#1Ausgrid Debt Investor Presentation JULY 2020 ausgrid.com.au Ausgrid Together#2Presenters • Richard Gross Chief Executive Officer of • and Richard has over 30 years experience in the energy infrastructure sectors and has previously held senior executive roles at CitiPower, PowerCor and Wellington Electricity His experience includes managing acquisitions and mergers, advising on and implementing regulatory strategies, leading high-performance teams and championing the interests of both providers and consumers in a rapidly changing environment Richard has successfully led major business transitions, including integrating billion-dollar businesses. He is also a leader and trusted advisor in the operation of utilities, with decades of experience in asset. management, risk asset management, valuation drivers, market dynamics and acquisitions Better Ausgrid Together Michael Bradburn Chief Financial Officer Michael has more than 20 years of experience in financial, commercial planning and audit roles across a range of industry sectors Prior roles include CFO Viva Energy Australia, CFO Brisbane Airport Corporation and senior financial and commercial roles at Asciano and predecessor Patrick Corporation Chartered Accountant (CA ANZ), Chartered Certified Accountant (ACCA), Graduate of Australian Institute of Company Directors and holds a Master of Business Administration from AGSM and a Bachelor of Business • . • Edwin Waters Group Treasurer Ed has more than 20 years of experience in banking and financial markets focusing on Capital Markets, Debt Origination, Structuring and Analytics Ed's previous position was Executive Director Debt Capital Markets at ANZ Banking Corporation (9 years), where he was responsible for advising issuers on domestic and offshore capital markets issues, including in the utility and infrastructure sectors Earlier roles have included a variety of analytical and structuring responsibilities for Westpac Institutional Bank (7 years) • • • Craig Wilson Sustainability Manager Craig has more than 15 years of experience in strategy, commercial, regulatory and sustainability roles mainly within the electricity and rail industries Craig's previous sustainability experience with Asciano required significant input into the design and implementation of Australia's carbon scheme and associated policies and regulations With an MBA, a International degree in Business, previous training as and a reserve officer in the Australian Army, he has international experience in several different industries and roles 2#3Agenda Better Ausgrid Together 1 About Ausgrid 2 Operations and performance 3 Strategic priorities and transformation 4 5 A Impact of COVID-19, regulation and financial performance Capital management and funding Supporting materials 3#4Ausgrid's investment highlights Our vision is to become a leader in energy solutions, recognised locally and globally 1 Stable, regulated natural monopoly - no material COVID-19 impact 2 Nationally significant infrastructure 3 Experienced leadership Capital management and shareholder 4 support Long-life essential infrastructure with stable, inflation-protected cash flows Regulated revenues are insulated from volume exposure through the revenue cap regulatory regime providing revenue certainty The AER has made a final revenue determination for Ausgrid that allows for clear and predictable revenue over five years, from 1 July 2019 to 30 June 2024 95% of revenues are regulated ✓ The impact of COVID-19 on electricity consumption and Ausgrid's regulated revenues is temporary in nature, with the revenue cap regulatory regime allowing Ausgrid to recover any revenue under-recovery in future years Natural monopoly position in franchisee area within the State of NSW - no competition for transportation of electricity within Ausgrid's existing network ✓ Core infrastructure servicing Sydney and parts of NSW - the most populous state in Australia ✓ Australia is one of the few remaining AAA economies with 28 consecutive years of GDP growth (prior to COVID-19) Culture change and transition to new executive leadership with a significant safety focus Productivity improvements and operational savings from the Transformation Program driving a sustainable reduction in opex Credit ratings of Baa1 from Moody's and BBB from S&P (both stable outlook) and prudent approach to capital management (Ausgrid's Treasury Policy and Partnership Deed requires that Ausgrid use reasonable endeavours to maintain a bbb/baa2 baseline credit assessment) Shareholders, Board and management are committed to maintaining these credit ratings - shareholder support evidenced by Board decision to reinvest dividends to support the business Strong liquidity position of $614 million as at 30 June 2020. No debt maturities until December 2021 No covenant pressure with headroom against key thresholds ✓ $12.6 billion drawn debt with gearing of 76% net debt/RAB and $8.7 billion of acquisition equity value Better Ausgrid Together 4#5Ausgrid's position in the NSW electricity supply chain Competitive Generation Regulated natural monopoly Transmission Distribution ++ Ausgrid Competitive Retail Ausgrid Together E agl O origin End customers of electricity Note: 1. FY20 numbers are unaudited and subject to revision TransGrid Interconnectors Ausgrid network • Includes c.230 large substations • 32,000 small distribution substations More than 500,000 power poles and 49,000 kilometres of below and above- ground electricity cables FY201 Regulated asset base $16.1 billion Endeavour Energy essential energy Network GWh 24,957 e Energy Australia Customers Revenue 1.8 million $2.3 billion Other retailers Operating expenditure $563 million Capital expenditure $682 million Employees 3,142 5#6Ausgrid's network area Ausgrid's core business is building, extending, maintaining and operating the electricity distribution and transmission network in Ausgrid's supply area, spanning 22,275 square kilometres including eastern Sydney, the Central Coast and the Hunter Valley. Ausgrid's network extends past the Barrington Tops in the north to Waterfall in the south, and from Merriwa in the west to Newcastle in the east. Essential Energy Broken Hill NSW Sydney Byron Bay Lightning Ridge Tamworth Dubbo New South Wales Parramatta Newcastle Bathurst Sydney Wollongong Canberra ACT Ausgrid Endeavour Energy Essential Energy Ausgrid's network supplies electricity to: 1.8 million customers Better Ausgrid Together Essential Energy Merriwa Scone Muswellbrook Barrington Singleton Ausgrid Endeavour Energy Waterfa Gosford Rural/Industry Upper Hunter Valley Suburban/ Subregional Lower Hunter Valley and Central Coast City/Urban Sydney ROYAL AUSTRALIAN AIR FORCE Williamtown Newcastle NEWCASTLE PORT AUTHORITY AUSTRALIAN GOVT DEPT OF DEFENCE (GARDEN ISLAND) SYDNEY TRAINS NETWORK Sydney SYDNEY KINGSFORD SMITH AIRPORT Wollongong 200,000 1,200 105 businesses schools 5 hospitals universities SYDNEY PORT AUTHORITY CO 6#7Ownership and governance arrangements Governance • • • Ausgrid has been majority owned by Australian Super and IFM Investors (together 50.4%) since 2016 The NSW Government holds the remaining 49.6% through a specially created entity and indirect subsidiaries which are independent from Government Australian Super and IFM Investors have a right of first offer in relation to any further sell down by the NSW Government Statutory independence, with state partner entities not subject to control or direction from the NSW Government In general, Board decisions can be made by ordinary majority (and Australian Super / IFM Investors appointed directors comprise an ordinary majority) Matters requiring unanimous decision are limited to matters such as constitutional amendments and dissolution/disposal of the business The NSW Government cannot divest its holding without enacting further enabling legislation AustralianSuper 25.2% ownership >$180 billion AUM Managed on behalf of more than 2.3 million members Australia's largest industry superannuation fund Large-scale, long-term infrastructure investor - approved mandate to invest in meaningful core infrastructure assets Over $18 billion of infrastructure investments Experienced infrastructure investor with assets including: Utilities (Anglian Water in the UK) Ports (Port of Brisbane, NSW Ports, Mersin International Port in Eastern Mediterranean, GCT Global Container Terminals in Canada) Roads (Transurban Queensland, Westconnex, Indiana Toll Road in the US, M6 Toll in Europe, Aleatica in Europe and Latin America) ifm investors 25.2% ownership >$168 billion AUM Across infrastructure, listed equities, private capital and debt One of the world's largest owners and managers of nationally critical infrastructure assets Manages over $68 billion of direct infrastructure investments globally Proven track record of transitioning infrastructure assets from government to private ownership Experienced infrastructure investor with assets including: Utilities (Wyuna Water, Colonial Pipeline in the US, Arqiva Limited in the UK, Anglian Water in the UK) Airports (Melbourne Airport, Brisbane Airport, Perth Airport, Adelaide Airport, NT Airports) Ports (Port of Brisbane, NSW Ports) Better Ausgrid Together 7#8Agenda Better Ausgrid Together 1 About Ausgrid 2 Operations and performance 3 Strategic priorities and transformation 4 5 A Impact of COVID-19, regulation and financial performance Capital management and funding Supporting materials 8#9Ausgrid's revenue streams Ausgrid has four distinct revenue streams which align to the regulatory framework Network Service Provider Ausgrid Ring-fencing regulation REGULATED - 95% of revenue2 Standard Control Services 88% of revenue revenue cap regulation Price and volume regulated Network services (transmission and distribution of electricity to customers through Ausgrid's 'poles and wires' network) Augmentation of the network Type 7 metering services Alternative Control Services 7% of revenue price cap regulation Price regulated Type 5-6 metering provision, reading, data services, transfer administration services and unrecovered meter costs Ancillary Network Services (mostly facilitating new connections, disconnections and reconnections to the network) Public lighting (managing street lights on behalf of councils, community groups and government associations) UNREGULATED -5% of revenue² Unregulated market price Facility access (licencing the use of Ausgrid pole space, fibre and duct by telecommunication carriers, loT service providers, councils and government agencies as well as modular data centres) Property rental (leasing out spare floor space in Ausgrid property) PLUS ES1 market price Smart (Type 1-4) metering services (meter installation and maintenance, data services provided to electricity retailers, C&I businesses and embedded network operators) Telecommunication infrastructure services (design and construction of mobile small cells and connecting fibre on power infrastructure for telecommunication companies) Electrical infrastructure services under development (design, construction and maintenance of high voltage infrastructure, calibration and testing of high voltage assets for C&I businesses, state governments and power network businesses) Ausgrid Notes: Better 1. PLUS ES was founded by integrating Ausgrid's existing metering business with the AGL digital metering subsidiary acquired by Ausgrid in November 2017; Together 2. Revenue breakdown is based on FY20 numbers which are unaudited and subject to revision 9#10Customer profile Ausgrid has a large and diverse end customer base with low concentration risk End customer type Business 10% Residential Overview Annual consumption Large Business Medium Business 10% Small