Water Utility Financial Model

The model begins with the customer base rather than with revenue. Closing connections equal opening connections plus new connections, and new connections grow at population growth.

• That single connection line drives both the billing base and developer fees, so the two never disagree. Water volume then builds from connections multiplied by persons per household, per-capita consumption and days, with an annual per-capita demand trend that reduces use over time.
• Non-revenue water starts at an opening percentage and falls by a fixed number of basis points each year, so billed volume is total volume less the leakage share. A nominated dry year applies a demand uplift that raises both volume and the volume-driven costs, which matters because a drought lifts revenue and power and chemical costs together.

Water revenue combines a fixed charge per connection with a volumetric charge on billed volume. Tariff escalation is not hardcoded: it is computed as inflation plus a K factor, and the tariff index compounds that escalation across the forecast.

• Wastewater revenue follows the same structure using a fixed sewerage charge and a volumetric wastewater tariff, with wastewater volume equal to billed water volume multiplied by the return-to-sewer percentage, which prevents billing all water as sewage. Developer or connection fees are a separate line, escalated at inflation.
• Because developer fees sit outside the price control, the model compares allowed revenue only against regulated revenue — water plus wastewater — rather than total revenue.

Cost of sales separates variable costs — power, chemicals and sludge — from the direct shares of labour and network maintenance, with the remaining shares sitting in operating expenses alongside IT, insurance, compliance and bad debt. Capital expenditure is built as a percentage of revenue split between maintenance and growth, with a leakage-reduction block added on top and driven by the non-revenue-water improvement target.

• An eligibility flag determines the share that enters the Regulated Asset Base. The RAB roll-forward adds eligible capex, subtracts regulatory depreciation and adds CPI indexation on the opening balance.
• Because the RAB is indexed, the allowed return applied to it must be a real WACC — using a nominal rate as well would pay for inflation twice.

Debt is sized off cash need rather than a gearing target. Cash available before debt movements is compared with a minimum cash balance; any surplus repays debt, and any shortfall is funded by a drawdown capped at the target debt-to-RAB capacity.

• Interest expense and interest income are both calculated on opening balances, so the sweep can be driven off the actual full-year cash flow without a circular reference.
• The outputs include the income statement, balance sheet, cash flow, covenant ratios such as interest cover and debt to RAB, a dashboard with KPI cards and a RAB waterfall, and a single valuation bridge that discounts explicit free cash flow and adds a terminal value based on the closing RAB. The public download is a values-only preview, not a live model.