Cost of Debt report by NERA

Portsmouth Water commissioned NERA Economic Consulting (NERA) to review Ofwat’s consultation on setting the cost of debt allowance for the 2019 price review.

In particular, the company asked for a review Ofwat’s proposed approach to compensating for embedded debt costs which – based on the industry average embedded debt costs –may not compensate Portsmouth Water for its atypical and efficiently incurred embedded debt. In this report, it is concluded that Portsmouth Water’s embedded cost of debt allowance should be set with reference to a market benchmark value at the time of issuance, in common with the approach of UK regulators for companies with atypical debt profiles.

Download the full report here