Analysing financial side of sewer deal

  • Jun. 8, 2011 10:00 a.m.

The District of Sooke sought out the opinion of a U.S.-based consultant to analyze the financial implications of the 21-year sewer agreement.

The executive summary conducted by Raftelis Financial Consultants Inc. on the proposed 21-year sewer agreement. Raftelis Financial Consultants Inc. is a full-service water and wastewater consultants whose services primarily include water and wastewater rate studies, cost of service studies, revenue bond feasibility studies, conservation pricing studies, and strategic financial planning studies.

In summary, the executive summary findings are as follows:

1. The proposed pricing structure in the franchise agreement is reasonable and is consistent with comparable service arrangements.

2. The Basic Service Fee will be subject to adjustments in three-year re-determination periods to reflect inflation.

3. An 8 per cent corporate overhead rate is well within a reasonable range and is consistent with comparable service agreements. For comparative purposes, the corporate overhead rate used by EPCOR in a recent utility regulatory filing was 21.9 per cent.

4. EPCOR’s target internal rate of return is between 8 – 10 per cent for this agreement and a typical range for similar agreements is between 7 – 12 per cent depending on the level of risk.

5. 7.5 per cent fee is planned for construction program management and capital project construction mark-up is 5 per cent.

The entire financial analysis provided by the South Carolina company Raftelis Financial Consultants Inc. is available on the District of Sooke website, under “What’s New.”

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