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Letters to Regulatory Directors
RD 19/03 9 May 2003 Dear Regulatory Director AQUARIUS 3 FINANCIAL MODEL Our new financial model, Aquarius 3, was released in November 2002. Since then we have updated the model to take account of the outcome of our recent consultation on the methodology for the 2004 review, make improvements to its ease of use and software compatibility, and to add a data import/export facility. The audit of the updated version of the model by RSM Robson Rhodes is now complete and the update is being released today. This letter explains the release arrangements. Aquarius 3 May release The version of the model released today is based on the methodology set out in 'Setting water and sewerage price limits for 2005-10: Framework and approach' and is consistent with the business plan formats and tables. The May 2003 update will be the version of the financial model that we expect companies to use when preparing the draft business plans for submission on 15 August. We will use the May 2003 update of the model to determine price limits for 2005-10 in 2004. However, if there are unforeseen developments during the course of the review prior to the submission of the final business plans in April 2004 that require changes to the model, there will be a further release to deal with these. We will explain the reasons for this and give as much notice as possible should the need arise. The data import/export facility is a new feature in this version of the model. It has been designed to load the relevant data from the draft business plan information capture system (ICS) into Aquarius 3 and other inputs (not captured in the ICS) prior to running the model. It will also save and load fully modelled datasets. Distribution and availability The Aquarius 3 financial model has been developed with us by Cap Gemini Ernst & Young (CGEY). Under the terms of our contract with CGEY, one copy of the model is available free of charge to water companies, DEFRA, the Welsh Assembly Government and WaterVoice. Extra copies of the model can be purchased from CGEY. Others who want a copy of the software can also purchase it from CGEY. A contact point at CGEY is given at the end of this letter if you wish to order a copy. The updated model will be distributed free of charge to those who have purchased the November 2002 version. Documentation We have revised the rule book to accompany the Aquarius 3 software to reflect the changes to the methodology for the 2004 review. This provides an overview of the modelling principles and contains a copy of the final audit opinion from RSM Robson Rhodes to Ofwat. It also includes a guide to the inputs with cross references to the sources of the definitions for data items already collected by us and new definitions for items not previously collected. Similarly we have updated the Aquarius 3 user manual to include guidance on using the import/export facility. Both the rule book and the user manual are available on our web site with this letter. Data The Aquarius 3 financial model is populated with dummy datasets. The dummy datasets have been compiled for a hypothetical water and sewerage company and a hypothetical water company. They are provided so that you can follow the arithmetic of the financial model more easily than reading the Excel equations. We do not intend to distribute the detailed data (either the inputs or the outputs) widely. We intend to share a fully populated model with the companies to support the draft and final determination of price limits in 2004 and expect to receive fully populated model from the companies to support their draft and final business plans. Workshops We held workshops for the water companies in early April to explain the changes made since November and how to use the model. These sessions were based on the pre-audit version of the May release of the model. A similar session was held for reporters and auditors as part of Joint Workshop 20 on 23 April 2003. Contacts If you have any queries on any aspect of the Aquarius 3 financial model please contact: Dawn Harrison Head of Financial Modelling E-mail – dawn.harrison@ofwat.gsi.gov.uk Tel: 0121 625 1317 Fax: 0121 625 3609 To purchase the Aquarius 3 financial model software contact: Jim Fairley Cap Gemini Ernst & Young 1 Forge End Church Street West Woking GU21 1DB E-mail – jim.fairley@cgey.com Tel: 0870 904 4834 Yours sincerely Keith Mason Director of Regulatory Finance  |
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