Response to Tilt Renewables Target Company Statement

Infratil Limited 5 Market Lane, PO Box 320, Wellington, New Zealand Tel +64-4-473 3663 www.infratil.com

26 September 2018


The Tilt Renewables Independent Adviser Report is overly optimistic and not supported by
market benchmarks

On 17 September 2018, Tilt Renewables Limited ("Tilt Renewables") released its Target
Company Statement and Independent Adviser Report. These documents included a valuation
range for Tilt Renewables shares of between NZ$2.56 and NZ$3.01 per share.

Infratil believes there are a number of areas where the independent adviser's assumptions are
significantly more favourable than market comparatives. As such, Infratil has commissioned an
independent report from Grant Thornton Corporate Finance Pty Ltd ("Grant Thornton") to review
the assumptions underlying the Northington Partners ("Northington") valuation. Grant Thornton
has extensive experience in preparing independent expert reports with strong credentials in
valuing renewable energy businesses. Grant Thornton has concluded that a number of
assumptions adopted by Northington are overly optimistic and do not fully allow for the risks of
the Tilt Renewables operating portfolio, leading to a valuation range that is higher than fair market
value.

The assumptions that Grant Thornton considered overly optimistic include:

• The market required rate of return, or weighted average cost of capital ("WACC"), assumed
by Northington for Tilt Renewables’ operating wind farms is too low. The current uncertainty
in the Australian political environment and energy market is not adequately reflected in the
Northington assessment of WACC, nor is the future exposure to merchant energy prices that
Tilt Renewables faces following the expiry of its existing revenue contracts (revenue
contracts in respect of approximately 10% of annual output are expected to expire from
December 2018). Northington’s assumption is also materially lower than the WACC Tilt
Renewables itself used to test the fair value of its operating wind farms for impairment in its
2018 annual report and the WACCs used by all independent research analysts who publish
analysis on Tilt Renewables. The mid-point Grant Thornton WACC for New Zealand and
Australian cash flows is 7.90% and 7.35% respectively, and if applied would decrease the Tilt
valuation by 44 cents per share.

• The market required rate of return on equity used for the valuation of the Dundonnell wind
farm development project is too low and leads to a value that is not supported by comparable
transactions. The Dundonnell project, which is yet to be finally approved, is exposed to
development risk and merchant price risk with more than 60% of its output currently
uncontracted. Further, it appears Northington do not allow for sufficient debt repayment from
the project cash flows. These factors justify a materially higher required rate of return than
Northington has assumed. If applied, the mid-point Grant Thornton Dundonnell cost of equity
would further reduce the Tilt valuation by 18 cents per share.

• Northington has assumed that it is likely the life of operating wind farms could be extended
for a period of 5 years beyond their useful life, with increased operating and maintenance
costs but no degradation in generation output. Tilt Renewables has no proven ability to
operate assets beyond their design life, and Grant Thornton refers to international research
which indicates that the generation performance of wind farms can degrade by a third over
their useful lives.

If Grant Thornton's revised market required rates of return for the operating and Dundonnell wind
farms were applied in aggregate, Northington's implied valuation of Tilt Renewables would reduce
to between NZ$1.87 to NZ$2.46 per share.

The Northington report acknowledges there are risks surrounding their assessment of the
valuation upside, concluding that:

“there are a wide range of factors that will affect the potential timing and quantum of any
value upside. Shareholders who do not accept the Offer may also not realise any upside at
all.”

As a result, Infratil continues to believe that the NZ$2.30 offer price is attractive and fair. The
Target Company Statement acknowledges that there is a risk that minority shareholders will not
receive full value for their entitlements in the upcoming equity raising for the Dundonnell wind
farm, if they choose not to participate themselves. The Target Company Statement also assumes
that shareholders are indifferent to the future Tilt Renewables dividend yield. Infratil strongly
encourages shareholders who are unlikely to participate in future equity raising, or who invest
primarily for dividend yield, to consider whether accepting the Offer is appropriate for them.

The Offer is scheduled to close on 15 October 2018 (unless extended in accordance with the
Takeovers Code). Tilt Renewables shareholders that accept the Offer will be sent NZ$2.30 cash
per share within seven days of receipt of their acceptance. The Offer can be accepted online at
www.TiltTakeover.co.nz.

A copy of the Grant Thornton report is attached.