Business 14% 90% Residential 35% NUOS revenue Large Business 23% 41% Medium Business 12% Small Business 19% Residential Top 10 end customers with individually calculated tariff 46% 1.8 million end customers in FY20, representing almost half of the electricity customer connections in NSW NUOS No. Customer revenue (%) 1 Large business customers (i.e. customers > 750MWh p.a.) accounted for 23% of network revenue in FY20 1 Sydney Trains (NSW Government) 0.8% 2 Yancoal Australia 0.4% Diversified customer base the largest customer accounts for <1% of network 3 Sydney Airport 0.3% revenue 4 Molycop 0.3% Key retailers for Ausgrid are AGL (Baa2), EnergyAustralia (BBB+) and Origin Energy (Baa2/BBB) 5 Global Switch Data Centres 0.2% 6 Orica Botany Industrial Park 0.2% 7 Port Waratah Coal Services 0.2% Credit terms with retailers and the regulatory regime allows for recovery in the event of retailer insolvency 8 Glencore Coal Assets Australia 0.2% 9 Australian Navy - Garden Island 0.1% 10 Orora Limited 0.1% Total 2.8% Ausgrid Together Better Notes: 1. Percentage of total NUOS revenue for the year ended 30 June 2020 10#11• • • Asset management - 'whole of life' approach Sustainably improving performance for customers, stakeholders and partners while complying with regulatory obligations Achieving asset management objectives through: 120 A robust asset management framework, including asset policies, asset standards and plans 100 A single investment governance framework, with a consistent risk prioritisation methodology Asset maintenance and replacement programs to support network safety, reliability and performance outcomes Extensive monitoring and reporting of network performance • Delivery of improvement initiatives to achieve operating efficiencies Performance Ausgrid Together Risk Sustainable Value Cost 0 MINUTES 20 20 40 40 60 80 60 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Right axis Average interruptions per customer p.a. (System Average Interruption Frequency Index) - Left axis Average outage duration in mins per customer p.a. (System Average Interruption Duration Index) 11 1.5 1.4 1.3 1.2 1.1 Q 1.0 E FREƠUENCY 0.9 C 0.8 0.7 0.6 0.5#12Peer RAB and customer base comparison Largest distribution network in Australia by RAB, end customer numbers, electricity delivered and maximum demand Snapshot • Ausgrid's network has distributed electricity within NSW for over 100 years 1.8 million end customers 2 and 24,957 GWh of electricity transported in FY20 Total RAB of $16.1 billion as at 30 June 2020 RAB of distribution networks in the NEM ($2019 bn)1 Largest RAB of any other network in the NEM 16.1 12.7 11.3 8.3 6.6 4.4 4.3 4.2 Ausgrid Energex Ergon Energy Essential Energy Endeavour Energy AusNet Services SA Power Networks Ausgrid Together Better Powercor 2.4 1.9 1.8 United Energy CitiPower TasNetworks 1.5 0.8 Jemena Power and Water Evoenergy Customers of distribution networks in the NEM (million) 1,2 More customers than any other network in the NEM 1.8 1.5 1.0 0.9 0.9 0.9 0.8 0.8 0.7 0.4 0.3 0.3 0.2 0.1 Ausgrid Energex Endeavour Energy Essential Energy SA Power Networks Powercor Ergon Energy AusNet Services United Energy Jemena CitiPower TasNetworks Evoenergy Power and Water Source: AER State of the Energy Market - Data Update - June 2020 Notes: 1. Customer numbers, line length and asset base as at 30 June 2019 except for Ausgrid which is as at 30 June 2020 (31 December 2019 for Victorian businesses); 2. Represents total residential, government, commercial and industrial customers 12#13Sustainability at Ausgrid Our sustainability approach Sustainability at Ausgrid means operating in a safe, responsible manner that will enable us to deliver affordable, reliable and clean energy choices to our customers now and in the future. Our material sustainability focus areas that are most important to our stakeholders and have the most impact on Ausgrid are: • • • Health and safety Emerging technologies Network resilience Cyber and physical security Customers and communities • Affordability Inclusion and diversity Our journey so far Our vision to become a leading energy solutions provider, recognised both locally and globally, is the compass for our sustainability initiatives. Major milestones achieved in the last year to set the foundation for our way ahead include: Increasing focus on reporting, investigating, and implementing corrective actions related to High Potential Incidents Launching our internal emissions reduction targets • Publishing our Climate Change Statement • ⚫ Publishing our Energy Charter Report Publishing our Global Reporting Initiative compliant Sustainability Report on our FY19 performance Aligning Ausgrid to five of the United Nations Sustainable Development Goals (these five are represented by the icons below) Our developing ambitions Key actions underway to further mature our sustainability response include: Developing our Health and Safety Strategic Roadmap and continued rollout of the Return to Live Work program Further developing and communicating our response to climate change Developing our community engagement program and exploring innovative ways to use our assets for additional public benefit Developing our Modern Slavery Statement to communicate our actions to address any risks Developing our Sustainability Policy Continuing to publish on an annual basis our Global Reporting Initiative compliant Sustainability Report and Energy Charter Report that is transparent and to develop trust Communicating our response to COVID-19 and how we are keeping our employees and communities safe 5 EQUALITY GENDER 7AFFORDABLE AND CLEAN ENERGY DECENT WORK AND ECONOMIC GROWTH 11 SUSTAINABLE CITIES AND COMMUNITIES 13 ACTION CLIMATE More detail and reports on our sustainability performance can be found on our website, and in the Supporting Materials of this presentation Ausgrid Together 13#14Agenda Better Ausgrid Together 1 About Ausgrid 2 Operations and performance 3 Strategic priorities and transformation 4 5 A Impact of COVID-19, regulation and financial performance Capital management and funding Supporting materials 14#15Strategic priorities - FY20 performance Substantial progress has been made in FY20 to accelerate the delivery of Ausgrid's strategic priorities Strategic priority FY20 achievements I • Live our values Transform the way we work • Foster community trust . • Shape our future • Grow PLUS ES Better Ausgrid Together • We continue to increase our focus on reporting, investigating and implementing the corrective actions related to High Potential Incidents Injury frequency rates have declined significantly compared to prior year. As at 30 June 2020: Total Recordable Injury Frequency Rate was 6.5. This represents a 22% improvement compared to the June 2019 TRIFR of 8.3 The Lost Time Frequency Rate was 1.2. This represents a 29% improvement compared to the June 2019 LTIFR of 1.7 . • • FY20 Restructure delivered two months ahead of schedule Continued reduction in non-labour costs including vegetation management contract renegotiations Reduction in the size of our fleet by 250 vehicles, reducing vehicle maintenance and running costs by $1 million per annum Established a number of collaborative working groups with customers on key issues such as community batteries, cyber security and tariff reform Formation of a Customer Transformation Team to accelerate the customer strategy Evolving Ausgrid's services to meet customer needs including contact channel mapping, segmentation analysis, and journey mapping Developed Ausgrid's first carbon emissions target and Climate Change Statement. Progressed key sustainability initiatives such as community bush regeneration Delivered an electrical safety education program to almost 800 schools First Virtual Power Plant trial commenced Community battery feasibility study completed, moving into pilot phase Term sheet for eight modular datacentre sites signed with Leading Edge DC. Development planning commenced with Newcastle Council for their first site on Ausgrid land Signed agreement with Jolt EV for electric vehicle charging/advertising from distribution kiosks In spite of COVID-19, PLUS ES has installed 152,238 meters in FY20 (6% above budget), with a meter population of 684,348 on 30 June 2020 Successful implementation of S/4HANA has allowed PLUS ES to lock-in efficiencies leading to a reduction of FTE's in FY20 15#16Strategic priorities - looking ahead Ausgrid's vision is to be recognised locally and globally as a leading energy solutions provider. Our key priorities for FY21 and beyond are outlined below. Strategic priority Actions Live our values Promotion and maintenance of a strong safety culture and safety performance • Operational improvements for safety Transform the way we work • Foster community trust Shape our future • Z Grow PLUS ES Better Ausgrid Together • ° • Streamlining processes in operations and back-office Continuously improving customer experience through web and contact centre services enhancement Core focus on business productivity enhancements through people, process, information and technology-enabled ways of working across operations and back-office processes - refer to following page for further details Improve our customer service and reputation with key stakeholder and customer groups Achieving favourable regulatory outcomes, through actively influencing customers, communities, policy makers, regulators and key stakeholders Promoting the uptake of Distributed Energy Resources (including electric vehicles) Taking a leadership role in tariff reform Using the Taskforce on Climate-related Financial Disclosure Framework to address climate change impacts Bolstering our storm response protocols and developing a resilience capex uplift plan • Continue to scale in the growing metering market including data services Pursuing modest growth opportunities in electrical and telecommunications infrastructure Delivering operational excellence - right first time, every time 16#17Transformation Program Comprehensive program to deliver first quartile cost efficiencies while improving customer, operational and safety outcomes Objectives Scope . • • . Improve the customer experience: Better understand our customers' needs and deliver a better service experience through a programme of continuous improvement in our engagement channels and underlying service delivery Establish a culture of staff empowerment: Change the ways of working across Ausgrid to tap the potential of our skilled workforce, through localised decision-making ability and accountability for continuous improvement within parameters of controlled risk Reduce operating costs: Right-size the workforce and shape the organisation to be a flatter organisation with the frontline closer to the CEO Reduce work volumes: Make better use of data to balance cost, risk and performance in the planning of work, so we prioritise work that drives the greatest improvement in risk and performance outcomes, whilst sustaining the overall condition of our asset base Improve non-labour productivity: Pursue cost efficiencies across all non-labour categories, balanced with the sustainability procurement objectives including total cost of ownership, environmental, social and government factors Programs running from FY20 to FY24, designed to streamline processes and find more effective ways of conducting business through a series of people, process and technology improvements: Operations; Customer; Supply Chain; and Enabling Services Progress • • • The Transformation Program has already contributed to a 28% reduction in regulated SCS opex from $545 million in FY16 to $393 million in FY20 (excluding reform costs) FY20 transformation delivered successfully and ahead of schedule. 