#1Ausgrid Lender Presentation SEPTEMBER 2019 CONFIDENTIAL Ausgrid Together#2Important notice and disclaimer You must read the following before continuing. By accepting or viewing this presentation you represent and warrant that you are entitled to receive or access the presentation in accordance with the restrictions below and agree to be bound by the limitations contained within it. The information contained in this presentation (including this notice) or discussed at this presentation has been prepared by the Ausgrid Group (Ausgrid), comprising Ausgrid Finance Pty Limited (the 'Borrower'), 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, the Australian partnership known as PLUS ES and the partners therein and their respective subsidiaries. Confidentiality The presentation is provided or shown to you on a strictly confidential basis and by accepting or viewing it you agree to keep it confidential and secure. This presentation may not be copied, disclosed, reproduced or distributed to any other person in whole or in part for any purpose without the express written consent of the Ausgrid Group. Summary information This presentation contains summary information about the Ausgrid Group and its activities, and is current as at the date of this presentation. This presentation may also include information derived from public or third party sources, including public filings, research, surveys or studies conducted by third parties, including industry or general publications and other publicly available information, that has not been independently verified. Neither Ausgrid Group nor any of its subsidiaries or any of the respective directors, officers, employees, representatives, agents or advisers makes any representation or warranty with respect to the fairness, accuracy, completeness or adequacy of such information. No representation or warranty, express or implied, is provided by the Ausgrid Group in relation to the accuracy or completeness of the information. Statements in this presentation are made only as of the date of this presentation unless otherwise stated and the information in this presentation remains subject to change without notice. The Ausgrid Group is not responsible for updating, nor undertakes to update, this presentation. Not investment advice This presentation has been prepared by the Ausgrid Group for use on a no-reliance basis. The information in the presentation is an overview and does not contain all the information necessary to make an investment decision. Accordingly, no investment, divestment or other financial decisions or actions should be based solely on the presentation. It is intended to be a summary of certain information relating to the Ausgrid Group as at the date of the presentation and does not purport to be a complete description of the Ausgrid Group. It is provided for information purposes only. The information contained in the presentation has been prepared without taking account of any person's investment objectives, financial situation or particular needs and nothing contained in the presentation constitutes investment, legal, tax or other advice. You must not rely on the presentation but make your own independent assessment and rely upon your own independent taxation, legal, financial or other professional advice. Investor status The presentation is provided or shown to you on the basis that you are, and you represent and warrant that you are either (i) outside of the United States and you are not acting for the account or benefit of a U.S. person (as defined in Regulation S under the Securities Act of 1933, as amended (the 'Securities Act')), or (ii) inside the United States or you are a U.S. person and (a) a qualified institutional buyer within the meaning of Rule 144A under the Securities Act, or (b) a dealer or other professional fiduciary organised, incorporated or (if an individual) resident in the United States that is acting for an account (other than an estate or trust) held for the benefit or account of persons that are not 'U.S. persons' (as defined in Rule 902(k) under the Securities Act) for which you have, and are exercising, investment discretion, and you acknowledge and agree that you will keep information in this presentation confidential. If you are not a person that meets the foregoing description, you may not read or consider this document or attend the presentation. Please return the presentation immediately to the Ausgrid Group. 2 Ausgrid#3Important notice and disclaimer (continued) The distribution of this presentation may be restricted by law in certain jurisdictions. You should take all necessary steps to be informed of such restrictions and you should observe such restrictions. No offer of securities The presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or in any other jurisdiction and neither this presentation, nor anything contained herein, shall form the basis of any contract or commitment. Securities of the Ausgrid Group and its affiliates have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States. Accordingly, any such securities may not be offered or sold, directly or indirectly, in the United States unless they have been registered under the Securities Act or are offered and sold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. Forward-looking statements This presentation contains statements that constitute 'forward-looking statements' within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (Securities Exchange Act). Examples of these