Financial sustainability of wind electricity sectors in the Baltic States

The Baltic States realize the necessity to develop wind electricity sectors. This comes from the Baltic States concern of energy security, competitiveness and sustainable development of energy sectors. The paper deals with the financial aspects of sustainability of wind electricity sector. Namely, it aims at performing a comparative analysis of financial sustainability of companies producing electricity from wind resources in the Baltic States during 2009-2013. The financial statement analysis method is employed and the financial ratio technique is used. Altman, Liss and Tafler bankruptcy forecasting models are used to show both health and viability of the companies. 4 groups of financial ratios are computed: financial leverage, profitability, liquidity and assets utilization. Support schemes are recognized as a relevant factor influencing on the financial sustainability. The results of the analysis revealed that financial sustainability of the companies is moderate in the Baltic States. Lithuania and Estonia use high share of debt (80-85%) to finance economic activity, whereas Latvian companies use relatively high share of equity capital (35-40%). This shows that credit risk is available in the companies. Liquidity of the companies decreases. Operational efficiency is higher in Estonia and Lithuania than in Latvia, when profitability indicators are analyzed. During the latter several years efficiencies of assets utilization were similar in the Baltic States. The efficiency of current assets utilization is higher compared to efficiency of non-current assets utilization. Companies in Latvia demonstrate middle but increasing and in Estonia - high but reducing bankruptcy probabilities. Lithuanian case reveals that bankruptcy probability varies from high to low depending on the financial ratios analyzed, however, bankruptcy probability reduces. Companies should make liquidity, solvency, efficient use of assets and profitability management as a part of their corporate management policy framework. (C) 2015 Elsevier Ltd. All rights reserved.