Advice to NERSA on value of its asset base

Genesis was commissioned to advise the National Energy Regulator of South Africa (NERSA) on the appropriate methodology to use in order to determine the value of its regulatory asset base.

The firm was also asked to advise on certain cost-of-equity adjustments for the approval of petroleum storage and loading facility tariffs.

The project team reviewed the approach being used by NERSA to determine the regulatory asset base, referring to best practice and lessons from other industries. The team also evaluated the adjustments to the cost-of-equity for small stock premiums, liquidity premiums and project risk, and evaluated whether these adjustments should be allowed for government-owned assets.

The final report included a discussion of the capital asset pricing model and presented alternatives for determining the cost of equity.