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12 November 2003
Dear Regulatory Director
AQUARIUS 3 AND THE INFORMATION CAPTURE SYSTEM FOR FINAL BUSINESS PLANS
This letter outlines the changes we intend to make to Aquarius 3 and why. It also sets out the timetable for giving you the revised model, the information capture system and business plan reporting requirements.
The use of the Aquarius 3 financial model for draft business plans has highlighted the need to improve the compatibility of the information capture system (ICS) for the business plan and the Aquarius 3 financial model. It also identified a small number of minor equation errors in the model. Whilst these do not have a material effect on the answers they will be corrected.
All companies have had difficulty reconciling the outcome of tax calculations to their own tax modelling. The taxation is the most complex module in the model. We will simplify the calculations when dealing with the tax treatment of capital expenditure in the model. It will mean companies derive the relevant values off line and input them to the model. These inputs will then flow directly through to the calculation of taxation profit without adjustment. Table 34 in the business plan will be changed in parallel.
We do not regard the changes to improve compatibility with the ICS or correct minor errors as significant changes. The changes to taxation calculations are more substantive but as explained above there are corresponding changes to the ICS.
A pre-audit version of the Aquarius 3 software will be available in December. The pre-audit version will be accompanied by a colour-coded guide to the sources of the input data. This will go some way to removing confusion and uncertainty about where the inputs come from.
Changes to business plan reporting requirements have been kept to a minimum between draft and final business plan. A 'working' draft of the final business plan reporting guidance will be placed on the Ofwat website by the end of November 2003. In addition to these changes your final business plan ICS will also include, where possible, pre-populated data from the company preferred strategy in your draft business plan and any updates to that data from the ongoing associated query process. This data is provided to help ease some of the data entry burden. The data can be changed and the ICS will include functions to allow you to completely blank all, or parts, of the ICS if required.
The final version of both Aquarius 3 and the business plan reporting guidance ICS will be released 15 January 2004. We are unable to bring forward the release of the definitive Aquarius 3 financial model or the ICS because of the need to ensure the two software systems are aligned. Following the release of the software we will be holding training workshops. These will cover the procedures for using the ICS, transferring data from ICS into Aquarius, populating the remainder of the Aquarius 3 inputs and onward financial modelling. Dawn Harrison will send out more information with invitations to these workshops shortly.
We are committed to making these improvements to the software to support the final business plan. If you need to carry out modelling for your board before January then you could use the current version of the financial model as the extent of the changes are not great.
Yours sincerely
Fiona Pethick
PR04 Project Manager
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