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
Decisioncomponent / 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 / 2017-18Icon 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
2015/162017/18IconWater2015/16IconWater2017/18
Icon Water
IndustryPanelpublichearing6 February2015
Thankyou
Disclaimer
ThisdocumenthasbeenpreparedbyIconWaterfortheIndustryPanelReviewpublichearingheldon6February2015.IconWaterhasmadeeveryattempttoensuretheaccuracyandreliabilityoftheinformationinit,howeveranyprospectivereadermustmaketheirownenquiriestosatisfythemselvesregardingtheinformationprovided.IconWaterdoes not provideanywarrantiesanddoesnotacceptany
responsibilityor liabilityfortheaccuracy,content,completeness, legality,orreliabilityoftheinformation21
within.