Any enquiries should be directed to:

Mark Flesher, Investor Relations, Infratil Limited mark.flesher@infratil.com

---

Tilt Renewables Limited
Review of Northington Partners’ Independent Adviser’s Report and
Financial Services Guide
25 September 2018

2







Grant Thornton Corporate Finance Pty Ltd
ABN 59 003 265 987
AFSL 247140

Level 17, 383 Kent Street
Sydney NSW 2000
PO Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T + 61 2 8297 2400
F + 61 2 9299 4445
E info@gtnsw.com.au
W www.grantthornton.com.au




Dear Directors
Introduction
On 15 August 2018, Infratil Limited (“Infratil”) and Mercury NZ Limited (“Mercury”), through their joint
venture (“TLT JV”) announced their intention to make a full takeover offer of Tilt Renewables Limited
(“Tilt” or the “Company”) at a cash offer price of NZ$2.30 per ordinary share (“Offer Price”). On 2
September 2018, the TLT JV issued the offer documents to Tilt shareholders, with the offer being
declared unconditional on 6 September 2018. On 14 September 2018, Shareholders of Tilt were
advised by the Independent Directors of the Company not to accept the offer on the basis of it being
too low and not factoring in the significant benefits expected to flow from prospective projects. The
Independent Directors have based their recommendation on an Independent Adviser’s Report (“IAR”)
provided by Northington Partners (“Northington”) on 17 September 2018.
Infratil owns and operates infrastructure and utility businesses and investments in New Zealand,
Australia, and the United States through its investments in Trustpower, Tilt Renewables, Wellington
International Airport, NZ Bus, Perth Energy, Canberra Data Centres, Retire Australia and other
associated companies. Infratil held a 51% interest in Tilt Renewables following the demerger from
Trustpower in October 2016.
In May 2018, Mercury acquired a 19.99% interest in Tilt from TECT Holdings Limited (“TECT”), a
wholly owned subsidiary of the Tauranga Energy Consumer Trust, at a price of NZ$2.30 per share.
As part of the transaction, TECT also issued an option to Mercury to acquire an additional 6.81% of
shares in Tilt. Following the offer becoming unconditional, Mercury exercised the option to accept the
remaining shares held by TECT into the takeover offer, bringing the TLT JV’s collective interest to 78%
of the ordinary shares of Tilt.
Purpose of the report
Infratil has engaged Grant Thornton Corporate Finance Pty Ltd (“Grant Thornton Corporate Finance”)
to provide an independent review of the IAR provided by Northington. Specifically, Grant Thornton
Corporate Finance have reviewed the valuation assumptions and scenarios employed by the
Independent Adviser, and have commented on the impact of these assumptions on the Northington
assessed valuation range for Tilt shares.
In preparing our report, we have relied on information contained in the offer document dated
2 September 2018 prepared by the TLT JV and the Target Company Statement dated
17 September 2018 prepared by Tilt, including the Northington IAR.

Directors
Infratil Limited
5 Market Lane
Wellington 6140
New Zealand


25 September 2018

3







We have not been privy to the financial model used by Northington in the preparation of the IAR.
Instead, we have relied on a model provided to us by Infratil and prepared by H.R.L Morrison & Co.,
which provides Infratil’s best estimates of the cash flows arising from the Company’s assets. Our
adjustments have been applied to these best estimates, and we have assessed the impact of our
inputs on Northington’s assessed valuation range.
We have not been engaged to, nor have we attempted to assess, an independent valuation of Tilt. We
have only been engaged to undertake a review of the valuation assumptions and scenarios employed
by Northington in the IAR and comment on their impact on the valuation range determined by
Northington. Although the impact of our assumptions on Northington’s assessed value has been
stated in the form of value per share, this does not reflect a valuation assessment. Accordingly, our
Report should not be considered as a substitute for the IAR and should be read together with the IAR.
Overview of Tilt
Tilt is a developer, owner and manager of renewable energy generation assets in Australia and New
Zealand. Currently Tilt owns and operates the following wind farms:
Assets Location Capacity Date commissioned
Snowtown 1 SA, Australia 101 MW 2008
Snowtown 2 SA, Australia 270 MW 2014
Blayney NSW, Australia 10 MW 2000
Crookwell NSW, Australia 5 MW 1998
Salt Creek Vic, Australia 54 MW 2018
Taurana 1 & 2 NZ 68 MW 1999,2004
Taurana 3 NZ 93 MW 2007
Mahinerangi NZ 36 MW 2011
Source: Northington IAR
In addition to the operating assets, Tilt currently has a pipeline of approximately 3,114 MW of capacity
in solar and wind projects across Australia and an additional 540 MW of wind projects in New Zealand.
Included in the development pipeline of assets is the Dundonnell wind farm, a proposed 336 MW wind
farm in Victoria. The estimated cost to develop Dundonnell is A$560 million, with key contracts
(Engineering, Procurement and Construction (“EPC”), Operations and Maintenance (“O&M”) and
connection agreements) close to being executed. On 11 September 2018, Tilt announced it was
successful in the recent Victorian Government renewable energy auction, whereby it has received an
offer from the Government to enter into a Support Agreement in relation to 37% of the generation
output of the Dundonnell wind farm. Under the Support Agreement, Tilt will enter into a 15-year
contract for difference with the Government, at a fixed real price (electricity and Large Scale
Generation Certificates (“LGCs”) of approximately $57/MWh.
Tilt has secured a fully committed debt package from National Australia Bank Limited (“NAB”) and
MUFG Bank Ltd (“MUFG”) which, following completion of standard conditions, will be available to fund
approximately A$300 million of Dundonnell’s construction costs.
Summary of Northington Valuation
The following table provides a summary of the Valuation conclusions of Northington as presented in
the IAR:

