Software

Hayward Consulting Group

UTILITY ECONOMIC
REGULATION

“FinMod”
A Valuation Model For Water Utilities

Copyright © 2005 Hayward Consulting Group, All rights reserved.

Abstract

FinMod — A valuation model for water utilities – enables water utility participants (e.g., utilities, commercial bankers, other lenders, regulators and investors) to estimate a utility’s value and future revenue requirements (for rate case purposes). A valuation study could be used for:

  1. Financial acquisitions or divestitures
  2. Damages (e.g., condemnation, lost profit, etc.)
  3. Business planning
  4. Strategic planning
  5. Gift, estate, donation
  6. Property taxes
  7. “Buy/sell” agreements
  8. Corporate dissolution (i.e., liquidation)
  9. Antitrust
  10. Marital dissolution
  11. Transfer of ownership
  12. Going private
  13. Employee Stock Ownership Plan (ESOP)

Benefits and Value

  1. Analyzes the value of a utility using 12 valuation methods.Uses well recognized approaches/ methods, and in particular, those approaches appropriate for a regulated utility.
  2. Analyzes several economic benefit streams so that any anomalies in the utility’s value are readily apparent.
  3. Produces an exhibit showing key profitability, leverage, liquidity, and operating performance measures for each year during the forecast period.
  4. Compares a utility’s financial and operating performance to comparable utilities.
  5. Compares the subject utility’s rates to comparable utilities.
  6. Identifies how the utility’s expected performance compares to the National Regulatory Research Institute’s (NRRI) financial distress benchmarks. This is useful for regulators in making policy decisions.
  7. Captures the key regulatory policy issues in a state.
  8. Clearly identifies over 95 key financial, regulatory, legal, tax, and operating assumptions.
  9. FinMod’s exhibits can be used in preparing a formal valuation report meeting the requirements of the National Association of Certified Valuators and Analysts (NACVA).
  10. Uses the National Association of Regulatory Utility Commissioners (NARUC) Uniform System of Accounts for accounting purposes.
  11. Allows for using multiple types of financing.
  12. Data for the model is based on a unique “client questionnaire.” Entering the data for the model is simple.
  13. The model identifies year-to-year changes in a utility’s value. This allows the user to isolate the reasons for the changes.
  14. The output reports meet the requirements of suppliers of capital (e.g., bankers).
  15. The user can specify the level and detail of analysis it wants and bypass various valuation methods.
  16. The model can be linked to a rate design model for rate case purposes or used on a stand-alone basis.

To see a sample exhibit click here.

For more information contact:

Hayward Consulting Group
David L. Hayward, Principal
1047 Hygeia Ave, Leucadia, CA 92024
Phone (760) 637-7305
Email: DavidLHayward@cs.com