Today's growing sub-standard asset performance, coupled with downward pressures on rates, is
forcing water utilities to review their long-term investment position given current and projected
levels of financing, set against the increasing cost of regulatory compliance. To compound
matters, past investment decision-making has been far from optimal in terms of the fitness for
purpose of many of the technical solutions implemented by water utilities. High maintenance and
high capital cost technology has commonly been used where significantly more efficient
alternatives exist, thus locking in costs over the lifetime of the associated assets. Whereas this
may be manageable or even acceptable in times of high capital reserves, it is not the case when
capital is rationed, as today. As such, utilities must adopt a more strategic view on when and how
to expend capital, paying particular attention to the Net Present Value (NPV) of any investment
decisions taken. At a stroke, this forms a direct link between the asset management planning
process and the life-span of the asset.
This paper discusses the key aspects of lifecycle analysis from an asset management
planning point of view. The following strategic planning points are discussed:
the importance and relevance of age, condition, performance and criticality as key
parameters in the lifecycle planning process;
understanding the capital and operating expenditure balance over the lifecycle of assets;
the economics of technology choice;
the importance of lifecycle analysis in understanding depreciation of an asset base;
the role of asset lifecycle analysis as the kernel of valuing water utilities for credit rating
or sale purposes, for example; and,
the role of lifecycle analysis in ensuring effective regulatory and financial reporting.
In addition, the paper discusses some of the softer issues that the water industry must
address before lifecycle analysis becomes a fully accepted means upon which investment
decision-making is based. Includes figures.
| Edition : | Vol. - No. |
| File Size : | 1
file
, 260 KB |
| Note : | This product is unavailable in Ukraine, Russia, Belarus |
| Number of Pages : | 12 |
