Investor roadshow presentation - ERM Power 2020-04-20آ  19 November 2013 Investor roadshow presentation

19 November 2013

Investor roadshow presentation

Attached is a presentation which ERM Power Managing Director and CEO Philip St Baker will make to investors in Australia, Asia, the United Kingdom and the United States over the next three weeks.

Peter Jans Group General Counsel & Company Secretary ERM Power Limited

Investor Roadshow

19 November 2013

Important notice - disclaimer.

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Disclaimer This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of ERM Power Limited (ERM Power) and certain plans and objectives of the management of ERM Power. Such forward-looking statements involve both known and unknown risks, uncertainties, assumptions and other important factors which are beyond the control of ERM Power and could cause the actual outcomes to be materially different from the events or results expressed or implied by such statements. None of ERM Power, its officers, advisers or any other person makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward-looking statements or any outcomes expressed or implied by any forward-looking statements. The information contained in this presentation does not take into account investors investment objectives, financial situation or particular needs. Before making an investment decision, investors should consider their own needs and situation and, if necessary, seek professional advice. To the maximum extent permitted by law, none of ERM Power, its directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of this presentation or its contents or otherwise arising out of, or in connection with it.

Non-IFRS information This document may contain certain non-IFRS financial measures and other defined financial terms. The directors believe the presentation of certain non-IFRS financial measures is useful for the users of this document as they reflect the underlying financial performance of the business. The non-IFRS financial measures include but are not limited to: • EBITDAIF - Earnings before interest, tax, depreciation, amortisation, impairment and net fair value gains / losses on financial

instruments designated at fair value through profit and loss and gains/losses on onerous contracts. • Statutory NPAT - Statutory net profit after tax attributable to equity holders of ERM Power unless otherwise stated. • Underlying profit or Underlying NPAT- Statutory net profit after tax attributable to equity holders of ERM Power after excluding the

after tax effect of unrealised marked to market changes in the fair value of financial instruments and impairment. The above non-IFRS financial measures have not been subject to review or audit. However, the Company’s auditors, PricewaterhouseCoopers, have separately undertaken a set of procedures to agree the non-IFRS financial measures disclosed to the books and records of the consolidated entity. All reference to $ is a reference to Australian dollars unless otherwise stated. Individual items and totals are rounded to the nearest appropriate number or decimal. Some totals may not add down the page due to rounding of individual components.

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The Objective.

• Well-positioned, fast-growing Australian energy business

• Strongly differentiated customer proposition that has led to steady business sector market share growth – 0 to 7.5% in six years

• Expanding into small business market segment and developing complementary business lines including metering

• Macquarie Generation offers opportunity to become the 4th pillar – a significant, integrated generation and retailing business

• Board and management have highly disciplined approach to acquisitions

To become the 4th pillar in the Australian energy market

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Section 1 – Introduction to ERM Power

Our business in a snapshot.

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Australia's 4th largest electricity retailer, with significant generation development and operating expertise

• Ownership interest in, and operator of, two low emission gas-fired peaking power stations − Oakey (100%1) in Queensland − Neerabup (50%) in Western Australia

• Operator of the 320MW Kwinana baseload power station in Western Australia

• Australia's 4th2 largest electricity retailer, licenced to sell electricity in all Australian states and the ACT and Northern Territory

• Electricity supply exposure is hedged by using owned or contracted generation capacity and derivative contracts

• Targeting business customer market − Large businesses − Small businesses

• Conventional and unconventional exploration and production tenements in Western Australia and New South Wales

• Exploring options for the business, including potential demerger

Notes: 1 Financial close on acquisition of the remaining 16.67% interest in Oakey expected prior to end of CY2013 2 Based on ERM Power’s forecast league table for volume of electricity sold in the National Electricity Market for FY2013. The analysis draws on 2011 SRES scheme liability data, ERM Power signed contracts and broad assumptions about the market and participants. This is not an independently verified forecast

• Since inception, ERM Power has developed >2,600MW of generation and has a further >2,000MW approved for development

0

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Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

A $m

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Underlying EBITDAIF¹ ERM Power S&P / ASX 200 (rebased to EPW)

 72.4% TSR since listing  Solid growth in underlying earnings  Rated no. 1 in customer satisfaction2  Forecasting 28% growth in FY14 electricity sales  Early wins in the small business space

Delivering growth.

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Strong earnings and dividend growth since IPO with increasingly diverse customer type and geography

Notes: 1 Earnings before interest, tax, depreciation, amortisation, goodwill impairment and net fair value gains / losses on financial instruments designated at fair value through profit and loss. Excludes significant items 2 Utility Market Intelligence (UMI) survey of retail electricity industry by independent research company NTF Group in 2012 (17th year of Survey). Research based on survey of 495 business electricity customers between November 2012 and January 2013. Five major electricity retailers benchmarked

National Energy Market structure.

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Customers

Hedge counterparties1

Note: 1 Providers of financial hedges to electricity price movements

Generators Transmission and distribution

Electricity Cash payment Cash settled hedge contracts

Australian Energy Market Operator

ERM Sales Pool price

Pool price

Bilaterally agreed contract price

Network charge

• Delivery under physically deliverable electricity sales contracts occurs by purchasing electricity from spot market to meet obligations under sales contracts

• ERM Power manages exposure by entering into a variety of non-deliverable electricity derivative contracts

• ERM Power has agreements with generators and intermediaries such as investment banks

Sales strategy.

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• Business customer market accounts for around 70% of Australia’s total electricity market by load

• The larger retailers are focussed on mass- market customers, providing an opportunity for ERM Power to capitalise on its superior customer service and efficient operations

Business customer market

Size of market 1 (TWh) ~150

ERM Power Market Share

> 7.5% (from 0% six years ago)

Note: 1 ESAA 2013 annual report

Why target the business market?

ERM Power targets the business customer market and has organically grown market share to >7.5%

Small business expansion underway

• Gross margins in small business segment can be five times higher than in large business segment

• Opportunity to set a new standard for small business customer service

• Natural path to the small business market

− Many large business customers have small sites that ERM Power can now supply

− Many brokers who bring large customers to ERM Power also represent small businesses

Small business sales growth

 11,500 customer sites contracted

 Over A$150m of forward sales contracted

 More than 0.5TWh over three years contracted

 Rapid growth since commencement of small business offering on 1 July

Demonstrated risk management.

• Daily exposure to spot market tightly managed with no major losses since electricity sales business started in 2008

• This six year track record has tested ERM Power’s risk management with significant events including the GFC, two major floods and a major cyclone in Qld, and severe heat waves and bushfires in Victoria, NSW and Western Australia

• The most significant adverse daily event was ~$500,000 in