A valuer’s guide to EVS-PME 2022

• Structure 1 of 4 · Part I.A · Standards

• Structure 2 of 4 · Part I.B · Guidance

Market Value and other bases of value; the valuation process with macro and micro identification and data collection; the valuation approaches and methods; reporting the valuation, with an annex on report content; and PME valuation and energy efficiency.

GN 1–3 apply the market, cost and income approaches. GN 4–9 cover useful life, functional obsolescence, separating plant buildings from machinery, inventory, insurable, scrap and salvage value, and recycling of renewable energy equipment.

• Structure 3 of 4 · Part II · Information

• Structure 4 of 4 · Parts III–IV

Four information papers

Ethics and EU law

Practical context on how maintenance affects value and how to verify it, EU carbon-reduction rules, PME serving energy efficiency in buildings, and how real estate and PME valuation meet in the energy transformation of Europe’s building stock.

Part III is the European PME Valuers’ Code of Conduct. Part IV explains PME valuations required by EU legislation, EU law as part of the PME valuation matrix, and PME valuation for taxation, with a schedule of relevant EU legislation.

• Core rule 1 of 4 · EVS-PME 1

• Core rule 2 of 4 · EVS-PME 1

Unless law, contract or the client requires otherwise, valuers use Market Value, the amount PME should exchange for between a willing buyer and seller at arm’s length after proper marketing. Because PME is also leased, Market Rent applies to the expected rent for PME items.

Market Value reflects the use that is physically possible, reasonably probable, and legal or likely to become so, and gives the highest value. In most cases it equals existing use, because the cost of changing use outweighs any gain.

• Core rule 3 of 4 · EVS-PME 1

• Core rule 4 of 4 · EVS-PME 5

In situ or ex situ

Energy efficiency deadlines

PME valuations need a stated assumption on how the assets are sold. In situ means sold in place as a complete or incomplete line, for a going concern or a closed business. Ex situ means sold separately and moved to the buyer, after dismantling, transport and reinstallation costs.

A legal deadline for higher energy efficiency or lower emissions forces owners to upgrade or replace PME. Valuers must track such deadlines, estimate the upgrade or replacement cost, and consider its effect on Market Value at the valuation date.

■ Structured summary

EVS-PME 2022, part by part

The left column follows the five standards in the order a valuation is carried out. The right column covers the nine guidance notes, the four information papers, the code of conduct and the EU legal background.

Standards (EVS-PME 1–5)

Guidance and context

EVS-PME 1 Bases of value: Market Value and Market Rent, highest and best use, assumptions such as in situ or ex situ, special assumptions, and other bases from fair value to idle-in-place.

GN 1–3 Approaches: direct and comparative match; straight-line and exponential depreciation; direct capitalisation and DCF.

EVS-PME 2 Process: written terms agreed before the work, sub-contracting with client approval, third-party use, limited information, and the report-signing valuer’s own inspection.

GN 4 Useful life: life-cycle analysis, replacement analysis, and an indicative table of useful lives by equipment family.

EVS-PME 2 Identification: macro-identification of the whole plant (process, capacity, condition, energy, maintenance) and micro-identification of each item (maker, model, serial number, capacity, age, location), plus data collection.

GN 5 Functional obsolescence: operational versus technological obsolescence, excess operating cost and excess capital cost.

EVS-PME 3 Market approach: direct match, comparable match and percentage of cost, with adjustments for differences between comparables and the subject.

GN 6 Plant building versus machinery: when machinery counts as fixed or non-fixed.

GN 7 Inventory valuation.

EVS-PME 3 Cost approach: current cost new by the detail, trending or cost-to-capacity method, less physical, functional and economic depreciation, plus residual value.

Income approach: direct capitalisation or DCF, often on EBITDA for process plants.

GN 8 Insurable, scrap and salvage value.

GN 9 Recycling renewables: EU waste rules and the end-of-life challenge for PV panels, wind turbines and batteries.

EVS-PME 4 Reporting: clear written report, inspection details, conflicts, uncertainty, compliance statement, an annex of report content, and valuation review.

EVS-PME 5 Energy efficiency and legal deadlines.

Information papers: IP 1 maintenance and value, IP 2 EU carbon-reduction rules, IP 3 PME serving energy efficiency in buildings, IP 4 real estate and PME valuation in the energy transformation.

Part III European PME Valuers’ Code of Conduct, and Part IV EU legislation: valuations required by EU law, the PME valuation matrix, and taxation.

