UK water and sewerage companies face a continued evolution of their regulatory landscape and time pressures for major asset improvement decisions.
Baringa was brought into to work with one water company to help their leadership teamwork through this uncertainty at pace and define their optimal bioresources strategy. The impact of the Environment Agency’s Sludge Strategy and Farming Rules for Water, along with Industrial Emissions Directive regulation, posed a significant risk of non-compliance and commercially detrimental scenarios for the client.
Our team of water industry experts brought the best of commercial, regulatory, and technical knowledge to create an adaptive plan helping the client leverage all sources of value while maximising the asset base. We worked closely with the client’s senior leadership team in a phased approach to ensure we covered all bases, decoupled interacting choices into sequential steps, and created a logical set of decision gates for creating the “right mix” of options.
Aligning strategies and creating a commercially focused methodology
Phase 1 was short and focused to make the case for aligning the strategies for bioresources, energy, and land for the organisation and to gain approval of a commercially focused assessment methodology. Our experts helped summarise the external drivers of value and risk and interplay of considerations for bioresources and energy to client. We also ideated and presented the broad options and future scenarios for the clients bioresources strategy and helped identify gaps in their thinking. This was particularly important due to the uncertainty around the direction of regulations. Our approach helped articulate a clear methodology for assessing the value and risk associated with different options, as well as optimising the overall portfolio.
Identifying investment opportunities
Phase 2 involved a deeper study to help specify a suite of investment options across the company’s portfolio. We assured the client’s asset models and worked collaboratively with their asset and engineering teams to provide a comprehensive bottom-up sizing and forecasts of various parameters for each investment opportunity. We assessed the commercial benefits of the bioresource investment options including the net present value and internal rate of return, taking into account the PR24 methodology. Furthermore, we provided views on the potential impact of options on strategic criteria including carbon/net zero targets, biogas generation, compliance etc. as well as a detailed risk assessment.
Our work in turn helped the client evaluate opportunities for renewables and overall carbon strategy that built from the bioresource position.
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