VCT
22/07/2014 08:49
GENERAL
REL: 0849 HRS Vector Limited
GENERAL: VCT: WACC draft decision constrains Vector investment
The Commerce Commission has released its draft decision on the proposed
amendment to the Weighted Average Cost of Capital (WACC) percentile,
recommending a decrease from the current 75th percentile to the 67th
percentile.
This change would reduce the allowable return on our assets when all previous
investment decisions have been based on the returns we would expect from a
75th percentile. A WACC setting at the 75th percentile is a position
long-held by the Commission.
The draft decision reduces the investment returns from the network and, when
added to other approaches by the Commission, places further pressure on our
ability to invest in network sustainability and growth.
Current technology advances greatly increase risk and uncertainty in network
investments, which should be increasing the allowable return on assets or
WACC percentile, not reducing it.
The correct balance between lower prices for consumers and a suitable return
on investment in the network is critical to maintaining the long-term,
security of supply that is essential for Auckland's growth and success.
The Commission has exercised considerable discretion in proposing the 67th
percentile in light of two of its independent expert advisors recommending
the status quo or higher percentiles.
Vector continues to engage with the Commerce Commission on the draft WACC
percentile decision.
The draft decision can be found on the Commerce Commission website.
ENDS
End CA:00252932 For:VCT Type:GENERAL Time:2014-07-22 08:49:14