362 FTEs released following the FY20 Restructure. This exceeded the FY20 Business Plan target by 63 FTE and was delivered two months ahead of schedule due to our transparent consultation Continued reduction in non-labour costs (such as vegetation and fleet costs). Fleet size reduced by 250 vehicles, reducing vehicle maintenance and running costs by $1 million per annum Majority of savings for FY21 have already been locked in with limited delivery risk. Focus on increasing delivery certainty for future year opex targets via end-to-end process focus, transformation operating model enhancement and embedding change activities New customer centric organisational structure in place • FY21 savings have been agreed and targets 'locked in' to budgets Ο Outcomes Better Ausgrid Together The Transformation Program will be phased to consciously balance workforce reductions with employee engagement and technology implementation 17#18Agenda Better Ausgrid Together 1 About Ausgrid 2 Operations and performance 3 Strategic priorities and transformation 4 5 A Impact of COVID-19, regulation and financial performance Capital management and funding Supporting materials 18#192019-24 Final Determination The AER determines the maximum revenues that Ausgrid can earn over a five year regulatory period through a building- block methodology. Ausgrid's revenue cap regulatory regime provides revenue certainty ($million, nominal) FY20 FY21 FY22 FY23 FY24 Total Return on capital 897 910 917 918 917 4,559 Regulatory depreciation 103 134 164 193 193 787 Operating expenditure 474 486 499 513 528 2,500 Efficiency carryover 19 20 20 21 21 101 FY15-19 remittal adjustment (329) (329) Corporate income tax 28 23 26 29 26 132 Building block revenue 1,193 1,573 1,627 1,674 1,685 7,752 Smoothed revenue 1,506 1,517 1,537 1,559 1,585 7,704 Building blocks Return on capital Regulatory depreciation Operating expenditure Efficiency carryover (incentive schemes and other adjustments) FY15-19 remittal adjustment Corporate income tax Better Ausgrid Together Description A return (nominal, post-tax) on the assets deployed in the provision of regulated services, with this return being commensurate with the efficient financing costs of a benchmark efficient entity with a similar degree of risk Recoupment of the straight-line depreciation of the RAB, calculated by reference to the value of assets used for the delivery of regulated services and their economic life The costs of operating and maintaining the distribution network A CESS revenue reward due to capex underspend over FY15-19. In the FY25-29 period, Ausgrid will also be able to earn a revenue reward through the EBSS if it underspends opex over FY20-24 A one-off negative revenue adjustments relating to over-recovered revenue in the FY15-19 period. This was unusually large given the prior revenue determination was not finalised until the final year of the five year regulatory period. This delay was caused by a disagreement between the prior owners of Ausgrid (NSW Government) and the AER An amount that reflects the corporate income tax obligations of a benchmark network service provider 19#20COVID-19 impact and management response Ausgrid moved early to address the onset of the COVID-19 pandemic, with the activation of its internal Incident Management and Crisis Teams in early January to implement Ausgrid's Pandemic Response Plan Moody's and S&P have recently affirmed Ausgrid's credit ratings of Baa1 (Stable) and BBB (Stable) • Shareholder support for Ausgrid evidenced by decision to reinvest dividends for FY20, FY21 and FY22 Strong liquidity position of $614 million as at 30 June 2020 • Ausgrid's people and the public have been our number one priority during COVID-19 Significant proportion of workforce shifted to working from home arrangements • On-line employee development activities implemented to ensure continuation of mandatory training and compliance activity People Sharpened focus on business transformation to deliver long term operating and financial benefits Deploying operational levers to reduce cost base Accelerated transformation program Costs Capital management & funding Revenue & demand • FY20 regulated revenue impacted due to reduced non-residential energy consumption Ausgrid's regulated revenues are insulated from volume risk under the revenue cap regulatory regime Better Ausgrid Together Response to COVID-19 Sustainability Operations • Crisis management and emergency response protocols deployed Customer centric focus: bill relief for households and small businesses enduring hardship deferral of non-essential maintenance to reduce disruption First Sustainability Report published during COVID-19 • Dedicated to environmental protection and execution of our environmental programs Climate change activities relating to emissions reduction, bushfire season preparations and managing storm events have continued during this period Ausgrid Together Better 20 20#21Impact of COVID-19 on Ausgrid's network Actual energy consumption data on Ausgrid's network indicates a recent stabilisation from the initial COVID-19 volume reduction of ~10% in April 2020. The increase in residential consumption and the decrease in commercial and industrial load largely offset each other COVID-19 Impacts Observations Volume (weekday and weekend data) Mix (Pre vs. Post, mid-April) 1 COVID-19 Impacts (mid-Jul)² Comments Ausgrid overall Residential 100% -10% +2.1% 33% +6% +15% COVID-19 impact on commercial and industrial segments is being offset by increased residential demand Residential consumption above FY19 resulting from school holidays and travel restrictions Large businesses 30% -22% -13% Large and medium customers are showing slow signs of recovery Medium businesses 8% -25% -11% Small businesses 6% -25% -7% Small business consumption is showing stronger signs of recovery with week-on-week improvement since mid-April Others: High voltage and sub-transmission 23% -13% -17% High voltage customers remain impacted, notably in selected industry sectors such as mining Notes: 1. Comparison of two weeks pre-COVID-19 baseline with four weeks post COVID-19 ending on 19 April, using comparable days with similar weather patterns 2. 14 day rolling average against the same period in FY19. This allows us to moderate for time of year effects and monitor each customer and industry segment as they recover at varying pace Better Ausgrid Together 24 21#22Impact of COVID-19 on Ausgrid's network Following sharp energy consumption movements at the end of March, the effects of COVID-19 are currently pointing towards a recovery. The residential spike started to ease off when schools returned and more people returned to workplaces. Small, medium and large businesses have shown signs of recovery since the start of June Actual consumption variation compared to baseline by key segments¹ (%) 25 20 15 10 5 0 -5 -10 -15 -20 -25 Time Base 29 period line Mar Apr 5 12 19 26 3 10 Apr Apr Apr May May 17 May May 24 31 7 14 21 28 5 12 18 May Jun Jun Jun Jun Jul Jul Jul Residential Ausgrid overall Large businesses Medium businesses Small businesses High voltage Better Ausgrid Together 1. Analysis from the week ending 29 March to the week ending 26 April compared actual consumption against a fixed baseline of days in March before restrictions were in place. From the week ending 3 May the baseline was updated to be a 14 day rolling average of the same period in FY19, i.e. the average demand of 14 days in April 2020 are compared to the average demand of the same 14 days in April 2019. This methodology allows us to moderate for time of year effects over a longer period of analysis 22#23Financial summary FY20 is the first year of the new five year regulatory period (1) • Key highlights SCS revenue fell by $284 million in FY20 due to a reduction in Ausgrid's Maximum Allowable Revenue (MAR) following the AER Determination. This was primarily due to the lower risk free rate and market risk premium within the regulatory WACC (refer page 43 for further details) The reduction in unregulated revenue of $21 million was primarily a result of the reclassification of activities from unregulated to ACS. This was offset within ACS by lower demand for ancillary network services due to COVID-19 and lower prices for metering and public lighting services from FY20 following the AER Determination Operating expenses remained stable in total. Higher SCS opex was primarily due to abnormal storm activity experienced during FY20, which is subject to a regulatory pass-through process, and is forecast to be recovered in FY22 A goodwill impairment expense of $348 million was recognised in FY19 in response to the AER Determination, which included a reduction in the regulatory rate of return. No impairment has been recognised in FY20 Reform costs in the profit or loss in FY20 were lower and represent the exit payments that were not provided for in FY19 Statement of profit or loss $million, nominal Revenue SCS ACS FY19 FY201 Variance 2,299 2,015 (284) 154 153 Unregulated Total revenue 142 121 (21) 2,595 2,289 (306) Expenses SCS (376) (393) (17) ACS (81) (103) (22) Unregulated (107) (67) 40 Total SCS, ACS and unregulated (564) (563) 1 Pass-through costs (355) (397) (42) Loss on disposal of PPE (21) (10) 11 Total operating expenses (940) (970) (30) EBITDA 1,655 1,319 (336) Depreciation and amortisation (593) (639) (46) Finance costs (478) (478) Interest income 3 (1) Impairment expense (348) 348 Reform costs (77) (12) 65 Profit for the year 162 192 30 Ausgrid Together Better Notes: 1. FY20 numbers are unaudited and subject to revision. Audited accounts are expected to be available on 28 August 2020 23 23#24Agenda Better Ausgrid Together 1 About Ausgrid 2 Operations and performance 3 Mauren Proctor 5 A Strategic priorities and transformation Impact of COVID-19, regulation and financial performance Capital management and funding Supporting materials 24#25Capital management strategy Ausgrid is committed to supporting its current credit ratings and has a prudent capital management strategy to support this. Ausgrid has a proven track record of taking action to support its credit ratings 1 Capital management strategy • • . Ausgrid has a $12.6 billion debt portfolio and is committed to prudent capital management Investment grade credit ratings are a core part of Ausgrid's capital management strategy Ausgrid is rated Baa1 by Moody's (implied baa2 on a standalone basis) and BBB (bbb standalone) by S&P (both stable) The Moody's rating currently includes a one notch uplift due to the implied support of all three shareholders, i.e. not just the NSW Government 2 3 • Commitment to support credit ratings The Board, shareholders and management have a strong commitment to maintain the current credit profile • Ausgrid's Treasury Policy and Partnership Deed requires that Ausgrid use reasonable endeavours to maintain a bbb/baa2 baseline credit assessment and not less than bbb-/baa3 Ausgrid has a range of levers available to support credit ratings - these include both operational (e.g. cost efficiency, capex program selection and timing etc.) and capital management levers (e.g. investment decisions, dividends, equity related funding etc.) • • Distribution policy Under the Partnership Deeds, each Partnership must distribute at least 85% of its surplus cash within 30 days of the end of each quarter - so long as paying this distribution will not cause the baseline credit assessment to fall below investment grade Ausgrid has a proven track record of taking action to support the credit ratings - Board and Shareholders have decided to reinvest dividends for the three years to June 2022 Ausgrid Together 