Decision-Makers´ Attitudes Towards Biogas Investments

In order to evaluate the managers´ attitudes regarding investments in biogas, a statement battery using a 5-point Likert scale was formulated. Statements presented in Figure 7.3 reflect the attitudes towards biogas in the context of the model variables “relative advantage” (Section 4.1.1.3), “investment costs” (Section 4.1.1.2), “payback period”

(Section 4.1.1.1), “green tariff” (Section 4.1.4.1), “interest rates” (Section 4.1.4.3), “natural gas price” (Section 4.1.4.4) and “technological complexity” (Section 4.1.1.5). The Figure 7.3 illustrates the arithmetic means of the answers to the respective statements.

Figure 7.3: Attitudes of the interviewed top-managers towards biogas investments (n = 68, arithmetic mean) (Author´s calculation)

1. We consider biogas to be an attractive investment.

2. Biogas requires large capital investments.

3. If the payback period of biogas exceeds six years then such a

1 - Agree strongly; 2 - Agree a little; 3 - I am indifferent; 4 - Disagree a little; 5 - Disagree strongly

The results show that the answers of the respondents range in average between low agreement (2 – “Agree a little”) and indifference (3 – “I am indifferent”). Most of the responders agree that biogas generation would require high initial investments (statement 2, mean 2.0), and that current interest rates in Ukraine would make biogas investments uninteresting for their business (statement 5, mean 2.21). Furthermore, the top-managers expressed an indifferent position to the statements regarding investment attractiveness of biogas (statement 1, mean 2.44), and the influence of the current natural gas prices (statement 6, mean 2.4), as well as the statements related to the need of the green tariff for biogas (statement 4, mean 2.53), a six-year payback period for a biogas investment (statement 3, mean 2.63) and the perceived technological complexity of biogas (statement 7, mean 2.79).

After the attitudes regarding biogas investments of the interviewed managers were analysed, an additional analysis of the organisational factors “internal economic situation”, “energy costs” and “need for waste recycling” was carried out (see Figure 7.4). The results reveal that 60.0 % of the executives in the sample considered their total revenue and net profit between 2012 and 2014 as “excellent”. It is worth adding that the responders expressed this positive perception of the key business results at the time of the recession and geopolitical uncertainty in 2015 in Ukraine. Due to the low growth of Ukraine´s agricultural sector from 2012 to 2014, the objective business results of the agroholdings in these years might have been different from the expressed perception of the interviewed top-managers³⁹. However, 47.0 % of the responders were satisfied with the financial situation of their companies in 2015. Furthermore, 67.6 % of the interview partners expressed their discontentment with the energy costs. Therefore, it can be assumed that biogas and biomass investments between 2009 and 2014 (Table 7.2 and Figure 7.2) may not have been sufficient to reduce heating and electricity costs. Nevertheless, the price increase for energy in 2015 may have caused this dissatisfaction as well⁴⁰. Finally, 25.0 % of the respondents expressed some difficulties associated with the company production waste. One explanation may be that though 73.5 % of agroholdings in the present sample practice animal farming, most of them are mainly concentrated on crops (see Figure 2.16 in Section 2.2.2). As a consequence, animal husbandry of agroholdings in the sample may not generate large amounts of animal waste.

Figure 7.4: Analysis of organisational factors of agroholdings (n = 68) (Author´s calculation)

The study also intended to provide some insights concerning individual business attitudes of the senior managers. These factors were risk-taking attitudes and innovativeness (Figure 7.5). First, 61.8 % of the respondents would not be ready to take higher business risks for the sake of higher profits. Second, 44.1 % of the interviewed top-managers choose projects with a lower risk, when making new investment decisions.

39 For the development of agroholdings in Ukraine from 2009 to 2014 see Section 2.2.2.

40 Development of payments for consumed natural gas was described in Section 4.1.4.4.

0% 20% 40% 60% 80% 100%

Recycling of production waste is a problem for us.

We are satisfied with the level of our heating and

electricity costs.

Key results of our business (revenue, profit) from 2012 to

2014 were excellent.

We are satisfied with the financial situation of our

company.

Agree strongly Agree a little I am indifferent Disagree a little Disagree strongly

These two findings may indicate risk aversion in the senior management of Ukrainian agroholdings. This confirms the conventional economic theory, presented in Section 3.3, which postulates that agents tend to avoid risks when making important business decisions. Additionally, 75.0 % of the top-managers in the sample consider themselves to be among the first in Ukraine who apply and use new agricultural technologies. Obviously, so many companies cannot be “among the first”, confirming the “better-than-average” effects, stated in Section 3.3.2. One explanation for these answers could be that high-ranking executives want to be associated with application of new technologies. This may help create a positive image of a successful and prospering business organisation. In addition, the executives could have meant only certain production segments where they may use modern technologies, e.g. GPS or no-till in crop farming, but not their general tendency to always adopt the newest agricultural technologies, when such technologies appear on the Ukrainian market. Another explanation could be that the senior managers interviewed compared their companies only on the regional level, where they may not have strong and innovative competitors. Finally, the respondents could have given socially desirable answers to this question. However, an overall examination of the adoption of new technologies, employed in Ukrainian agroholdings, is beyond the scope of the present work.

Figure 7.5: Individual business attitudes of the interviewed top-managers (n = 68) (Author´s calculation)

0% 20% 40% 60% 80% 100%

We are always among the first in Ukraine who apply and use modern agricultural technologies.

To achieve higher profits we are ready to take higher risks in

business.

When making decisions regarding new investments we choose a

project with a lower risk.

Agree strongly Agree a little I am indifferent Disagree a little Disagree strongly