EY Alpine Valuation

Timaru District Holdings
Limited
Valuation of Alpine Energy Limited
Reliance Restricted
25 October 2018
25 October 2018
Reliance Restricted
Timaru District Holdings Limited

Attention: Ms. Tina Rogers, Group Manager, Corporate Services
PO Box 522
Timaru 7940
New Zealand
Ernst & Young Transaction Independent valuation 25 October 2018

Advisory Services Limited
2 Takutai Square In accordance with your instructions, we have performed the work set out in our engagement agreement dated 4 September
Britomart, Auckland 1010 2018 (the Engagement Agreement). We are pleased to present the following valuation report (Report) in connection with the
P O Box 2146, Auckland 1140 valuation of your investment in Alpine Energy Limited (AEL) as at 31 March 2018 in accordance with IFRS 13, Fair Value
Tel: +64 9 377 4790 Measurement.
Fax: +64 9 309 8137
Purpose of our report and restrictions on its use
ey.com/nz
This Report was prepared on the specific instructions of the directors of Timaru District Holdings Limited (TDHL) solely for the
purpose of assisting TDHL management in its assessment of the Fair Value of its investment in AEL for financial reporting
purposes.
This Report and its contents may not be quoted, referred to or shown to any other parties except as provided in the
Engagement Agreement.
We accept no responsibility or liability to any person other than to TDHL, or to such party to whom we have agreed in writing to
accept a duty of care in respect of this Report, and accordingly if such other persons choose to rely upon any of the contents of
this Report they do so at their own risk.
The report should be read in terms of our Disclaimer contained in Appendix A.
Nature and scope of the services
The nature and scope of the services, including the basis and limitations, are detailed in the Engagement Agreement.
We have performed our work giving consideration to applicable professional guidance and accounting standards. When we
were performing our work, we have acted as an independent valuer. We did not perform any management functions or make
any management decisions.
Whilst each part of our Report addresses different aspects of our work, the entire Report should be read for a full
understanding of our findings and advice.
Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 2 of 36

25 October 2018
Ernst & Young Transaction The contents of our Report have been reviewed by the management of TDHL, who have confirmed to us its factual accuracy.
Advisory Services Limited
2 Takutai Square We reserve the right, but are under no obligation, to review all calculations included or referred to in this opinion and, if we
Britomart, Auckland 1010 consider it necessary, to revise our valuation in light of new information, inaccuracies, or alterations to the information
P O Box 2146, Auckland 1140 provided.
Tel: +64 9 377 4790
Fax: +64 9 309 8137 Our work commenced on 4 September 2018 and was completed on 25 October 2018.
ey.com/nz We appreciate the opportunity to provide our services to TDHL. Please do not hesitate to contact us if you have any questions
about this engagement or if we may be of any further assistance.
Yours sincerely,
Ernst & Young Transaction Advisory Services Limited
Peter Goss Rajan Chopara

Partner Executive Director

25 October 2018
Dashboard 1 Executive Summary

2 Business description
Table of contents 3 Appendices
Executive Valuation Appendices

Summary analysis
1 2 3
Valuation results and engagement overview Valuation of TDHL and its subsidiaries Appendices
Page 5 Page 10 Page 20

25 October 2018
1
Executive Summary
Valuation results and engagement overview
In this section Page
Engagement overview 6
Our approach 8
Valuation results 9

25 October 2018
1 Executive Summary 1 Executive summary

2 Valuation analysis
Engagement Overview 3 Appendices
Background and objectives Sources of information

Timaru District Holdings Limited (“TDHL”) has appointed EY to provide an In the course of our valuation we have been supplied with and/or relied on the
independent valuation of its 47.5% equity interest in Alpine Energy Limited (“AEL”) following:
Group for financial reporting purposes.
► Historical financial statements 2015 – 2018
Date of valuation
► Alpine Energy Limited Annual Report (Group level)
Ernst & Young Transaction Advisory Services (EYTAS) was required to provide an
► NETcon Limited
estimate of the Fair Value of AEL as at 31 March 2018. Our report is dated 25
October 2018. ► Infratec Ltd
Standard of value ► Infratec Renewables (Rarotonga) Limited
The appropriate basis of valuation for the purpose is Fair Value. NZ IFRS 13 Fair ► On Metering Limited
Value Measurement defines Fair Value as:
► Rockgas Timaru Limited
The price that would be received to sell an asset or paid to transfer a liability in an
► 10-year forecast
orderly transaction between market participants at the measurement date.
► Alpine Energy Group
The results of our work will be used solely for the purposes of assisting TDHL
management in its assessment of the Fair Value of its investment in AEL for ► Alpine Energy Limited
financial statement reporting purposes in accordance with NZ IFRS 28, Investment
► NETcon Limited
in Associates and Joint Ventures.
► Infratec Ltd
Valuation method
► On Metering Limited (Income statement)
In general terms, it is recognised that the value of an entity is a function of the
expected future cash flows accruing to that interest and the risk of achieving those
cash flows. Cash flows can be in the form of dividends or proceeds from the sale of
the shares or a residual sum derived on the liquidation of the company.
In undertaking a valuation of a business, it is necessary to determine the
appropriate valuation methodology to be applied. The primary valuation method we
have applied is the discounted cash flow (DCF) method for the regulated electricity
business and the capitalisation of maintainable earnings (CME) for the other
businesses.

