Using Indicators to Deal with Uncertainty in the Capital Renewals Planning of an Industrial Water Supply System: Testing the Infrastructure Value Index

Abstract

Uncertainties are a key issue when planning for long term capital investments in asset intensive organizations. Amongst the sources of uncertainty are the quality and accuracy of readily available data and the assumptions underlying the various estimations involved in capital renewal plans, namely those related to re-placement costs and useful lives of the asset base. This paper addresses the effect of such uncertainties in the capital investment strategies for the industrial water supply system of the Industrial and Logistics Zone of Sines (ILZS), installed in the Portuguese seacoast around 40 years ago. The discussion includes deterministic and stochastic approaches to an asset management KPI that is presently being tested in the Portuguese water sector - the Infrastructure Value Index (IVI).