forward-looking statements include, but are not limited to, (i) statements regarding the Ausgrid Group's future results of operations and financial condition, (ii) statements of plans, objectives or goals, and (iii) statements of assumptions underlying those statements. Words such as 'may', 'will', 'expect', 'intend', 'plan', 'estimate', 'anticipate', 'believe', 'continue', 'probability', 'risk' and other similar words are intended to identify forward-looking statements but are not the exclusive means of identifying those statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that such predictions, forecasts, projections and other forward-looking statements will not be achieved. A number of important factors could cause the Ausgrid Group's actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. As such, undue reliance should not be placed on any forward-looking statement. Financial Information All financial information is presented in AUD unless otherwise stated. Investors should note that this presentation contains pro forma financial information, which has been prepared in accordance with the recognition and measurement principles of Australian Accounting Standards (AAS) and International Financial Reporting Standards (IFRS). The pro forma historical financial information included in this presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the U.S. Securities and Exchange Commission. The Ausgrid Group's results are recorded under AAS and IFRS. This presentation contains certain financial data that are 'non-GAAP financial measures' under Regulation G under the Securities Exchange Act and that are non-AAS and non-IFRS financial measures. Such measures include EBITDA, net debt, cash flow available for debt service (CFADS), regulatory asset base (RAB) and capital expenditure. The Ausgrid Group believes that these 'non-GAAP financial measures' provide a useful means through which to examine the underlying performance of the business. These measures, however, should not be considered to be an indication of, or alternative to, corresponding measures of net profit determined in accordance with AAS or IFRS. In addition, such measures may not be comparable to similar measures presented by other companies. Credit rating This Presentation includes credit ratings. A credit rating is not a recommendation to buy, sell or hold any securities and may be changed at any time by the applicable credit ratings agency. 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 (Cth) 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 presentation and anyone who receives this presentation must not distribute it to any person who is not entitled to receive it. © Copyright Ausgrid Finance Pty Limited (ABN 14 615 343 005). All rights reserved. No part of this 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 Borrower. 3 Ausgrid#4Presenter Michael Bradburn Chief Financial Officer Michael has more than 20 years' experience in financial, commercial planning and audit roles across a range of industry sectors. Michael's prior roles have included CFO of Viva Energy Australia, CFO of Brisbane Airport Corporation and senior financial and commercial roles at Asciano Limited (and its predecessor, Patrick Corporation). Michael is a Chartered Accountant, a member of the Association of Chartered Certified Accountants and a graduate of the Australian Institute of Company Directors. He also holds a Master of Business Administration from Australian Graduate School of Management (AGSM) and a Bachelor of Business. Michael is a member of the Australian Institute of Company Directors Reporting Committee and is a non-executive director of the Financial Executives Institute. Ed Waters Group Treasurer Ed has more than 20 years' experience in banking and financial markets focusing on Capital Markets, Debt Origination, Structuring and Analytics. Ed has held several senior roles in Australia and offshore. In his most recent position, Executive Director Debt Capital Markets at ANZ Banking Corporation (9 years), he was responsible for guiding many of Australia's top listed corporates, financial institutions and government related entities through the domestic and offshore capital markets including the utility and infrastructure sectors. Earlier roles have included a variety of analytical and structuring responsibilities for Westpac Institutional Bank (7 years) in Sydney and Japan and management/economic consulting. Ed holds a Bachelor of Economics (Finance) and Bachelor of Arts (Honours 1st class) majoring in Japanese language. Ausgrid 4#5Glossary AAP ACS Ausgrid Asset Partnership1 FY Financial Year Alternative Control Services GDP ADMHC Alpha Distribution Ministerial Holding Corporation loT ADMS Advanced Distribution Management System LED Gross Domestic Product Light Emitting Diode AEMC Australian Energy Market Commission NEM Internet of Things National Electricity Market AEMO Australian Energy Market Operator NER National Electricity Rules AER AMTN ANS AOP ASF AVR CAGR Capex Capital expenditure CCF CESS C&I Australian Energy Regulator Australian Medium Term Note Ancillary Network Services Ausgrid Operator Partnership² Asian Syndicated Facility Additional Voluntary Redundancy Compound Annual Growth Rate Climate Change Fund Capital Expenditure Sharing Scheme Commercial and Industrial NSP Network Service Provider NSW New South Wales NUOS Opex p.a. PP&E Network Use of System Operating expenditure per annum Property, Plant and Equipment RAB Regulated Asset Base RBA Reserve