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Today's growing sub-standard asset performance, coupled with downward pressures on rates, isforcing water utilities to review their long-term investment position given current and projectedlevels of financing, set against the increasing cost of regulatory compliance. To compoundmatters, past investment decision-making has been far from optimal in terms of the fitness forpurpose of many of the technical solutions implemented by water utilities. High maintenance andhigh capital cost technology has commonly been used where significantly more efficientalternatives exist, thus locking in costs over the lifetime of the associated assets. Whereas thismay be manageable or even acceptable in times of high capital reserves, it is not the case whencapital is rationed, as today. As such, utilities must adopt a more strategic view on when and howto expend capital, paying particular attention to the Net Present Value (NPV) of any investmentdecisions taken. At a stroke, this forms a direct link between the asset management planningprocess and the life-span of the asset.This paper discusses the key aspects of lifecycle analysis from an asset managementplanning point of view. The following strategic planning points are discussed:the importance and relevance of age, condition, performance and criticality as keyparameters in the lifecycle planning process;understanding the capital and operating expenditure balance over the lifecycle of assets;the economics of technology choice;the importance of lifecycle analysis in understanding depreciation of an asset base;the role of asset lifecycle analysis as the kernel of valuing water utilities for credit ratingor sale purposes, for example; and,the role of lifecycle analysis in ensuring effective regulatory and financial reporting.In addition, the paper discusses some of the softer issues that the water industry mustaddress before lifecycle analysis becomes a fully accepted means upon which investmentdecision-making is based. Includes figures.

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Edition: Vol. - No. Number of Pages: 12 File Size: 1 file , 260 KB