25#26Credit metrics Ausgrid has headroom against key metric thresholds. Moody's and S&P have also recently reaffirmed Ausgrid's BBB/Baa1 credit ratings (both stable outlook) on 5 June and 29 June 2020 respectively Leverage Net debt/ RAB Net debt/EBITDA2 -<90.0% CFCR ³ Cash flow EBITDA / interest <1.4x <1.2x Legend FY15-19 reg. period 9.3x 3.6x 3.7x 1.7x 1.7x 1.6x 3.0x 79.1% 77.6% 75.9% 7.6x 7.4x FY20-24 reg. period FY18 FY19 FY204 FY18 FY19 FY204 FY18 FY19 FY204 FY18 FY19 FY204 • Bank covenant: <90.0% Net debt/RAB gearing has decreased from 79.1% to 75.9% as a result of lower debt funding of capex and debt repayments. Significant headroom maintained above bank covenant level FY20 net debt/EBITDA has increased as a result of lower FY20 revenues from the 2019-24 AER Determination, the inclusion of remittal payments and temporary impact of COVID-19 on electricity consumption volumes Default: <1.2x Lock-up: <1.4x CFCR has remained at 1.6-1.7x with headroom above bank covenant levels FY20 EBITDA/interest has also reduced as a result of lower revenues from the AER Determination, the inclusion of remittal payments and COVID-19 Transformation program has resulted in substantial savings since 2016 with further savings to be delivered through this regulatory period Credit rating metrics FFO/debt is the primary credit metric assessed by S&P and Moody's, with historical outcomes disclosed in their reports outlined below FFO / debt FY18A FY19A FY20E MOODY'S 8.1% 8.4% 7.0-7.1% S&P Global 8.5% 8.6% 5.8-5.9% Source: Moody's and S&P credit rating reports Better Ausgrid Together MOODY'S 66 We regard Ausgrid's exposure to ongoing financial impacts associated with the coronavirus outbreak as manageable, given (1) the essential nature of the provided services which underpins demand for electricity, (2) the low price- elasticity of electricity demand, (3) the diverse customer base, and (4) the supportive regulatory framework allowing the group to recover revenue shortfalls in future periods. 5 June 2020 Notes: 1. Net debt presented at face value; 2. FY19 EBITDA normalised by adding back goodwill impairment; 3. Cash flows normalised by adding back reform costs; S&P Global 66 We have affirmed the ratings on Ausgrid based on our expectations that the company's FFO to debt will revert to 7% by the year ending June 30, 2022. This recovery is based on our expectations of upward adjustments related to the under-recovery of revenues against regulatory allowances from fiscals 2020 and 2021 and Ausgrid achieving its forecast cost savings. 29 June 2020 4. FY20 numbers are unaudited and subject to revision. Audited accounts are expected to be available on 28 August 2020 26#27Funding and liquidity Ausgrid has a $12.6 billion debt portfolio, is committed to prudent capital management and seeks to minimise its cost of funding within defined risk parameters Summary Management's key focus to date has been to establish a global capital markets presence in order to achieve diversity of funding sources and tenors, with a view to managing refinancing risk in a prudent manner. All foreign currency and A$ debt is hedged to Australian dollar exposures at the time of issue. As set out in the Supporting Materials, interest rates are hedged separately to match regulatory periods The next debt maturities are in FY22, being $1.424 billion (B2 bank facility) in December 2021 and $917 million (B1 bank facility) in June 2022. The $971 million ($251 million undrawn) combined Working Capital/Capex Facility matures in June 2022 Ausgrid has total liquidity of $614 million as at 30 June 2020, comprising $211 million of undrawn committed facilities and minimum cash balances of $403 million Debt funding sources (as at June 2020) Total drawn debt of $12.6 billion Debt maturity profile 1,2 Bank USPP US144A 9.5% AMTN 8.2% 18.7% 53.1% 251 I -27 3.5y 693 To be partially repaid by proceeds of this 1,424 issuance 917 659 1,400 1,200 1,037 600 6.5y 250 1,400 995 659 643 EMTN 10.4% Notes: H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 FY21 FY22 FY23 FY24 FY25 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 FY28 FY26 FY27 FY29 FY30 FY31 FY32 SFA Capex facility WC facility Capex + WC (undrawn) USPP AMTN ΠΕΜΤΝ ■ US144A ■ ASF 1. Foreign currency debt is hedged for its term via cross currency swaps to A$; debt amount shown are at the relevant hedged exchange rate 2. Weighted average debt maturity of the drawn debt portfolio as at 30 June 2020 equals 5.0 years Ausgrid Together 728 H1 H2 FY33 27#28Summary Our vision is to become a leader in energy solutions, recognised locally and globally 1 Stable, regulated natural monopoly - no material COVID-19 impact 2 Nationally significant infrastructure 3 Experienced leadership Capital management and shareholder 4 support Long-life essential infrastructure with stable, inflation-protected cash flows Regulated revenues are insulated from volume exposure through the revenue cap regulatory regime providing revenue certainty The AER has made a final revenue determination for Ausgrid that allows for clear and predictable revenue over five years, from 1 July 2019 to 30 June 2024 95% of revenues are regulated ✓ The impact of COVID-19 on electricity consumption and Ausgrid's regulated revenues is temporary in nature, with the revenue cap regulatory regime allowing Ausgrid to recover any revenue under-recovery in future years Natural monopoly position in franchisee area within the State of NSW - no competition for transportation of electricity within Ausgrid's existing network ✓ Core infrastructure servicing Sydney and parts of NSW - the most populous state in Australia ✓ Australia is one of the few remaining AAA economies with 28 consecutive years of GDP growth (prior to COVID-19) Culture change and transition to new executive leadership with a significant safety focus Productivity improvements and operational savings from the Transformation Program driving a sustainable reduction in opex Credit ratings of Baa1 from Moody's and BBB from S&P (both stable outlook) and prudent approach to capital management (Ausgrid's Treasury Policy and Partnership Deed requires that Ausgrid use reasonable endeavours to maintain a bbb/baa2 baseline credit assessment) Shareholders, Board and management are committed to maintaining these credit ratings - shareholder support evidenced by Board decision to reinvest dividends to support the business Strong liquidity position of $614 million as at 30 June 2020. No debt maturities until December 2021 No covenant pressure with headroom against key thresholds ✓ $12.6 billion drawn debt with gearing of 76% net debt/RAB and $8.7 billion of acquisition equity value Better Ausgrid Together 28#29Contact information Ausgrid 24 Campbell Street Sydney NSW 2000 www.ausgrid.com.au Better Ausgrid Together Michael Bradburn Chief Financial Officer [email protected] +61 2 8569 6858 Edwin Waters Group Treasurer [email protected] +61 2 9160 6785 29 29#30Better Ausgrid Together Supporting materials i. Company information ii. Regulatory iii. FY20 and historical financials iv. Security structure v. Treasury Policies vi. ESG commitments 30 30#31NSW economic overview Sydney is the capital city of NSW, the driving force of economic growth across Australia Better Ausgrid Together Key highlights Australia has experienced 28 consecutive years of positive economic growth prior to the onset of COVID-19 2 3 5 NSW is the largest economy and most populous state in Australia, representing 32% of the total Australian population and over 5 million people residing in Greater Sydney The NSW economy represented a third of Australia's GDP for the year ended 30 June 2020 The 2019-20 NSW State Budget released in June 2019 provides for an infrastructure related capital spend of $93bn over four years to 2022-23 NSW has three major electricity distribution networks: Ausgrid, Endeavour Energy and Essential Energy 31#32Overview of the Ausgrid board Independent Chairman Dr Helen Nugent AO • Professional company director with 35 years experience in the energy, resources and financial services sectors Non-Executive Director of IAG and Chairman of the National Disability Insurance Agency Non-executive directors AustralianSuper ifm investors NSW GOVERNMENT Jason Peasley • More than 20 years of experience working across investments globally infrastructure Manages infrastructure investment portfolio and is on the leadership team for AustralianSuper's investments Hugh Gleeson More than 30 years of experience in the utility sector at senior executive and governance levels CEO of United Energy and Multinet Gas for 12 years Wendy Thorpe More than 30 years of experience in financial services, education, health and not-for-profit Chair of On-Line Education Services, Non-Executive Director of Tower, Epworth Healthcare, Very Special Kids and former director of AMP Bank Michael Hanna Head of Infrastructure (Australia) at IFM Investors More than 20 years of experience related to major infrastructure projects Michael Byrne • More than 30 years of executive experience in the logistics, supply chain, retail and property sectors Previously MD & COO of Toll Holdings Limited Ashley Barker across Executive Director at IFM Investors 17 years of experience investment banking, private equity and infrastructure funds management Belinda Gibson Over 30 years of financial markets experience Partner at Mallesons Stephen Jaques for 20 years and deputy chairperson of ASIC 2007-2013 Steven MacDonald Over 20 years of experience in the construction and infrastructure sectors in Australia, New Zealand and Asia Former CEO of Transfield Construction and MD of Zinfra Group Robert Wright Over 35 years of financial management experience across a range of industries (e.g. retail, food processing and fast moving consumer goods) Recent former Directorships include APA Group from 2000-2015 Better Ausgrid Together 32#33Risk management and insurance Formalised risk management framework Risk management cycle consistent with ISO 3100:2018 Incorporates use of Bow-Tie methodology as part of the risk assessment process • Network risk management includes the identification of network failure modes and their criticality as a core element • Provides visibility of any uncertainties to the achievement of plans, priorities and the ability to work to Ausgrid's corporate values Provides assurance to management that the business critical controls in place are designed and operating effectively Regular reporting including emerging risks, key risk indicator trends and risk treatment action status Board risk appetite statement 1. People, Health & Safety 2. Customer 3. Reputation 4. Cyber and Physical Security 5. Environment 6. Regulatory & Compliance Themes Risk Averse Risk Sensitive Risk Neutral Risk Averse Risk Sensitive Risk Sensitive 7. People Conduct Risk Averse 8. People Workforce & Culture Risk Sensitive 9. Network Operations 10. Finance Risk Sensitive Risk Sensitive Risk Neutral Risk Seeking Insurance ° . General Liability - $860 million of cover with a $250,000 deductible (includes Full Failure to Supply) - Property $1 billion of cover with a $10 million deductible for substations, $500,000 for vehicles and $200,000 for other assets Bushfire Liability - $860 million of cover with a $10 million deductible 11. Operating Technology 12. New Business Better Ausgrid Together Risk Averse Risk Sensitive Risk Neutral Risk Seeking Definitions Avoid risk taking wherever possible Limited risk taking Calculated risk taking Engage with risk pursue opportunities 33 33#34Bushfire risk management Inspection and maintenance using the latest technology in all potential bushfire impact areas In potential bushfire impact areas, Ausgrid conducts: • Vegetation