Forecast Time-Limited Costs (amortisation of Capex, 2022-2023 Opex and Financing costs):

Amortisation Analysis

1. Capex Amortisation

DSB Build Costs / Capital Expenditure (Capex) are usually amortized over four years, starting from the year after the service/functionality goes live (i.e. 2024-2027), as approved via industry consultation. Due to the number of users subscribing to the UPI Service being below initial estimates (in both user numbers and user types subscribed), the four year amortisation of 2020-2023 build costs will start in 2025 rather than 2024. This approach is being taken as the DSB has an obligation to avoid the potential impact of excessive year on year fluctuations and ensure overall cost stability.

Build Costs are funded by the DSB’s financial sustainability margin with 25% of the cost incorporated into the cost basis for the four years following build of the service/functionality. Build Costs are based on the known evolution of the service which is driven by industry consultation. Therefore, additional Build Costs / Capex for 2026 onwards will be provided when details are known.

2. Amortised 2022-23 Opex

The operational expenditure (Opex) incurred up to 31 December 2023 is amortized over four complete years from 2024-2027. This is to ensure a fair distribution of costs across the broadest user base, and to not disadvantage early adopters.

3. Financing Costs Amortisation Analysis

This is the cost of financing the Capex (Build Costs), initially to be repaid over four years (2024 –2027). Annualised interest represents the total interest from the start of the build phase to the date these costs are fully repaid. Like the capex amortisation, the repayment of this finance cost has been re-profiled over five years (2024-2028) to ensure overall cost stability.

Amortisation Analysis Summary

The below table provides an overview of the amortisation for the period 2025-2028:

2023-2024 UPI Fee Model Variables

Given the UPI Service launch in Production on 16 October 2023, the DSB estimated the Number of Users per User Type for the 2023 and 2024 invoicing periods based on a market sizing exercise and stakeholder outreach. Further details can be found in the UPI Fee Model Variables and Annual User Fee Update, published September 2023. 

Additionally, as a result of the UPI Service launching in 2023, the actual costs that would normally have been incurred in the 2024 calendar year were spread over five quarters, resulting in the 2024 UPI Forecast Total DSB Cost representing 4/5th of the 2024 cost base.

The below annualised UPI Fee Model Variables table will be updated quarterly:

2024 UPI Forecast Total DSB Cost (1 Jan 2024 – 31 Dec 2024)

Annual user fees recover the DSB overhead costs which include a 20% margin for financial sustainability. The 2023 UPI Forecast Total DSB Cost includes the UPI Build Costs for the period 2020-2023, Forecast Time-Limited Costs (amortisation of Capex, 2022-2023 Opex and Financing costs) and the recurring Forecast Annualised Operating Expenditure for 300 users.

In accordance with the DSB Charges Policy, Excess Fee Income resulting from additional contracts as well as operating cost efficiencies, go to defraying the UPI Forecast Total DSB Cost for the contract year following the audited statutory accounts. Conversely, where the UPI Actual Total DSB Cost exceeds the UPI Forecast Total DSB Cost, creating a shortfall in cost recovery, this will be incorporated into the UPI Forecast Total DSB Cost for the year following the audited financial accounts.

The tables below show the breakdown of the 2024 UPI Forecast Total DSB Cost upon which the 2023-2024 UPI annual user fees have been calculated and includes the 20% margin for financial sustainability. Two columns are provided, the first relating to the annualised billing period 1 Jan 2024 – 31 Dec 2024, and the second for the five quarter billing period 16 Oct 2023 – 31 Dec 2024 (from the date of the UPI Service launch in Production).

Recurring Forecast Annualised Operating Expenditure (Opex) for 300 users: