Guide to

Power
Generation
Industry KPIs
for Investment Professionals
Shalabh Gupta, Manager – Energy & Utilities
Karan Sadh, Research Associate II – Energy & Utilities
In This Guide
This guide highlights the key performance indicators for the
power generation industry and where investors should look
to find an investment edge. While this guide is not a fully
integrated power generation industry primer, as the market
leader in granular consensus estimates data, Visible Alpha
works with partners and clients to determine the key
performance indicators in the industry. This guide will aid
market participants in identifying industry trends and the
potential future performance of power generation companies,
by region and service type.

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Visible Alpha Industry KPIs - 2

 Industry Overview

The electric utility industry is divided into three segments: power

generation or the business of producing electricity; transmission, which
involves the bulk movement of the electrical energy from a generating site
to electrical substations where voltage is transformed; and distribution,
which involves supplying electricity to the end consumers through power
lines.

Large energy companies often operate in all three segments as it is more

cost-effective, while smaller companies tend to operate in only one of these
segments. In this guide, we primarily focus on the first segment of the
electric utility sector’s value chain: power generation.

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Power generation is the business of generating electricity in power plants or
power stations, from primary sources of energy. A power plant contains one
or more power generators, which are rotating machines that convert
mechanical energy into electrical energy using renewable or non-renewable
energy sources. Renewable energy sources include wind, solar power,
hydropower, geothermal, and biomass energy. Non-renewable energy
includes coal, nuclear energy, natural gas, and oil. Most power generation
companies have a portfolio comprising both non-renewable and renewable
energy sources.

Coal and natural gas are the most commonly used energy sources in
electricity generation. The heat from burning coal produces steam that
moves the blades of the turbines inside the power plant, producing
electricity. Coal power plants are the largest source of electricity generation
and the single largest source of energy-related CO2 emissions. Nuclear
power is considered to be one of the cleanest forms of energy amongst
fossil fuels. Nuclear power plants use reactions from nuclear fission to
produce electricity. Renewable energy sources such as solar, wind, and
hydropower use sunlight, wind force, and the movement of water to produce
electricity. A major challenge with renewable energy sources like solar and
wind is that they are intermittent in nature. Energy storage technology is
gradually getting cheaper and attracting investment as means of providing
backup and will be critical for supporting the widespread deployment of
renewable energy sources in the total power mix.

As the world considers ways of establishing a path toward limiting the rise in
global temperatures and curbing emissions, the power generation industry
has a central role to play. Recent policy commitments by major economies
towards net-zero emissions have led to power generation companies
investing aggressively in renewable energy.

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Industry Business Model
Revenue
Power generation companies generate revenue by producing electricity
(GWh) and then selling it to transmission and distribution companies at an
average realized price ($/MWh). Transmission and distribution companies
then sell this electricity to the end consumers at a regulated price depending
on the local jurisdiction.

Volume and average selling price (ASP) are two important metrics when
analyzing revenue for power generation companies. Volume sold is derived
from capacity and capacity factor, or the capacity utilization of the power
plants owned or operated by a power generation company.

Capacity is the power plant's output when running at its maximum. Maximum
output is typically measured in megawatts (MW) or gigawatts (GW). Capacity
factor (%) represents the efficiency with which a power plant generates
electricity. A power plant’s capacity factor is the ratio of actual output to the
maximum possible output during a given period. A plant with a capacity factor
of 100% produces power at all times. The capacity factor of power plants
differs depending on the source of fuel or energy used.

A nuclear power plant is known to be the most efficient with capacity factors
as high as 95%. Coal-powered plants, which are the most widely used, have
capacity factors ranging between 40-60%. The capacity factors of wind and
solar-powered plants depend on the availability and quality of sunlight and
wind available. Capacity factor (%) for a year = (total volume per year (GWh))
⁄ ((total capacity(MW) ✖ 365 days ✖ 24 hours) ⁄ 1000 ( ⁄ 1000 to convert from
MWh to GWh)).

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The total volume sold (in MWh or GWh) by a power generation company is the
product of total capacity (MW or GW) and the capacity factor (%) of all the
power plants owned or operated by the company. To ensure comparability of
KPIs for the power generation industry and given that volume sold is in GWh
and capacity in MW, we use the following conversion: total volume (GWh) for a
year = ((capacity (MW) ✖ 365 days ✖ 24 hours) ✖ capacity factor (%)) ⁄
1000.

ASP is the weighted average price of the volume of electricity sold by a power
generation company. ASP is usually measured in MWh or KWh. Power
generation companies sell a portion of the electricity they generate at a fixed
price under long-term agreements (LTA) or purchase power agreements (PPA)
to buyers for a long tenure. They also sell a portion of the electricity in the
wholesale market at spot prices. Power generation companies operating in
different countries are mandated to adhere to local regulations which impact
ASP.

Profitability
EBITDA (earnings before interest, taxes, depreciation, and amortization) is a
key measure of profitability for analyzing companies in this industry. Energy or
fuel-based EBITDA such as EBITDA - coal, natural gas, wind, and solar
provides essential insights into the performance of the different fuel segments
within and across companies. In the case of valuations of pure play power
generation companies, analysts generally use discounted cash flow (DCF)
based, sum-of-the-parts (SOTP) at the fuel type and geographical level.
EV/EBITDA is another popular ratio used to value companies in this industry.

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Expenses
Cost structure analysis provides insights into a company’s ability to maintain
margins and trends in ASPs for power generation. Fuel cost is a crucial
expense for companies operating power plants using fossil fuels like coal and
natural gas.