monitoring and trimming to maintain minimum clearances from powerlines Annual Light Detection and Ranging scanning for vegetation clearance by helicopter Detailed assessments using drones of bushfire impact areas (identified using satellite imagery) Electrical asset inspection and maintenance regime (including high definition photography) Additional training for hazard tree identification by pole and line inspectors Annual inspections of private mains Annual inspections of all non-insulated service wire connections Annual audit of all high voltage customers installation safety plans Better Ausgrid Together UBO ZEK TWE 217m 34#35Competitive Regulated natural monopoly Future trends in the electricity value chain Competitive Generation Industry transition from coal and other fossil fuels to renewable sources Transmission Transmission will be required to manage new interconnections as fuel mix evolves Poles and wires have a significant role to play in facilitating distributed generation Distribution TTT Smart metering enables increased customer engagement with network and provides the opportunity to modify tariff structures and improve service through data analytics The grid acts as a conduit to facilitate all forms of energy, including solar and batteries Retail Better Ausgrid Together อ Use of smart metering, interactive household devices and other technologies may result in an evolution of the retailer / end customer relationship 35#36Australian electricity market regulatory environment Established national regulatory regime governing the operational framework and revenue determination • • Ausgrid's electricity distribution and transmission network is economically regulated by the AER – an independent statutory body that is required to follow a process set out in the NER The NER is set by a separate independent body (the AEMC), and any changes to the Rules governing the regime can only be made if the change is in line with an explicit Rule-making test, and follows a public consultation process A key component of the regulatory environment is the assessment of a revenue requirement for a network operator through a regulatory determination process The AER is a mature regulator that has established a highly collaborative process for making regulatory determinations, which creates transparency for market participants AER determinations are administrative decisions under Australian law and may therefore be subject to judicial review overseen by the Federal Court Better Ausgrid Together AER AUSTRALIAN ENERGY REGULATOR AEMC 36#37Regulatory framework NSW government is a member of the COAG Energy Council COAG Energy Council Policy setting and strategic direction AER AER Consumer Challenge Panel Economic regulation and enforcement Licensing standards, environmental regulation NSW Government COAG Energy Council may request reviews and receive advice from the AEMC National Electricity Law¹ Legislative framework All stakeholders (Except the AEMC) Rule change proposals AEMO AEMC National transmission planning System and market operations National Electricity Rules Reviews and advice Better Ausgrid Together Source: Houston Kemp Economists 1. Allows for the making National Electricity Regulations Ausgrid Regulatory environment Distribution and Transmission services Retailer Organisations in the NEM Organisations outputs Review and advice Reporting flow Customer 37#38Regulatory building block methodology Background • . AER determines Ausgrid's annual expected revenue requirement based on a building block methodology - this is set at the commencement of each regulatory period (typically five years), providing transparency and revenue certainty throughout the period • Customer tariffs are set annually based on an AER agreed methodology (i.e. a Tariff Structure Statement approved as part of the regulatory determination process) during each regulatory period to allow Ausgrid to recover its revenue requirement Under the revenue cap form of regulation, tariffs are adjusted to account for over/under recovery of revenue requirement in previous years, whilst under a price cap mechanism the price is limited for the applicable service RAB Opening value of assets Depreciation over period + Capex Asset disposals + CPI indexation (inflation protection) Revenue 1 requirement Return on capital RAB x WACC 2 Opex allowance Regulatory depreciation 3 + Tax allowance Efficiency carryover Average tariffs Revenue requirement Forecast volume Actual revenue Average tariffs X Actual volume Annual price setting process sets tariffs based on revenue requirement and provides: 1) Inflation protection - revenues are adjusted for observed CP15 on a lagged basis 2) Volume protection – adjustments for differences in forecast and actual volumes (revenue cap) 3) Interest rate protection - update to cost of debt in regulatory WACC to incorporate changes in interest rates Notes: 1. The revenue requirement could include a reduction from the application of the shared assets guideline (if a materiality threshold is met); 2. Weighted average cost of capital; 3. Equal to depreciation over period less CPI indexation; 4. The financial outcome for the application of the STPIS scheme will be added to the revenue requirement in deriving an average tariff; 5. Consumer Price Index (Sydney all groups) published by the Australian Bureau of Statistics Better Ausgrid Together 38#39Regulatory key drivers The regulatory framework is incentive-based, meaning that the regulator allows Ausgrid to outperform the regulated rate of return by pursuing desirable objectives Value Driver Opex Capex Debt pricing Gearing STPIS Income tax Description AER determines an efficient level of opex by reference to peer benchmarking and a range of other factors Provided a business is 'efficient', AER typically adopts a 'base-step-trend' approach in setting the opex allowance, which relies on escalation of actual opex in a base year The EBSS rewards opex underspend and penalises opex overspend against the regulatory allowance AER determines an efficient level of capex, typically based on a bottom-up assessment and trend analysis of historical expenditure The CESS rewards capex underspend and penalises capex overspend against the regulatory allowance AER can challenge any capex above the capex allowance on the basis it is imprudent or inefficient In determining regulatory WACC, the AER assumes a cost of debt by reference to a benchmark basket comprised of 2/3 efficient entities with a BBB+ rating and 1/3 efficient entities with an A rating issuing 10 year debt In determining regulatory WACC, the AER consistently assumes a gearing ratio of 60% for all electricity utilities AER offers incentive payments / penalties based on performance against reliability targets relating to length and frequency of outages and telephone response times AER assumes Ausgrid pays a corporate tax rate of 30% in determining the regulatory tax allowance Outperformance potential The EBSS entitles Ausgrid to retain approximately 30% of any opex underspend against the opex allowance EBSS will apply in the FY20-24 regulatory period The CESS entitles Ausgrid to retain approximately 30% of any underspend against the capex allowance Underspend also removes the risk of the AER challenging the prudency/efficiency of any capex if there is an aggregate capex overspend across the regulatory period Regulated returns are improved by achieving borrowing costs below the AER benchmark for example by: • • Targeting a weighted average debt tenor shorter than the benchmark Active treasury management to achieve more attractive pricing than the benchmark Hedging current debt book at current rates (whereas the AER uses a 10- year trailing average approach which includes higher historical debt costs) Regulated returns are improved by targeting higher gearing than the AER assumption of 60% Exceeding performance and reliability targets will result in additional incentive payments to Ausgrid Ausgrid's regulatory tax allowance will exceed actual tax paid where Ausgrid's effective tax rate is less than 30% Better Ausgrid Together 39#40Regulatory developments - COVID-19 Ausgrid participated in the ENA package to assist small business and residential customers for the three months ended 30 June 2020. We are also discussing additional support options with the AER going forward • Background Key details 1 ENA relief package ⚫• Developed through consultation with retailers • • Key focus to provide immediate relief to retail customers - well received by retailers with 22 retailers signed up Combination of waiver and deferrals of network charges Smaller retailers can defer 20% of all network charges in respect of residential customers until September 2020 and receive a rebate for residential customers in hardship and small businesses in financial distress due to COVID-19 Larger retailers are able to defer network charges for residential customers on hardship arrangements and will also receive a rebate for distressed small business customers Scheme ends on 30 June 2020 2 AER rule changes in response to COVID-19 AER has commenced work on potential rule changes in response to COVID-19 Two rule changes are currently being examined 1. Extending payment terms from 10 days to up to 6 months where a customer enters into a payment plan, deferred debt or other hardship arrangement because of COVID-19 2. Ability to smooth true-ups for COVID-19 related revenue under- recovery over multiple years or regulatory periods The first rule change has been initiated by the AEMC and is under consultation Potential impact • Measures have had an estimated $36 million¹ impact in FY20, most of which is deferred revenue $13 million waiver component, this revenue is forgone in FY20 $23 million deferral component, this revenue will be recognised in FY20 but won't be received until September 2020 • Rule change 1 - AEMC has released a directions paper which limits expected cash flow consequences of revenue deferrals to small customers and small retailers. Ausgrid has boosted liquidity by increasing the working capital facility limit in March 2020 Rule change 2 - Will enable networks to minimise potential for price shocks Applicability to network charges 31 Mar 2020 3 months Better Ausgrid Together 1. Estimates based on latest available data 30 Jun 2020 6 months + 40 40#412019-24 Final Determination - detailed components Rate of Return (% nominal) FY20 FY21 FY22 FY23 FY24 Average Capex and opex allowance ($m, real FY19) 1 Return on equity (nominal post-tax) 5.70% 5.70% 5.70% 5.70% 5.70% 5.70% 1,085 1,015 986 952 937 Return on debt (nominal pre-tax) Gearing 5.74% 5.55% 5.36% 5.17% 4.98% 5.36% 455 455 457 458 460 60% 60% 60% 60% 60% 60% 631 560 529 493 Nominal vanilla WACC 5.72% 5.61% 5.49% 5.38% 5.27% 5.49% 477 FY20 FY21 FY22 FY23 FY24 ■Capex Opex FY20 rates confirmed, outer years return on debt will be updated based on prevailing market data Return on equity components FY20-24 Imputation Credits FY20-24 Nominal risk free rate 2.04% Distribution Rate 90% Market Risk Premium 6.10% Utilisation Rate 0.65 Equity Beta 0.6 Return on Equity 5.70% Gamma² 0.585 Ausgrid Together Source: 2019-24 AER determination for Ausgrid Notes: 1. Capex excludes capital contributions, opex excludes debt raising costs; 41 2. Gamma represents the value of imputation tax credits received by shareholders with dividends which offset tax liabilities#422019-24 Final Determination – projected RAB - A$million, nominal FY20 FY21 FY22 Opening RAB 15,681 16,234 16,693 17,057 FY23 FY24 17,413 Net capex (incl. disposals) 656 593 528 549 543 Straight line depreciation (483) (528) (569) (607) (615) Indexation 380 394 405 414 422 Closing RAB 16,234 