Asset Management in Water Utility

8/12/2019 Asset Management in Water Utility

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Japans waterworks facilities have been developed, peaking around 1975 and 1998. The coverage of the watersupply system is approximately 97% (FY 2007).

The current waterworks facility assets are estimated 40 trillion yen or more as the accumulated investment amount(at the end of FY 2005).

Circumstances Surrounding the Waterworks

Facilities Renewed in Japan

Asset Management

Changes in Investment in Waterworks Facilities (Values in 2005)

ntamount:Millionyen

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

50.0

60.0

70.0

80.0

90.0

100.0

watersupplysystem:%

Source: Materials from the Waterworks Vision Follow-up Panel

Investme

0

200,000

400,000

600,000

10.0

20.0

30.0

40.0

Coverageof

th

Fiscal year

Investment amount Coverage of the water supply system

Asset Management in Water Utility

Definition

Asset Management

Asset management in water utility provides a practice lesson to realize a sustainablewaterworks project as stated in the waterworks vision. This activity is systematized from themedium and lon term stand oint to mana e and o erate the waterworks facilities in an

Renewal demand

Anticipated financial balance

Basic ConceptFrom a Medium & Long Term Perspective(Over 30 to 40 years or more in general)

effective and streamlined manner over their life time, indentifying the characteristics ofwaterworks facilities.

Examination of renewal cyclesbased on functional checkups

Examination offund-raising plans

Formulate and implement financially supported renewal plans basedon technical platforms.


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Formulation of the Guideline on Asset Management

in Water Utility

Practice of asset management is indispensable for preparations for major renewals to come.

With introduced asset management approaches, planned rebuilding or renewal of waterworks facilities, as well

Revised Waterworks Vision (July 2008)

At present, only part of the water utility entities are prepared for renewals to come from a mediumand long term perspective.

as their efficient maintenance and operation, should be promoted based on the technical platforms from a

medium and long term perspective. To obtain consumers understanding for burdens shared for reconstruction

and renewal, how to provide information properly should be studied in details, while funds raising will be

conducted through renewal reserves and other means.

The guideline released on July 7, 2009 has been delivered to all prefectural governments and thewater utility entities authorized by the minister.

Start formulating the guideline, expecting all water utility entities to practice asset managementafter urging each entity to fully recognize the importance of asset management.

Asset Management Practice Cycles

In water utility, asset management is composed of the following four elements: (1) Provision of necessary

information; (2) implementation of micro management; (3) implementation of macro management; and

(4) utilization of anticipated renewal demand and financial balance.

Asset Management

Implementation of macro management Utilization of anticipated renewal demand andfinancial balance

Provision of necessary informationMaintenance &complaint data

Examination of

anticipated

renewal demand

Examinationof anticipated

financialbalance

Financialdata

Provision ofinformation

Effects of

renewal

Selection of

examination

approaches

Selection of improvement measures for upgrade of macro

management

Summarizationof validitychecks &

examinationresults (II-3-4)

Checkupresults

Inspectiondata

Asset ledgerFacility ledger

Regional waterworks vision

Basic

plansFinancial plan

Facilitydevelopment plan

Necessity ofrenewal

investment

Facility B

Implementation of micro management (II-2) Facility A

Installation

&

renewal

Repair

investment

Operation managementand inspection researchof waterworks facilities

Checkups &assessmentsof the facilities Implementation plans

Financial plan

Facility development plan

Utilization of

operation

indicators


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System to Implement Asset Management

Since asset management is an activity Management judgment

Financial ]

(Article 7 of the Local Public Enterprise Act)

Water utility manager

general, it is necessary for the entire

organization to tackle the activity.

Particularly, the technical

administrator of waterworks, whose

key role is specified in Article 19 of

Technical administratorof waterworks

Service levelTechnical level

Business scale

condition

Renewalproject

expenses

RestructuringReorganization

Renewaldemand

]

[Macromanagement

(Article 19 of theWaterworks Low)

Managementjudgment

Financialcondition

Person in

charge of

finance

Renewaldemand

the Waterworks Low, should leadasset management with a focus on

well-disciplined activities by the

entire organization.

Micromanagemen erson n

charge ofmanagementof facilities

and equipment

Person incharge ofmanagementof pipelines

Person incharge ofplanning

Key Points in Practice of Asset Management

Collection of Facility DataRegard the data in ledgers as basic information

Cover unavailable data with proper assumptions

Asset Management

Checkups & Assessments

Renewal Demand

rea on o a a a ase

Securely accumulate daily management data

Understand the conditions of the facilities

Assessment of soundness and evaluation of seismiccapacity

It is essential to determine renewal cycles

Prioritize key facilities in determining renewal cycles

Do not cause shortage of funds

Maintain funds required for renewals

Level of dependence in bond issuance, charge setup,cost reduction, etc.

