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Financial modelling is important to simulate the income generated by the new tariff structure and to confirm that this revenue is sufficient for the long-term viability of the utility.

The financial model covers the following:

  • Income from sales by applying the tariff structure to customer category consumption levels added to any other income such as interest, grants or subsidies.

  • Expenses such as Operating and Maintenance costs, repayment of capital and support costs.

  • All income and expenses are projected into the future.

  • Indicators such as cash flow, internal rate of return and net present value.

  • Aspects such as surplus, taxation, non-technical losses and social-economic implications. 

Such a model is useful to calculate different scenarios and to highlight the factors that influence the financial well being of the utility. The utility can then be managed towards the strategic long-term goals.

Income Statement:

Products and Tools used:

The Financial Model is a MicroSoft Excel application. The model consists of a number of sheets used for data input and intermediate calculations. The final product of the financial model is the financial statement sheets providing a projection of the expected financial statements for the given data inputs. 
The model can be used on Microsoft Excel versions 97 to the latest version of MicroSoft Excel.
The model is designed to work with the Tariff Analysis Module as described in separate documentation.

Net Income After Tax:

Methodology:

The Financial Model simulates and utilises the results from the following strategic studies normally undertaken and maintained by a utility:

  • Tariff Structure Studies

  • Generation Expansion Plans

  • Transmission and Distribution Expansion Plans

  • Refurbishment and Replacement Plans

  • Operation and Maintenance Expenditure Plans

  • Sales and Revenue Forecasts

  • Business Plans

  • Annual and medium term budgets

  • Electrification plans

  • Any study or investigation that is of primary importance to the business of the utility.

 

Major Projects Completed:

NETGroup has completed many projects where the group’s financial modelling skills were applied. The following projects deserve specific mentioning:

  • SFPC Zanzibar Tariff Study and Financial Modelling (40 MVA system)

  • Tanesco Tariff Study and Financial Modelling (500 MVA system)

  • City Power Restructuring (2000 MVA system)

  • Tshwane Primary Networks Master Plan (1500 MVA system)

  • Eskom Kwa Zulu Natal Master Plan (4000 MVA system)

  • Eskom Eastern Cape Master Plan (1000 MVA system)

  • Eskom Southern Transvaal Master Plan (6000 MVA system)

Balance Sheet:

Cash Flow Statement:


 

For more information, contact Marius du Preez (men.dupreez@netgroup.co.za)