ODV Principles and Methodology for Determining Asset Lives

Principles

The key principles related to determining an asset’s life for the optimized deprival valuation are:

• Asset life data is assessed for the actual gas infrastructure fixed assets used by the transmission and distribution organizations and applied to the modern equivalent assets.
• Asset life data is used to determine the remaining life of each asset. The remaining life of an asset represents the unexpired portion of the asset’s cost based value.
• Assets not being used to provide transmission or distribution services (for example abandoned pipes) can still have an economic life if they can be used for other purposes. However, for the transmission or distribution network valuation assets not providing a network service are not included.
• Assets that are “grouped” from several major components (for example, gate stations) should use standard economic lives applicable to the overall asset and adopt a weighted average age based on the components.

Methodology

Each asset type valued using the ODV methodology requires the determination of four asset life parameters, namely:

Standard Economic Life (SEL)

The expected standard economic life of an asset or asset category is the average period the asset will be in use, from new, before replacement, substantial refurbishment or obsolescence based on the technical and economic life. This should take into account safety, economic, and technical factors as well as any legislative requirements.

Age

The asset’s current age, usually based on records of installation date, or the date of substantial refurbishment.

Remaining Economic Life (REL)

The remaining economic life of an asset is the period from the current point in time that the asset or asset category has remaining before replacement, refurbishment or abandonment.

Minimum Remaining Life (MRL)

The minimum remaining life is defined as the age after which no further ageing or loss in asset value is recognized. This will give the asset a minimum value that recognizes ongoing use even though the asset is nearing or has exceeded the SEL./p>