● Fuel cost - This is the cost associated with securing the source of fuel
used in generating electricity by a power plant. In other words, it is the
amount of fuel it costs to produce 1 KWh/MWh/GWh volume of electricity.
Fuel cost is mainly seen in companies that run coal, natural gas, and
nuclear-based power plants.

For a coal-based power plant, fuel cost = total quantity of coal used ✖
cost per quantity. The total quantity of coal = total volume (GWh) ✖
quantity of coal required per GWh.

Any changes in the benchmark prices of fuel affect fuel costs.

Unit Conversions

1 KWh 1000 watt

1 MWh 1000 KWh

1 GWh 1000 MWh

1 TWh 1000 GWh

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Industry Schematic Diagram

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Key Industry Metrics
Key performance indicators (KPIs) are the most important business metrics for a
particular industry. When understanding market expectations for the power
generation industry, whether at a company or industry level, some KPIs to
consider include:

● Volume - Electricity Generation (GWh)

● Capacity - Electricity Generation (MW)
● Average Selling Price - Electricity Generation, Renewable (per MWh)
(Solar, Wind, Hydro and Geothermal)
● Total Revenue - Electricity Generation
● EBITDA Margin (%)
● Operating Margin (%)

...and more!

Current Power Generation

Industry KPI Forecasts

Visible Alpha offers detailed consensus

estimates for key performance
indicators for power generation
companies, sourced from the world’s
leading equity analysts. Uncover
current market expectations through
our consensus estimates data on
capacity metrics, utilization metrics and ACCESS THE DATA
more to identify power generation
industry trends and future performance
of power generation companies.

Visible Alpha Industry KPIs - 9

DATA AS OF MARCH 2023

Visible Alpha’s Standardized

Industry Metrics
To understand market expectations for the power generation industry, a key
information source is sell-side analyst estimates and consensus forecast data.
The buy-side, sell-side, and public companies leverage this type of data to
conduct competitive analysis, a type of analysis conducted by professional
analysts that involves comparing standardized metrics of one company with
those of similar companies. Because companies report metrics differently – and
sometimes report on different metrics altogether – standardizing the key metrics
for each company can be a cumbersome process.

Visible Alpha Insights includes analyst data, company data, and industry data at
a level of granularity unparalleled in the market. Our industry data –
Standardized Industry Metrics – enables market participants to quantify and
compare market expectations for companies across 150+ industries.

Our integrated power generation industry data set includes:

75
Global Tickers
77
Contributing Brokers
781
Current Analyst Excel Models

219
Unique line items in
293
Unique line items in our
512
Total standardized
our standardized standardized operating line items
financials data metrics data

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Available Comp Tables
Consensus Estimates

Visible Alpha offers one power generation-related comp table, comparing

forecasts for key financial and operating metrics, to make it easy to quickly
conduct relative analysis, whether you are interested in looking at key values
for global companies, Americas, or Europe. Every pre-built, customizable
comp table is based on region, sub-industry, or key operating metrics.

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Financial and Operating KPIs Available for
Power Generation Companies

North America APAC

● Constellation Energy Corporation ● Huadian Power International

(CEG_US) (1071_CN)
● Nextera EnergyPartners ● China Yangtze Power Co.
(NEP_US) (600900_CN)
● Algonquin Power & Utilities ● China Longyuan Power Group
(AQN_CA) (916_CN)
● Capital Power (CPX_CA) ● Xinyi Energy Holdings Limited
● Brookfield Renewable Partners (3868_CN)
LP (BEP_US) ● Huaneng Lancang River
Hydropower Inc (600025_CN)
EMEA

● Orsted AS (ORSTED_DK)
● CENTRICA PLC (CNA_UK)
● Electricite de France (EDF_FR)
● Energias de Portugal (EDP_PT)
● EDP Renovaveis (EDPR_PT)

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Visible Alpha Industry KPIs - 12

Industry KPI Terms & Definitions
Watt
Watt is the unit of electrical power equal to one ampere under the pressure of one volt.

Watt Hour (Wh)

Watt hour (Wh) is equal to the energy of one Watt steadily supplied to, or taken from, an electric
circuit for one hour.

MW
MW is a measure of electricity equal to 1 million watts.

MWh
MWh is a measure of electricity generation of 1MW produced over one-hour.

Capacity
Capacity is the maximum electric output a power plant can produce at a given point in time. Capacity
is generally measured in multiples of kilowatts such as Megawatts (MW) and Gigawatts (GW).

Capacity Factor
Capacity factor, also known as load factor or capacity utilization is the ratio of actual output to the
maximum possible output a power plant can produce during a given period.

Volume
Volume is the electricity generated and sold by a power generation company during a given period. A
1 GW power plant operating for 2 hours can generate a volume of 2 GWh electricity, assuming its
capacity factor is 100%.

Average Selling Price (ASP)

ASP is the average sales price realized from selling electricity produced by all power plants of
a company.

EBITDA Margin (%)

EBITDA margin is a measure of profitability that helps analyze the earnings of a company before
interest, taxes, depreciation, and amortization, as a percentage of revenue.

Operating Margin (%)

Operating margin is a profitability ratio that measures the revenue of a company after covering all
operating and non-operating expenses.

Total Revenue - Electricity Generation

Total electricity generation revenue is the revenue generated by a power generation company
through the sale of electricity. It is calculated by multiplying the total volume of electricity generated by
the price per unit of electricity sold.

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