14 June 2013

UBS Australian Resources, Energy & Utilities Conference ERM Power Managing Director and CEO Philip St Baker will be speaking at the UBS Australian Resources, Energy & Utilities Conference in Sydney today. A copy of his presentation follows.

Peter Jans Group General Counsel & Company Secretary ERM Power Limited

Leveraging our competitive advantage.

UBS Australian Resources, Energy & Utilities C fConference.Philip St BakerPhilip St Baker

Managing Director and CEO

14 June 201314 June 2013

Important notice - disclaimer.pDisclaimerThis 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. o o e ted ( o e ) a d ce ta p a s a d object es o t e a age e t o o eSuch 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 resultsexpressed 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. y g y p p y y gThe 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, seekprofessional 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 informationThis 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.Th b IFRS fi i l h t b bj t t i dit H th C ’ ditThe 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 thebooks 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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Setting higher standardsg g

• ERM Power is breaking records and setting higher standards forstandards for service and value in the supply ofthe supply of electricity to business customers across Australia

• Refer independent survey results on next five pages

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Independent customer research.p• Utility Market Intelligence (UMI)

b i d d t hsurvey by independent research company NTF Group

• 17th year of survey17 year of survey

• Based on interviews with 495 business customers between November 2012 and January 2013

• Only for business customers - no id ti l t iresidential customers in survey

• Five major electricity retailers benchmarkedbenchmarked

• We have participated in the survey for the last two years

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y

ERM Power sets new record.We set a new record for the survey with a customer

ti f ti t f 93% Thi i ifi tl hi h thsatisfaction rate of 93%. This was significantly higher than the next best at 55% and the average of others at 52%.

Category ERM Power Average for others

Overall satisfaction 93% 52%

Billing accuracy 96% 67%

Informing of change in energy market 96% 32%g g gy

Value for money 88% 47%

Value in relationship with retailer 91% 50%Value in relationship with retailer 91% 50%

Ease of contracting 96% 58%

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5X more likely to be “very satisfied”.

7%Retailer A

7%Retailer C % of customers “very satisfied”

8%Retailer B

% of customers very satisfied

9%Retailer D

44%ERM Power

• Our customers are five times more likely to be “very satisfied” when compared to the average of all other retailers surveyed

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compared to the average of all other retailers surveyed

Best account management.g

33%Retailer D

35%

33%

Retailer A

Retailer D

% of respondentswith an account manager

42%Retailer B

51%Retailer C

94%ERM Power

• 94% of our customers report they have an account manager, which is more than double the average of others at 40%

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more than double the average of others at 40%

Best value for money.y

42%Retailer B

46%Retailer C

% satisfied with value for money

49%Retailer A

value for money

49%Retailer D

88%ERM Power

• 88% of our customers feel they get value for money, which is almost double the average of others at 47%

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double the average of others at 47%

Operational excellence.p

• Highly accurate and efficient operations enable market leadership in customer satisfaction, service and value – a major competitive advantage

• Outstanding operational performance• Outstanding operational performance

• Billing accuracy at 99.94%, and• Billing collection rate of 99.97%

• We have achieved this industry leading performance level by designing, e a e ac e ed t s dust y ead g pe o a ce e e by des g g,building, owning and operating our own retailing processes and IT systems which also make it very difficult to replicate by others

• Maintaining and improving operational performance while growing at a high but sustainable rate is a top priority

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Retail systems.yERM Power

Meter Data Management CustomerWeb Portal

CustomerSec

Customer Relationship Management

Market a

$

Banks

Offers, e-Bills

Customer Account Management

curity and Dat

Email

Market Operator

and External P

Billing and Payment ManagementExternal System

e Bills

Network Settlementta E

xport Lay

Networks

Parties C

onne

Finance(SAP)

Billing and Payment Management

Market Settlement

er

Suppliers

ections

Trading(SimEnergy)

Forecasting & Trading Management

• Integration of ERM Power proprietary systems is the key

(SimEnergy)

ERM Proprietary SystemsExternalParties

CustomersInternal Systems

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• Integration of ERM Power proprietary systems is the key

End to end customer management .gEnd to end management of customer, contract, load and trading data ensures exceptional data quality and leads to exceptional customer service and tightly managed risk. Integration eliminates double keying of data and reconciliations.

Offer Self Serve Sign Up C&I Contract ForecastOffer Se Se e S g Up(For SME Segment) Acceptance Forecast

Automated Transfer Trading Data

Management Billg

Settlement Receivables Reporting Customer Support

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Australian businesses respondp• ERM Power has been embraced by Australia’s business customers

• We have grown organically to become fourth1 largest electricity supplier in• We have grown organically to become fourth1 largest electricity supplier in National Electricity Market

• We have accrued >13%2 of the large Commercial and Industrial (C&I) segment of the market, up 41% on last year including 91% growth in NSW and 127% growth in Victoria

• 29% growth in forward contracts for the C&I market over the last year• 29% growth in forward contracts for the C&I market over the last year

• This year we have started to offer electricity to the Small to Medium Enterprise (SME) segment of the market and we are off to a great start by signing >10,000 customer sites and contracts >$150 million in value

• We have achieved these results with little marketing, but that is about to change1 2 This is based on ERM Power’s forecast for volume of electricity sold in the National Electricity Market for FY2013 The Australian Electricity Market size = 210 TWh comprising1 ,2 This is based on ERM Power s forecast for volume of electricity sold in the National Electricity Market for FY2013. The Australian Electricity Market size 210 TWh, comprising

