**1. Introduction**

After 2010, the fight against the climate crisis intensified and supranational bodies started to act. In 2020, the EU Commission proposed a Climate Target plan of cutting carbon dioxide (CO2) emissions by at least 55% by the year 2030 and set a goal of carbon neutrality by 2050 [1]. Germany has been one of the most active countries in turning to renewable energy (RE) as a remedy to tackle CO<sup>2</sup> emissions. The German RE markets are the fifth largest in the world (after China, US, Brazil, and India [2]) and are well established due to the long-lasting efforts by the German government to promote green energy with a Feed-in-Tariff (FIT) support mechanism. Transition in the RE support mechanism has already been started and new mechanisms will most likely be introduced.

This research focuses on uncovering the profitability determinants of unlisted German electricity-producing RE companies. Profitability is examined in terms of companies' yearly profit and loss statements and not from an investment or a plant operations perspective. This research falls under the umbrella of studies that concentrate on firm performance. Lebas and Euske (2007) [3] defined firm performance as a set of quantifiable financial and non-financial indicators that can be illustrated with a causal model, reflecting the future outcomes of current actions. The selected indicators of financial performance used in this study include measures of profitability such as the Return on Investment (ROI), Return on Assets (ROA), and Return on Equity (ROE) and measures of growth such as the growth of revenues and assets.

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**Citation:** Luts, M.-K.; Savolainen, J.; Collan, M. Profitability Determinants of Unlisted Renewable Energy Companies in Germany—A Longitudinal Analysis of Financial Accounts. *Sustainability* **2021**, *13*, 13544. https://doi.org/10.3390/ su132413544

Academic Editors: Julian Scott Yeomans and Mariia Kozlova

Received: 25 October 2021 Accepted: 25 November 2021 Published: 7 December 2021

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It is well known, see, e.g., [4] that the profitability indicators are prone to accounting manipulation, undervaluation of assets, and different depreciation policies, which makes comparing companies complicated. As we are looking only at German companies, the accounting regulation and the legal structures that all companies in the sample use are uniform and we expect that all companies in the sample act in a profit-maximizing way within the limits set by the law. While profitability can also be measured by using a more holistic set of indicators [5], we limit the focus to company-level profit indicators only.

The rest of this paper is constructed as follows: In the following section, the background and motivation of the study are discussed following the review of the literature and hypotheses. The second chapter introduces the data, selected variables, and the paneldata-method used in the analysis. The third chapter presents the results of the panel data analysis and the answers to the hypotheses made about the models used and the significance of different firm- and industry-specific determinants to firm profitability. The fourth chapter discusses the results in light of the previous research. Finally, the contribution of this paper is summarized and ideas for further research are discussed.
