Life Cycle Investment in the Water Sector – a Case Study

Nowadays, it is important to manage physical assets of companies as a way of realizing value in order to ensure their survival, where resources are becoming scarcer, and the global economy is unclear. Purpose: It is strategic to know the expenses related to initial investment and the ones indexed to maintenance and functioning, as well as the profits throughout the asset’s Life Cycle. The objective is that, based on these data, the managers may support decisions aiming to increase value for the assets and from the assets. Realizing the value of assets is the primary goal of asset management, being supported by the Strategic Asset Management Plan (SAMP), which must include a number of activities to achieve this goal. Method: Based on the evaluation between expenses and profits, it was used an econometric model to evaluate the asset’s life cycle. Because each sector is significant in the overall picture, asset management interacts with several areas and needs a clear channel for communication, both inside and outside of the business—part of the SAMP is the Life Cycle. Results: The preceding method was applied in the water distribution industry, where a substantial portion of expenses is attributable to energy use and maintenance, both of which are essential for providing the quality of water delivered to the customer. On the other hand, good water use management must be ensured. The result demonstrated objectively the relation between the water price and the asset’s life cycle. Conclusion: The purpose of this paper is to bring managers new tools to improve life cycle analysis, based on risk and availability. The results are different from what is normally expected, thus resulting that electricity consumption is not as important a factor as the risk factor. This paper presents a case study on the water sector while using the latest econometric models and considering different availability and risk rates.