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. 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. 2 The Objective. To become the 4th pillar in the Australian energy market • 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 3 Section 1 – Introduction to ERM Power 4 Our business in a snapshot. Australia's 4th largest electricity retailer, with significant generation development and operating expertise • Ownership interest in, and operator of, two low • Australia's 4th2 largest electricity emission gas-fired peaking power stations retailer, licenced to sell electricity − Oakey (100%1) in Queensland in all Australian states and the − Neerabup (50%) in Western Australia ACT and Northern Territory • Operator of the 320MW Kwinana baseload • Targeting business customer power station in Western Australia market • Since inception, ERM Power has − Large businesses developed >2,600MW of generation − Small businesses and has a further >2,000MW approved for development • Electricity supply exposure is hedged by using owned or contracted generation • Conventional and unconventional capacity and exploration and production derivative contracts 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 5 liability data, ERM Power signed contracts and broad assumptions about the market and participants. This is not an independently verified forecast Delivering growth. Strong earnings and dividend growth since IPO with increasingly diverse customer type and geography 3.50 90 72.4% TSR since listing Solid growth in underlying earnings 80 Rated no. 1 in customer satisfaction2 3.00 Forecasting 28% growth in FY14 electricity sales Early wins in the small business space 70 60 2.50 50 A$m 40 2.00 Share price (A$/share) Share price 30 20 1.50 10 1.00 0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Underlying EBITDAIF¹ ERM Power S&P / ASX 200 (rebased to EPW) 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 6 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. • Delivery under physically deliverable electricity sales contracts occurs by purchasing electricity from spot market to meet obligations under sales contracts Generators Transmission and distribution Customers • ERM Power manages exposure by entering into a Network variety of non-deliverable charge electricity derivative Bilaterally agreed Pool contracts contract price price ERM Sales • ERM Power has agreements with Pool generators and price Hedge intermediaries such as counterparties1 investment banks Australian Energy Market Operator Electricity Cash payment Cash settled hedge contracts Note: 1 Providers of financial hedges to electricity price movements 7 Sales strategy. ERM Power targets the business customer market and has organically grown market share to >7.5% • Business customer market accounts for Business customer market Why target the around 70% of Australia’s total electricity Size of market 1 ~150 business market by load (TWh) market? ERM Power > 7.5% • The larger retailers are focussed on mass- Market Share (from 0% six years ago) market customers, providing an opportunity for ERM Power to capitalise on its superior customer service and efficient operations • Gross margins in small business segment can be Small business sales growth Small business five times higher than in large business segment expansion 11,500 customer sites underway • Opportunity to set a new standard for small contracted business customer service Over A$150m of forward • Natural path to the small business market sales contracted − Many large business customers have small More than 0.5TWh over sites that ERM Power can now supply three years contracted − Many brokers who bring large customers to ERM Power also represent small businesses Rapid growth since commencement of small business offering on 1 July Note: 1 ESAA 2013 annual report 8 Demonstrated risk management. ERM Power's accuracy in forecasting, monitoring and hedging customer electricity consumption enables effective 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 November 2011 and the most significant favourable daily event was ~$1.4 million in January 2013 Two Year History of Unexpected Spot Earnings 80% 60% 40% 20% 0% -20% % of daily daily revenue of % -40% -60% <------------------------------------FY2012--------------------------------------><------------------------------------FY2013----------------------------><-----FY2014--- 9 Track record of growing sales. ERM Power has delivered a 50% CAGR in electricity sales between 2009 and 2013 and is forecasting continued growth in FY2014 and FY2015 Electricity Sales - All Segments 45 ERM Power 40 35 30 25 TWh 20 15 10 5 0 FY2009A FY2010A FY2011A FY2012A FY2013A FY2014F FY2015F AGL ORG FY2013A FY2013A Source: ERM Power, Origin Energy and AGL Energy FY2013 annual reports and ERM Power