Corporate power purchase agreements and the value of decarbonization

Abstract

Purpose

The purpose of this paper is to examine if the announcement of corporate power purchase agreements (PPAs) induce significant effects on the electricity buyers' stock returns.

Design/methodology/approach

This is an event study based on the Fama French Five Factor Model which uses several significance tests and robust regression approaches.

Findings

The announced closing of corporate PPAs induces significant positive abnormal stock returns. This announcement effect is even more pronounced in case of virtual PPAs.

Originality/value

To the best of the author‘s knowledge, this study is the first which explictly investigates the announcement effects of corporate PPAs, which are closed between the owner of the renewable energy asset and the institutional end consumer. In addition, this study extends the event study approach by robust regression methods.

Citation

Hundt, S. (2023), "Corporate power purchase agreements and the value of decarbonization", International Journal of Energy Sector Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJESM-03-2023-0008