Question
Now assume that you change your job and move to a regulated network company called Green Electricity, working as a CFO. Regulated network companies own
Now assume that you change your job and move to a regulated network company called Green Electricity, working as a CFO. Regulated network companies own the poles and wires of the electricity grid and typically have their fees approved by government on a costplus basis. Your company has a $15 billion debt. As interest rates are at a record low, the accountant has suggested that it might be good timing to lock in rates for the next 15 years. Your CEO has queried this strategy on the basis that the regulated return for network assets set by the government is based on resetting interest rates every five years at a specific reset date. As the CFO, do you agree with your accountant or your CEO? Give your reasons in detail. (15 marks
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