4







Source: Northington IAR
*Net debt is based on the estimated 30 September 2018 determined by Northington
Summary of our assessment of the impact on value
The valuation prepared by Northington is based on a number of assumptions that we consider are
optimistic and not fully addressing the risks of the Tilt operating portfolio. The following presents our
indicative view on the impact of key assumptions on Northington’s assessed value per share:

Note: The sensitivity on asset life extension shown above has been assessed on the mid-point of Northington’s assessed valuation range.
This shows the reduction in value by changing only the assumptions on extended asset life, and does not reflect a change to the discount
rate. The same should not be considered in conjunction with the sensitivities on discount rates above.
Refer to Section 2 and Section 3 for a discussion on Revised WACC and Revised Cost of Equity
respectively.

Summary of Tilt valuation
A$mLowHigh
Australian assets 920 978
New Zealand assets 238 254
Enterprise Value of operational assets 1,158 1,232
Dundonnell project94 124
Remaining development47 71
Total Enterprise Value 1,299 1,427
Net debt*(571)(571)
Equity value (control basis) 728 856
Number of outstanding shares (millions) (fully diluted)312.97 312.97
Assessed fair market value per share (control basis) (A$/share)2.33 2.74
Assessed fair market value per share (control basis) (NZ$/share)2.56 3.01

5







The effects of our revised assumptions are outlined in the graph below.

It is our view that certain assumptions adopted by Northington lead to a value for the shares that is
higher than the fair market value:
 The weighted average cost of capital (“WACC”) range assumed by Northington for the operating
assets of 5.8% to 6.4% for Australia and 6.1% to 6.8% for New Zealand is too low. We would
expect a WACC range of 6.7% to 8.0% for Australia and 7.2% to 8.6% for New Zealand, which
would adequately reflect the market and specific risks of the operating portfolio, particularly with
regard to current market uncertainty and potential merchant price exposure following PPA expiry.
In particular, the 101 MW Snowtown 1 wind farm PPA expires in December 2018 and it will be
exposed to merchant pricing for the remainder of the asset life, estimated to 2033.
 The cost of equity range utilised for the valuation of the Dundonnell project assumed by
Northington of 9.5% to 10.5% is lower than expected and implies an enterprise value/MW of
A$0.28 million to A$0.37 million. This is materially above the price paid in transactions of
comparable assets. We would expect a cost of equity in the range of 11.1% to 12.2%, which
would imply an EV/MW for the Dundonnell project to be between A$0.11 million to A$0.21 million,
which is supported by comparable transactions.
 Northington has assumed that it is likely that the life of operating assets could be extended for a
period of 5 years beyond their useful life, with increased O&M costs but no degradation in
generation output. As there is no proven ability for the life to be extended, we considered the
impact on value assuming that the capacity factor would reduce by 25% during the asset life
extension. If only this revised assumption were applied to the Northington valuation, it would
reduce the implied value per share, by NZ$0.08 for the reduced capacity factor and NZ$0.48 if no
extension is assumed.

