Q6 Full Business Plan - Heathrow Airport

6. Dependencies and risks
6.1. Regulatory model (continued)
A fundamental shift in regulatory policy towards a
new construct – particularly at a time of legislative
and economic turbulence – would increase uncertainty
and risk, distort incentives to investment, and possibly
create an unnecessary burden on both the regulator
and market participants, while adding no immediate
additional value. Moreover, a shift in regulatory
policy – which has an adverse effect on the RAB and
by definition, Heathrow’s financing structure and
business – is likely to also have an adverse effect
across the value chain.
As stated above, Heathrow has developed its business
plan based on an assumption of a RAB-based single till
regulatory construct. Given the interdependent nature
of the variables within the ‘building block’ model and
the inter-temporal nature of regulation and incentive
structure at Heathrow, any amendments to the
regulatory construct will have an impact on the
business plan.
6.2. Licence
Heathrow remains keen to ensure that the development
of proposals on the structure of the licence and its
content proceed simultaneously to the development of
the wider Q6 review. It will be critical for Heathrow and
all stakeholders to have an early and clear understanding
of how regulatory policy is intended to operate through
the proposed licensing framework.
The new licensing framework will bring significant
changes to the regulatory regime and may also have a
bearing on the type of regulation. This business plan is
based on an assumption that the new legislative and
licensing framework will not materially affect either how
Heathrow is regulated, or the assumed regulatory
construct. For example, the business plan does not allow
for any additional cost which may arise as a result of new
licence conditions or related regulatory requirements.
However, there are clearly potential risks to Heathrow.
Uncertainty and risk associated with the legislative and
licensing process could directly impact market and
investor confidence in what is a highly capital intensive
business.
6.3. Government policy
The business plan is based on the existing two-runway
Heathrow, in accordance with current government policy.
There is however the possibility of a change to
government policy, for example permission for a future
expansion at Heathrow. Any change in government
policy will have an impact on this plan, and in particular
we assume will trigger expenditure under a ‘Notified
Items’ approach.
See Box 6.1 on sustainable hub capacity growth.
Page 48 Heathrow Q6 Full Business Plan - Public version | Chapter 6 © Heathrow Airport Limited 2013