Ross continues to explain the “Service Levels, Growth, Risk, Lifecycle Management Diagram” and in this post, he talks about “Lifecycle Management” and “Financials”
Lifecycle management in the middle here, this is the engine room. So you’re looking at your operational cost and programs, your maintenance cost and programs, your renewal cost and programs, your new capital and then ultimately disposal.
And they are driven by what service I’m trying to provide. Do I have enough of this asset? Do I need more if I’ve got capacity?
The demand, including sustainability and climate change demand and adaptation. And what do I need to do to meet that, and what are my risks? And I can’t meet everything cause there’s never enough money.
So it’s always trade-offs. But you do all that. You work out the best programs that you can and the cost that you can from there.
There’s optimization side of that is then looking at, you know sometimes you can do more maintenance and less renewal. Or you can do more renewal and less maintenance. So all of those sorts of trade-offs.
Dr. Henning is a worldwide expert on areas of optimization. So if you want to know the nitty-gritty of that, we have the man in the room when he’s here. So ask those sorts of questions, his expertise is quite widely recognized.
And then out of that, you produce a set of financials. And the financials will be expenditure line, operations and maintenance, renewals, capitals and maybe depending on the jurisdiction, depreciation.
New Zealand is quite interesting because we are required to cash fund depreciation. Not many places in the world where that’s the case. In most cases, it’s the book entry in accounting.
And then how we are going to, how are we actually going to pay for that. So, there are fees, charges, tariffs, loans, government grants, other funding.
In the US, they have municipal bonds in some of the jurisdictions. So you go out to the market and you raise a bond. So, all of those ways are ways of funding.
FEATURED IMAGE CREDIT: Stewart Baird via Flickr Creative Commons License.