If our revised discount rates for the operating assets and the Dundonnell project were applied,
Northington’s implied valuation of the Company would decline to between NZ$1.87 to NZ$2.46 per
share with the mid-point NZ$2.17. The Offer Price is within this range of values.

The above chart reflects movements in value from the Northington expected valuation range, which
we have based on our assessment of the Northington assumptions applied to a financial model
developed by Infratil. While there may be differences in cash flow assumptions contained in the

6







financial model developed by Infratil and those utilised by Northington, we have been able to reconcile
the values derived by Northington as the base for our scenario analysis.
In preparing this report, we also considered the other assumptions contained in the Northington IAR.
Unless otherwise stated in this report, we do not consider any other assumption adopted by
Northington to be particularly conservative, a revision to which would result in a higher value.This
report only covers the assumptions that we consider to be unreasonable or inappropriate and where
we have not provided commentary on any assumption, then we have considered that assumption to
be not unreasonable in the circumstances.
This report is an analysis of certain inputs assumed in the Northington IAR and does not constitute a
valuation. We note we did not have access to the financial model utilised by Northington therefore any
illustrative impact on value described in this report is indicative only, and based on Infratil’s best
estimates of the assumptions underpinning the Northington valuation.
We note that we have not been provided with access to Management of Tilt, and limited information
relating to the Proposed Transaction has been made available by Infratil. With the exception of the
financial model provided by Infratil, we have relied on publicly available information in undertaking this
assessment.
Grant Thornton, for the purposes of this Report, has made a number of independent judgements
including for example, assumptions around the operational life of the assets and capacity factors. The
judgements made are for the specific purposes of this Report, and as at the date of this Report, and
may vary, materially or otherwise, with the intentions or expectations currently held by Tilt, Infratil or
Mercury.
Other matters
Grant Thornton Corporate Finance has prepared a Financial Services Guide in accordance with the
Corporations Act. The Financial Services Guide is set out in the following section.
The decision of whether or not to accept the takeover offer is a matter for each Tilt Shareholder to
decide based on their own views of value of Tilt and expectations about future market conditions, Tilt’s
performance, risk profile and investment strategy. If Tilt Shareholders are in doubt about the action
they should take in relation to the takeover offer, they should seek their own professional advice.
Yours faithfully
GRANT THORNTON CORPORATE FINANCE PTY LTD

JANNAYA JAMES ANDREA DE CIAN
Director Director

7







25 September 2018
Financial Services Guide
1 Grant Thornton Corporate Finance Pty Ltd
Grant Thornton Corporate Finance carries on a business, and has a registered office, at Level 17, 383
Kent Street, Sydney NSW 2000. Grant Thornton Corporate Finance holds Australian Financial
Services Licence No 247140 authorising it to provide financial product advice in relation to securities
and superannuation funds to wholesale and retail clients.
Grant Thornton Corporate Finance has been engaged by Infratil Limited to provide general financial
product advice in the form of a review of an Independent Adviser’s Report in relation to the Proposed
Transaction. This report is included in Infratil’s market announcement.
2 Financial Services Guide
This Financial Services Guide (“FSG”) has been prepared in accordance with the Corporations Act,
2001 and provides important information to help retail investors make a decision as to their use of
general financial product advice in a report, the services we offer, information about us, our dispute
resolution process and how we are remunerated.
3 General financial product advice
In our report we provide general financial product advice. The advice in a report does not take into
account your personal objectives, financial situation or needs.
Grant Thornton Corporate Finance does not accept instructions from retail clients. Grant Thornton
Corporate Finance provides no financial services directly to retail clients and receives no remuneration
from retail clients for financial services. Grant Thornton Corporate Finance does not provide any
personal retail financial product advice directly to retail investors nor does it provide market-related
advice directly to retail investors.
4 Remuneration
When providing the Report, Grant Thornton Corporate Finance’s client is Infratil. Grant Thornton
Corporate Finance receives its remuneration from Infratil. In respect of the Report, Grant Thornton
Corporate Finance has received from Infratil a fixed fee of A$80,000 plus GST, which is based on a
commercial rate plus reimbursement of out-of-pocket expenses for the preparation of the report. Our
directors and employees providing financial services receive an annual salary, a performance bonus
or profit share depending on their level of seniority.
Except for the fees referred to above, no related body corporate of Grant Thornton Corporate Finance,
or any of the directors or employees of Grant Thornton Corporate Finance or any of those related
bodies or any associate receives any other remuneration or other benefit attributable to the
preparation of and provision of this report.