25 October 2018

Engagement Overview 3 Appendices
Sources of information
► Information provided by TDHL management in telephone calls and in email
correspondence
► Information provided by AEL management at meetings, in telephone calls, and
in email correspondence
► Information sourced from:
► S&P Capital IQ
► Oxford Economics
► Reserve Bank of New Zealand
► Thomson Reuters
► BMI Research
► Commerce Commission
► AEL company website

25 October 2018

Our approach 3 Appendices
Our approach Except for Infratec, we have valued AEL’s non regulated businesses using the
capitalisation of maintainable earnings (CME) method. We have based the
In addition to AEL’s regulated electricity business, the company also has a wholly
earnings multiples on observed publicly listed comparable companies and
owned subsidiary, NETcon Limited, and joint ventures On Metering Limited and
transactions.
Rockgas Timaru Limited.
The future maintainable earnings (FME) estimate for each company is based on
historical EBITDA and on forecasts. AEL management has provided forecasts for
NETcon, Infratec, Infratec Renewables, and the fibre network business. The fibre
network business sits within AEL and is valued on a stand alone basis and added
to the value of the lines business as a surplus asset. The market value of a rental
property has also been considered separately and added to the overall value of
AEL.
Intercompany debt is excluded in deriving the equity values from the computed
enterprise values. For the purposes of the valuation, intercompany debt was treated
as equity. The table below summarises our methodology per company.
Valuation approach
% ownership Methodology
We have used a sum of the parts approach to value the Alpine Energy Group. Each Alpine Energy Limited 100% DCF
company is valued on a stand alone basis. The resulting individual values are NETcon Limited 100% CME
weighted by the group’s ownership and summed to arrive at the value for the group. Infratec Ltd 100% NAV orderly realisation
We have derived the cash flows of the regulated business of AEL using the Infratec Renewables (Rarotonga) Ltd 100% CME
regulatory EBITDA from public information disclosures and management forecasts On Metering Limited 50% CME
for depreciation, capital expenditures and working capital. Management has Rockgas Timaru Limited 50% CME
provided a 10-year forecast but we have elected to utilise the discounted cash flow
(DCF) method until FY25 when the fourth regulatory period ends.

25 October 2018

Valuation results 3 Appendices
Valuation summary
Background
We have performed a valuation of Alpine Energy Limited in accordance with the terms of our Engagement
Agreement dated 4 September 2018.
The valuation is prepared for the purposes of assisting TDHL management in its assessment of the Fair
Value of its investment in AEL for financial reporting purposes.
The valuation date is 31 March 2018. The standard of value applied is Fair Value. We have summarised our
Alpine Energy Group 182,351 194,098 206,081 valuation in the table on the left.
TDHL's share 47.5% 47.5% 47.5%
Our assessment of the Fair Value of 100% of the equity in AEL lies in the range of $182.4 million to
Alpine Energy Group, 47.5% 86,617 92,196 97,889
Sources: EYTAS analysis
$206.1 million with a mid-point of $194.1 million.
Cross checks
The resulting implied is within the range of observed for similar

businesses.
The computed implied also falls within the range of multiples for comparable publicly listed
companies.

25 October 2018
2
Valuation analysis
Valuation of TDHL and its subsidiaries
Selected valuation methodologies 11
Valuation of AEL 12
Valuation of AEL’s fibre network 14
Valuation of NETcon 15
Valuation of Infratec 16
Valuation of Infratec Renewables 17
Valuation of Rockgas 18
Valuation of On Metering 19

25 October 2018
2 Valuation analysis 1 Executive summary

Selected valuation methodologies 3 Appendices
Valuation approach and methodology Valuation cross-check

Valuation methodologies We have corroborated our business valuation
th
A fundamental aspect of any valuation is determining the appropriate valuation comparable listed companies and comparable transactions.
approach to be applied.
Valuation analysis
In valuing
. , we have:
These alternative approaches (each of which, or a combination thereof, is ► Estimated the having regard to historical
appropriate in certain circumstances) are described in Appendix B. and forecast results. We have used earnings before interest, taxation,
Our approach depreciation and amortisation (EBITDA) as the measure
.
. We consider this method to be the most ► Determined the appropriate . We have derived an
appropriate because the business has a proven operating history. from comparable transactions and listed peers
.
we have considered
the valuation multiples derived from comparable companies and transactions. ► Calculated the
.
Valuation analysis
► Subtracted , as appropriate.
In valuing AEL, we have:
Valuation analysis
► Estimated the (when the fourth regulatory period
ends) based on for the In valuing the net assets of Infratec , we
regulatory period. have:
► Deducted provided by AEL ► Identified associated to the business.
management . ► Assessed the realisable values of the assets. We have estimated the
► Deducted and added
have applied those to their adjusted book values.

► Calculated
► Deducted .
►
25 October 2018

Valuation of AEL 3 Appendices
Valuation of AEL (for example) for growth in the cash flows

arising from potential efficiency gains in actual operating and/or capital expenditure
We used
being less than the amount allowed by the regulator, and benefits of a more
regulated electricity business. Our steps and assumptions made are described
efficient tax structure or higher gearing levels than the benchmark assumptions
below.
adopted by the regulator.
Estimation of
.
AEL management has provided a This
We have elected to estimate the
using the 10-year New
.
Zealand government bond yields and a debt spread for BBB rated corporate bonds.
Our estimate is for the period . We have selected this period
Our estimate of the market risk premium
because and there is greater uncertainty
. We have used Please refer
about the regulations that might be imposed in the fifth regulatory period.
to Appendix C for our detailed calculations.
The table below summarises the key inputs into
In addition to the publicly available 2018 asset management plan of AEL, .
management has provided us
:
We have elected to use
The are obtained from

.
Terminal value
Based on our analysis, we have forecast the and used as our estimate
of the terminal value a multiple of

25 October 2018

Valuation of AEL 3 Appendices
Valuation summary Cross checks

In the table below we have summarised our valuation of AEL. We have cross checked the value of AEL’s regulated business by
Using the , we obtain an enterprise value of AEL
.
We have AEL also has
We have also added
for the purposes of the valuation.
Our estimate of AEL’s 100% equity value is
The resulting implied is within the range of observed

RAB multiples for similar businesses.
The computed implied also falls within the range of multiples for
comparable publicly listed companies.

