Valuation of RAB assets for Power Generation company in South Africa

Brief

South Africa’s electric public utility company reached out, as they required a valuation of its Regulatory Assets Base (RAB) for its Generation, Transmission and Distribution tangible fixed assets. This was to be achieved in terms of the International Valuation Guidance (IVG) Note No.8. While also reflecting the Multi-Year Price Determination (MYPD) methodology and in accordance with International Financial Reporting Standards (IFRS) for full financial reporting.

Work

In partnership with our partners and consultants in South Africa, we valued the assets using the Modern Equivalent Asset Value (MEAV) methodology. This centres on determining the current cost of replacing an asset with its modern equivalent. This is then adjusted for physical deterioration and all other relevant forms of obsolescence and optimisation to allow for a reasonable return on such RAB.

Outcome

As a result of the report and the detail of information, the valuation was utilised within the company’s MYPD application to the energy and utilities regulatory board in South Africa.