Bank of Australia RCP Regulatory Control Period S&P Standard & Poors SCS Standard Control Services CPI Consumer Price Index SFA DNSP Distribution Network Service Provider STPIS EA Enterprise Agreement TNSP EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation Totex EBSS EMTN FTE Efficiency Benefit Sharing Scheme USPP Euro Medium Term Note WACC Full Time Employee WC Syndicated Facility Agreement Service Target Performance Incentive Scheme Transmission Network Service Provider Total expenditure US Private Placement Weighted Average Cost of Capital Working Capital 12 1. Also referred to as NAP in loan documents 2. Also referred to as NOP in loan documents 5 Ausgrid#6CONFIDENTIAL Agenda 1 About Ausgrid 2 Operations and performance 3 Strategic priorities 4 Regulation and financial performance 5 Funding and capital management A Supporting materials Ausgrid 6#73 Ausgrid investment highlights Our vision is to become a leader in energy solutions, recognised locally and globally 1 2 Stable, regulated natural monopoly Nationally significant infrastructure ✓ ✓ ✓ Long-life essential infrastructure with stable, inflation-protected cash flows Regulated revenues are insulated from volume exposure through revenue cap regime 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 94% of revenues are regulated 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 positive GDP growth NSW is rated AAA by the two major credit rating agencies: S&P and Moody's ✓ Culture change and transition to new executive leadership with a significant safety focus Experienced leadership ✓ Productivity improvements and operational savings from Transformation Program that bring positive influence on opex High quality network with significant capacity Capital management and shareholder support Strong ownership base Baa1 by Moody's and BBB by S&P credit rating and prudent capital management (baa2/bbb standalone credit profile is an Ausgrid policy and a requirement under the Partnership Deed with the NSW Government) Shareholders and management are committed to maintaining these credit ratings $12.4 billion drawn debt with gearing of 79% net debt / RAB and $8.7 billion of acquisition equity value 7 Ausgrid#8NSW economic overview Sydney is the capital city of NSW, the driving force of economic growth across Australia Key highlights 1 Australia has experienced 28 consecutive years of positive economic growth 2 3 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 2019 The 2019-20 NSW State Budget provides for an infrastructure related capital spend of A$93bn over four years to 2022-23 5 NSW has three major electricity distribution networks: Ausgrid, Endeavour Energy and Essential Energy Ausgrid 8#91. Competitive Regulated natural monopoly Competitive Ausgrid position in the NSW electricity supply chain Transmission¹ Generation Coal Gas Solar Hydro Wind . Area covers 22,275 square kilometres www TransGrid Interconnectors Ausgrid network • Includes approximately 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 FY19 Ausgrid Network GWh 25,424 Distribution Endeavour Energy essential Customers 1.75 million energy Revenue Retail agl Energy Australia Other retailers Employees Total opex $2.598 billion 3,576 $996 million origin Total capex $1.026 billion End users of electricity Ausgrid's network of 132kV transmission cables in the inner metropolitan area of Sydney are directly connected to TransGrid's NSW main transmission network. Where these assets are operated in parallel and provide transmission services to support TransGrid's network, they are defined as transmission assets for the purposes of the NEM and are treated as dual-function assets under the NER. Ausgrid is therefore registered as both a DNSP and a TNSP. Dual function assets are regulated by the AER as if they were part of the distribution system for the purposes of revenue allowance determinations 9 Ausgrid#10Ausgrid 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 from past Barrington Tops in the north to Waterfall in the south and from Merriwa in the west to Newcastle in the east NSW Ausgrid Network NEM Other regions Upper Hunter Muswellbrook Singleton Cessnock Northern Beaches Sydney Maitland Port Stephens Newcastle Rural/Industry Upper Hunter Valley Suburban/Subregional Lower Hunter Valley and Central Coast City / Urban Sydney Ausgrid 10#11Ownership overview In December 2016, AustralianSuper and IFM Investors acquired a combined 50.4% interest in Ausgrid from the NSW Government via a 99 year lease . Governance arrangements Ausgrid has been majority owned by AustralianSuper and IFM Investors for almost three years now • The NSW Government holds its 49.6% interest through a specially created entity and indirect subsidiaries which is 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 Matters requiring unanimous decision are limited to matters such as constitutional amendments and dissolution/disposal of the business • . In general, Board decisions can be made by ordinary majority (and AustralianSuper/IFM Investors appointed directors comprise an ordinary majority) • The NSW Government cannot divest its holding without enacting further enabling legislation . Over AustralianSuper (25.2%) AustralianSuper $166 billion Assets under management managed on behalf of more than 2.3 million members • Australia's largest industry superannuation fund Large-scale, long-term infrastructure investor with an approved mandate to invest in meaningful core infrastructure assets Over $17 