25 October 2018

Valuation of AEL’s fibre network 3 Appendices
Valuation of AEL’s fibre network Valuation summary

We have used to value AEL’s Our enterprise value estimate of the fibre network is in the range
fibre network.
Our valuation of the fibre network is summarised on the table below.
We have estimated the
For the high end of , we have used the

We were not provided with a breakdown of AEL’s financials that
would enable us to analyse
We have analysed comparable listed peers for the fibre business and obtained
current and forward looking multiples. Considering that most of the comparable
companies have materially higher revenues,
and due to the limitations in the information provided
to us,
.
We have summarised the details of the comparable companies in

25 October 2018

Valuation of NETcon 3 Appendices
Valuation of NETcon Valuation summary

We have used the Our enterprise value estimate of NETcon
We have adjusted the enterprise value by adding NETcon has a

but this is
We have estimated the assumed to
Our valuation of NETcon’s
The historical
EBITDA multiple
We have obtained multiples for comparable listed peers and transactions of
companies operating in the same industry.
Considering that most of the comparable companies have higher revenues, the
and the limitations
in the information provided to us,
We have summarised the details of the comparable companies in and

of the transactions in Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 15 of 36
25 October 2018

Valuation of Infratec 3 Appendices
Valuation of Infratec Infratec has and this is excluded

from the calculations.
Infratec is a subsidiary of AEL that has historically
Management has provided us with
Considering that the division Our valuation of Infratec’s
and that no information was provided to us to understand the
reasons for we have elected to
as the basis for the valuation.
The table below summarises our valuation of Infratec.
We have estimated the

.
of Infratec.

25 October 2018

Valuation of Infratec Renewables 3 Appendices
Valuation of Infratec Renewables Valuation summary

We have used the to value Infratec Our enterprise value estimate of Infratec Renewables
Renewables.
We have added cash as Infratec renewables has
We have not been provided with We based our
estimate Our valuation of Infratec Renewables’ equity value is in the range
We have obtained data for comparable listed peers and transactions of companies
operating in the same industry.
and the limitations

of the transactions in .

25 October 2018

Valuation of Rockgas 3 Appendices
Valuation Valuation summary

We have used the Our enterprise value estimate of
.
We have added cash as at
.
We have estimated
We have not been provided Our valuation of
with
and the limitations
.
of the transactions in

25 October 2018

Valuation of Metering
J 3 Appendices
Valuation of Valuation summary

We have used Our enterprise value estimate
We have added cash as at

We have estimated
We have not been provided Our valuation of
with forecasts for On Metering.
, and the limitations

of the transactions in

25 October 2018
3
Appendices
Appendix A: Disclaimers 21
Appendix B: Valuation Methodologies 22
Appendix C: Discount rate derivation – AEL 24
Appendix D: Comparable companies – AEL 25
Appendix E: Comparable companies – Infratec Renewables 26
Appendix F: Comparable companies – NETcon and On Metering 27
Appendix G: Comparable companies – Rockgas 28
Appendix H: Comparable companies – Fibre network 29
Appendix I: Comparable transactions – AEL 30
Appendix J: Comparable transactions – Infratec Renewables 31
Appendix K: Comparable transactions – NETcon and On Metering 32
Appendix L: Comparable transactions – Rockgas 33
Appendix M: Comparable transactions – Fibre network 34
Appendix N: Abbreviations 35

25 October 2018
3 Appendices 1 Executive summary

Appendix A: Disclaimers 3 Appendices
Disclaimers
Independence and impartiality The valuation assumes the client has no information or knowledge of any facts or
EYTAS has no interest in the business being valued. This valuation review has not material information not specifically noted in our report which would reasonably be
been undertaken on a contingent or success fee basis. Its only role has been the expected to affect the conclusions of the valuation.
preparation of this report. Review of opinion
Confidentiality EYTAS reserves the right, but is under no obligation, to review all calculations
Our valuation opinion is strictly confidential to the Management of Timaru District included or referred to in this opinion and, if we consider it necessary, to revise our
Holdings Limited. valuation in light of any information, inaccuracies, or alterations to the information
provided by Management relevant to this valuation, which was in existence on the
Limitation of liability valuation date and becomes known to us after the date of this opinion.
EYTAS total civil liability (including interest and costs) to you, concerning the Interviews
subject matter in this opinion shall be limited to the amount agreed in our
Engagement Agreement dated 4 September 2018. The valuation and opinion assume that any persons interviewed were competent to
answer the questions, and that we were given the opportunity to interview every
Indemnification person necessary to satisfactorily answer each question.
Timaru District Holdings Limited has agreed to indemnify EYTAS in respect of any Advance drafts
liability arising from any third party claim.
Advance drafts of this opinion were provided to TDHL in order to check the factual
Valuation date and purpose accuracy and completeness of information provided to us. While certain changes
The valuation is valid only on the date indicated and for the purpose stated, and is may have been made to this report as a result of the circulation of the draft report,
not to be applied by implication to any other matters. there was no material alteration to the methodology employed or opinion reached
by us.
Reliance on information
Third party information
This opinion reflects our assessment of the material factors based on the prevailing
business and economic conditions existing on the date of the opinion. In forming Where it is stated in the report that information has been supplied to us by another
our opinion, we have also relied on information and assumptions provided by TDHL party, this information is believed to be reliable at the time of receipt but we will
management about future events. Inevitably, such conditions and assumptions may accept no responsibility should it be subsequently proven to be inaccurate.
change, with potentially material effect on the opinion we have expressed. Publication
We have relied on the information supplied by TDHL management and set out in Neither the whole nor any part of our opinion or valuation, nor any reference
the Engagement Overview section. Our duties, while involving an assessment of thereto, may be included in any published document, circular or statement, nor
information provided and commenting as necessary, do not extend to verifying the otherwise published or disclosed in any way without our written approval of the
accuracy of the information, and we have assumed its authenticity and exact form and context of such publication or disclosure. Such approval is required
completeness. We have not audited or reviewed the information provided, nor have whether or not EYTAS is referred to by name and whether or not the opinion is
we been required to do so. combined with others.
25 October 2018

