Investor Presentaiton

Ausgrid 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

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