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Utility Valuation Qualifications FinMod/Financial Valuation Model Article: "Water Utility Valuation: Beyond the Dartboard Approach"
David L.
Hayward
© Copyright Hayward Consulting 2008 Designed
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UTILITY
VALUATION
Utility Valuation Books, Publications, and Presentations
Utility Valuation Conferences
UTILITY VALUATION PROJECTS Our utility valuation projects have been in the context of privatizations, condemnations, "buy-sell agreements," asset acquisitions, utility bankruptcy proceedings, and valuations for property tax purposes. The following project profiles reflect our experience in the areas of utility valuation. Confidential Water ClientScope of Work: On behalf of a privately-owned water company, prepared a full valuation report which considered the asset, market, and income valuation approaches. The study was in preparation for the eventual sale of the company. Moongate Water Company CondemnationScope of Work: Reviewed and critiqued a valuation report prepared in the context of litigation involving the acquisition of a portion of Moongate Water Company’s service territory by the City of Las Cruces, New Mexico. Valuation of Johnson Utilities (Water and Wastewater). Scope of Work: For a land developer interested in purchasing Johnson Utilities, we developed a list of issues for the developer to perform its “due diligence” for the acquisition; researched Arizona Corporation Commission’s decisions and orders affecting the valuation of water and wastewater utilities; and researched comparable transactions. Development and Commercial Use of a Water Utility Financial Valuation Model Scope of Work: In cooperation with the National Association of Water Companies (NAWC), developed a water utility valuation model “FinMod” using the three main valuation methodologies – income, asset, and market – used by analysts in the financial industries and professional valuation societies. The model has been used by at least two publicly-traded, investor-owned water companies in the U.S. Consolidation of Small Water Utilities in California Scope of Work: On behalf of Golden State Water Company, prepared draft testimony involving valuation issues related to consolidating small water utilities in California, asset impairment (risk) issues; and water utility pricing. Valuation Conferences (2000 and 2002) Prepared for the National Association of Water Companies (NAWC) Scope of Work: Develop the curriculum for the first two international conferences regarding valuing water utilities. In addition, Mr. Hayward is the author of Valuing A Water Utility, 2006, for NAWC. This is the only water utility valuation book sold by NAWC to the investor-owned water utility industry. In the 2002 conference, Mr. Hayward taught the following topics: Valuation Introduction, Valuation Methodologies, and Valuation Case Study – Sierra Pacific Resources. Sale of Sierra Pacific Resources (Westpac Utilities) Water Assets Scope of Work: Prepared a 67-page valuation report for NV Nuon (a Dutch integrated utility) using the cost, market, and income methods of valuation. Developed an enterprise discounted cash flow (DCF) model “FinMod” using free cash flows to value the assets. (HCG’s recommended valuation was informally confirmed by another large publicly traded investor-owned water utility considering acquiring Westpac’s assets.) The assets were ultimately purchased by a government entity for $350 million. Chattanooga-American Water Works, Inc. CondemnationScope of Work: Reviewed and critiqued a valuation briefing prepared by a consulting firm for the City of Chattanooga, Tennessee. A precise valuation was not made and this condemnation project was eventually terminated. Cottonwood Water Works, Inc.Scope of Work: Prepared a confidential valuation study (“buy-sell agreement”) for an investor-owned water utility in Arizona. Sale of Water Utility Assets to the City of Santa Fe Scope of Work: As a Staff Economist with the New Mexico Public Regulatory Commission, Mr. Hayward evaluated the proposed sale of New Mexico-American Water Company’s water utility assets to the City of Santa Fe. (Case Nos. 1965/1969 were subsequently withdrawn.) Valuation Conferences Prepared for the National Association of Certified Valuation Analysts (NACVA) Scope of Work: Lectured at three seminars and conferences related to valuation techniques and issues in the public utility industry. Valuation of Montenegro Electric Company (EPCG) Scope of Work: Mr. Hayward was involved in critiquing a valuation report prepared by Deloitte & Touche, et. al. on EPCG for the Government of Montenegro’s Privatization Council. On the basis of this project and other valuation workshops prepared for NACVA, Mr. Hayward was asked by NACVA to address the issue of privatizing electric utilities at their 2002 Annual Conference. The topic of the presentation was: “Valuing a State-Owned Power Company: A Case Study From Montenegro.” Valuation of the Power Holding Company of Nigeria Scope of Work: As part of the Government of Nigeria’s process of privatizing state-owned companies, prepared an outline of a valuation report related to creating 11 separate distribution companies. (The project was terminated due to the government not providing the necessary data.) Valuation of A Generating Plant for Property Tax Purposes. Scope of Work: In 2001, we analyzed the value of an electric utility peak generating plant located in San Diego County, California. Using an income approach, we concluded that the plant was undervalued by approximately $1 billion. (Note: this was an unfunded research project completed in conjunction with Mr. Hayward’s teaching responsibilities at the University of Phoenix, San Diego.) Egyptian Electricity Sector Privatization. Scope of Work: As part of a USAID-funded Financial Management Project for the Government of Egypt, Mr. Hayward was involved in restructuring the electricity sector in Egypt. A significant portion of the project involved developing financial models for the seven electric distribution utilities that the Egyptian Government wanted to privatize. In addition, Mr. Hayward reviewed a valuation model used by an investment banking firm. Electric Utility Valuation Book for Public Utilities Reports, Inc. (PUR) Scope of Work: Mr. Hayward was the primary author of Valuing an Electric Utility: Theory and Application for Public Utilities Reports, Inc. (www.PUR.com). Chapter 11 contains a case study of the valuation of El Paso Electric Company from the perspective of Central and South West Corporation. The concepts and methodologies in this book were used in Valuing A Water Utility for NAWC. PUR claims that the electric book is a “best seller.” USAID Privatization Project in the Czech Republic Scope of Work: Prepared a fully developed business plan including financial projections for a new district heating company in the Czech Republic. Designed software to project the new company’s cost of service over a 20-year period. Assessment of Utility Assets by the City of Las Cruces, New Mexico Scope of Work: In a joint venture with The Columbia Group, we were involved in a variety of regulatory, valuation, and ratemaking issues related to the bankruptcy of El Paso Electric Company (EPE). Part of the project involved assessing two reports that evaluated the possible acquisition, by condemnation, of electric assets by the City of Las Cruces, New Mexico. The goal of the assignment was to identify which report represented the more realistic view of the acquisition by condemnation. The estimates ranged from $37.1 million (one report) to $148.1- $171.8 million (second report). For more information contact: Hayward Consulting L.L.C.
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