Appendix B: Valuation methodologies 3 Appendices
Valuation methodologies The main components of the DCF approach are:

A fundamental aspect of any valuation is determining the appropriate valuation ► A detailed cash flow forecast, usually for a period of at least five years, together
approach to be applied. In assessing share values, the following valuation methods with an estimate of the annual recurring cash flows (incorporating long term
can be considered: growth expectations) expected to be generated over the residual period beyond
the forecast period; and
► The discounted cash flow (DCF) method.
► An appropriate discount rate, typically represented by the weighted average cost
► The capitalisation of future maintainable earnings method (the earnings method of capital (WACC) required by providers of finance, both debt and equity.
or FME method).
► In our experience, the DCF approach is generally preferred over competing
► The capitalisation of dividends method. methods of valuation due to its strong technical basis. However, its application
► The net asset value (NAV) method. is often undermined by the absence of reliable forecast cash flow data.
Furthermore, it is often the case that a substantial component of the value
► A review of comparable transactions. determined according to the DCF approach will be represented by the “forecast
► A consideration of industry rules of thumb. cash flow into perpetuity”, which is highly sensitive to the projected operating
performance of the business at the end of the forecast period. Practical
These alternative approaches (each of which, or a combination thereof, is difficulties in arriving at a reliable projection can introduce considerable
appropriate in certain circumstances) are described below. uncertainty into the resulting value, although similar assumptions are also
Discounted cash flow (DCF) impounded into the FME method.
This method requires a formal business model and discounts free cash flows after ► The DCF method initially yields a present value (PV) of expected future cash
excluding depreciation and allowing for expenditure on capital items. Ideally it flows to represent the total value of the business enterprise (often referred to as
requires long-term forecasts. the “enterprise value”). Any surplus assets not required by the business should
be added to this enterprise value to determine an aggregate value. External
This approach is particularly suitable where the future performance of a company is debt (net of any cash balances) is then subtracted to derive a value for the
likely to be significantly different from its past performance or where cash flows are equity in the business.
expected to fluctuate substantially over time, due to major capital expenditure or for
other reasons. Capitalisation of Earnings
Free cash flow is the surplus cash from operations after deducting operating Earnings valuations involve capitalising the earnings of a business at an
expenses, income tax, movements in working capital and capital expenditure. It appropriate multiple and require consideration of the following factors:
represents the cash which is available to pay returns to providers of debt and ► Estimation of the future maintainable earnings (FME) of the company having
equity, by way of debt service and dividends or returns on capital, respectively. regard to historic and forecast operating results and abnormal or non-recurring
items, including sensitivity to key industry risk factors, future growth prospects
and the general economic outlook;

25 October 2018

Appendix B: Valuation methodologies 3 Appendices
► Determination of an appropriate capitalisation multiple which will reflect a This methodology is appropriate where a business or company consists largely of
purchaser's required rate of return, risks inherent in the business, future growth trading assets such as real estate; is not trading; is not making an adequate return
prospects and alternative investment opportunities; on assets; or where there are surplus or non-operating assets.
► Separate assessment of surplus or non-operating assets and liabilities, which Comparable Transactions
have not been taken into account in the estimation of FME.
Public information of comparable transactions can provide a useful basis for
► This methodology is the most commonly used method for the valuation of assessing value, or alternatively for assessing the reasonableness of values
companies or businesses that have a proven operating history and a consistent derived according to one or more of the alternative approaches outlined above.
earnings trend. This methodology is not suitable for start-up businesses, Comparable transaction data is, by its nature, often difficult to obtain and in many
businesses experiencing strong earnings growth, cyclical businesses or those cases will be confidential due to its commercial sensitivity. Furthermore, any
that have uneven cash flows or capital expenditure requirements. transaction will be subject to its own particular circumstances, which will need to be
recognised when making a comparison. That notwithstanding, transactions which
► A capitalisation multiple is most commonly applied to either earnings before
have occurred within the same or similar industries, especially where the
interest and taxation (EBIT), earnings before depreciation, amortisation, interest
transaction is of a similar size, can provide a valuable comparison.
and taxation (EBITDA) or net profit after taxation (NPAT). Earnings multiples
applied to NPAT are known as Price Earnings (PE) multiples. Industry Rules of Thumb
► Earnings multiples are estimated using data for comparable publicly traded Within certain industries or for certain types of businesses, “rules of thumb”, or
companies, which generally reflect the price payable for a minority parcel of industry benchmarks may exist, that can be used to assess the value of a particular
shares. In assessing an appropriate multiple, there is consideration of factors business or as a cross check. For example, certain types of retail businesses may
such as premium for control (to the extent it exists), and discounts for sometimes be valued according to a multiple of turnover.
marketability and liquidity in the case of unlisted companies.
Capitalisation of Dividends
Dividend valuations involve the capitalisation of the estimated future maintainable
dividend stream from the investment, using a capitalisation rate which reflects an
investor's required rate of return and including a separate assessment of the
dividends (if any) flowing from the disposal of any surplus assets and liabilities.
Net Asset Value
Asset valuations involve the determination of the net realisable value of the assets
used in the business on the basis of an assumed orderly realisation. This value
includes an allowance for the reasonable costs of carrying out the sale of assets
including tax and the time value of money. This is not a valuation on the basis of a
forced sale, where the assets might be sold at values materially different from their
market value.