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 in Eastern Mediterranean, GCT Global Container Terminals in Canada) Roads (TQ, Westconnex, Indiana Toll Road in the US, M6toll in Europe, Aleatica in Europe and Latin America) • Over IFM Investors (25.2%) ifm $140 billion investors Assets under management across infrastructure, listed equities, private capital and debt investments One of the world's largest owners and managers of nationally critical infrastructure assets Manages over $58 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) 11 Ausgrid#12CONFIDENTIAL Agenda 1 About Ausgrid 2 Operations and performance 3 Strategic priorities 4 Regulation and financial performance 5 Funding and capital management A Supporting materials Ausgrid 12#13Ausgrid revenue streams Ausgrid has four distinct revenue streams which align to the regulatory framework: SCS, ACS, unregulated services and the ring-fenced PLUS ES business Direct Control Services Ausgrid NSP Ring-fencing regulation 1. • SCS 88% of revenue revenue cap regulation Network services (transmission and distribution of electricity to customers through Ausgrid's 'poles and wires' network) Augmentation of the network Type 7 metering services ACS 6% of revenue price cap regulation Type 5-6 metering provision, reading, data services, transfer administration services and unrecovered meter costs ANS (mostly facilitating new connections, disconnections and reconnections to the network) Public lighting (managing street lights on behalf of councils, community groups and government associations) REGULATED - 94% of revenue • Unregulated market price Facility access (licencing the use of Ausgrid pole space, fibre and duct by telecommunication carriers, IoT 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 Type 1-4 metering services (meter installation and maintenance, metering 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 major telecommunication companies) Electrical infrastructure services under development (design, construction and maintenance of high voltage infrastructure, calibration and testing of high voltage assets for C&l businesses, state governments and power network businesses UNREGULATED -6% of revenue PLUS ES was founded by integrating Ausgrid's existing metering business with the AGL digital metering subsidiary acquired by Ausgrid in November 2017 Note: Revenue breakdown is based on the financial results for FY19 Ausgrid 13#14Customer profile Ausgrid has a large and diverse end customer base End customer type 10% O 90% Annual consumption NUOS revenue 22% Residential 46% Small business Medium business 20% ■Large business ■Residential ■Business ■Residential 34% 41% ■Small business 11% Medium business 15% ■Large business 10% Overview 1.75 million end customers in FY19, representing almost half of the electricity customer connections in NSW Top 10 end customers with individually calculated tariff No. Customer NUOS revenue (%) 1 Large business customers (i.e. customers > 750MWh p.a.) accounted for 22% of network revenue in FY19 1 Sydney Trains 0.9% 2 Yancoal 0.4% Diversified customer base revenue - the largest customer accounts for <1% of network 3 Sydney Airport 0.4% 4 Commsteel 0.3% Key retailers for Ausgrid are AGL (Baa2), EnergyAustralia (BBB+) and Origin Energy (Baa2/BBB) 5 Global Switch 0.2% 6 Port Waratah Coal Services 0.2% 7 Credit terms with retailers and the regulatory regime allows for recovery in the event of retailer insolvency Orica Botany Industrial Park 0.2% 8 Glencore Coal Assets Australia Pty Limited 0.2% 9 Australian Defence Garden Island 0.1% 10 Orica Eastern Nitrogen Kooragang 0.1% Total 2.9% 1. % of total NUOS revenue year ended 30 June 2019 14 Ausgrid#15Minutes Asset management Ausgrid has adopted a 'whole of life' approach. Effective asset management ensures the appropriate balance between cost, risk and performance for the safe and efficient delivery of a reliable and sustainable electricity network Ausgrid achieves this balance with: An asset management framework, including asset policies, asset standards and plans 120 110 . A single investment governance framework, with a consistent risk prioritisation methodology Extensive monitoring and reporting of network performance Asset maintenance and replacement programs to support network safety, reliability and performance and ensure compliance with obligations Delivery of improvement initiatives to achieve operating efficiencies 100 90 80 70 60 50 40 30 20 FY07 FY08 FY09 FY10 FY11 Ausgrid Reliability Performance FY12 System Average Interruption Duration Index (Left Axis) (Average outage duration in mins per customer p.a.) 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 FY13 FY14 FY15 FY16 FY17 System Average Interruption Frequency Index (Right Axis) (Average interruptions per customer p.a.) FY18 FY19 Frequency Risk Performance Sustainable value Cost Effective asset management has allowed Ausgrid to significantly improve its reliability performance track record Ausgrid 15#1613.0 12.2 10.8 7.8 • . • Ausgrid's network has distributed electricity within NSW for over 100 years 1.75 million end customers² and 25,424 GWh of electricity transported in FY19 Total RAB of A$15.7 billion as at 30 June 2019 per Final Determination 6.2 4.1 3.9 3.8 Ausgrid Energex Ergon Energy Essential Energy Endeavour Energy SA Power Networks Peer RAB and customer base comparison Largest distribution network in the NEM by RAB, end customer numbers, electricity delivered and maximum demand RAB of distribution networks in the NEM in FY18 (A$bn)¹ Largest RAB of any other network in the NEM 2.1 Distribution Transmission |Network located in NSW Customers of distribution networks in the NEM in FY18 (m)³ More customers than any other network in the NEM I I I 1.7 i 1.5 Network located in NSW 2.3 1.9 1.7 1.4 0.9 0.9 Powercor AusNet Services United Energy CitiPower TasNetworks Jemena Power and Water Evoenergy ¡ Ausgrid Energex Endeavour Energy Essential Energy 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.3 0.3 Source: AER State of the Energy Market Report (2018) (data gathered from AER regulatory determinations and benchmarking Regulatory Information Notices) as at 17 December 2018 RAB as at June 2018 (December 2018 for Victorian businesses) 1. 