A Valuation & Strategic Appraisal of SaskPower

Valuation of Crown Corporations, Crown Corporations, Ian Madsen

SaskPower is the electric power generating holding company and retail utility supplying the province of Saskatchewan. It also buys power from independent suppliers within the province. Unlike some of its Crown utility peers in Canada, it is not in bad financial condition.

Using an intrinsic value method, with net income substituted for free cash flow (which is negative and forecast to remain so) and taxed at statutory rates, the company’s value is estimated from $1.61B to a maximum of $11.24B, with a tighter, more plausible range of a median (midpoint of all the relevant values) of $2.81B to a mean (simple average of all the relevant values) of $3.21B.

Under the market-based valuation system, as noted in the Executive Summary, using seven standard valuation metrics (trailing and forward Price/Earnings, Price/ Sales; Price/Book Value; Enterprise Value to Earnings Before Interest, Taxes & Depreciation & Amortization [EV/EBITDA]; Revenue/EBITDA; Price/Operating Cash Flow), the current value ranges from $3.34B to $7.81B, with a median of $5.88B and a median of $6.73B.

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