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Regulated Asset Base (RAB)

Heathrow is subject to RAB based regulation, the RAB is intended to represent the economic value of the business.
The RAB is calculated each year by taking the opening RAB, adding capital expenditure, and deducting regulatory forecast depreciation and any proceeds from asset disposals. It is then uplifted by inflation to give the closing RAB.

CAA Q6 Decision Forecast RAB

£million 2011/12 prices
CAA Decison
Regulatory Asset Base 9 mo. 2014 2015 2016 2017 2018
Opening RAB 13,816 13,788 13,812 13,805 13,661
Capital Expenditure 439 669 646 529 534
Depreciation (467) (645) (653) (672) (676)
Closing RAB 13,788 13,812 13,805 13,661 13,519
Average RAB 13,802 13,800 13,808 13,733 13,590

Before capital expenditure is added to the RAB, it must meet two sets of criteria based on the capital expenditure’s value for money as well as going through a process of effective consultation with the airlines.

In Q6, a more flexible approach to capital planning has been adopted, recognising that additional flexibility is required in order to respond to the dynamic nature of the airport industry. A two tier approach has been applied, where capital investment is classified as either, core or development, to reflect the maturity of projects. A development capital expenditure cashflow incentive is applied to ensure that Heathrow only recovers a return on development capital expenditure that is actually used.