2. As at June 2018 23 Represents total residential, government, commercial and industrial customers Ausgrid 16 Powercor SA Power Networks Ergon Energy AusNet Services United Energy CitiPower 0.3 0.2 0.1 Jemena TasNetworks Evoenergy Power and Water#17CONFIDENTIAL Agenda 1 2 3 4 15 About Ausgrid Operations and performance Strategic priorities Regulation and financial performance Funding and capital management Supporting materials A Ausgrid 17#18Strategic priorities Our purpose is to connect communities and empower lives Focusing on safety, leadership and people Promotion and maintenance of a strong safety culture and safety performance Building a strong executive leadership group with commercial capabilities to drive transformation Delivering on customer and stakeholder expectations Balancing customer affordability focus with improving customer experience Preparing the grid for a lower carbon future and taking a customer centric approach to investment planning 2 Optimising the business environment 5 Focus on cost effectively maintaining current reliability levels Technological investment Delivering incremental value to Ausgrid's business and end customers by improving customer service, cyber security, information, communication and technology services Driving operational excellence through Ausgrid's Transformation Program Improving operating efficiencies and right-sizing the workforce, so Ausgrid can continue providing end customers with safe, reliable and affordable electricity supply while improving profitability Pursuing modest growth opportunities in unregulated businesses Pursuing growth opportunities in Ausgrid's unregulated business and developing innovative energy solution offerings, such as smart metering services, electrical infrastructure and telecommunications infrastructure 18 Ausgrid#19Transformation program The Transformation Program is a comprehensive program to deliver first quartile cost efficiencies while improving customer and safety outcomes & Objectives Progress • • • • • . • Change the legacy ways of working and thinking across Ausgrid to unleash the potential of the workforce and empower within parameters of controlled risk Right size the workforce and shape the organisation to be a flatter organisation with the frontline closer to the CEO Pursue cost efficiencies across all non-labour categories balanced with the sustainability procurement objectives including total cost of ownership, environmental, social and government factors Embed a culture of continuous improvement where cost efficiencies can be delivered sustainably and consistent with an end-to-end value chain perspective New EA in place supporting a performance-based culture The Transformation Program has already reduced SCS opex by $148 million and there is a plan to deliver another $56 million by FY24 Progressive reduction in operating expenditure since FY15 In FY20 Ausgrid's Transformation Program will result in a further reduction of 360 FTE Transformation implementation well under way New customer centric organisational structure in place . Outcomes Savings have been agreed and targets 'locked in' to budgets • The Transformation Program will be phased to consciously balance workforce reductions with employee engagement and technology implementation 19 Ausgrid#20CONFIDENTIAL Agenda 1 About Ausgrid 2 Operations and performance 3 Strategic priorities 4 Regulation and financial performance 5 Funding and capital management A Supporting materials Ausgrid 20 20#212019-24 Final Determination - revenue The AER determines the maximum revenues that Ausgrid can earn through a theoretical economic building-block methodology, prior to the commencement of each regulatory period that resets every 5 years ($m, 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 Remittal decision (329) 0 0 0 0 (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) Corporate income tax 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 network assets, and 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 For the FY19-24 period there is a CESS revenue reward due to capex underspend over FY14-19. There is also a negative revenue adjustments relating to over-recovered revenue in the FY15-19 period In the FY24-29 period Ausgrid will also be able to earn a revenue reward through the EBSS if it underspends opex over FY19-24 An amount that reflects the corporate income tax obligations of a benchmark network service provider Ausgrid 21 21#22Financial summary Statement of profit or loss and other comprehensive income nom. $ million Revenue SCS ACS Unregulated Interest income Total revenue Expenses SCS ACS Unregulated Pass-through costs Unregulated energy costs Total operating expenses EBITDA Depreciation and amortisation Finance costs Impairment expense Loss on disposal