25 October 2018

Appendix C: Discount rate derivation – AEL 3 Appendices
Weighted average cost of capital - AEL

Low Midpoint High
Debt capital
Spread S 1.48% 1.48% 1.48%
Risk free rate Rf 2.72% 2.72% 2.72%
Before tax cost of debt Rf + S 4.20% 4.20% 4.20%
Tax rate Tc 28.00% 28.00% 28.00%
Cost of debt Rd = (Rf + S)*(1-Tc) 3.02% 3.02% 3.02%
Common equity (Brennan-Lally)
Risk free rate Rf 2.72% 2.72% 2.72%
Beta B 0.60 0.63 0.65
Market risk premium MRP 7.50% 7.50% 7.50%
Company specific premium a - - -
Return on common equity Re = (Rf)*(1-Tc) + B * MRP + a 6.48% 7.04% 7.60%
Capital structure
Weight of debt Wd 42.00% 42.00% 42.00%
Weight of equity We 58.00% 58.00% 58.00%
WACC
Debt capital Wd * Rd 1.27% 1.27% 1.27%
Common equity We * Re 3.76% 4.08% 4.41%
WACC We * Re + Rd * Wd 5.03% 5.35% 5.67%
Sources: EYTAS analysis, RBNZ, Capital IQ, Thomson Reuters

25 October 2018

Appendix D: Comparable companies – AEL 3 Appendices
Comparable companies - AEL

EBITDA multiple
Company Country Market Capitalization (NZD'm) Revenue (NZD'm) Assets (NZD'm) LFY NFY NFY+1 Float Liquidity Net debt / equity (5-yr avg) Unlevered Beta
Enel SpA Italy 86,017 104,846 235,882 8.2x 6.4x 6.1x 76.4% 71.0% 85.0% 0.39
Electricité de France S.A. France 58,538 117,776 474,865 5.8x 4.9x 4.6x 15.2% 30.8% 93.4% 0.65
Iberdrola, S.A. Spain 63,457 52,879 187,219 12.0x 8.5x 7.9x 91.2% 77.4% 71.9% 0.40
Endesa, S.A. Spain 32,235 33,094 52,496 7.5x 7.0x 6.8x 29.9% 52.1% 21.1% 0.67
PPL Corporation United States 27,131 10,490 58,427 9.6x 10.0x 9.3x 100.0% 157.4% 89.1% 0.32
SSE plc United Kingdom 25,049 51,975 42,808 8.6x 8.0x 7.8x 98.5% 87.9% 42.5% 0.41
Entergy Corporation United States 19,756 15,600 65,792 8.4x 9.0x 8.7x 99.7% 163.6% 100.3% 0.23
EDP - Energias de Portugal, S.A. Portugal 19,107 26,633 71,166 10.3x 8.8x 8.3x 61.9% 46.1% 120.0% 0.32
Acciona, S.A. Spain 6,011 13,307 29,003 8.0x 7.6x 7.4x 39.5% 74.4% 162.7% 0.38
BKW AG Switzerland 4,778 3,595 13,136 7.4x 7.5x 7.6x 30.4% 18.3% 23.1% 0.35
Direct Energie Société Anonyme France 2,335 3,326 4,020 14.2x 10.0x 7.8x 20.6% 27.7% 6.7% 0.79
Otter Tail Corporation United States 2,374 1,196 2,823 11.4x -- -- 89.8% 55.8% 42.6% 0.44
Genesis Energy Limited New Zealand 2,374 1,951 4,219 11.1x 10.0x 9.5x 49.0% 16.9% 49.8% 0.41
Min 2,335 1,196 2,823 5.8x 4.9x 4.6x 15.2% 16.9% 6.7% 0.23
Mean 26,859 33,590 95,527 9.4x 8.1x 7.7x 61.7% 67.6% 69.9% 0.44
Median 19,756 15,600 52,496 8.6x 8.3x 7.8x 61.9% 55.8% 71.9% 0.40
Max 86,017 117,776 474,865 14.2x 10.0x 9.5x 100.0% 163.6% 162.7% 0.79
Sources: EYTAS analysis, Capital IQ

25 October 2018

Appendix E: Comparable companies – Infratec Renewables 3 Appendices
Comparable companies - Infratec and Infratec Renewables

EBITDA multiple
Company Country Market Capitalization (NZD'm) Revenue (NZD'm) Assets (NZD'm) LFY NFY NFY+1
CIMIC Group Limited Australia 15,321 14,776 10,531 8.4x 8.3x 8.0x
Fluor Corporation United States 11,062 27,497 13,139 11.4x 8.0x 7.7x
SNC-Lavalin Group Inc. Canada 10,640 10,485 15,458 14.6x 10.7x 10.2x
Quanta Services, Inc. United States 7,321 13,334 9,128 8.7x 7.2x 6.4x
MasTec, Inc. United States 5,260 9,307 5,728 8.6x 7.5x 6.8x
Sweco AB (publ) Sweden 3,394 2,906 2,457 11.7x 11.8x 11.0x
Maire Tecnimont S.p.A. Italy 2,269 5,943 5,750 7.0x 6.4x 6.3x
Aecon Group Inc. Canada 1,172 3,151 2,838 9.6x 7.3x 7.0x
Ameresco, Inc. United States 814 1,010 1,386 16.1x 13.3x 11.9x
Argan, Inc. United States 923 921 879 1.3x 1.3x 2.4x
MYR Group Inc. United States 701 1,977 850 8.3x 6.7x 6.2x
Renew Holdings plc United Kingdom 461 1,036 398 8.4x 7.8x 7.4x
Lycopodium Limited Australia 206 227 150 8.3x -- --
RCR Tomlinson Limited Australia 701 1,354 813 11.0x 7.7x 5.6x
Decmil Group Limited Australia 216 318 290 143.6x 12.8x 7.5x
Min 206 227 150 1.3x 1.3x 2.4x
Mean 4,031 6,283 4,653 18.5x 8.3x 7.5x
Median 1,172 2,906 2,457 8.7x 7.7x 7.2x
Max 15,321 27,497 15,458 143.6x 13.3x 11.9x

