The digital era has given a new course to the age-old discussion on CapEx-OpEx optimization. The direct impact of technology on financial levers of utilities business was never so great. Operationalization of capital expenditure opens up a wide range of possibilities like minimized upfront investments, improved asset usage ratios, increased average revenue per unit, average margin per user, and cost of asset recovery.
Digital and Cloud Solutions – Impact of Opex Solutions on a CapEx Centric Utility Industry
Global CapEx growth is projected to surmount global GDP growth over the next decade as capital intensive industries strive to meet the world’s demand for energy, resources, information, mobility, and connectivity. As such, CapEx optimization is on the top priority list of most corporate leaders worldwide.
Owning to its practice of providing a rate of return on capitalized investments, the Utility industry has traditionally had it easy when it came to cost of capital. However, judiciousness around spend and capital allocation-based on total value consideration have been mostly sub-optimal. Financial pundits, also at the same time, have struggled to establish credible benchmarks around optimal usage of capital due to ambiguities in capital deployment in replacement and growth projects. Other factors, like the iterative nature of capital planning, process, and risk-oriented asset management, have forced Utilities to incline towards OpEx for finding viable technology and financial solutions. OpEx is almost often deduced as a favorable economic calculus compared to CapEx. However, the debate is much broader than just that.
Published By Avasant