of PP&E Profit for the year FY18 FY19 2,327 168 2,299 154 117 142 4 3 2,616 2,598 (465) (446) (76) (88) (87) (107) (435) (355) (1) (1064) (996) 1,552 1602 (543) (593) (482) (478) (348) (10) (21) 517 162 • • Key highlights Revenue decreased mainly due to a reduction in energy consumption for low voltage non-residential customer. Operating expenses decreased mainly due to lower transmission costs from TransGrid, lower consultancy and contractor expenditure, partially offset by higher IT maintenance costs and higher employee benefits costs. Employee benefit costs increased mainly due to higher reform costs primarily driven by the restructuring provision reassessments and the increase in long service leave costs as a result of a reduction in the discount rate from 4.00% at 30 June 2018 to 2.75% at 30 June 2019. EBITDA includes reform costs of $35 million in FY18 and $77 million in FY19. In FY19 an impairment of $348 million was recognised against the goodwill allocated to the NSP. The NSP impairment resulted mainly from the AER Final Determination. Ausgrid 22 22#23CONFIDENTIAL Agenda 1 About Ausgrid 2 Operations and performance 3 Strategic priorities lauren Proctor 4 Regulation and financial performance 5 Funding and capital management A Supporting materials Ausgrid 23 23#24Funding Ausgrid has a $12.4 billion debt portfolio, is committed to prudent capital management and seeks to minimise its cost of funding within defined risk parameters Summary • • • Ausgrid is rated Baa1 by Moody's (implied baa2 on a standalone basis) and BBB (bbb standalone) by S&P (both stable). Shareholders and management are committed to maintaining this credit profile 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 debt is hedged to Australian dollar at the time of issue Ausgrid interest rate hedging program mimics the AER's approach to setting regulatory cost of debt and cost of equity allowances, thereby aligning Ausgrid's financing base rates with the equivalent base rates used in the revenue calculation Debt funding sources (as at 31 July 2019) 11% 8% 10% Drawn debt $12.4 bn 19% 52% ■Bank facility USPP ■AMTN ■ EMTN US144A Debt maturity profile 1,2 I 397 2,886 600 1,400 1,400 250 1,200 1,037 995 659 659 643 728 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 USPP AMTN ■EMTN ■US144A ■Bank facility (drawn) Bank facility (undrawn) 1. 2. Foreign currency debt is hedged for its term via cross currency swaps to AUD; debt amount shown at relevant hedged exchange rate Weighted average debt maturity of the drawn debt portfolio as at 31 July 2019 equals 6.0 years Ausgrid 24 24#25Credit metrics Leverage Net debt¹ / RAB Net debt / EBITDA² 7.6x 7.4x 7.1x <90.0% Cashflows CFCR³ EBITDA / Interest 3.8x 3.6x 3.4x 1.95 1.72 1.73 78.8% 79.1% 77.6% <1.4 <1.2 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 Bank covenant Lock-up Default ° Credit rating Ausgrid is committed to maintain its baseline credit rating assessment of baa2 / bbb Consistent with its Treasury Policy and Partnership Deeds The credit ratings are a core part of Ausgrid's capital management strategy Refer to Appendix A for details on Ausgrid's credit rating and distribution policies 123 1. Net debt presented at face value FY17 based on pro-forma EBITDA; FY19 EBITDA normalised by adding back goodwill impairment Cashflows normalised by adding back reform costs Ausgrid 25#26CONFIDENTIAL Contact and more information Ausgrid 24-28 Campbell Street Sydney NSW 2000 www.ausgrid.com.au Michael Bradburn Chief Financial Officer [email protected] +61 2 8569 6858 Ed Waters Group Treasurer [email protected] +61 2 9160 6785 Ausgrid 26 26#27CONFIDENTIAL Agenda 1 About Ausgrid 2 Operations and performance 3 Strategic priorities 4 Regulation and financial performance 5 Funding and capital management A Supporting materials Ausgrid 27#28Overview of the partnerships' 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 Australian Rail Track Corporation and the National Disability Insurance Agency Non-executive directors AustralianSuper Jason Peasley • • More than 20 years' experience working across infrastructure investments globally Manages infrastructure investment portfolio, and is on the leadership team for AustralianSuper's investments Hugh Gleeson More than 30 years' 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' 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 ifm investors Michael Hanna • Head of Infrastructure (Australia) at IFM Investors More than 20 years' experience related to major infrastructure projects Michael Byrne Director, MD & CEO of Toll Holdings More than 30 years of executive experience in the logistics, supply chain, retail and property sectors • Ashley Barker Executive Director at IFM Investors 17 years' experience across investment banking, private equity and infrastructure funds management • Belinda Gibson NSW GOVERNMENT Over 30 years' of financial markets experience Partner at Mallesons Stephen Jaques for 20 years and deputy chairperson of ASIC 2007-2013 Laura Reed Over 20 years' experience in the energy infrastructure sector CEO and MD of Spark Infrastructure from 2008-2012 Robert Wright Over 35 years' 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 28 Ausgrid#29Strategic plan Our strategic plan to achieve our vision and deliver for our customers, shareholders, and employees can be distilled into six strategic responses Our vision: 'be a leading energy solutions provider, recognised both locally and globally' Our purpose: 'connecting communities, empowering