Renewal planning with a balance between techniqueand costs

as soon as possible

Anticipated Financial Balance


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Provision of Necessary Information

Collect data on all facilities, including those for water intake, storage, conveyance, purification and distribution. Classify information into two categories of structures & facilities and pipelines. It is acceptable to cover unknown data with assumptions. However, file the detailed assumptions as records.

Key Points in Collecting Necessary Information

Asset Management

Update the information timely. Continue to make improvements for enhancement of accuracy and reliability.

Item Major Information

Ledgers and specifications of theapplicable facilities

Names & identification codes, years of acquisition, acquisition prices (book cost prices), locations,structure types & materials, shape sizes/capacities/ performances/diameters, number of units/fundamentalnumbers/extensions, etc.

Data on inspection researchDrawings, facility conditions (troubles and their levels), aging history (repair, accident records, andcheckup results in the past) etc.

Information required for facility Inspection research results, ground information, materials on estimated earthquake damages, hazard maps,

Table Types of Information Required

c ec ups an assessments eve s o ac ty mportance, eve s o e ect n rea owns, etc.

Information required for anticipatingrenewal demand

Passed years, statutory useful lives, facility conditions (troubles and their levels), levels of facilityimportance, facility checkup results, soundness level prediction results, renewal p riority assessmentresults, laying unit prices, deflators, etc.

Information required for anticipatingfinancial balance

Profit balance, capital balance, financial statements, issuance & redemption of bonds, etc.

Information required for organization ofmacro management

Total assets, level of asset soundness, service level, rate level, etc.

Provision of necessary information (Creation of a Database)

Key Points in Creating a Database Collection of waterworks facility data is essential to asset management

Asset Management

Water supply system is composed of so many assets. Paper-based data management requires increasing labor year by year due toexpanded facilities and accumulated data amounts. In addition, securement of filing spaces and deterioration of paper quality (loss of

scattered data) are also problems to be settled.

Labor required for data management is savedUseful for retrieval, secondary processing, etc.

There are a variety of applications, in addition to asset managementPay attention to user-friendliness, operation rules to be prescribed, and otherfactors


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Micro Management (Operation Management & Inspection Research)

Operation Management & InspectionResearch of Waterworks Facilities

Asset Management

.Check ongoing deterioration through periodic inspection.

Such inspection research is essential to detect signs of accidents and failures, as well as toconfirm the operating conditions of the waterworks facilities.

Utilize inspection data accumulated for a long period as basic data to know tendencies insoundness, failures and accidents of the waterworks facilities.

Repair the facilities remarkably deteriorated, which are identified through inspectionresearch, with emergency measures to normalize their functions.

Inspectionresearch Accumulation(Creation of a database) Data analysis

Utilization in macro management For example, data on deterioration and periods

from installation to failure may be used as grounddata in determining renewal cycles.

Micro Management (Checkups & Assessments

In general, the lives of facilities, which differ depending on locational conditions and

Checkups & Assessments ofWaterworks Facilities

Asset Management

usage env ronmen s, s ou no e e erm ne un orm y.

Therefore, it is important to determine optimal renewal cycles based on the integritylevels assessed through functional and other checkups.

Under the ministry ordinance revised in March 2008 (the Ministry Ordinance

Specifying the Technical Standards for Waterworks Facilities), the seismic capacitycriteria applied to the waterworks facilities are given a clear-cut definition.

On the other hand, the seismic capacity of the existing waterworks facilities supposedlydiffer depending on when they were built. Examine the urgency of their renewal andproper points of time for renewing individual facilities (when to make seismicretrofitting) through comparison between their seismic capacity assessed by seismic

agnos s an t e per ormance requ re un er t e or nance.

These results are used asimportant grounds in

determining renewal cycles inmacro management.

Functional checkups &seismic diagnoses

Assessment of integrity &evaluation of seismic capacity

In the guideline, principles for checkups andassessments, as well as guidance, are referred to.


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Macro Management

(Anticipated Renewal Demand and Financial Balance)

(1) Examination of renewal demand

Determine renewal cycles

Asset Management

Consider the importance, priority, level of integrity, and seismic capacity ofthe facilities

(2) Examination of the anticipated financial balance

Reflect the examined renewal demand

Examine renewal financial sources, including bond issuance and charge

Check the current asset management level in waterworks facilities by yourselfbefore studying macro management about available approaches.

rev s on to prevent un s ortage, t roug s mp e s mu at on.

Renewal Demand (Renewal Cycles & Reinvestment Values)

(1) Determination of renewal cycles

Regarding the periods from acquisition of assets to their renewal (called renewal standards in theguideline) as parameters, determine renewal cycles (years) by setting up a renewal standard, which isestablished based on monitored maintenance or time schedule maintenance for each facilitycategory (civil engineering structures, pipelines, machinery & facilities, etc.), applying the said

Asset Management

Status-monitoring maintenance

Individual renewal cycles are determinedbased on inspection research and checkup results.