8







5 Independence
Grant Thornton Corporate Finance is required to be independent of Infratil in order to provide this
report. The guidelines for independence in the preparation of independent expert’s reports are set out
in Regulatory Guide 112 Independence of expert issued by the Australian Securities and Investments
Commission (“ASIC”). The following information in relation to the independence of Grant Thornton
Corporate Finance is stated below.
“Grant Thornton Corporate Finance and its related entities do not have at the date of this report, and
have not had within the previous two years, any shareholding in or other relationship with Infratil (and
associated entities) that could reasonably be regarded as capable of affecting its ability to provide an
unbiased opinion in relation the Proposed Transaction.
Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the
transaction, other than the preparation of this report.
Grant Thornton Corporate Finance will receive a fee based on commercial rates for the preparation of
this report. This fee is not contingent on the outcome of the transaction. Grant Thornton Corporate
Finance’s out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant
Thornton Corporate Finance will receive no other benefit for the preparation of this report.
Grant Thornton Corporate Finance considers itself to be independent in terms of Regulatory Guide
112 “Independence of expert” issued by the ASIC.”
Notwithstanding the above, we note that the New Zealand Takeovers Panel has not approved Grant
Thornton Corporate Finance as being independent. No such approval was sought or required because
this report is not required by the Takeovers Code.
6 Complaints process
Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member of
the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing and
addressed to the Chief Executive Officer at Grant Thornton Corporate Finance. We will endeavour to
resolve all complaints within 30 days of receiving the complaint. If the complaint has not been
satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service who can
be contacted at:
Financial Ombudsman Service Limited
GPO Box 3
Melbourne, VIC 3001
Telephone: 1800 367 287
Grant Thornton Corporate Finance is only responsible for this report and FSG. Complaints or
questions about the takeover should not be directed to Grant Thornton Corporate Finance. Grant
Thornton Corporate Finance will not respond in any way that might involve any provision of financial
product advice to any retail investor.
Compensation arrangements
Grant Thornton Corporate Finance has professional indemnity insurance cover under its professional
indemnity insurance policy. This policy meets the compensation arrangement requirements of section
912B of the Corporations Act, 2001.

Our Ref: Tilt - IER Review - JJ.Docx





Contents
Page
1 Introduction 10
2 Discount rate - Operating assets 10
3 Discount rate - Dundonnell 17
4 Asset life assumptions 19
5 Implied market multiples 19
6 Share price analysis 24
7 Sources of information, disclaimer and consents 27
Appendix – Glossary 29

10




1 Introduction
Northington in its IAR derived a valuation range for Tilt of NZ$2.56 to NZ$3.01 per share which is
materially above the price of NZ$2.30 per share offered by the TLT JV. It is our opinion that certain
assumptions derived by Northington are overly optimistic and not reflective of the risks inherent in the
assets and the renewables market in which they operate.
The following sections provide a summary of certain Northington assumptions and our opinion on
alternative assumptions.
2 Discount rate - Operating assets
The following table provides a summary of the Weighted Average Cost of Capital range developed by
Northington for the Australian and New Zealand operating assets:

While there are certain assumptions in the WACC calculations prepared by Northington with which we
agree, we highlight below certain inputs into Northington’s WACC calculations where we have an
alternative point of view.
2.1 Risk free rate assumptions
Northington has assumed a risk free rate of 2.6% for Australia and 2.5% for New Zealand based on the
observed spot rates of the 10-year Government bond rates in each jurisdiction. However, given the
volatility in Government bond rates and the sustained historically low rates being observed in the bond
Tilt Renewables Limited
WACC calculationLowHighLowHigh
Cost of equity
Risk free rate2.6%2.6%2.5%2.5%
Asset Beta0.500.600.500.60
Regearing ratio (D/E)82.0%82.0%82.0%82.0%
Equity beta0.790.940.911.09
Market risk premium6.5%6.5%7.0%7.0%
Specific risk premium0.0%0.0%0.0%0.0%
Cost of equity7.7%8.7%8.2%9.4%
Cost of debt
Cost of debt (pre tax)5.0%5.0%4.9%4.9%
Tax 30%30%28%28%
Cost of debt (post tax)3.5%3.5%3.5%3.5%
Capital structure
Proportion of debt45%45%45%45%
Proportion of equity55%55%55%55%
100%100%100%100%
WACC (post tax)5.8%6.4%6.1%6.8%
Source: Capital IQand GTCF calculations
Northington assessment
AustraliaNew Zealand

