Market (in)efficiency in valuing electric utilities--The case of Norwegian generating companies

After deregulation of the energy market in Norway, a number of mergers and acquisitions of hydropower generating companies have taken place. However, valuation of these companies has proved controversial. From an ex-post perspective, there is support for the criticism that generation assets have been sold too cheaply. This article presents a simple valuation model providing evidence of how value has evolved. On the basis of these results, we discuss the valuation from an ex ante perspective and in the light of the market efficiency hypothesis of (Fama, 1970) and (Fama, 1991).