Capital Investment Plan 2009 - Heathrow Airport

practice and provides below detailed information on inflation assumptions and issues as
they impact the delivery of the capital investment plans at Heathrow.
5.4.1 Terminology
In order that information on inflation is not misunderstood HAL presents below
definitions of the key terminology used.
Constant = Price base is fixed regardless of the year in which investment occurs.
Nominal = Outturn price. I.e. the actual cost of the investment including impact of
inflation.
Real = Known price base where inflation is fixed and no longer assumed.
Inflation Years = Inflation is quoted from middle of regulatory year to middle of the
subsequent year. E.g. Inflation from “07/08 prices” to “08/09 prices” is the year on year
rate from September 2007 to September 2008. “08/09 prices” refers to values as they
would have been in September 2008.
5.4.2 Price Bases and Inflation Indices
The Q5 regulatory decision in March 2008 was published in real 2007/08 prices. This
forms the basis of all calculations for the quinquennium. CIP 2008 was published in
estimated 2008/09 constant prices with values being increased by 4.23% estimated
inflation from the 2007/08 real prices. CIP 2009 is published in real 2008/09 constant
prices with budget values being increased by 5.00% (Refer to section 5.4.4) known
inflation from the 2007/08 real prices. This change allows HAL to define the
management of the project budgets and is explained in the CIP for utmost clarity in line
with Annex G commitments.
The regulatory decision includes five areas of capital expenditure, namely;
• Capital Projects
• IT
• Rail
• Thames Water, and
• PSDH.
However, CIP 2008 only detailed Capital Projects, IT and Rail expenditure. CIP 2009
details all five areas of expenditure.
The following tables provide a summary of the total capital investment plan for
Heathrow in the three cost bases outlined. Note: These are produced with cash flow
assumed to be as per regulatory decision in order to calculate “control totals” for
rephrased budgets.
Actual budgetary cash flow will be shown in Appendix Q: Cost Schedules.
Internal File Name: 0903XX-CIP 2009 Main Document-V71-IG 39