25 October 2018

Appendix F: Comparable companies – NETcon and On Metering 3 Appendices
Comparable companies - NETcon and On Metering

EBITDA multiple
Acuity Brands, Inc. United States 8,030 4,899 4,053 9.4x 9.0x 8.8x
Tutor Perini Corporation United States 1,517 6,701 6,006 7.0x 5.7x 4.9x
MYR Group Inc. United States 701 1,977 850 8.3x 6.7x 6.2x
IES Holdings, Inc. United States 447 1,122 587 10.9x -- --
Instalco Intressenter AB (publ) Sweden 441 536 395 12.0x 10.4x 9.6x
Alfen N.V. Netherlands 340 124 50 68.5x -- --
Stuart Olson Inc. Canada 220 1,143 708 7.9x 6.1x 5.6x
The Goldfield Corporation United States 135 161 132 5.7x -- --
Primero Group Limited Australia - - 0 -- -- --
TClarke plc United Kingdom 67 494 199 5.2x 3.8x 3.6x
Pioneer Power Solutions, Inc. United States 80 164 111 13.1x 7.3x 6.2x
Sun Pacific Holding Corp. United States 11 1 2 nmf -- --
Min - - 0 5.2x 3.8x 3.6x
Mean 999 1,443 1,091 14.8x 7.0x 6.4x
Median 280 515 297 8.8x 6.7x 6.2x
Max 8,030 6,701 6,006 68.5x 10.4x 9.6x

25 October 2018

Appendix G: Comparable companies – Rockgas 3 Appendices
Comparable companies - Rockgas
EBITDA multiple
APA Group Australia 9,879 2,438 15,770 13.1x 12.7x 12.1x
Superior Plus Corp. Canada 1,889 2,679 2,625 9.2x 8.8x 8.3x
UGI Corporation United States 10,620 8,470 16,027 8.7x 8.9x 8.2x
South Jersey Industries, Inc. United States 3,089 1,751 5,444 13.8x 10.6x 9.7x
AltaGas Ltd. Canada 4,544 2,941 11,268 12.6x 9.0x 6.2x
Northwest Natural Gas Company United States 2,290 1,074 4,282 9.6x 11.2x 10.0x
Southwest Gas Holdings, Inc. United States 4,504 3,590 8,786 9.0x 8.7x 8.1x
New Jersey Resources Corporation United States 4,854 3,139 5,436 20.4x 15.9x 15.2x
Suburban Propane Partners, L.P. United States 1,867 1,644 3,005 11.0x 9.6x 9.1x
ONE Gas, Inc. United States 4,773 2,169 7,334 10.9x 11.3x 10.7x
Atmos Energy Corporation United States 12,916 3,819 14,875 12.3x 12.1x 10.7x
National Fuel Gas Company United States 6,100 2,186 8,446 8.2x 8.6x 8.1x
Spire Inc. United States 4,830 2,409 9,059 13.2x 12.0x 11.6x
Chesapeake Utilities Corporation United States 1,589 870 1,997 12.1x 12.1x 11.1x
Fulcrum Utility Services Limited United Kingdom 249 68 68 18.2x 13.5x 9.4x
Rubis France 9,465 4,554 5,631 16.6x 10.7x 10.1x
RGC Resources, Inc. United States 280 86 253 15.1x -- --
Star Group, L.P. United States 722 1,832 933 8.3x 5.1x 5.9x
AmeriGas Partners, L.P. United States 5,135 3,395 5,617 11.4x 10.2x 9.9x
Ferrellgas Partners, L.P. United States 419 2,577 2,149 11.7x 9.1x 8.3x
Corning Natural Gas Holding Corporation United States 73 42 147 14.2x -- --
Italgas S.p.A. Italy 6,689 2,711 9,885 9.9x 9.4x 9.4x
Naturgy Energy Group, S.A. Spain 32,818 39,420 80,041 10.1x 8.9x 8.4x
Changfeng Energy Inc. Canada 74 73 130 5.5x -- --
Ascopiave S.p.A. Italy 1,234 901 1,339 10.3x 10.4x 10.0x
Acsm-Agam S.p.A. Italy 305 284 609 8.7x -- --
Min 73 42 68 5.5x 5.1x 5.9x
Mean 5,046 3,658 8,506 11.7x 10.4x 9.6x
Median 3,796 2,298 5,440 11.2x 10.3x 9.5x
Max 32,818 39,420 80,041 20.4x 15.9x 15.2x


25 October 2018

Appendix H: Comparable companies – Fibre network 3 Appendices
Comparable companies - Fibre network

EBITDA multiple
Telstra Corporation Limited Australia 39,631 28,659 44,160 6.05x 5.38x 5.14x
Singapore Telecommunications Limited Singapore 58,008 17,100 49,417 13.1x 12.4x 12.3x
Trustpower Limited New Zealand 1,750 940 2,505 10.9x 9.1x 10.6x
TPG Telecom Limited Australia 5,403 2,653 4,165 7.7x 7.9x 8.3x
Chorus Limited New Zealand 1,699 1,040 4,438 6.7x 6.3x 6.4x
Min 1,699 940 2,505 6.1x 5.4x 5.1x
Mean 21,298 10,078 20,937 8.9x 8.2x 8.6x
Median 5,403 2,653 4,438 7.7x 7.9x 8.3x
Max 58,008 28,659 49,417 13.1x 12.4x 12.3x

25 October 2018

Appendix I: Comparable transactions – AEL 3 Appendices
Comparable transactions - AEL