16,693 17,057 17,413 17,763 Closing RAB (A$million, nominal) 15,681 16,234 16,693 17,057 17,413 17,763 FY19 FY20 Better Ausgrid Together Source: 2019-24 AER determination for Ausgrid FY21 FY22 FY23 FY24 42#43Comparison of 2014-19 and 2019-24 Determination Comparison of key assumptions Item Regulatory CPI Tax allowance Depreciation method for tax calculation Straight Line Diminishing Value 2014-19 2.42% 2019-24 2.42% Comments Consistent across regulatory periods Gamma 0.400 0.585 Cost of equity allowance 7.10% 5.70% Risk free rate 2.55% 2.04% Final outcome of Review of Regulatory Tax Approach changed tax depreciation calculation from straight-line method to diminishing value method causing lower tax allowance over time Increase driven by shift from 2013 rate of return guideline to 2018 rate of return instrument Difference driven by shift from 2013 rate of return guideline to the 2018 rate of return instrument as presented by component below Difference driven by updated Australia sovereign yield curve Equity beta 0.7 0.6 Lower cost of equity allowed in the WACC Market risk premium 6.5% 6.1% Lower cost of equity allowed in the WACC Equity funding 40% 40% Cost of debt allowance 5.93% 6.51% 4.98% 5.74% Debt margin assumption BBB 2/3 BBB 1/3 A Unchanged Difference driven by updated debt forward yield curves and changed margin assumption Lower cost of debt allowed in the WACC Better Ausgrid Together Source: 2014-19 AER Determination for Ausgrid, 2019-24 AER Determination for Ausgrid 43 43#44Interest rate hedging strategy Notional swap profile 16% D/RAB 60% D/RAB 10 year trailing average RCP 2019-24 RCP 2025-30 Debt/RAB Swap Execution Tenor Year FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 7.55% 5 2019 7.55% 5 2019 6.0% 1 2016 6.0% 2 2016 6.0% 3 2016 6.0% 4 2016 6.0% 5 2016 6.0% 6 2016 6.0% 7 2016 6.0% 8 2016-17 6.0% 9 2017 6.0% 10 2018 60% Debt/RAB hedged to 10-year trailing average profile with 16% Debt/RAB hedged to next regulatory reset in June 2024 Ausgrid Together Better Overview Ausgrid's interest hedging strategy can be broken down into: 60% debt to RAB hedged to 10-year trailing average cost of debt 1 - Ausgrid has an amortising swap profile that matches the tenor and profile of the existing regulatory debt allowance Further swaps will be executed to match the timing and volume of the annual 10% cost of debt resets by the AER 16% debt to RAB (equity portion) hedged to end of current Regulatory Control Period Note: 1. The AER currently sets the allowed return on debt by implicitly assuming that at the start of FY15 Ausgrid issued 100% of its debt at the rate of 6.51% (the yield on 10 year BBB+ rated bonds 28 February - 30 June 2014) and then 10% of the notional debt that matures each year and is replaced with debt issued at a rate equal to prevailing rates over the observation period during previous calendar year 44#45Income statement Comments The reduction in SCS revenue of $284 million from FY19 was due to a combination of factors, including a reduction in Ausgrid's Maximum Allowable Revenue following the 2019- 24 AER Determination. This was primarily due to the lower risk free rate and market risk premium within the regulatory WACC (refer to page 43 for further details) The reduction in unregulated revenue of $21 million from FY19 was primarily a result of the reclassification of activities from unregulated to ACS. This was offset within ACS by lower demand for ancillary network services due to COVID-19 and lower prices for metering and public lighting services from FY20 following the AER Determination Operating expenses remained stable in total over FY19 and FY20. Higher SCS opex was primarily due to abnormal storm activity experienced during FY20, which is subject to a pass- through application and is forecast to be recovered in FY22 A goodwill impairment expense of $348 million was recognised in FY19 in response to the AER Determination, which included a reduction in the regulatory rate of return. No impairment has been recognised in FY20 Reform costs in the profit or loss of $12 million in FY20 were lower and represent the exit payments that were not provided for in FY19 Income statement FY18-201 Variance A$m, nominal FY18 FY19 FY20 (FY19-20) SCS revenue 2,327 2,299 2,015 (284) ACS revenue Unregulated revenue Revenue Pass-through costs Gross margin SCS opex 168 154 153 117 142 121 (1) (21) 2,612 2,595 2,289 (306) (436) (355) (397) (42) 2,176 2,240 1,892 (348) (434) (376) (393) (17) ACS opex (72) (81) (103) (22) Unregulated opex (87) (107) (67) 40 Operating expenses (593) (564) (563) 1 Loss on disposal of property plant and equipment (PPE) (10) (21) (10) 11 EBITDA 1,573 1,655 1,319 (336) Depreciation and amortisation (543) (593) (639) (46) Impairment (348) Reform costs (35) (77) (12) 65 EBIT 995 637 668 31 Finance charges Interest income Profit before tax Income tax expense Profit after tax KPIs Gross margin (482) (478) (478) 4 3 2 (1) 517 162 192 33 517 162 192 30 EBITDA margin Operating expenses as % of revenue 83% 86% 83% (3%) 60% 64% 58% (6%) 23% 22% 25% 3% Better Ausgrid Together Note: 1. FY20 numbers are unaudited and subject to revision 445#46Cash flow statement Cash flow statement FY18-201 Variance A$m, nominal FY18 FY19 FY20 (FY19-20) EBITDA 1,573 1,655 1,319 (336) (Increase)/decrease in net working capital (42) 17 (83) (100) Non-cash items / reform costs (151) (174) (129) 45 / finance lease interest paid Net cash flow from operating activities 1,380 1,498 1,107 (391) Acquisition of business combination, net of cash (165) acquired Capital expenditure (702) (1,026) (675) 351 Proceeds from the sale of PPE and assets 22 10 4 (6) Net cash flow from investing activities (845) (1,016) (671) 345 Free cash flow 535 482 436 (46) Equity injection from partners 110 43 30 (13) Net proceeds from borrowings 227 230 243 13 Finance costs paid (477) (451) (465) (14) Interest received 4 3 2 (1) Dividends paid (distributions paid) (505) (337) (30) 307 Net cash flows from financing activities (641) (512) (220) 292 Income tax paid Net cash flow (106) (30) 216 246 Net cash flow (excluding income tax and dividends paid) 399 307 246 (61) Better Ausgrid Together Note: 1. FY20 numbers are unaudited and subject to revision Comments Net cash flow from operating activities reduced by $391 million in FY20 primarily driven by: lower tariffs following the AER Determination and reduced consumption volumes impacted by milder weather and COVID-19 higher cash reform costs due to employee exits under the FY20 Restructure increased transmission charges from Trans Grid working capital movements Net cash flow from investing activities reduced by $345 million in FY20 due to lower capital expenditure as a result of the LWP Equity injection from partners of $30 million in FY20 represents distribution paid by Ausgrid Operator Partnership that was immediately reinvested as equity into PLUS ES Net proceeds from borrowings of $243 million in FY20 includes a $200 million drawdown during COVID-19 as a liquidity buffer. The smaller drawdown in FY20 is due to lower capital expenditure and a $95 million repayment of Ausgrid's syndicated loan facility Finance costs increased by $14 million in FY20 due to fees paid in relation to the refinance of Ausgrid's syndicated loan facility and higher interest payments from a higher loan balance in FY20 46#47Capital expenditure Capital expenditure FY18-201 A$m, nominal Replacement Augmentation Connection and reliability Non-network and other FY18 FY19 FY20 472 577 385 18 29 29 15 23 37 120 269 91 Regulated capex 625 898 542 ACS and unregulated capex 186 161 140 Total capex 811 1,059 682 Better Ausgrid Together Note: 1. FY20 numbers are unaudited and subject to revision 47#48Balance sheet Balance sheet FY18-201 A$m, nominal FY18 FY19 FY20 Variance (FY19-20) Property, plant & equipment 16,212 16,735 16,925 190 Intangibles 3,981 3,671 3,641 (30) Assets held for sale 10 4 4 Fixed assets 20,203 20,410 20,570 160 Accounts receivable/contract assets 426 419 359 (60) Creditors (301) (292) (266) 26 Inventories 39 38 31 (7) Other current liabilities (8) (8) (11) (3) Net working capital 156 157 113 (44) Deferred tax assets/(liabilities) (6) 206 305 99 Provisions (472) (530) (399) 131 Derivatives 55 (23) 155 178 Other non-current liabilities (42) (56) (75) (19) Deposits and unclaimed monies (2) (2) (2) Other assets/(liabilities) (467) (405) (16) 389 Borrowings (12,138) (13,003) (13,763) (760) Cash, deposits and investments 217 187 403 216 Other debt items Net debt (11,921) (12,816) (13,360) (544) Net assets Capital Reserves Retained earnings 7,971 7,346 7,307 (39) 8,847 8,890 8,920 30 13 (480) (711) (231) (889) (1,064) (902) 162 Equity 7,971 7,346 7,307 (39) Better Ausgrid Together Note: 1. FY20 numbers are unaudited and subject to revision Comments The increase in fixed assets of $160 million in FY20 is mainly driven by additions of $813 million offset by depreciation/amortisation of $639 million and disposal of assets of $14 million The decrease in accounts receivable/contract assets of $60 million in FY20 is mainly driven by the lower unread meter revenue accrual which reflects the lower tariffs following the AER Determination for the FY20-24 regulatory period and lower consumption in the last quarter of FY20 due to COVID-19 The increase in deferred tax assets/(liabilities) of $99 million in FY20 represents the tax impacts (30%) on the fair value movement of the cash flow hedges and the actuarial losses of the defined benefit plan The decrease in provisions of $131 million in FY20 mostly relates to employee exits through the FY20 Restructure The increase in derivatives of $178 million in FY20 is mostly due to the strengthening of the AUD against the EUR and USD and decrease in interest rates The increase in borrowings of $760 million in FY20 is mainly due to drawdowns under the Ausgrid's loan facilities (net drawdown of $243 million), fair value movements of $504 million due to the strengthening of the AUD against the EUR and USD, and the decrease in interest rates and capitalised ASF transaction costs of $16 million. Borrowings in the balance sheet are measured at fair value under accounting standards and translated at year end exchange rates. This differs from borrowings presented on page 27 which are measured at the relevant hedged rate The increase in cash of $216 million in FY20 is mostly due to the $200 million additional funds drawn down during COVID-19 The increase in reserves of $231 million in FY20 mainly relates to the decrease in the fair value of swaps during FY20 due to a reduction in interest rates 48#49Security structure Blue Asset Hold Trust 100% Blue Asset Partner Trust 50.4% 5 ADMHC 6 Main Lease External financiers (including AMTN noteholders) Security includes: Security net ERIC Alpha Asset Trust 1 (2/3/4) Each 12.4% Total 49.6% 2 Ausgrid Asset Partnership NAP On-Loan 100% Ausgrid Finance Pty Limited NSW State ERIC Alpha Holdings Pty Limited 100% 4 3 Blue Op Hold Trust 100% ERIC Alpha Operator Trust 1 (2/3/4) ERIC Alpha AUP Trust 1 (2/3/4) Blue Op Partner Trust Blue PES Partner Trust Each 12.4% Each 12.4% 50.4% 50.4% Total 49.6% Total 49.6% NOP On-Loan Ausgrid Operator Partnership 6 Sub-lease 100% 2 PLUS ES Partnership1 1 1 Ausgrid Management Pty Limited PLUS ES Management 1 Pty Limited 100% PLUS ES Management 2 Pty Limited 1 1) General security agreement in respect of all of the assets and undertakings of Ausgrid Finance Pty Limited, Ausgrid Management Pty Ltd, PLUS ES Management 1 Pty Limited and PLUS ES Management 2 Pty Limited General security agreement in respect of all the assets and undertakings of Ausgrid Asset Partnership, the Ausgrid Operator Partnership and the PLUS ES Partnership General