© 2019 Synario

FINANCIAL MODELINGFOR WATER AUTHORITIESESSENTIAL ELEMENTS OF A WELL-CRAFTED PROJECTION MODEL

© 2019 Synario

AGENDA

• The Challenge

• The Solution

➢ Build the Right Model

➢ Conduct the Right Analysis

➢ Make the Right Decisions

2

© 2019 Synario

A Complex Business Model

Ongoing organic business• Revenue requirements

• Rates

• Resources

Prospective initiatives and projects• Cost

• Timing

• Funding

AffordabilityMultiple stakeholder groups

3

Changing mandates

Shifting regulatory environment

© 2019 Synario

A Vicious Decision Cycle

4

BurdenWhat is your time worth?

General ManagerBoard of DirectorsRating Agencies

StaffBusiness Officers

Consultants

CFOScenario Definition

OpaqueAnalysis

StaticAnswers

•Model Development

•Data Management

•Scenario Wrangling

•Reliability Testing

•Report Writing

CredibilityWhat is your reputation worth?

AngstWhat is your confidence worth?

QuestionsIdeation

© 2019 Synario

Build the Right Model

Structured environment• Object-oriented design

• Rolled-up reporting summaries

• Separate modeling from reporting regimes

• Dovetailed projection with audit/budget

5

Expense Object

InstanceInstanceInstance

Expense Summary

Revenue Summary

Revenue Object

InstanceInstanceInstance

Revenue Object

InstanceInstanceInstance

Modeling Regime Reporting Regime

NO-NOs• Perfect becomes the enemy of the Good• False precision• Exception modeling• Wish List modeling

Data

Data

Data

Results

2019 Budget 2020 Projected 2021 Projected 2022 Projected 2023 Projected

RevenuesOperating Fund Revenues

Commodity & Delivery $494,984,802 $517,217,928 $539,026,329 $560,374,050 $581,547,186 Readiness to Serve 27,774,067 28,514,435 29,217,834 30,032,139 30,895,991 Renewable Energy Charge 11,182,996 11,294,826 11,407,774 11,521,852 11,637,071 Other Fees 346,875 350,344 353,847 357,386 360,960 Street Lighting 3,498,387 3,533,371 3,568,705 3,604,392 3,640,436 Energy Optimization Charge 6,743,856 6,811,294 6,879,407 6,948,201 7,017,683 Late Payment Charge 693,750 700,688 707,694 714,771 721,919 Other Services 2,127,500 2,148,775 2,170,263 2,191,965 2,213,885Total Operating Fund Revenues 547,352,233 570,571,660 593,331,854 615,744,756 638,035,130

Revenue RequirementsOperating Fund Expenditures

Purchased Power 117,029,676 120,540,566 124,156,783 127,881,487 131,717,931 External Resource Debt and O and M 49,725,682 51,217,452 52,753,976 54,336,595 55,966,693 Depreciation 84,819,081 87,363,653 89,984,563 92,684,099 95,464,622 Administrative & General 48,399,691 49,912,361 51,462,420 53,059,806 54,704,742 Fuel 31,197,413 32,133,335 33,097,335 34,090,255 35,112,963 Conservation Electric 7,254,634 7,472,273 7,696,441 7,927,334 8,165,154 Distribution -137,500 -141,625 -145,874 -150,250 -154,757 Non Fuel Production and Maintenance 38,500,315 39,655,324 40,844,984 42,070,334 43,332,444Total Operating Fund Expenditures 376,788,991 388,153,339 399,850,628 411,899,659 424,309,792

Operating ResultsNet Operating Income 170,563,242 182,418,321 193,481,226 203,845,097 213,725,339

Non-OperatingNon-Operating Revenue 1,700,500 1,870,550 2,057,605 2,263,366 2,489,702Non-Operating Expense -1,683,720 33,400,466 33,480,443 33,556,421 33,628,600Debt Service 56,097,031 56,108,094 56,111,844 56,097,844 56,100,844

Other Cash FlowsOther Cash Flows In 0 0 0 0 0Other Cash Flows Out 58,573,702 90,645,017 87,862,766 85,219,627 82,708,646

Cash BalanceStarting Cash Balance 54,745,032 114,021,762 118,157,056 136,240,835 167,475,406Surplus/Deficit 59,276,729 4,135,295 18,083,779 31,234,571 43,776,951Ending Cash Balance 114,021,762 118,157,056 136,240,835 167,475,406 211,252,357

RatiosCoverage 3.04 3.25 3.45 3.63 3.81Days Cash on Hand 110 111 124 148 182

2019 Budget 2020 Projected 2021 Projected 2022 Projected 2023 Projected

RevenuesOperating Fund Revenues

Commodity & Delivery $494,984,802 $517,217,928 $539,026,329 $560,374,050 $581,547,186 Readiness to Serve 27,774,067 28,514,435 29,217,834 30,032,139 30,895,991 Renewable Energy Charge 11,182,996 11,294,826 11,407,774 11,521,852 11,637,071 Other Fees 346,875 350,344 353,847 357,386 360,960 Street Lighting 3,498,387 3,533,371 3,568,705 3,604,392 3,640,436 Energy Optimization Charge 6,743,856 6,811,294 6,879,407 6,948,201 7,017,683 Late Payment Charge 693,750 700,688 707,694 714,771 721,919 Other Services 2,127,500 2,148,775 2,170,263 2,191,965 2,213,885Total Operating Fund Revenues 547,352,233 570,571,660 593,331,854 615,744,756 638,035,130