Transaction date Target company Country Acquirer Stake acquired Deal value (NZD'm) Implied EBITDA multiple
02 Mar 2018 King Country Energy Limited New Zealand Trustpower Limited (NZSE:TPW); King Country Electric Power Trust 15.0% 19 8.4x
15 Feb 2016 King Country Energy Limited New Zealand Trustpower Limited (NZSE:TPW) 64.4% 106 8.6x
29 Jun 2015 Horizon Energy Distribution Limited New Zealand Eastern Bay Energy Trust 22.7% 25 10.5x
03 Jan 2014 AusNet Services Ltd (ASX:AST) Australia State Grid International Australia Development Company Limited 19.9% 994 9.7x
30 Mar 2012 Infratil Limited (NZSE:IFT) New Zealand HRL Morrison & Co Limited 2.5% 28 8.4x
01 Dec 2011 King Country Energy Limited New Zealand No available information 2.7% 2 6.2x
26 Feb 2009 Powerco Limited New Zealand QIC Private Capital Pty Ltd 58.0% 1,784 7.1x
02 Nov 2004 Powerco Limited New Zealand Prime Infrastructure Group 100.0% 1,786 9.2x
23 Jul 2003 United Energy Distribution Pty Limited Australia Power Partnership Pty Limited 42.8% 629 6.9x
15 Nov 2002 UnitedNetworks Limited New Zealand Vector Limited (NZSE:VCT) 100.0% 2,739 12.8x
Min 6.2x
Mean 8.8x
Median 8.5x
Max 12.8x

25 October 2018

Appendix J: Comparable transactions – Infratec Renewables 3 Appendices
Comparable transactions - Infratec and Infratec Renewables

Transaction date Target company Country Acquirer Stake acquired Deal value (NZD'm) Implied EBITDA multiple
15 Jan 2016 EnServe Group Limited United Kingdom Grovepoint Capital LLP; Rubicon Partners 100.0% 128 27.9x
12 Nov 2014 Foster Wheeler AG United Kingdom Amec Foster Wheeler plc 100.0% 4,044 10.9x
02 Dec 2010 EnServe Group Limited United Kingdom Cinven Limited 100.0% 801 9.7x
22 Dec 2014 Pike Corporation United States Court Square Capital Partners L.P. 92.1% 657 8.5x
01 Oct 2010 Omega Red Group Limited United Kingdom South Staffordshire Plc i.n.a. i.n.a. 8.3x
07 Nov 2012 MasTec, Inc. (NYSE:MTZ) United States Information not available 4.3% 91 7.5x
09 May 2014 CIMIC Group Limited (ASX:CIM) Australia HOCHTIEF Australia Holdings Limited 10.9% 894 4.2x
Min 4.2x
Mean 11.0x
Median 8.5x
Max 27.9x

25 October 2018

Appendix K: Comparable transactions – NETcon and On Metering 3 Appendices
Comparable transactions - NETcon and On Metering

Transaction date Target company Country Stake acquired Deal value (NZD'm) Implied EBITDA multiple
02 Dec 2010 EnServe Group Limited United Kingdom 100.0% 801 9.7x
23 Feb 2009 Acro Electric, Inc. United States 100.0% 13 9.1x
22 Dec 2014 Pike Corporation United States 92.1% 657 8.5x
13 Jul 2010 Seacliff Construction Corp. Canada 100.0% 534 8.1x
07 Sep 2012 GA Energieanlagen and GA Energieanlagenbau and GA Frankenluck and GA Hochspannung and GA Netztechnik Germany 100.0% 388 6.5x
30 Jun 2013 Enel.si Srl Italy 100.0% 153 5.9x
08 Feb 2016 J & P Richardson Industries Pty Ltd Australia 100.0% 106 4.0x
28 Feb 2015 Primoris AV United States 100.0% 30 3.8x
29 Apr 2011 Mccaine Electric Ltd. Canada 100.0% 16 3.7x
28 Jul 2010 ColonialWebb Contractors Co., Inc. United States 100.0% 141 2.8x
Min 2.8x
Mean 6.2x
Median 6.2x
Max 9.7x

25 October 2018

Appendix L: Comparable transactions – Rockgas 3 Appendices
Comparable transactions - Rockgas

04 Aug 2017 Hearthstone Utilities Inc. United States 100.0% 283 21.9x
03 Nov 2014 Gasum Oy Finland 51.0% 1,504 19.2x
27 Jul 2017 Naturgas Energia Distribucion Sa Spain 100.0% 3,999 15.7x
03 Oct 2016 Piedmont Natural Gas Company, Inc. United States 100.0% 9,833 15.0x
07 May 2015 Madrileña Red de Gas S.A.U. Spain 100.0% 2,897 13.9x
20 Sep 2017 Delta Natural Gas Company, Inc. United States 100.0% 375 13.7x
26 Oct 2016 Scotia Gas Networks Limited United Kingdom 16.7% 1,061 12.2x
21 Aug 2014 Australian Gas Networks Limited Australia 82.5% 4,502 11.7x
02 Sep 2014 Spire Alabama Inc. United States 100.0% 1,805 11.6x
01 Jul 2016 Southern Company Gas United States 100.0% 18,454 9.8x
16 Sep 2016 Dominion Energy Questar Corporation United States 100.0% 9,407 9.7x
31 Jan 2016 Gasum Oy Finland 25.0% 1,098 9.2x
Southern Gulf LNG Company and CIG Gas Storage
02 May 2014 Company and 50% stake in Ruby Pipeline Holding United States 100.0% 2,329 9.0x
Company
21 Sep 2016 Naturgy Energy Group, S.A. (BME:NTGY) Spain 20.0% 5,837 8.2x
23 Dec 2015 Acsm-Agam S.p.A. (BIT:ACS) Italy 2.0% 4 7.2x
20 Dec 2013 2i Rete Gas SpA Italy 14.8% 202 7.2x
01 Jun 2013 Alta Gas Services, LLC United States 100.0% 7 7.1x
30 Sep 2016 DONG Gas Distribution A/S Denmark 100.0% 527 6.5x
01 Jul 2014 RUBIS Energia Portugal, S.A. Portugal 100.0% 193 5.0x
03 Apr 2017 Pasubio Group S.p.A. Italy 100.0% 25 3.5x
19 Mar 2018 Gas Distribution Business In Spain Spain 100.0% 2,396 1.7x
Min 1.7x
Mean 10.4x
Median 9.7x
Max 21.9x

