Cost of Capital
With a track record spanning over 20 years, we have established ourselves as trusted advisors in regulatory economics and cost of capital issues.
We have consistently delivered high-quality results, enabling our clients to make informed decisions, navigate complex regulatory environments, and achieve their strategic objectives. We cater to a diverse range of clients including private companies and utility regulators both in the UK and overseas. We take pride in our ability to offer comprehensive support throughout the entire regulatory process. From the initial assessment of price controls to the preparation of regulatory appeals, our team provides expert guidance to ensure that our clients’ interests are effectively represented. We also excel in providing cost of capital advice as part of expert witness submissions, bringing our technical expertise and industry knowledge to bear in legal proceedings. We frequently leverage our deep understanding of cost of capital principles to provide comprehensive advice to clients on a range of corporate finance issues.
When it comes to cost of capital advice, we understand the critical role it plays in informing key decisions and shaping regulatory outcomes
Our approach is rigorous and data-driven, combining economic analysis with an understanding of the unique dynamics of the sectors we serve. Examples of sectors we have advised include: water, energy (gas and electricity), transport (aviation, rail, roads), telecoms, ports,etc.
For example, we can advise on:
Methodology for cost of capital
Advising on specific methodological issues related to the Weighted Average Cost of Capital (WACC).
Estimation of cost of capital
Estimating the cost of capital for projects, firms or sectors using the Capital Asset Pricing Model (CAPM) or other models (e.g. Dividend Growth Model, third moment CAPM, Fama-French model), drawing on market data and regulatory precedents.
Financeability
Assessing the financeability of price control proposals, and advising on how any financeability problems that are identified should be addressed.
Support in price review process
Providing support on the cost of capital and financeability to regulated firms or regulators in the context of price control reviews (e.g. by providing them with analysis and assisting them in responding to representations from other parties). Our wider price control expertise is presented in more detail here.
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Support in price review process
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Policy assessments
Assessing the impact of policy interventions (e.g. changes in regulatory frameworks) on firms’ cost of capital.
Analysis of business risk
Modelling the systemic risk (i.e. those correlated with the broader economy) of business activities.
Financial viability of capital projects
Assessing the expected costs of financing capital projects.
Macroeconomic analysis
Providing forward looking views on the macroeconomic cycle and its implications for the building blocks of the cost of capital (e.g. risk-free rate, asset betas, and debt premium). Our macroeconomic analysis expertise is presented in more detail here.
When it comes to cost of capital advice, we understand the critical role it plays in informing key decisions and shaping regulatory outcomes
Our approach is rigorous and data-driven, combining economic analysis with an understanding of the unique dynamics of the sectors we serve. Examples of sectors we have advised include: water, energy (gas and electricity), transport (aviation, rail, roads), telecoms, ports,etc.
For example, we can advise on:
Key Contacts
Please feel free to reach out to our experts if you have any questions.
Cost of Capital Publications
2018
2014
2011