40% (or 84 TWh) for Commercial and Industrial (C&I) Market and 30% (or 63 TWh) for SME Market and Residential Market respectively. 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

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Campaign coming soonp g g

13Note: illustration only – marketing concept

Why now SME?yGross margins in SME are ~5 times larger than C&I and the size of the market in terms of gross margins available is ~4 times larger

Operating costs are higher in SME. Opportunity to create a competitive advantage similar to C&I where we estimate our operating costs are half our competitors

Opportunity to set a new standard for SME customer service as we have done with C&I customers

C&I market SME market

pp y

Many C&I customers have SME loads that we haven’t previously serviced. ERM’s C&I market share provides a natural SME path to market

C&I market SME market

Size of market (TWh) 84 63

Average gross margins $/MWh $4.50 $22.00

Size of market gross margin $378 million $1,386 milliong g $ $ ,

Current ERM Market Share > 13% (from zero 5 years ago)

< 1%

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Source: ERM Power estimates

SME expansion underway.p y

Business up and running after more than 12 months spent on systems and p g p ymarket preparation

ERM-owned SAGE software company, which built the successful C&I platform, has developed the SME platformhas developed the SME platform

Marketing under our “ERM Business Energy” brand

Focus on customer service & value and operational excellenceFocus on customer service & value and operational excellence

Targeting NSW and Victorian markets initially

Achievements to date:Achievements to date:

− Over 10,000 customer sites already contracted

Over $150 million of forward sales contracted− Over $150 million of forward sales contracted

− Over 0.5TWh over 3 years contracted

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SME – business case.Profitability

Expect small profit from SME in FY2014.

Estimate >$30 million EBITDAIF p.a. in 3-5 years

Return on Capital

C&I currently producing a return on capital (pre tax)1 of ~25%.

SME returns are expected to exceed C&I returns within 3 years of operationsoperations.

161 Calculated as EBITDAIF divided by total of prudential capital and working capital requirements.

SME – capital requirements.p qERM raised $60 million from placement to institutions and sophisticated investors - $45 million to fund SME expansion. To raise up to another $10 million from eligible shareholders at same price ($2.40) in SPP

Most SME customers over first 12 months, including NSW government multi-site contract are on quarterly billing with 30 day payment termsmulti site contract, are on quarterly billing with 30 day payment terms compared to monthly billing with majority 14 day terms in C&I market

Translates to higher initial proportionate working capital requirements d C&Icompared to C&I

As SME market share grows, billing terms are expected to trend toward expectations of market average, which will reduce proportionateexpectations of market average, which will reduce proportionate working capital requirement

Smart meter ingress will also reduce working capital requirements by i ti f t l t thl billi lmoving many parties from quarterly to monthly billing cycles

SME growth will require prudential funding for AEMO and contracting counterparties. This should be comparable to C&I on a $/MWh basisp p

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FY2013 outlook.Overall the business is performing very well.

The electricity sales business is growing strongly and maintaining good margins. We expect EBITDAIF of $37 million (from $31 million last year) which includes a $3 million expense from non-capitalised costs on the SME business, which will commence sales in FY2014.

The generation business has performed on plan and we expect EBITDAIF to be in line with last year at $47 million (excluding discount on acquisition of anbe in line with last year at $47 million (excluding discount on acquisition of an additional interest in the Oakey power station and arbitration expenses).

The gas business has performed well but a delay on the start up of the Red G ll j t h lt d i EBITDAIF l f $1 5 illi i FY2013Gully project has resulted in a EBITDAIF loss of $1.5 million in FY2013 against neutral budget.

Corporate costs are in line with budget at $9.5 million.p g $

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FY2013 outlook - continued.The largest variable relates to a legacy construction dispute which is awaiting determination from arbitrators.

– Our market guidance includes assumptions on costs and proceeds of the arbitration.– Our estimate of the net proceeds (gross proceeds less costs) from the arbitration ranges

from $7 million to $12 million positive.The arbitration process has taken longer than anticipated and although we expect a– The arbitration process has taken longer than anticipated and although we expect a positive determination this financial year, it may be delayed beyond 30 June 2013.

– If a determination is not received in FY2013, there is no prospect of receiving proceeds to offset the estimated legal costs of $4.5 million already expensed this financial year.

$ million FY20123 FY2013Guidance

FY2013 Guidance Ex-Arbitration4

EBITDAIF¹ 66 69 8 4EBITDAIF¹ 66 69 - 85 74

Underlying NPAT² 11 14 - 26 17

1 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.2 Underlying NPAT is Statutory NPAT but excludes the impact of unrealised changes in fair values of financial instruments and onerous contracts, which best reflects the ongoing performance of the business .3 E cl des the one off significant item of the Oake p rchase disco nt on acq isition of $19 million

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3 Excludes the one-off significant item of the Oakey purchase discount on acquisition of $19 million.4 FY2013 guidance adjusted to exclude any arbitration success upside and the $4.5 million in associated legal costs that are estimated to be expensed in FY2013.

More Information:

Garry WestCorporate Communications Managerp gEmail: gwest@ermpower.com.auDirect Ph: 61-7 3020 5165Mobile: 61- 457 140 650Mobile: 61 457 140 650

Website: www.ermpower.com.au

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