lives' Customers Safety For our: via our six strategic responses: Lead Better Safety Outcomes Uplift frontline safety leadership | Build an infield coaching capability | Improve controls to reduce risk Live Our Values and Behaviours Bring our values to life Foster Community Trust Build trusting stakeholder relationships | Customer service basics done brilliantly | Foster sustainable communities Lower bills 2 Reliability Sustainability Seamless interactions 5 Choice & control Fairness Transform the Way We Work Shareholders Safety Dividend certainty Operate and maintain network | Customer | Supply chain | Streamline functional support Shape Our Future Accelerate tariff reform | Serve emerging customer needs | Data driven grid Grow PLUS ES Capture metering volume | New value pools | Grow and optimise telco and electrical infrastructure services Growing cash flows Risk mitigation Employees Ausgrid 29#30Australian 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 ER AUSTRALIAN ENERGY REGULATOR AEMC 30 Ausgrid#31Regulatory 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 National Electricity Law¹ Legislative framework AEMO COAG Energy Council may request reviews and receive advice from the AEMC All stakeholders (Except the AEMC) Rule change proposals AEMC National transmission planning System and market operations National Electricity Rules Reviews and advice Ausgrid Licensing standards, environmental regulation Regulatory environment Distribution and Transmission services Retailer Organisations in the NEM Organisations outputs Review and advice Reporting flow NSW Government Source: HoustonKemp Economists 1. Allows for the making National Electricity Regulations Customer Ausgrid 31#32Regulatory regime • 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 5 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 revenue reset 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 Average tariffs Return on capital + RAB WACC 2 Opex allowance + Regulatory depreciation 3 Tax allowance Efficiency carryover Revenue requirement 4 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 1. The revenue requirement could include a reduction from the application of the shared assets guideline (if a materiality threshold is met) 4. The financial outcome for the application of the STPIS scheme will be added to the revenue requirement in deriving an average tariff 32 23 2. Weighted average cost of capital 5. Consumer Price Index (Sydney all groups) published by the Australian Bureau of Statistics 3. Equal to depreciation over period less CPI indexation Ausgrid#33Regulatory key value 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 which rewards opex underspend and penalises opex overspend against the regulatory allowance in a future period 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% Ausgrid 33 33#342019-24 Final Determination - detailed components 12 1. 2. Rate of Return (% nominal) FY20 FY21 FY22 FY23 FY24 Average Capex and opex ($m, real FY19)1 1,085 Return on equity (nominal post-tax) 5.70% 5.70% 5.70% 5.70% 5.70% 5.70% 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% 631 560 529 493 477 Nominal vanilla WACC 5.72% 5.61% 5.49% 5.38% 5.27% 5.49% 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 Capex excludes capital contributions, opex excludes debt raising costs Gamma represents the value of imputation tax credits received by shareholders with dividends which offset tax liabilities Ausgrid 34#352019-24 Final Determination - projected RAB The RAB is projected to grow to $17,763 million by 30 June 2024 under the Final Determination ($m, nominal) FY20 FY21 FY22 FY23 FY24 Opening RAB 15,681 16,234 16,693 17,057 17,413 Capex nominal 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 ($m, nominal) 2.5% CAGR 18,000 16,000 14,000 12,000 10,000 8,000 15,681 16,234 16,693 17,057 17,413 17,763 6,000 4,000 2,000 FY19 FY20 FY21 FY22 FY23 FY24 Ausgrid 35#362014-19 Determination vs 2019-24 Determination Comparison of key assumptions Item Regulatory CPI 2014-19 2019-24 2.38% 2.42% Comments Difference driven by the AER method (geometric average of two years (FY20-21) of forecast CPI from RBA and eight years (FY22-29) assumed at 2.5%) Tax allowance Depreciation method for tax calculation Straight Line Diminishing Value 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% 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 Lower cost of equity allowed in the WACC Unchanged Difference driven by updated debt forward yield curves and changed margin assumption Lower cost of debt allowed in the WACC 36 Ausgrid#37Security structure NSW State Blue Asset Hold Trust ERIC Alpha Holdings Pty Limited 100% Blue Asset Partner Trust 50.4% ERIC Alpha Asset Trust 1 (2/3/4) Each 12.4% Total 49.6% 100% 4 3 3 Blue Op Hold Trust 100% 4 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% Total 49.6% Each 12.4% Total 49.6% 50.4% 50.4% 5 ADMHC 6 Main Lease Ausgrid Asset Partnership NOP On-Loan 6 Sub-lease NAP On-Loan 100% External financiers Security Net Security includes: Ausgrid Finance Pty Limited Ausgrid Operator Partnership 100% Ausgrid Management Pty Limited 1 PLUS ES Partnership1 1 PLUS ES Management 1 Pty Limited 100% PLUS ES Management 2 Pty Limited 1 2) 3) 1) General security agreement in respect of all of the assets and undertakings of Ausgrid Finance Pty Limited and Ausgrid Management 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 4) 5) 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 6) Tripartite deed in respect of the Network Lease (between ADMHC and AAP) and sub-lease (between AAP and AOP) arrangements 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 37#38Summary borrowing structure Security structure All senior secured creditors (including 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 Main 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 Lessor¹ 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 1. 