It would be better to determine the renewal cycles of the waterworks facilities, of which lives differ depending on theirlocational conditions and usage environments, based on status-monitoring maintenance.

s an ar s ar ng n e year o acqu s on o a ac y.

Time schedule maintenance

Renewal cycles are determined based on statutory useful lives and passed years (in-service periods).

Classified in the same category with other assets, key facilities should be renewed from a perspective of preventivemaintenance.

(2) Determination of reinvestment values

As for structures and facilities, regard the prices calculated by correcting book cost prices shown inthe fixed asset ledger with deflators for price increases (current prices) as reinvestment values.

With regard to pipelines, their reinvestment price is calculated with the following steps; determine thetotal length of the pipeline to be renewed, referring to the lengths constructed year to year, and thenmultiply the total length thus determined by the installation unit price.

In addition, for the plan to improve aseismic performance and other functions, such functionalimprovements should be reflected in the reinvestment values.


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Renewal Demand Examination Flow

(1) Organize the reinvestment value by facility.

(2) Examine the cases with no renewals. (Understand how the integrity of the facilities changes without

Asset Management

renewa s).

(3) Examine the cases with renewals in statutory useful lives for all facilities. (Roughly understand the totalinvestment amount required for renewalprojects over a period subject to examination (30 to 40 years)).

(4) For examination of renewalsbased on time schedule maintenance (facilities of greater importance andhigher priority such as key facilities including purification plants and distribution reservoirs, majorpipelines including main conveyance, supply and distribution pipes, and distribution pipes to importantfacilities), set renewal cycles on apreventive maintenancebasis. As for other facilities, it is possible

(5) Examine the renewal cases based on status-monitoringmaintenance. (Study earlier renewal ofthefacilities of which seismic retrofitting is needed early. Shorten the renewal cycles of the facilities ofwhich replacement urgency is identified through functional checkups (asbestos-cement pipes, etc.).Examine the extension of renewal cycles for the facilities of which life prolongation is possible underthe premise that necessary measures should be taken.)

o exen e renewa cyc es renewa s an ar s onger an e ac es o grea er mpor ance anhigher priority based on micro management

Examination of the Anticipated Financial Balance

Simulate each renewal case roughly to examine the necessity.

Asset Management

Own financial sourceIn Type B, the profit balanceis assumed as good at all times.

The necessity of renewalis reflected here afterexamination.

Check fundshortage here.

Depreciation expenses,redemption principalsand interest due areestimated for bothexisting facilities andfacilities to be renewedin the future.

Accumulated profit

& loss account

reservation fund,

etc. (Internal

reserve fund, etc.)

ro

Depreciationexpense

Interest due

Maintenance&

operation

Watercharge

receipts,

etc.

Profit & lossaccountreservationfund, etc.

Redemptionprincipal

Constructionimprovement

expense

Compensation

Accumulation

Compensation

Own fund

Through calculation of the fund balance, check the accumulated profit & loss account reservation fund,etc. (Internal reserve fund, etc.).

For fund raising by issuing enterprise bonds, also check the bond issuance rate.

In Type A, examination is madefor this factor only (comparison

between recent constructionimprovement expense investmentresults and demand for renewals).

quantity influencescharge receipts andmaintenance &operation expenses.

expense

Expenditure Revenue

Profit balance

Expenditure Revenue

Capital balance

nerprsebonds, etc.


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Reflect the future images and tasks to be performed in business, which are examined basedon the renewal demand and financial balance anticipated through asset management, inregional waterworks visions.

Reflection in Regional Waterworks Visions

Asset Management

In addition, materialize renewal plans as projects through basic and implementation plans.

Anticipated renewal demand & financial balance(over 30 to 40 years)

Passed10years

This guideline

Regionalwaterworks vision

Futureimage

Measures toachieve the goal BackcastGoal

Passed20years

Passed30years

Passed40years

Long-term comprehensiveplan on expansion,improvement & renewal ofwaterworks facilities

At 3 to 5year

intervals

Planningon

implemen-tation ofprojects

Basic planning

Implementationplanning

Utilization in Communication with Users

For smooth implementation, it is important to gain users understanding by explaining thenecessity and effects of the projects. It is favorable to provide users with the informationwith easy-to-follow indicators showing expected results.

Asset Management

Example ImagesWithout renewal projects With renewals based on the criteria

Soundness of the Assets (Structures & Facilities)

6,000

8,000

10,000

12,000

assets:Millionyen

6,000

8,000

10,000

12,000

assets:Millionyen

Soundness of the Assets (Structures & Facilities)

The rates of aging and aged assets fluctuate from 5 to 10%.However, 12.5 billion yen should be invested to maintain soundness.

0

2,000

4,000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Fiscal year

Amountsof

Sound assets Aging assets Aged Assets

2,000

4,000

Amountsof

2010 2015 2020 2025 2030 2035 2040 2045 2050

Sound assets Aging assets Aged Assets

Fiscal year

Documents

Asset Management in Water Utility