construction stage or low-interest investment loans to develop biogas plants. In addition, using only price guarantees under the feed-in tariffs, with dynamic changes in costs, may bring the industry a relatively high investment risk compared to other RES, where the operational costs during the lifetime are low, as it is in PV or wind systems.

Keywords: biogas plants; DuPont; return on equity (ROE); net profit margin (NPM); total assets turnover (TAT); equity multiplier (EQM); deviation method (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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