Icon Water

IndustryPanelpublichearing

6 February2015JohnKnox

ManagingDirector

1

Response tothe draftdecision

•Wesupportthedraftfindingsinfavourofeachofourcontentionswiththe2013ICRCdecision

•Wesupportthewell-acceptedregulatorytechniquesadoptedbythePanel

•Weseekreconsiderationofsomedecisionelements,particularly:

–demandrisk,and

–costofcapital

IconWater’spresentationtoday

•Ourplansfor thenextfouryears(AmandaLewry- GeneralManager,Asset Management)

•Draftdecisionsfor whichwe are seekingreconsideration(SamSachse- GeneralManager,Finance)

Icon Water

Ourplanforthenextfouryears

AmandaLewry

GeneralManager,Asset Management

4

Theinfrastructuresupportingyour

Capitalprojectsto support

continuedservicesinagrowingCanberra

Supportingthe continuedprovision

ofexistingservices

WaterNetworkRiskProfilebyAsset Class

SewerageNetworkRiskProfilebyAsset Class

Non-potable

WaterReservoirs

TreatedWaterPumping

WaterTransferMains

StromloWaterTreatmentPlant

GoogongWaterTreatmentPlant

RawWaterPumping

DamOfftake andhydro

Remotetreatment

FyshwickLMWQCCElectrical

LMWQCCSiteServicesRiskProfile

LMWQCCtreatmentRiskProfile

OdourControlSeweragePump

Stations

0%50%100%

0%50%100%

RenewalProgram

7

Capitalprojects –Renewalof themains

GoodconditionsewerpipePoorconditionsewerpipe

8

Capitalprojects –Renewalof themains

GoodconditionsewerpipePoorconditionsewerpipe

8

Supportingandenablinggrowthin

theACT

AllgrowthinACTsupportedbyLMWQCCVolumesofwaterhavenotincreasedbutsewerloadinghasincreased

9

180,000

Operating costs

Actual operatingcosts($'00012-13prices)

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

-

2013-14Actual2014-15Forecast2015-16Forecast2016-17Forecast2017-18Forecast

Costsarenotpredictedtoincreaseinrealtermsdespiteageingnetworkanda25%increaseinassetbase

Icon Water

Areasinwhichwe areseeking

reconsiderationSamSachse

GeneralManager, Finance

11

IconWaterisseeking

reconsiderationof

•Demandrisk

–Watersalesforecasts

–Thedeadbandforthedemandvolatility

adjustmentmechanism

•Costofcapitalparameters

–Equitybeta

–Gamma

Demand risk

•Riskthatrevenuewillfallsignificantlyshortofefficientcosts:

–Watervolumesareuncertainandsensitivetoweatheroutcomes

–Revenuehighlysensitivetowatervolumes

–Relativelyhighwatersalesforecasts(inourview)

–Noadjustmentforsalesvariancewithin±7%

60,000

55,000

50,000

Water volumes forecast

NetevaporationWatersales

45,000

40,000

Icon Waterestimate/forecast

Paneldraftforecast

35,000

30,000

25,000

20,000

15,000

Financialyearending30 June

AdoptingIconWater’sforecast would increaseatypicalresidentialbillbyaround$1perweek

Deadband

IconWaterproposalPaneldraftdecision

60

40

20

0

-20

-40

•IconWaterproposestherevenueatriskbereducedto 3%offorecastsales(from7%)

•Thisbenefitscustomersby

–reducingthe scopeforIconWaterto earnmorerevenuethanisnecessary,and

–Allowing IconWatertofundproductivityimprovementinitiatives

-60

-80

Costofcapital

Decision
component / Paneldraft
decision / IconWater
proposal
Equitybeta / 0.7 / 0.9
Gamma / 0.5 / 0.25
NominalvanillaWACC / 7.20% / 7.78%

•Weseekanappropriate rateofreturnthatprovidesincentiveforefficientinvestment

•TheWACCdecisionsfor NSWutilitiesin2013wereabove7.20%

•Impactontheannualbill foratypicalresidentialcustomerwouldbe$2perweek

16

IconWater’sproposedprice path

1600

PaneldraftdecisionIconWaterproposal

CPI increaseon 2012-13base

1400

1200

1000

800

600

400

200

ICRCdetermination

Theproposedincreaseonthe2012-13(pre-ICRCdetermination)baseisinlinewithCPI, despitethelargeinvestmentsthathavesecuredwatersupplyforthelongterm

0

2012-132013-142014-152015-162016-172017-18

17

2.0%

Water billasa proportionof

householdincome

1.5%

1.0%

0.5%

0.0%

200kLbillasa%ofaveragehouseholdincome

Theaverageannualcombined waterbillhasremainedbelow1%of

averagehouseholdincomesince 1994-95.

18

IconWater’sproposedprice path

2015-16 / 2016-17 / 2017-18
Icon Waterproposal
Water / CPI+10.8% / CPI+0% / CPI+0%
Sewerage / CPI+11.7% / CPI+0% / CPI+0%
Panel draftdecision
Water / CPI–7.5% / CPI–2.4% / CPI–2.4%
Sewerage / CPI+2.4% / CPI+0% / CPI+0%

Under Icon Water’sproposal to bringprices backapproximately inlinewith2012-13prices,atypicalresidentialcustomerwouldpayaround$3 more eachweek.

2000

Icon Water’sproposedprices

1800

1600

1400

1200

1000

800

2015/162017/18IconWater2015/16IconWater2017/18

Icon Water

IndustryPanelpublichearing6 February2015

Thankyou

Disclaimer

ThisdocumenthasbeenpreparedbyIconWaterfortheIndustryPanelReviewpublichearingheldon6February2015.IconWaterhasmadeeveryattempttoensuretheaccuracyandreliabilityoftheinformationinit,howeveranyprospectivereadermustmaketheirownenquiriestosatisfythemselvesregardingtheinformationprovided.IconWaterdoes not provideanywarrantiesanddoesnotacceptany

responsibilityor liabilityfortheaccuracy,content,completeness, legality,orreliabilityoftheinformation21

within.