PEXA Flags Material Understatement in IPART’s Initial Asset Base Proposal

PEXA Pushes Back Against IPART’s Regulatory Framework

In a virtual public hearing with the Independent Pricing and Regulatory Tribunal (IPART) of New South Wales, PEXA Group Limited (ASX:PXA) mounted a robust challenge to the regulator’s methodology for determining service fees for Electronic Lodgement Network Operators (ELNOs). The digital property exchange giant argued that IPART’s reliance on the traditional Building Block Model is ill-suited for its capital-light digital infrastructure, which contrasts sharply with the physical assets the model was designed to regulate.

Disputing the Initial Asset Base Valuation

PEXA contended that IPART’s proposed Initial Asset Base (IAB) is significantly understated. The company warned that if this undervaluation persists beyond the current regulatory period, it could impose an unsustainable financial profile on PEXA, potentially undermining its ability to invest and operate effectively. The critique extends to IPART’s draft report, which PEXA described as relying on "highly sensitive and contestable inputs" rather than more appropriate valuation methodologies.

Questioning Depreciation and Return Assumptions

Central to PEXA’s submission was a call to revisit key regulatory parameters such as depreciation schedules, the rate of return on historical expenditures, and asset life assumptions. These factors heavily influence the asset base and, consequently, the allowable revenue under IPART’s framework. PEXA’s stance suggests that the current approach could distort the economic reality of its digital platform’s value and operational costs.

Warning Against Premature Pricing Changes

PEXA urged IPART to adopt a more cautious stance on pricing recommendations, cautioning that precipitous fee reductions or regulatory adjustments could introduce operational risks and unpredictable regulatory uncertainty. The company emphasised the absence of any demonstrated customer benefit from the proposed changes, implying that the regulatory approach might do more harm than good.

The public hearing transcript is awaited on IPART’s website, which will provide further insight into the regulator’s deliberations. Meanwhile, PEXA’s intervention underscores the ongoing tension between digital infrastructure providers and traditional regulatory frameworks.