25 October 2018

Appendix M: Comparable transactions – Fibre network 3 Appendices
Comparable transactions - Fibre network

03 Jul 2017 Southern Light, LLC United States 100.0% 1,004 17.1x
08 Jul 2015 Amcom Telecommunications Limited Australia 100.0% 852 16.9x
16 Jun 2010 SAVVIS Canada, Inc. Canada 100.0% 249 15.0x
28 Dec 2010 InFiber AS Norway 100.0% 331 14.6x
31 Oct 2014 TW Telecom Inc. United States 100.0% 8,833 14.1x
17 Nov 2014 euNetworks Holdings Limited United Kingdom 17.3% 85 13.0x
14 May 2015 Amcom Telecommunications Limited Australia 10.0% 62 12.9x
02 Dec 2010 Q-Comm Corporation United States 100.0% 1,512 12.8x
02 Jul 2012 AboveNet, Inc. United States 100.0% 2,825 11.6x
31 Aug 2012 FiberGate, Inc. United States 100.0% 168 11.5x
17 Nov 2017 Lumos Networks Corp. United States 100.0% 1,309 10.3x
21 Mar 2012 Metroweb S.p.A. Italy 11.1% 67 8.2x
04 Oct 2011 Level 3 GC Limited United States 100.0% 4,461 8.0x
08 Oct 2014 Enventis Corporation United States 100.0% 429 7.8x
01 Mar 2012 IdeaOne Telecom Group, LLC United States 100.0% 36 6.9x
12 Nov 2010 FASTWEB Spa Italy 17.9% 452 6.6x
02 Jul 2012 SureWest Communications United States 100.0% 642 6.2x
27 Jul 2017 Infracom Italia S.p.A. Italy 94.1% 197 6.0x
06 Feb 2010 Managed Communications Limited United Kingdom 100.0% 20 5.6x
07 Mar 2008 First Telecom Services, LLC United States 100.0% 58 5.6x
27 Feb 2008 NTS Communications, Inc. United States 100.0% 61 4.7x
02 Aug 2011 1&1 Versatel GmbH Germany 100.0% 1,416 4.2x
31 May 2011 euNetworks Managed Services GmbH Germany 100.0% 63 3.6x
Min 3.6x
Mean 9.7x
Median 8.2x
Max 17.1x

25 October 2018

Appendix N: Abbreviations 3 Appendices
List of abbreviations
Abbreviation Definition
AEL Alpine Energy Limited
CME Capitalisation of maintainable earnings
DCF Discounted cash flows
EBIT Earnings before interest and tax
EBITDA Earnings before interest, tax, depreciation, and amortisation
EV Enterprise value
EYTAS Ernst & Young Transaction Advisory Services
FME Future Maintainable Earnings
FY Financial year ending 31 March
Infratec Infratec Limited
Infratec Renewables Infratec Renewables (Rarotonga) Limited
k Thousand
KPI Key performance indicator
MAR Maximum allowable revenue
MRP Market risk premium
NAV Net asset value
NETcon NETcon Limited
NZD or $ New Zealand Dollar
On Metering On Metering Limited
PPE Property, plant, and equipment
RBNZ Reserve Bank of New Zealand
Rockgas Rockgas Timaru Limited
TDHL Timaru District Holdings Limited
Valuation date 31 March 2018
WACC Weighted average cost of capital

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Timaru District Holdings

Valuation of Alpine Energy Limited

Timaru District Holdings Limited

Ernst & Young Transaction Independent valuation 25 October 2018

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 2 of 36

Peter Goss Rajan Chopara

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 3 of 36

Dashboard 1 Executive Summary

Executive Valuation Appendices

Page 5 Page 10 Page 20

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 4 of 36

Valuation results and engagement overview

In this section Page

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 5 of 36

1 Executive Summary 1 Executive summary

Background and objectives Sources of information

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 6 of 36

1 Executive Summary 1 Executive summary

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 7 of 36

1 Executive Summary 1 Executive summary

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 8 of 36

1 Executive Summary 1 Executive summary

The resulting implied is within the range of observed for similar

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 9 of 36

Valuation of TDHL and its subsidiaries

In this section Page

Selected valuation methodologies 11

Valuation of AEL’s fibre network 14

Valuation of Infratec Renewables 17

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 10 of 36

2 Valuation analysis 1 Executive summary

Valuation approach and methodology Valuation cross-check

have applied those to their adjusted book values.

2 Valuation analysis 1 Executive summary

Valuation of AEL (for example) for growth in the cash flows

We have elected to use

The are obtained from

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 12 of 36

2 Valuation analysis 1 Executive summary

Valuation summary Cross checks

The resulting implied is within the range of observed

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 13 of 36

2 Valuation analysis 1 Executive summary

Valuation of AEL’s fibre network Valuation summary

For the high end of , we have used the

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 14 of 36

2 Valuation analysis 1 Executive summary

Valuation of NETcon Valuation summary

We have adjusted the enterprise value by adding NETcon has a

We have summarised the details of the comparable companies in and

2 Valuation analysis 1 Executive summary

Valuation of Infratec Infratec has and this is excluded

We have estimated the

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 16 of 36

2 Valuation analysis 1 Executive summary

Valuation of Infratec Renewables Valuation summary

We have summarised the details of the comparable companies in and

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 17 of 36

2 Valuation analysis 1 Executive summary

Valuation Valuation summary

Timaru District Holdings Limited: Valuation of Alpine Energy Limited | Page 18 of 36

2 Valuation analysis 1 Executive summary

Valuation of Valuation summary

We have added cash as at