{
  "docId": "019dd923-5de0-76bd-a165-578b9862173f",
  "docSlug": "091122f6e046fa86",
  "documentTitle": "Rail industry cost and revenue sharing (2011)",
  "authorId": "misc",
  "authorName": "L.E.K.",
  "documentKindSlug": "consulting-deck",
  "documentKindLabel": "Consulting deck",
  "sourceTypeSlug": "strategy_consulting",
  "sourceTypeLabel": "Strategy consulting",
  "presentationDate": null,
  "orientation": "landscape",
  "aspectRatio": 1.414,
  "pageNumber": 91,
  "pageCount": 170,
  "prevPage": 90,
  "nextPage": 92,
  "slideType": "financial_analysis",
  "function": "analyze_data",
  "density": "overcrowded",
  "nDataPoints": 8,
  "notes": "The slide uses a normal distribution curve to quantify financial risk/volatility.",
  "elementsJson": [
    "headline_text",
    "bullet_list",
    "line_chart"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-5de0-76bd-a165-578b9862173f/91",
  "deckHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f",
  "deckJsonHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f.json",
  "deckAnchorHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f#slide-91",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "Based on Oxera's view of underlying volatility, average under-spend in the under-spend outcomes is £460m p.a.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd951-edac-778d-bcb7-b384d1b54ee2",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.52,
        "w": 0.45,
        "x": 0.11,
        "y": 0.34
      },
      "kind": "chart",
      "text": "Probability distribution of average CP4 annual OM&R expenditure",
      "attrs": null,
      "subkind": "line",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "06b1c47f-f862-4f3c-a412-4a7e24d7fe37",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.55,
        "w": 0.38,
        "x": 0.54,
        "y": 0.33
      },
      "kind": "list",
      "text": "The smallest standard deviations of cost expenditure derived by Oxera were 7.9% for opex and 25.7% for capex. L.E.K. has applied these standard deviations to the PR08 average annual efficient expenditure determination for OM&R (£4,185m) in order to estimate the potential impact of underlying cost volatility on EBS payments\nIf the EBS mechanism covered both NR outperformance and underperformance then the underlying volatility in NR's costs would not have a significant impact on the ex-ante expected EBS payment – although it could have a significant impact ex-post in individual years\nHowever, if the EBS mechanism covered outperformance only then NR's underlying cost volatility would have a significant impact on the average EBS payment as NR over-spend outcomes would not cancel out NR under-spend outcomes\nBased on Oxera's view of underlying volatility, average under-spend in the under-spend outcomes is £460m p.a.\nHowever, this represents only 50% of outcomes, so the overall expected under-spend (averaged across all outcomes) is half this, i.e., £230m p.a.\nCaps or tapers could be used to limit train operators' exposure to large variances in NR's performance",
      "attrs": null,
      "subkind": "bullet",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "c6498752-d488-48cc-aec2-e2ecf79e9155",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "Average under-spend: £460m",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd951-edac-778d-bcb7-b709d043605b",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.35,
        "x": 0.1,
        "y": 0.92
      },
      "kind": "source-note",
      "text": "Source: L.E.K. analysis\nORR/ATOC/Network Rail. Rail industry cost and revenue sharing.",
      "attrs": null,
      "subkind": null,
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "83b877ed-95d3-4369-9766-f528d2cc1eb5",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.07,
        "w": 0.82,
        "x": 0.09,
        "y": 0.15
      },
      "kind": "title",
      "text": "The average under-spend of NR as a result of underlying cost volatility is expected to be £460m averaged across the under-spend outcomes, or £230m averaged across all outcomes",
      "attrs": null,
      "subkind": "action-title",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1baa6888-15e4-4e17-b341-c1bc4a1dfbfa",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.03,
        "w": 0.25,
        "x": 0.65,
        "y": 0.08
      },
      "kind": "title",
      "text": "Option 2: Outperformance only EBS",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "79e87463-8b8a-41d9-b860-10d0a8982495",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [
    {
      "name": "Chart Selection Guide",
      "slug": "chart-selection-guide",
      "agent": "Designer",
      "layer": "slide",
      "matchId": "8d7005da-5697-4745-b388-cd23586db435",
      "evidence": "The slide contains a chart/line component showing a probability distribution.",
      "confidence": 0.7
    }
  ],
  "frameworks": [],
  "arcBeats": [],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}