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Capital Investment
A sound capital investment plan outlines proposed projects to maintain and grow the enterprise asset base. The plan is analyzed and tested as it pertains to the financial and operational needs of the organization. Upcoming capital projects, operational and maintenance projects, plus customer demand, all must be considered in the decision making and planning process in order to gain maximum value while managing risk.
To successfully accomplish this, capital projects need to be identified and prioritized based on needs and costs. Acceptable failure rates and associated risk tolerances need to be defined and agreed upon, and their impact on critical issues such as customers and regulatory requirements analyzed. Appropriate upfront planning and tools can enable utilities to effectively analyze various project criteria including weighting (cost to do versus cost not to do), risk mitigation, historic reliability, personnel safety and customer reliability.
By prioritizing investments based on our clients' corporate objectives, we help them optimize the balance between risk of investment in aging assets versus deferring capital and operations and maintenance (O&M) spending. Our approach is to first understand and evaluate the business drivers and goals of the organization, combined with an analysis of existing data and processes. Leveraging this understanding combined with our in-depth experience, we help our clients prioritize investment decisions, maximize spending value, and more effectively manage the risk of high-cost, low-probability events.
The end results allow our clients to determine performance changes based on increasing or decreasing spending and if the dollars invested are justified with improved reliability, while managing risk at acceptable levels.
Benefits of a sound capital investment plan include the following:
- Leveraging historical information.
- Enhancing forecasted models.
- Optimizing investments on a continuous basis by enabling decisionbased on historical and forecasted performance of assets.
- Ensuring that O&M system data marts are collecting information that will benefit the planning process.
- Lowering material costs by allowing clients to work with suppliers and commit budgets well into the future to get the best price possible.
- Improving future rate cases by better forecasting long-term required capital investments based on historical O&M expenditures.
- Lowering the carrying cost of capital by managing daily operational cash reserves.
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