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UBS Utilities and Renewable Energy Conference

Presented by:

Ian Little

Managing Director

Envestra Limited

12 November 2003

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Recent market queries

• What’s happening with our distributions?• Where do we spend our capital?• Is Envestra’s gearing too low?• How do we minimise debt risks?• What’s happening in the regulatory arena?• Will Envestra participate in asset sales?• What are our 2003-2004 prospects?

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What’s happening with our distributions?

• Strong, reliable cash flows• Six years of meeting forecast returns

• Access arrangements in place – distributions to be maintained

• Distribution growth – depends on business growth, regulatory outcomes, tax and operating performance

• After loan notes repaid in 2009 - dividends

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1998 1999 2000 2001 2002 2003 2004

Financial Year

Cen

ts

Forecast

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Where do we spend our capital?

Normally $50-60M/year:– $10-15M replacement– $40-$45M growth

Replacement:– Upgrade mains (100-150km/year)– 60,000 meters/year

Growth:– New subdivisions (300 km last year)– Mains, inlets and meters (20,000/year)

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Where do we spend our capital?

2003-2004 forecast:

– $15M Replacement

– $45M Growth

– $30M FRC

$90M Total

Full retail contestability system:

– $50M over three years

– Victoria and South Australia (Queensland deferred)

– $20 million/annum revenue

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How do we fund our capex?

About 25 per cent of growth capital expenditure (excluding acquisitions) and all distributions to shareholders are funded from revenue.

2002-2003 Summary

25%

75%

Interest ($117M)

Operating expenses ($80M)

Interest on loan notesLoan note repayments

Growth capital expenditure ($65M)

Replacement capital expenditure ($10M)

Distributions ($67M)

Loan drawdowns ($47M)

Revenue ($283M)

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Is our gearing too low?

• Aim to minimise cost of capital• Debt $1.8B and Assets $2.4B• Loan notes excluded from debt• Gearing 75%• Assets at acquisition values (1997 and 1999)• Revaluation $386M to $535M gearing <65%

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Is our gearing too low?

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How do we minimise debt risks?

• Debt duration and balanced maturities

• Interest rate hedging – currently about 90% hedged through to 2006

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What’s happening in the regulatory arena?

• Access Code Review – our proposals:

Clear set of objectives to guide Regulators

Creating real incentives for network extensions

Greater allowance for marketing activities

More flexible, light handed, approach

Improving efficiency of regulatory process

Risks – none for three years

Gearing, beta, 6% risk free rate

Upside – pre-tax approach, benchmarked operating costs, more realistic volume forecasts

Process

Outcomes

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Will Envestra participate in asset sales?

• Four major ‘groups’ of transmission assets for sale• Potential value gap – buyers versus sellers• Significant “publicly known” issues with each• Transmission versus distribution – risk transfer for

Envestra• Acquisition far from certain

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What are our 2003-04 prospects?

• Cold and wet - off to a good start• Total gas delivered up 5% to October• 5,100 new domestic consumers in 1Q• 5.7¢ distribution – full-year 9.5¢ anticipated• Long-term financing via US private placement

(secured 30 year debt)• Higher than normal capex ($90M)• Revenue $300M• Modest pre-tax profit improvement forecast

Envestra performing to expectations