Smoothed revenue Smoothed revenue Smoothed revenue from the from the from the Smoothed revenue indicative final indicative final indicative a Revenue from the decisiona decision a decision decision including debt including debt including debt convergence. convergence convergence Based on revised Based on revised proposal except for: proposal except for: hybrid tax hybrid tax calculation calculation All costs from revised proposal except for: debt debt All from revised convergence convergence proposal except hybrid tax Costs for hybrid tax calculation 10 % per annum 20 % per annum calculation. reductions reductions debt between forecast between forecast convergence opex costs and opex costs and benchmark benchmark efficient opex efficient opex allowance allowance More favourable to Worst case scenario. Ausgrid than Scenario More favourable to Importantly, this 3. This scenario More favourable to Ausgrid than Scenario scenario reflects faster opex Ausgrid than Scenario 2. This scenario excludes the efficiency savings 1. This scenario is reflects partial effects of debt than scenario 2. In more closely efficiency savings by Comment convergence. combination, reflective of the Ausgrid to reduce the Excluding debt scenarios 3 and 4 decision difference between its convergence illustrate the circumstances than proposed opex costs artificially sensitivity of the scenario 1. and our final decision worsens the outcome to the ability opex determination. outcomes. to make efficiency savings. (a) At the time this analysis was provided to RSM Bird Cameron, decision inputs were not completely finalised. However, they are closely reflective of the final decision inputs. Results of the scenarios We summarise RSM Bird Cameron's conclusions in respect of each scenario in Table 202, below. RSM Bird Cameron's report identifies two key metrics: operating cash flows excluding regulatory depreciation, and cash flows after accounting for Ausgrid's proposed capex program. It presents these post-capex cash flows prior to and after external equity raised, and both of those subtotals including and excluding regulatory depreciation. Overall, Ausgrid performs favourably on both key indicators under all four scenarios. Table 202 Summary of RSM Bird Cameron Conclusions Scenario Conclusions Ausgrid generates positive operating cash excluding the regulatory depreciation allowance. 1 It generates positive cash flows prior to external equity raising if it uses portions of its regulatory depreciation allowance.
Revenue Smoothed revenue from the decision Smoothed revenue from the indicative final decisiona including debt convergence. Smoothed revenue from the indicative final decision a including debt convergence Smoothed revenue from the indicative a decision including debt convergence Costs All from revised proposal except for hybrid tax calculation. All costs from revised proposal except for: hybrid tax calculation debt convergence Based on revised proposal except for: hybrid tax calculation debt convergence 10 % per annum reductions between forecast opex costs and benchmark efficient opex allowance Based on revised proposal except for: hybrid tax calculation debt convergence 20 % per annum reductions between forecast opex costs and benchmark efficient opex allowance Comment Worst case scenario. Importantly, this scenario excludes the effects of debt convergence. Excluding debt convergence artificially worsens the outcomes. More favourable to Ausgrid than Scenario 1. This scenario is more closely reflective of the decision circumstances than scenario 1. More favourable to Ausgrid than Scenario 2. This scenario reflects partial efficiency savings by Ausgrid to reduce the difference between its proposed opex costs and our final decision opex determination. More favourable to Ausgrid than Scenario 3. This scenario reflects faster opex efficiency savings than scenario 2. In combination, scenarios 3 and 4 illustrate the sensitivity of the outcome to the ability to make efficiency savings. (a) At the time this analysis was provided to RSM Bird Cameron, decision inputs were not completely finalised. However, they are closely reflective of the final decision inputs. Results of the scenarios We summarise RSM Bird Cameron's conclusions in respect of each scenario in Table 202, below. RSM Bird Cameron's report identifies two key metrics: operating cash flows excluding regulatory depreciation, and cash flows after accounting for Ausgrid's proposed capex program. It presents these post-capex cash flows prior to and after external equity raised, and both of those subtotals including and excluding regulatory depreciation. Overall, Ausgrid performs favourably on both key indicators under all four scenarios. Table 202 Summary of RSM Bird Cameron Conclusions Scenario Conclusions 1 Ausgrid generates positive operating cash excluding the regulatory depreciation allowance. It generates positive cash flows prior to external equity raising if it uses portions of its regulatory depreciation allowance.
AER%20-%20Final%20Decision%20Ausgrid%20distribution%20determination%20-%20Attachment%2020%20-%20Analysis%20of%20financial%20viability%20-%20April%202015.docx