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:
- Financial acquisitions or divestitures
- Damages (e.g., condemnation, lost profit, etc.)
- Business planning
- Strategic planning
- Gift, estate, donation
- Property taxes
- “Buy/sell” agreements
- Corporate dissolution (i.e., liquidation)
- Antitrust
- Marital dissolution
- Transfer of ownership
- Going private
- Employee Stock Ownership Plan (ESOP)
Benefits and Value
- 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.
- Analyzes several economic benefit streams so that any anomalies in the utility’s value are readily apparent.
- Produces an exhibit showing key profitability, leverage, liquidity, and operating performance measures for each year during the forecast period.
- Compares a utility’s financial and operating performance to comparable utilities.
- Compares the subject utility’s rates to comparable utilities.
- 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.
- Captures the key regulatory policy issues in a state.
- Clearly identifies over 95 key financial, regulatory, legal, tax, and operating assumptions.
- 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).
- Uses the National Association of Regulatory Utility Commissioners (NARUC) Uniform System of Accounts for accounting purposes.
- Allows for using multiple types of financing.
- Data for the model is based on a unique “client questionnaire.” Entering the data for the model is simple.
- The model identifies year-to-year changes in a utility’s value. This allows the user to isolate the reasons for the changes.
- The output reports meet the requirements of suppliers of capital (e.g., bankers).
- The user can specify the level and detail of analysis it wants and bypass various valuation methods.
- 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