security agreements from each partner in the Ausgrid Asset Partnership, the Ausgrid Operator Partnership and the PLUS ES Partnership 2) 3) 4) 5) 6) Specific security agreement over the shares and units in each partner in the Ausgrid Asset Partnership, the Ausgrid Operator Partnership and the PLUS ES Partnership Mortgage of the Network Lease Tripartite deed in respect of the Network Lease (between ADMHC and AAP) and sub-lease (between AAP and AOP) arrangements Note: 1. PLUS ES has another subsidiary - Active Stream Pty Limited that holds legacy metering services and other contracts but is not a guarantor or security provider Ausgrid Together 49 49#50Summary borrowing structure Security structure All senior secured creditors (including AMTN noteholders) benefit from a security package comprising: • Security over the present and after acquired property of the Ausgrid Asset Partnership, Ausgrid Operating Partnership and PLUS ES Partnership Security over the present and after acquired property of Ausgrid Finance Pty Limited, Ausgrid Management Pty Limited, PLUS ES Management 1 Pty. Limited and PLUS ES Management 2 Pty Limited Security over the shares and units of the AAP partners and AOP partners and the PLUS ES Partners held by each of the holding entities Mortgage over Ausgrid's interest in the Network Lease from the NSW Government Tripartite Deed Senior creditors have additional protection through a Tripartite Deed entered into by Ausgrid, the Ausgrid Asset Partnership, the Ausgrid Operator Partnership, the Security Trustee and the NSW Government, which provides: . • the Lessor consents to the creation and existence of the Security (including the mortgage of the Network Lease granted by the Ausgrid Asset Partnership) the Lessor agrees that neither the creation of the Security nor the exercise of any powers under it is of itself a breach of, or constitutes a 'Lessor Termination Event' under, the Network Lease or entitles the Lessor to exercise any termination right under the Network Lease the Lessor agrees that an Enforcing Party2 may, in the exercise of its powers under any Security, assign and transfer the Network Lease in accordance with its terms, provided that the Enforcing Party does so in compliance with the requirements in the Network Lease the Lessor grants certain cure rights to the Security Trustee in respect of 'Lessor Termination Events' under and as defined in the Network Lease Ausgrid Notes: Better 1: ADMHC (ABN 67 505 337 385), under the Network Lease Together 2. Such as the Security Trustee or a receiver 50 50#51Treasury policies Category Credit rating Ausgrid will use reasonable endeavours to maintain a bbb/baa2 baseline credit assessment and not less than bbb-/baa3 Interest rate risk • Liquidity risk Funding Refinancing risk Foreign exchange risk Counterparty credit risk at inception • Minimum of regulatory debt allowance (60% of RAB) to be hedged on trailing 10-year basis, with up to 100% of any residual floating interest rate exposure to be hedged consistent with the five year regulatory reset framework Cash and committed undrawn credit facilities to cover 1.2x its rolling three months look-forward financial obligations, defined as working capital, finance costs and capital expenditure Capex will be funded by drawdowns from committed, undrawn facilities, to a maximum of 75% of total capex in that period If there is a planned concentration of capex spending within a 12 month period, the Board will consider whether to fund a capex reserve prior to such period Following the refinancing of the debt facilities put in place at the time of acquisition, no more than 20% of debt facilities to mature in any 12 month period The refinancing process for borrowing facilities to be commenced no later than 12 months prior to maturity date and a firm commitment be in place no later than three months prior to maturity Hedge all foreign exchange exposures in excess of A$5 million (equivalent) at inception of exposure Hedge and deposit counterparties must be rated a minimum of A-/A3 Better Ausgrid Together 51#52Sustainability – Business-wide ESG commitments - Sustainability at Ausgrid is about operating in a safe, responsible manner that will enable us to deliver affordable and reliable energy choices to our customers now and in future. To achieve this, we know that it's now more important than ever to communicate transparently on our progress. Environment Reducing our own carbon emissions Providing cleaner energy choices for HE customers Managing our climate change physical and transitional risks Enabling the transition to clean energy ISO 14001 Environmental management system (EMS) Key: UN Sustainable M 13 Reporting on our environmental, social and governance (ESG) commitments is an essential part of this effort. Our approach is underpinned by three business-wide commitments: Sustainable Development Goals (SDGs), Energy Charter Principles and Our Revised Regulatory Proposal 2019-24 Customers & communities Our material issues Affordability Network resilience to our customers and business. We're focusing on the five SDGs that are most important Sustainable Development Transforming our network to provideoices. Revised Regulatory Proposal 2 with reliable affordable energy c Cyber & physical security Goals (SDGs) Energy Charter Principles tment to Energy Charter Principles misgrid Board has formalised Emerging technology Health & safety Development Goals: Gender equality Energy Charter Principles: We will put customers at the centre of our business and the energy system 13 Affordable M and clean energy Decent work and economic growth Sustainable cities and communities Climate action We will improve energy affordability for customers We will prove energy safely sustainably and reliably We will improve customer experience We will support customers facing vulnerable circumstances Better Ausgrid Together Inclusion & diversity Social Keeping our people, customers and community safe Delivering affordable, reliable energy choices Listening and responding to our customers S Fostering community trust 4 Inclusion and Diversity - our workforce reflecting our 5 communities Managing our costs and network demand to make electricity more affordable Governance Building a workforce that lives our values Investing in our capability to protect critical infrastructure assets 0 AZE Integrating sustainability into policies and practices atc M Working with our customers to improve our business Our Board and its committees oversee our performance and the sustainability of Ausgrid All 52 32#53Sustainability - Environment We are committed to conducting our business in a way that drives environmental sustainability. This means we are proactively working to reduce our impact on the planet, address climate change and be innovative with new technologies and how we use them with our customers Reducing our own carbon emissions Our annual footprint is close to 1 million tonnes CO2-e To reduce this footprint, we established clear CO2-e emission reduction targets: 8% reduction by 17% reduction by end FY2024 FY2030 (44% excluding line losses¹) Ausgrid Climate Change Statement 13 Managing our climate change physical and transitional risks Our Climate Change Statement and emissions reduction targets demonstrate we take this seriously. In practice this means: Bushfire preparedness and storm management to keep our customers, people and network safe Hardening our network so it is more resilient. to climate change and provides our customers cleaner energy choices Spending $280m p.a. to replace ageing assets and improve reliability Key: Supporting documents -XNetwork resilience Emerging technology 1. In FY19, average line losses were 3.7% of the energy we move Better Ausgrid Together 00 Enabling the transition to clean energy We are investing $42m Network Innovation Program over the next five years to test new grid technologies that improve customer outcomes ECE M ISO 14001 Environmental management system (EMS) 20+ years certified to the international standard ISO 14001. Annual Environmental Sustainability Improvement Plan to identify actions that help achieve Ausgrid's environmental targets, objectives and long-term vision Environmental Management System Providing cleaner energy choices for our customers We are being innovative by: ⚫ planning pilots of community batteries ⚫trialling virtual power plants (in which household batteries feed back into our network) to allow us to become the internet of energy 33 53#54Sustainability – Social - Through our services, policies and organisational culture, Ausgrid delivers safe, reliable and affordable energy to our customers. We recognise that our infrastructure is present in all the communities we operate and that we have a large impact when things go well or when our service is interrupted Listening and responding to our customers 11 Each year our Energy Charter report will tell our customers how we are working to achieve the five principles, making sure we keep our customers at the centre of our decisions. This is informed by data-driven customer insights with the Customers at the Centre Project Fostering community trust 'Fostering Community Trust' which includes three priority programs; Building trusting stakeholder relationships; Basics done brilliantly customer service; and Fostering sustainable communities The objective of these programs is to better enable Ausgrid to address customer needs, deliver more collaborative governance, improve. Ausgrid's understanding of their emerging needs and then design services to meet them Energy Charter Annual Accountability Disclosure Report в 88 Delivering affordable, reliable energy choices We have been working to ensure our network meets the developing energy needs and choices of our customers. Between 2015-2019, there was: 28% total savings in Ausgrid network charges Financial Hardship Policy 13 Every five years Ausgrid also provides a regulatory submission to the Australian Energy Regulator who assesses our operational, maintenance and construction works plan and costs Our Revised Plan means: ⚫ lowered operating cost by $100m p.a. ⚫additional operational expenditure productivity improvements from 1 July 2020 Keeping our people, customers and community safe In FY19 we had an improvement from the previous year of a: 41% 14% decrease in decrease in lost recordable time injuries injuries 8 We also created Our Lifesavers, which are eight simple rules to add clarity to our highest risk tasks Commitment to Health, Safety & Environment Policy Managing our costs and network demand to make electricity more affordable We work with our Customer Consultative Committee to design new demand tariffs to make electricity more affordable. This resulted in fairer pricing structures in our tariff structure statement до Key: Supporting documents Affordability ԿԱՄ Health & safety Inclusion & diversity Customers & communities 2. Our Customer Consultative Committee includes representatives from eleven public advocacy, not for profit and other organisations. Better Ausgrid Together 4.14PP Inclusion and Diversity - our workforce reflecting our communities 5 @ Inclusion and Diversity Council is striving to have our workforce better reflect our communities. This is chaired by our CEO Our Reconciliation Action Plan outlines our commitment to advancing reconciliation and building relationships, respect and opportunities for Aboriginal and Torres Strait Islander peoples 54#55Sustainability – Governance - Our Board assumes overall responsibility for Ausgrid's corporate governance, overseeing the performance of the organisation, our management, employees and the interests of our shareholders and stakeholders Integrating