• Bases of value 1 of 4 · EVS-PME 1

• Bases of value 2 of 4 · EVS-PME 1

Fair value has a general meaning between identified parties and an IFRS 13 meaning for financial reporting. Special value reflects a special purchaser, synergistic value a combination worth more than its parts, and investment value specific investment criteria.

What creditors or equity holders could expect if a company’s PME is liquidated, piecemeal or as a whole. In situ, the housing real estate is excluded; ex situ, dismantling, transport, installation and commissioning costs must be taken into account.

• Bases of value 3 of 4 · EVS-PME 1

• Bases of value 4 of 4 · EVS-PME 1

Continued use and idle-in-place

Insurable, scrap and special assumptions

Continued use value assumes the PME keeps operating in its planned location and contributing to the business. Idle PME from a discontinued operation is a commodity, valued in exchange rather than in use; moving and reinstalling it is what restores value-in-use.

Insurable value is the cost of replacing damaged PME, with or without depreciation per the policy. Scrap value is the value of materials when PME is no longer usable, net or gross of disposal costs. Alternative use value and forced sale value are special assumptions.

■ Two checklists

Two checklists every EVS-PME assignment needs

EVS-PME 2 lists the minimum terms of engagement, which must be agreed in writing before the valuation is undertaken; without them the valuation does not comply. EVS-PME 4 and its annex set what the report must cover.

Engagement (EVS-PME 2)

Report (EVS-PME 4)

1. Parties: the client and any other intended users, the identity and status of the valuer, and declarations that no conflict of interest exists and of independence.

1. Form: in writing, reliable, understandable to someone with no knowledge of PME or valuation, and neither ambiguous nor misleading.

2. Subject and purpose: the purpose of the valuation, the PME being valued (with registration or inventory IDs where needed), and its ownership.

2. Instructions: the instructions, the basis and purpose of the valuation, and the addressee of the report.

3. Basis and date: the basis or bases of value and a specific valuation date.

3. Analysis: the comparables and other information used, the analytical process, and the results that led to the opinion of value.

4. Investigation and care: the scope and extent of investigations, including inspection, and the extent of any duty of care.

4. Inspection: the date, the documents examined, confirmation that the valuer inspected, and its extent, such as partial, sampling or desktop.

5. Compliance and fee: consistency with EVS-PME, the fee, and a basic disclaimer.

5. Conflicts: where instructed despite an actual or potential conflict, the conflict and its acceptance by the parties.

6. Also consider: assumptions, special assumptions and departures; reliance on client data; publication limits; the timetable; site health and safety; confidentiality of photos and patents; and security rules.

6. Opinion and uncertainty: a clear opinion of value at the valuation date, comment on unusual market uncertainty, and, where useful, a period after which the value should not be relied on.

7. Compliance: a statement that the qualified valuer responsible has conformed to EVS-PME, with the full list of report contents set out in the annex to EVS-PME 4.

• Practice point 1 of 4 · Identification

• Practice point 2 of 4 · Inspection

Start by understanding the whole production process: products, capacity, layout, energy use, maintenance and remaining life. Then identify each item by maker, model, serial number, capacity, age and location, using accounting inventory numbers where plates are missing.

The valuer who signs the report must personally inspect the PME, ideally in operation and in its environment. Where a full inspection is impossible, partial, sampling or desktop methods may be used, but the report must state which and what was seen.

• Practice point 3 of 4 · Depreciation

• Practice point 4 of 4 · Life and residual

Three forms of depreciation

Useful life and residual value

Physical deterioration is measured by age-to-life or use-to-total-use ratios, direct amount, or observation. Functional obsolescence reflects excess operating or capital cost against modern equivalents. Economic obsolescence comes from outside factors such as demand or regulation.

Distinguish economic, physical, useful and remaining life, and look beyond the current owner when judging economic life. Residual value is the net scrap or salvage value at the end of useful life. Maintenance and overhauls can extend life, so the valuer should verify them.

✱ Keep learning

Read the official text, then go deeper

This guide is Valuvix’s independent summary of European Plant, Machinery & Equipment Valuation Standards 2022; we are not affiliated with or endorsed by TEGOVA. The official text is published by TEGOVA and always prevails. Use this page to orient yourself, then rely on the standard itself, and see our EVS 2025 guide for real estate and our EVS-BV 2026 guide for business valuation.