Appendix B: Core Business Economic Value Added (EVA) ($NZm)
BACKGROUND EVA provides an economic measure of performance and explicitly recognises the expected return to investors. EVA underpins our pricing framework, which is premised on achieving a fair return on the capital invested in the core business, reflected by an EVA result of zero. Key parameters and inputs into the EVA framework have been presented to our customers through the consultation process for the FY20-22 pricing round.
Plan FY20
Plan FY21
Plan FY22
EVA
X X Total capital employed Debt employed
212.4
238.1
235.4
Equity employed
137.3
143.7
150.6
349.7
381.8 386.0
X X Charge on operating capital
21.5
24.1
25.3
X X Economic value added
–
–
–
Cost of capital – key parameters Risk free rate – 3 year Government Stock
1.69% 1.69% 1.69% 7.00% 7.00% 7.00%
Market risk premium
Business risk factor (asset beta)
0.60 67th
0.60 67th
0.60 67th
WACC range percentile
X X Cost of capital
6.59% 6.59% 6.59% 6.59% 6.59% 6.59%
X X Return on capital (RoC)
18
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