Revenue RequirementsOperating Fund Expenditures

Purchased Power 117,029,676 120,540,566 124,156,783 127,881,487 131,717,931 External Resource Debt and O and M 49,725,682 51,217,452 52,753,976 54,336,595 55,966,693 Depreciation 84,819,081 87,363,653 89,984,563 92,684,099 95,464,622 Administrative & General 48,399,691 49,912,361 51,462,420 53,059,806 54,704,742 Fuel 31,197,413 32,133,335 33,097,335 34,090,255 35,112,963 Conservation Electric 7,254,634 7,472,273 7,696,441 7,927,334 8,165,154 Distribution -137,500 -141,625 -145,874 -150,250 -154,757 Non Fuel Production and Maintenance 38,500,315 39,655,324 40,844,984 42,070,334 43,332,444Total Operating Fund Expenditures 376,788,991 388,153,339 399,850,628 411,899,659 424,309,792

Operating ResultsNet Operating Income 170,563,242 182,418,321 193,481,226 203,845,097 213,725,339

Non-OperatingNon-Operating Revenue 1,700,500 1,870,550 2,057,605 2,263,366 2,489,702Non-Operating Expense -1,683,720 33,400,466 33,480,443 33,556,421 33,628,600Debt Service 56,097,031 56,108,094 56,111,844 56,097,844 56,100,844

Other Cash FlowsOther Cash Flows In 0 0 0 0 0Other Cash Flows Out 58,573,702 90,645,017 87,862,766 85,219,627 82,708,646

Cash BalanceStarting Cash Balance 54,745,032 114,021,762 118,157,056 136,240,835 167,475,406Surplus/Deficit 59,276,729 4,135,295 18,083,779 31,234,571 43,776,951Ending Cash Balance 114,021,762 118,157,056 136,240,835 167,475,406 211,252,357

RatiosCoverage 3.04 3.25 3.45 3.63 3.81Days Cash on Hand 110 111 124 148 182

© 2019 Synario

Conduct the Right Analysis

Bundle assumption setso Unlimited permutationso Non-destructive changes

Dynamic comparisonso Real-time updateso Multi-dimensionalo Pivot-ableo Aggregate and Incremental

All Ratepayers

Residential Only

Delayed Increase

New FeeOtherSalary increase

New benefits planComp

Cases

Best

Expected

Worst

Pay-Go

LT Debt

CP

New Plant

New Plant (delayed)

Intake Project

Rates

NPE

NPS Mitigation

Funding

Capital

All Ratepayers

Residential Only

Delayed Increase

New Fee

Salary increase

New benefits plan

Scenario 1

Best

Expected

Worst

Pay-Go

LT Debt

CP

New Plant

New Plant (delayed)

Intake Project

NPS Mitigation

All Ratepayers

Residential Only

Delayed Increase

New Fee

Salary increase

New benefits plan

Scenario 2

Best

Expected

Worst

Pay-Go

LT Debt

CP

New Plant

New Plant (delayed)

Intake Project

NPS Mitigation

All Ratepayers

Residential Only

Delayed Increase

New Fee

Salary increase

New benefits plan

Scenario n

Best

Expected

Worst

Pay-Go

LT Debt

CP

New Plant

New Plant (delayed)

Intake Project

NPS Mitigation

∆x

• Create a “full-field view”• Consider version control issues• Develop revision-tracking regime

(permutations of Cases)(non-destructive versions)

© 2019 Synario

Make the Right DecisionsTailored narratives ➔ enhanced communication

• Malleable reports/interfaces

• Multi-user environment

• Concurrent accessibility

• Differential access

7

Modeling RegimePowerUsers (developers/analysts)

Units/heads

Rates/prices

Growth (%)

Salaries (%)

Benefits (%)

Capital project ON $50 FY18

ON $40 FY18Debt issuance

OFF $65 FY22Acquisition

ON $35 FY19Growth initiative

ON FY17Expense reduction plan

Op

erat

ion

sP

roje

cts/

init

iati

ves

Reporting RegimeUsers (analysts/reviewers)

Res

ult

sIn

pu

ts

ON

Operations

Board of Directors

Rating Agencies

Dashboards

OFF

Projects

Cases

Scenarios

Financials

Capital Plan

Debt

Ratios/metrics

Dynamic reportingTransparency ➔ audit functionality

Integratedreal-timeanalysis

© 2019 Synario

The Solution

8

BurdenBuild/use the right model

CredibilityMake the right decisions

AngstConduct the right analysis

• Employ a strict development construct

• Enforce use rules• Manage data consistently

• Control versioning• Write and manage Macros

• Write and manage Conditional

Logic

• Create process (XL ➔ ppt)• Accept lags• Accept stasis

© 2019 Synario 9

Purpose-build software: Burden

Angst

Lost Credibility

DEMONSTRATION

© 2019 Synario 10

Thank you!www.synario.com

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