the life time of an asset to zero, leading to a very high price at the
beginning of the asset life time and a zero price at the end.
6.3.4 A more adequate approach for service price setting are annuities, as
they keep the combination of depreciation and return on capital constant
over the life-time of an asset. In this case the Service Cost is calculated as:
SERVICE COST = OPEX + ANNUALIZATION FACTOR * CAPEX
The formula for calculating the annualization factor of annuities is:
Cost of capital/{1-[1/(1+cost of capital)]^asset life}
6.3.5 Infrastructure Providers are advised to base their price calculation on
annuities. Infrastructure Providers may be requested to present detailed
calculations to the Authority.
9