11




markets, we consider a longer term view to be more appropriate. Based on the analysis outlined below,
we consider a risk free rate of approximately 3.5% to 4.0% for both Australia and New Zealand to be more
appropriate.
In the absence of an official risk free rate, the yield on the government bonds (in an appropriate
jurisdiction) is commonly used as a proxy. For the purposes of assessing a long term cost of equity, it is
important to have regard to both the current and expected risk free rates over a longer period of time. Our
adopted risk-free rate of 3.5% to 4.0% for Australia and New Zealand is based on the long-term yield on
the respective 10-year Government bonds.
Long-term yield in Australia and New Zealand
We have observed the yield on the 10-year Australian and New Zealand Government Bonds over several
intervals from a period of 5 trading days to 10 trading years as set out in the below:

The following graph shows the historical trend in risk free rate over last 10 years and our assumption for
risk free rate.
Source: S&P Global and GTCF calculations
10-yr Government bond yields
as at 18 September 2018
RangeDaily averageRangeDaily average
Previous 5 trading days2.59% - 2.61%2.60%2.55% - 2.59%2.57%
Previous 10 trading days2.53% - 2.61%2.58%2.55% - 2.59%2.57%
Previous 20 trading days2.53% - 2.61%2.57%2.52% - 2.61%2.56%
Previous 30 trading days2.53% - 2.92%2.68%2.52% - 2.61%2.57%
Previous 60 trading days2.53% - 2.92%2.69%2.52% - 2.84%2.64%
Previous 1 year trading2.48% - 2.92%2.71%2.52% - 3.08%2.83%
Previous 2 years trading1.91% - 2.99%2.64%2.30% - 3.47%2.91%
Previous 3 years trading1.82% - 3.03%2.58%2.12% - 3.65%2.91%
Previous 5 years trading1.82% - 4.44%2.90%2.12% - 4.84%3.36%
Previous 10 years trading1.82% - 5.88%3.85%2.12% - 6.18%4.09%
Source: S&P Global, RBNZ and GTCF calculations
AustraliaNew Zealand
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
10-yr Government bond yields - previous 10 years
NZAUS

12




Cross-check with real yield in Australia
Additionally, given that the bulk of value of the operational assets comes from Australia, we have
calculated the long-term real yield on the Australian 10-year Government bonds adjusted for the RBA’s
target inflation of between 2%-3%. In calculating the real yield, we have observed the nominal yield on the
10-year Australian Government bond, which we have adjusted for historical inflation. We have set out
below the movement in the real Australian Government bond yield with 2% to 3% inflation applied. We
note the adopted risk free rate of 3.5% to 4.0% falls within the range of the real bond yield plus RBA’s 2%
to 3% inflation target band as shown below:
Source: S&P Global, GTCF analysis
Conclusion on risk-free rate
While the low bond yields are not sustainable, they ultimately depend on the federal banks being able to
achieve their inflation targets, and growth levels in the economy returning to normal. Historically, low bond
yields have tended to persist for long periods of time before reversing, and as such we could expect yields
to remain low in the short to medium term.
Furthermore, given the volatility in the global financial markets, longer investment period on infrastructure
assets and recent quantitative easing, we have placed more emphasis to the average risk free rate
observed over a longer period. Accordingly, we have adopted the risk free rate of 3.5% to 4.0% for both
Australia and New Zealand.
2.2 Equity Market Risk Premium
The market risk premium represents the additional return an investor expects to receive to compensate for
additional risk associated with investing in equities as opposed to assets on which a risk free rate of return
is earned.
Empirical studies of the historical risk premium in Australia and New Zealand over periods of up to 100
years suggest the premium is between 6% and 8%. For the purpose of the valuation, Grant Thornton
Corporate Finance has adopted a market risk premium of 6% for Australia and 7.5% for New Zealand.
We note that our adopted premium is consistent with the market risk premium used by regulatory
authorities in Australia (such as the Australian Competition and Consumer Commission and all other state
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Estimated yield on Australian Government 10-yr bond (last 10 yrs)
GT range RFR nominalReal + 2% inflationReal + 3% inflation

