Infrastructure: Regulatory

What type of regulated business?

Substantial portions of the electricity, gas and water distribution networks in the UK and in some European countries have been sold to the private sector.   Being natural monopolies, these distribution networks are subject to price controls by government regulators such as OFWAT and OFGEM in the UK.

What is a regulated model?

A financial model that is used for the semi-annual or annual operations of a regulated business.   More often than not this type of model is best known as a ‘strategic & operating regulatory model’.   This model combines the certainty of the historic actuals with the forecast of the future potential.   This model also wraps the underlying regulated operations with a set of statutory company financial statements, sometimes across a consolidated group of companies.

Modelling for large-scale regulated distribution networks in the UK or Europe is defined by five characteristics:

  1. Complex regulatory calculations to drive revenue
  2. Often consolidations of multiple company entities with associated adjustments and eliminations
  3. Highly structured financing including inter-company loans to link the operating companies to the holding and finance-holding companies
  4. The requirement to mix management accounting actuals and forecast
  5. Strategic, long-term time horizons to suit shareholder investment requirements (for example 25-years plus)

Given these five defining characteristics these models are normally big and highly complex.

Lazuli Solutions has a long and deep experience of these strategic operating models for electricity and gas distribution companies in both the UK and Europe.

To find out more read the case study on Infrastructure modelling.

Who are these models for?

Our strategic and operating regulatory models are for demanding, commercial-focused investors and directors.

They want to better understand the dynamics of their business, and gain an intuitive feeling for the key drivers of their business.

They require elegant and pragmatic solutions that simply give them the information they need, without wasting time.

They also demand the reassurance of proven technology and track record for the commercial world in which they work.

Features

  • Our strategic and operating regulatory models are fast and macro-free
  • Modular build allowing change over time
  • Transparent and simple modelling
  • Can comfortably deal with tens of financing structures and inter-company loans
  • Super-organised and structured
  • Excellent sensitivity analysis, results storage and comparison
  • Built in FAST standardised modelling language
  • Proven track record
  • Bankable models, they can be used to source investment or finance

Benefits

What are the key benefits?

  • Fast analysis for intuitive business understanding
  • Better commercial structuring
  • Better deal-driver understanding
  • Quicker analysis with clear and transparent organisation
  • Investor reassurance with bankable models
  • Reassurance from proven track record

Objections

We don’t doubt that the savvy financier has questions, so we try to answer these.

What is the cost of a strategic and operating regulatory model?

Our models contain part-template and part bespoke elements so are very well priced.

Are these models reusable?

Yes, for the most part they are.   We can explain this in more detail.

Will the model allow me to find the most optimised solutions?

Yes, one of the key strengths of our models is the organised and well-structured commercially correct cash flow waterfall.

Will the potential investors doubt the model?

No, our models are bankable.   More than that, we like to think they are at the very top of what investors and lenders will have seen.

Get in touch to find out more

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