ACFS WACC Workshop Sydney 31 March 2011 | Australian Centre for Financial Studies

ACFS WACC Workshop Sydney

“The old valuations out of WACC – changing risk premia post-GFC”

Presented by the Australian Centre for Financial Studies with Value Adviser Associates and supported by KPMG and The Finance and Treasury Association.

Date and Time

Thursday 31 March 2011
1 – 5 PM

Venue

KPMG Sydney: Ground Floor, Auditorium
10 Shelley Street, Sydney NSW whereis

The Program

Techniques such as Weighted Average Cost of Capital (WACC) are commonly used by:

Corporations – to help determine the optimal balance sheet mix of debt versus equity;
Regulators – to set an appropriate required rate of return on capital invested in regulated industries; and
Fund managers – to assist investment decision-making in company shares and discrete projects.

Both the theoretical foundations and practical application of WACC and associated techniques such as CAPM (Capital Asset Pricing Model) have long been matters of debate. Post-GFC, these questions are not merely academic but central to investment decisions and, often, project viability.

Delegates to this workshop will:

Be exposed to various forms of WACC and changes to risk premia;
Learn what is happening in debt markets and implications for the cost of debt;
Understand estimates of MRP and assess the cost of equity using CAPM;
Appreciate the impact of imputation tax on WACC;
Be shown the uses of WACC for corporate decision making; and
Hear from an experienced panel of practitioners.

Who should attend:

CFOs;
Corporate Treasurers;
Fund Managers;
Corporate Advisers;
Government and Regulatory Managers;
Regulators; and
Finance Academics.

The Workshop Program

Time	Topic	Speaker/s
1.00pm	Registration	ss
1.30 – 1.35pm	Welcome, Introduction and Current setting	Sean Collins, Partner, Valuations, KPMG
1.35 – 1.50pm	Background and Current Issues CAPM versus alternatives Market Risk Premium Cost of Debt versus Equity Taxation Implications of Financial Re-regulation	Prof Kevin Davis, Research Director, ACFS
1.50 – 2.15pm	What is happening in debt markets and implications for the cost of debt. Commentary on supply incl. maturity profile available Behaviour of yields and potential explanations Outlook in medium term.	Campbell Dawson, Director, Elstree Investment Management Limited
2.15 – 2.45pm	Estimates of the Market Risk Premium (MRP) to assess the cost of equity using the Capital Asset Pricing Model (CAPM) – especially in the current environment Update on the historical view Challenges in using a long term MRP for equity and a spot rate for debt Forward based views – implied volatility approach and glide path	Steve Bishop, Executive Director, Value Adviser Associates
2.45 – 3.05pm	The various forms of WACC – what suits in the current environment Vanilla WACC Post-tax Pre-tax	Prof Bob Officer, Chairman, Acorn Capital Limited
3.05 – 3.25pm	Refreshments	ss
3.25 – 3.45pm	The impact of imputation tax on Weighted Average Cost of Capital (WACC) What does it affect? How to adjust for it? Status of current debate about average gamma What should you do	Prof Bob Officer, Chairman, Acorn Capital Limited
3.45 – 4.15pm	The AGL Perspective: WACC parameters and CAPM The use of WACC in setting retail electricity prices The theory and reality of merchant power investments WACC decisions and market concentration implications	Prof Paul Simshauser, Chief Economist and Group Head of Corporate Affairs, AGL Energy
4.15 – 4.55pm	Structured Practitioner Panel Discussion – what issues are being faced and who is doing what? Steve Bishop, Executive Director, Value Adviser Associates Sean Collins, Partner, Valuations PricewaterhouseCoopers Alexander Oeser, Independent Pricing and Regulatory Tribunal Prof Bob Officer, Chairman, Acorn Capital Limited Paul Simshauser, Chief Economist and Group Head of Corporate Affairs, AGL Energy	Moderator – Prof Kevin Davis, Research Director, ACFS
4.55 – 5.00pm	Workshop Wrap Up and Conclusion	Sean Collins, Partner, Valuations, KPMG