Cost of Equity Alex Kummant, Executive Vice President Network 13 - PowerPoint PPT Presentation

QCA WACC Forum QCA WACC Forum Cost of Equity Alex Kummant, Executive Vice President Network 13 December 2013

Aurizon Network’s Investment Commitments Aurizon Network has made significant • RAB Value and Capital Expenditure investment in the network with $ 2.3 (UT3 Actual/UT4 Proposed ) billion invested since 2009 7,000,000 1,000,000 900,000 • Aurizon Network has indicated it is 6,000,000 prepared to invest a further $ 1.9 800,000 billion over the next four years. 5,000,000 700,000 ($000s) 600,000 (000s) 4,000,000 • Aurizon Network must obtain capital 500,000 500 000 Value ( Value from competitive markets where 3,000,000 return expectations are 400,000 benchmarked to comparable 300,000 2,000,000 infrastructure assets infrastructure assets. 200,000 1,000,000 100,000 • The QCA’s WACC determination has real consequences in terms of real consequences in terms of - - 2009 2010 2011 2012 2013 2014 2015 2016 2017 Aurizon’s ability to access capital to fund ongoing investment in the Opening RAB Annualised Capital Expenditure Network. 2

Recent Regulatory Decisions Recent Regulatory Decisions Weighted Average Cost of Capital 14% 2013 12% 2013 2011 2010 2010 2013 10% 2012 2012 2012 2011 2011 2012 2012 8% 2013 2012 2012 2013 6% 4% 2% 0% Relevant Industry Comparators Other Industry Comparators Note: The year in which the WACC was determined is shown All figures shown reflect regulatory determinations in the post-GFC financial environment Note: The year in which the WACC was determined is shown. All figures shown reflect regulatory determinations in the post GFC financial environment. 3

Recent Regulatory Decisions Equity Margin and Capital Structure 12% US Class 1 (STB) 10% TPI (Pilbara) 8% HVCN argin UT4 Proposal WestNet WestNet Equity Ma DBCT 6% SDP Electricity Gas UT3 4% 4% QRC Position 2% 0 10% 20% 30% 40% 50% 60% 70% Benchmark Gearing Level 4

Recent Regulatory Decisions Equity Margin and Capital Structure 12% US Class 1 (STB) Rail Industry Peers 10% W WestNet tN t TPI (Pilbara) (relevered) 8% HVCN argin UT4 Proposal Equity Ma DBCT 6% WestNet SDP Electricity Gas UT3 4% 4% QRC Position 2% 0 10% 20% 30% 40% 50% 60% 70% Benchmark Gearing Level 5

Recent Regulatory Decisions Equity Margin and Capital Structure 12% US Class 1 (STB) 10% TPI (Pilbara) 8% HVCN argin UT4 Proposal WestNet WestNet Equity Ma DBCT 6% SDP Electricity UT3 below Energy Utilities Gas UT3 4% 4% QRC Position QRC Position has no precedent 2% 0 10% 20% 30% 40% 50% 60% 70% Benchmark Gearing Level 6

Recent Regulatory Decisions Equity Margin and Capital Structure 12% US Class 1 (STB) 10% East Coast Coal Peers East Coast Coal Peers TPI (Pilbara) 8% HVCN argin UT4 Proposal WestNet WestNet Equity Ma DBCT 6% SDP Electricity Gas UT3 4% 4% QRC Position 2% 0 10% 20% 30% 40% 50% 60% 70% Benchmark Gearing Level 7