12 ADMHC (ABN 67 505 337 385), under the Network Lease 2. Such as the Security Trustee or a receiver 38 Ausgrid#39Ausgrid credit rating and distribution considerations Ausgrid's credit rating considerations • The Board has a strong commitment to maintain the current credit profile • • Ausgrid's Treasury Policy and a requirement under the Partnership Deeds is that Ausgrid will maintain a minimum bbb/baa2 baseline credit assessment. Ausgrid would be in breach of the Partnership Deeds and its Treasury policies if it actively sought to reduce the rating e.g. by increasing leverage. Further, the Partnership Deeds do not allow Ausgrid to borrow to pay distributions where the borrowing would cause the baseline credit assessment to fall below bbb/baa2 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 Previously the AER assumes that a benchmark efficient entity, for the purposes of regulation, has a BBB+ (Baa1) credit rating when calculating cost of debt allowances. In 2019 the regulator changed the methodology to take into account 1/3 of A rated debt instruments and 2/3 of BBB rated debt instruments. The current credit profile is consistent with the AER's regulatory approach Ausgrid's distribution considerations • • 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. A quarterly distribution of no less than 85% of surplus cash in the quarter is to be distributed to the Partners, unless the directors of the Ausgrid Group make a unanimous determination to distribute a lesser amount in respect of a particular quarter Surplus Cash of a Partnership is calculated as the operating cash flows of the relevant Partnership for the quarter; less growth capital expenditure for the quarter; less maintenance capital expenditure for the quarter; less interest and debt repayments for the quarter (including any voluntary prepayments); plus the proceeds of debt drawdowns or refinancings undertaken in the quarter; plus proceeds from the sale of any assets in the quarter 39 Ausgrid#40Hedging strategy Notional swap profile 20% 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 10% 5 2019 10% 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% 6.0% 9 2017 10 2018 60% Debt/RAB hedged to 10 year trailing average profile with 20% Debt/RAB hedged to next regulatory reset in June 2024 Overview The interest hedging strategy can be broken down into: • • 60% debt to RAB hedged to 10 year trailing average cost of debt¹ Ausgrid has 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 20% debt to RAB (equity portion) hedged to end of current RCP 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 40 Ausgrid#41Risk management 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 Risk appetite statement 12 Risk Themes - assessed against the following Risk Appetite Definitions RISK APPETITE DEFINITIONS Risk Adverse Risk Sensitive Risk Neutral Avoid risk tasking wherever possible Limited risk taking Calculated risk taking Engage with risk pursue opportunities Risk Seeking RISK THEME 1. People, Health & Safety Risk Adverse 2. Customer Risk Sensitive Regular reporting including emerging risks, key risk indicator trends and risk treatment action status 3. Reputation Risk Sensitive 4. Cyber and Physical Security Risk Adverse 56 5. Environment Risk Sensitive 6. Regulatory & Compliance Risk Sensitive CAUSES Hazardous Event 10. INHERENT RISK 7. People - Conduct Risk Adverse 8. People Workforce & Culture Risk Sensitive 9. CONSEQUENCES Network Operations Risk Sensitive 10. Finance Risk Sensitive 11. Information and Communication Technology Risk Neutral (ICT) Operations 12. New Business Risk Seeking PREVENTIVE CONTROLS Lower the probability of event occurring Risk Assessment MITIGATION CONTROLS Lower the consequence if event occurs Limit of indemnity General liability $860 million per occurrence Bushfire liability $860 million per occurrence • Full failure to supply $180 million ⚫ Professional indemnity $50 million 41 Ausgrid#42Bushfire risk management • Vegetation management including minimum vegetation clearance guidelines whilst balancing broader obligations of environmental sustainability • LiDAR (Light Detection and Ranging) scanning for vegetation clearance monitoring annually • • Ausgrid compliant with recommendations emanating from Blue Mountains Bushfires 2013 Coronial Inquiry Electrical asset inspection and maintenance regime (including high definition photography) in fire prone areas • Exploring advanced predictive analytics to enhance data use to better inform processes for the future T 8.33 42 Ausgrid#43Competitive Future trends in the electricity value chain Regulated natural monopoly Competitive Generation Transmission Distribution Retail อ • Industry transition from coal and other fossil fuels to renewable sources • • • 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 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 • Use of smart metering, interactive household devices and other technologies may result in an evolution of the retailer / end customer relationship 43 Ausgrid#44क्ष 海 my [43 C43 Ausgrid Connecting communities, empowering lives