sustainability into policies and practices We created our External Partner Code of Conduct to communicate our expectations of our external partners and their supply chains in providing goods and services to our organisation. These expectations are grouped under four pillars: • Social • Environmental Governance Economic External Partner Code of Conduct Ausgrid Procurement Statement Working with our customers to improve our business We established several bodies to better collaborate with our customers and become industry leaders in the management of new technologies. These include: ⚫the Technology Review Committee which helps improve transparency of investments in information technology and cyber ⚫ the Network Innovation Advisory Committee which drives our innovation program PPZZAT 00 Investing in our capability to protect critical infrastructure assets Ausgrid is investing in a range of measures designed to reduce our highest cyber risks, including inappropriate access to our systems, the potential loss of critical data and supplier cyber risk. These include: Investing $44m p.a. in technology, including cyber security Comprehensively reviewing all systems and processes to protect our assets, operations, and information from intrusion, damage and theft. bo Do -00- Our Board overseeing our success The Board maintains five committees that are essential to the financial success and sustainability of the company: Heath, safety & environment • Finance ⚫ Risk ⚫ Audit • Remuneration All Building a workforce that lives our values Our values: Work safe, live safe • Customer-focused •Commercially minded • Collaborative • Honest and accountable Respect We now have comprehensive customer-focused metrics and values in executive incentives, including both long- and short-term incentive plans. For example, improving the RepTrakⓇ score will be a key measure for the Executive Leadership Team's long-term incentives Energy Charter Annual Accountability Disclosure Report Code of Conduct Key: Supporting documents Emerging technology Health & safety Inclusion & diversity Cyber & physical security All All material issues Better Ausgrid Together 55#56Glossary AAP Ausgrid Asset Partnership¹ GRI ACS Alternative Control Services HV High Voltage ADMHC Alpha Distribution Ministerial Holding Corporation IoT ADMS Advanced Distribution Management System LED AEMC Australian Energy Market Commission LTIFR AEMO Australian Energy Market Operator LWP Global Reporting Initiative Internet of Things Light Emitting Diode Lost Time Frequency Rate Live Work Pause AER AMTN ANS Australian Energy Regulator Australian Medium Term Note Ancillary Network Services NEM National Electricity Market NER National Electricity Rules NSP Network Service Provider AOP Ausgrid Operator Partnership² NSW ASF AUM AVR Asian Syndicated Facility Assets under management Additional Voluntary Redundancy NUOS Opex p.a. CAGR Compound Annual Growth Rate PPE New South Wales Network Use of System Operating expenditure per annum Property, Plant and Equipment Capex Capital expenditure RAB Regulated Asset Base CCF Climate Change Fund RBA Reserve Bank of Australia CESS Capital Expenditure Sharing Scheme RCP Regulatory Control Period C&I Commercial and Industrial S&P Standard & Poors CPI Consumer Price Index SCS Standard Control Services COVID-19 Coronavirus pandemic SFA Syndicated Facility Agreement DER Distributed Energy Resources SDG Sustainable Development Goal DNSP Distribution Network Service Provider ST DSO Distribution System Operator STPIS EA Enterprise Agreement TCFD EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation TNSP EBSS Efficiency Benefit Sharing Scheme Totex EMTN Euro Medium Term Note TRIFR EMS Environmental Management System USPP ESG FTE FY GDP Environmental, social and governance Full Time Employee Financial Year Gross Domestic Product Ausgrid Together Notes: 1. Also referred to as NAP in the loan documents and AMTN IM 2. Also referred to as NOP in loan documents and AMTN IM VPP WACC WC Sub-transmission Service Target Performance Incentive Scheme Taskforce on Climate-related Financial Disclosure Transmission Network Service Provider Total expenditure Total Recordable Injury Frequency Rate US Private Placement Virtual Power Plant Weighted Average Cost of Capital Working Capital 56#57Important notice and disclaimer Disclaimer This Investor Presentation contains information which is strictly confidential and is provided to the recipient in connection with the medium term note programme of Ausgrid Finance Pty Ltd (ABN 14 615 343 005) ("Issuer"). The information may not be reproduced, retransmitted, further distributed or forwarded, electronically or otherwise, to any other person or published in whole or in part for any purpose. By receiving this Investor Presentation, you agree to be bound by the terms set out below. This Investor Presentation is prepared by the Group (comprising the Issuer, the Australian partnership known as the Ausgrid Asset Partnership and the partners therein, the Australian partnership known as the Ausgrid Operator Partnership and the partners therein, PLUS ES Partnership and the partners therein, Ausgrid Management Pty Ltd (ACN 615 449 548), Plus ES Management 1 Pty Ltd (ACN 622 269 907) and Plus ES Management 2 Pty Ltd (ACN 622 269 934)). No representation or warranty is made as to, and no reliance should be placed on, the accuracy, completeness or correctness of the information contained in this Investor Presentation. To the maximum extent permitted by law, none of the members of the Group or their respective members, directors, officers, employees, agents, affiliates, advisers or representatives nor any other person accepts any liability for any loss arising from or in connection with this Investor Presentation including, without limitation, any liability arising from fault or negligence. The information and opinions contained in this Investor Presentation in relation to the business and operations of the Group constitutes the sole judgment of the Group as at 27 July 2020 of this Investor Presentation and are subject to change without notice. There is no obligation on the Group or any other person to update, modify or amend this Investor Presentation or otherwise to notify the recipient if any information, opinion, projection, forecasts or estimate set forth herein, changes or subsequently becomes inaccurate. Certain of the information contained herein is or may be based upon or derived from information provided by third-parties. None of the members of the Group or their respective members, directors, officers, employees, agents, affiliates, advisers or representatives guarantee the accuracy of such information. This Investor Presentation has not been lodged with Australian Securities and Investments Commission or any other authority. This Investor Presentation is intended for distribution only to financial institutions and professional investors in Australia whose ordinary business includes the buying or selling of securities in circumstances where disclosure is not required under Chapter 6D.2 or Chapter 7 of the Corporations Act 2001 (Cth) (the "Corporations Act") and only in such other circumstances as may be permitted by applicable law. This Investor Presentation must not be given, and is not intended to be given, to any "retail client" within the meaning of section 761G of the Corporations Act. Any securities that may be offered by the Issuer in, or into, Australia are offered only as an offer that would not require disclosure to investors under Part 6D.2 or 7.9 of the Corporations Act. The Issuer does not hold an Australian Financial Services Licence under the Corporations Act and is not licensed to provide any advice, including in relation to securities or derivatives. The information in this Investor Presentation does not take into account individual investment and financial circumstances and is not intended in any way to influence a person dealing with a financial product, nor provide financial advice. This Investor Presentation does not, and is not intended to, constitute an offer or invitation by or on behalf of the Issuer or any member of the Group or their respective members, directors, officers, employees, agents, affiliates, advisers or representatives nor any other person to subscribe for, purchase or otherwise deal in any securities. Recipients of this Investor Presentation are required to make their own independent investigation and appraisal of the business and financial condition of the Issuer and the Group and any tax, legal, accounting and economic considerations relevant to the Issuer and the Group. Better Ausgrid Together 57#58Important notice and disclaimer (cont'd) This Investor Presentation should not be distributed to any person or entity in any jurisdiction or country where such distribution would be contrary to applicable law and no action has been taken to permit the public distribution of this Investor Presentation in any jurisdiction. You should take all necessary steps to be informed of such restrictions and you should observe such restrictions. This Investor Presentation may contain forward-looking statements. All statements that address expectations or projections about the future are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. None of the members of the Group or their respective members, directors, officers, employees, agents, affiliates, advisers or representatives nor any other person guarantees that these assumptions and expectations are accurate or will be realised. The actual results could thus differ materially from those projected in any such forward-looking statements. None of the members of the Group or their respective members, directors, officers, employees, agents, affiliates, advisers or representatives nor any other person assumes any responsibility to amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events, or otherwise. This Investor Presentation contains references to credit ratings. A credit rating is not a recommendation to buy, sell or hold securities, and may be subject to revision, suspension or withdrawal at any time by the relevant assigning organisation. Each credit rating should be evaluated independently of any other credit rating. Credit ratings are for distribution only to a person (a) who is not a "retail client" within the meaning of section 761G of the Corporations Act 2001 and is also a sophisticated investor, professional investor or other investor in respect of whom disclosure is not required under Part 6D.2 or 7.9 of the Corporations Act, and (b) who is otherwise permitted to receive credit ratings in accordance with applicable law in any jurisdiction in which the person may be located. Anyone who is not such a person is not entitled to receive this Investor Presentation and anyone who receives this Investor Presentation must not distribute it to any person who is not entitled to receive it. Neither the receipt of this Investor Presentation by any person nor any information contained herein or supplied herewith or subsequently communicated to any person in connection with any transaction described herein is or is to be taken as constituting the giving of investment advice to any person. This Investor Presentation is for information and convenient reference and does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. All financial results are presented in AUD unless otherwise stated. FY20 numbers are unaudited and subject to revision. O Copyright Ausgrid Finance Pty Ltd (ABN 14 615 343 005). All rights reserved. No part of this Investor Presentation may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written permission of the Issuer. Better Ausgrid Together 58