Subject: DCF analysis
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Fri, 28 Sep 2001 17:32:15 -0700 (PDT)

The attached is my simplistic analysis on how much capital it takes to generate $1bn in NPV.  

The short answers are:

A) only about $1.5 billion, if you believe the original Azurix profiles contained in the IPO model
B) about $2 billion if you can replicate our Cancun concession and actual experience there
C) about $3 billion if you believe you can earn a spread of 3.5% to 4.5% over capital cost
D) about $12 billion if you invest in the US water sector and earn a 1% spread over capital cost
E) about $28 billion if you invest in the UK water sector and earn a 0.25% spread over capital cost
F) all the capital in the universe (if you assume our experience in Buenos Aires)

All of these amounts are TOTAL capital amounts and could be leveraged by some amount of debt (50/50 seems reasonable?).  Additionally, these amounts assume an immediate up-front investment, rather than investing in several deals over time.  Investing over time would, obviously, require additional capital to achieve the same NPV.

The above scenarios (except for F) are contained in the attached spreadsheet.  We can flesh out a more detailed model to support these numbers, but I believe this gives us the range of potential answers.