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Consulting Practice of John Downie, MBA
Complex Financial Modeling
John Downie has developed financial spreadsheets and computer models for use in litigation since the mid-1990s. His modeling efforts have been used in many different contexts, including in product liability, breach of contract, and environmental enforcement cases.
In the context of environmental enforcement cases, on many occasions Mr. Downie has assisted in the calculation of the amount of economic benefit that a for-profit entity may have obtained by violating environmental requirements. His models in these cases have typically compared the present value of two sets of cost streams, one related to “on-time” compliance and the other related to delayed (or “actual world”) compliance. To put the two sets of cash flows on a comparable basis, at minimum he has had to employ inflation, depreciation, tax, discount, and interest forward rates. For some calculations, he has also had to consider the effects of the timing of the replacement of specific pieces of equipment in each scenario on resulting sets of cash flows. These calculations have required the use of many lookup tables, as well as a firm grasp of underlying principles of economics and corporate finance.
On several occasions Mr. Downie has created models to calculate economic benefit in the context of rate-of-return regulated entities. This modeling has recognized a crucial distinction between regulated and non-regulated enterprises, namely that many regulated entities earn a rate of return on capital investments included their rate bases, including for pollution control, whereas non-regulated entities do not.
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Financial and Regulatory Economics
Mr. Downie’s ability to develop complex financial spreadsheets for environmental enforcement cases is greatly facilitated by his past work in financial and regulatory economics. For example, he created a comprehensive, long-range financial planning model for a northeastern power authority. That model integrated inputs from several functional groups, and included electricity generation forecasts, capital investment planning, dual capital recovery regimes (Original Cost and Trended Original Cost), and alternative financing arrangements. Using these inputs, the model forecasted the overall cost of service and calculated net revenues.
In another engagement, Mr. Downie evaluated the international investment strategy of a major utility. The assignment included providing advice to senior management on understanding and quantifying the relevant portfolio risk factors of international investment and the development of valuation tools to facilitate clear decison-making.
In another engagement, he advised a South American national regulatory body on the principles of rate-of-return regulation and capital recovery methods to guide them in the creation of proper investment incentives for an emerging electric and natural gas utility system infrastructure.
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Damage & Valuation Analyses
Mr. Downie has applied his training in finance in many other litigation contexts. For example, in one case he analyzed the financial implications of major issues at the heart of a coal contract dispute between a major steel manufacturer and its principal supplier of metallurgical coal. In another case he developed a valuation model for a long-term stretch IRA portfolio. Other engagements included the valuation of the production output of a coal mine, a multi-billion dollar bridge/light rail system, and a water tunnel.
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