Understanding the Impact of Shorter Life Assets on the Longer Term Maintenance Requirements of the UK Water Industry
ISBN: 1 84057 635 9
Water industry capital maintenance expenditure has more than doubled in real terms in the 20 years since privatisiation. The report explores the reasons for increasing non-infrastructure capital maintenance requirements including growth in the asset base and an increase in the proportion of shorter life assets resulting in more frequent replacement cycles. The report also sets out to quantify at industry level historical expenditure by asset type and asset life category and then to forecast the impact of this historical investment on future maintenance requirements. The report shows that due to the nature of enhancement expenditure since privatisiation the trend of increasing non-infrastructure capital maintenance requirements is expected to continue in future. Capital maintenance requirements are not expected to stabilise until a significant period after enhancement expenditure is ceased. Capital maintenance expenditure is also compared with current cost depreciation into the long term, helping explain the differnces between the two.
For companies wishing to repeat the analysis at the company level the report proposes three different methodologies that could be implemented using company data. The outputs of the company methodologies may help inform long term strategy, validate water company capital maintenance plans and help explain why future maintenance requirements are different from historical requirements. However, the limitations of the methodologies need to be recognised and they are not intended as a replacement for detailed application of the Capital Maintenance Planning Common Framework.
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