NERA Economic Consulting Report on Cost of Capital for Water and Sewerage Companies in England and Wales

Study Contributes Input to 2009 Price Review

LONDON--()--NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, has produced a new report meant to provide input for the UK water industrys 2009 price review (PR09). The report, Cost of Capital for PR09, was commissioned by Water UK and produced by NERA with assistance from two leading finance academics: Professor Paul Grout of the University of Bristol and Professor Ania Zalewska of the University of Bath.

Our report applies advanced economic tools and models to estimate the cost of capital for the water and sewerage companies in England and Wales, including the cost of equity, cost of debt, and gearing, said NERA Associate Director Dr. Richard Hern. This is an important exercise because the cost of capital is a key factor regulators use in determining price limits for water companies.

The estimates produced by NERA and Professors Grout and Zalewska project a slightly lower cost of capital for the water industry than the cost of capital allowed by Ofwat at the 2004 price review. However, the main driver of the lower costs a lower cost of debt seems to be shifting as the cost of new debt for water companies has been moving up in recent months.

Cost of Capital for PR09 reflects the authors best estimates as of March 2008. Given the volatile conditions in the financial markets and the need to flesh out many details of PR09, NERA is planning to update the reports conclusions later this year.

About NERA

NERA Economic Consulting is an international firm of economists who understand how markets work. Our more than 45 years of experience creating strategies, studies, reports, expert testimony, and policy recommendations reflects our specialization in industrial and financial economics. Our global team of more than 600 professionals operates in over 20 offices across North America, Europe, and Asia Pacific.

NERA Economic Consulting (www.nera.com), founded in 1961 as National Economic Research Associates, is a unit of the Oliver Wyman Group, an MMC company.

Contacts

NERA Economic Consulting
Benjamin Seggerson, +1 202 466 9232
Public Relations Manager
ben.seggerson@nera.com

Contacts

NERA Economic Consulting
Benjamin Seggerson, +1 202 466 9232
Public Relations Manager
ben.seggerson@nera.com