13




based regulators). While the New Zealand Commerce Commission uses a market risk premium of 7.0%,
the Commission notes that several practitioners apply a premium of 7.5%, which is not unreasonable.
Observed market return
We have performed an analysis of the S&P ASX 200 accumulation index and the NZX50 Gross Return
(“NZX50GR”) index, which measures total returns generated by the respective indices, and compared this
to our adopted risk-free rate and market risk premium.
 Total returns generated by the ASX 200 since 1992
1
equate to a CAGR of 9.51% which approximates
the 9.5% implied by our adopted risk free rate of 3.5% and market risk premium of 6%.
 Total returns generated by the NZX50GR (gross return) since 2003
2

3
equate to a CAGR of 10.41%
which approximates to the 11% implied by our adopted risk free rate of 3.5% and market risk premium
of 7.5%.
 This provides support for our adopted risk-free rate and market risk premium. Below is a graph of the
S&P ASX 200 accumulation index and the NZX50GR index.

Simplified Brennan-Lally approach
In computing the WACC for the operational assets located in New Zealand, we have adopted the
simplified Brennan-Lally approach, as used by the New Zealand Commerce Commission. The simplified
Brennan-Lally approach advocates the use of a tax-adjusted market risk premium (“TAMRP”), which is
calculated using the total market return less the after-tax risk-free rate.
Using the total market return recorded by the NZX50GR, a risk-free rate of 3.5% - 4.0% and a corporate
tax rate of 28%, the implied TAMRP is between 7.5% to 7.9%, which is in line with our adopted market risk
premium of 7.5%.
2.3 Gearing
Northington has assumed a gearing level in the calculation of the WACC of 45% based on Tilt’s target
gearing. This is consistent with the current gearing levels of Tilt as indicated by their current market
capitalisation of c 46%
4
.

1
Furthest available data
2
Furthest available data
3
Total returns generated by the ASX 200 since 2003 equate to a CAGR of 9.68%.
4
Based on market capitalisation of NZ$729.2 million, NZ$627.5 million net debt (A$571) as at 30 September 2018 per Northington report
Source: Capital IQ and GTCF calculationsSource: Capital IQ and GTCF calculations
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
NZX50 Gross Return Index
CAGR:10.42% p.a.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
S&P/ ASX 200 Accumulation Index
CAGR since 1992: 9.51% p.a.

14




Whilst Northington has utilised the target gearing of Tilt of 45%, it is our view that, over time, gearing levels
are likely to decline as projects near the end of their contracted period and funding on new developments
tightens. Project financing of many renewable developments is based on the term of the PPA and the
credit worthiness of the counterparty. In the current environment, it is observed that PPA contract terms
are shortening, necessitating reduction in the level of gearing available to owners and developers of
renewable assets over the asset life. Furthermore, on a portfolio basis, as assets near the end of their
operational life there is a necessity to further de-gear the assets, resulting in a portfolio debt balance,
which is likely to be lower than the target.
The following table provides a summary of the gearing levels of comparable companies:

Source: S&P Global and GTCF calculations
Note (1): Gearing ratio calculated at net debt to EV over the LTM
As illustrated by the above table, gearing levels for renewable energy companies reflected a mean of 29%
and a median of 35% and comparable gentailer companies mean and median gearing of 24% to 25%.
Higher gearing levels were observed for regulated utility companies, with a mean of 40% and a median of
43%.
Company CountryGearing
Beta analysisRatio¹
Tilt Renewables Limited
Australia43.9%
NZ Windfarms Limited
New Zealand21.2%
Infigen Energy Limited
Australia48.1%
Windlab Limited
Australia-6.1%
Genex Power Limited
Australia53.1%
Average
29.1%
Median
34.7%
Trustpower Limited
New Zealand20.1%
Meridian Energy Limited
New Zealand14.5%
Mercury NZ Limited
New Zealand23.5%
Contact Energy Limited
New Zealand26.4%
Genesis Energy Limited
New Zealand31.9%
AGL Energy Limited
Australia16.1%
Origin Energy Limited
Australia32.6%
ERM Power Limited
Australia27.8%
Average
24.1%
Median
24.9%
APA Group
Australia45.6%
AusNet Services Ltd
Australia55.0%
Spark Infrastructure Group
Australia19.7%
Vector Limited
New Zealand40.6%
Average
40.2%
Median
43.1%
Australasian Comparable Renewable Energy Companies
Australasian Comparable Gentailer Companies
Listed Australasia Utility Companies

15




The gearing level adopted by Northington is in line with those observed for the utilities, which included
lower risk, longer life regulated assets, with a substantially different risk profile to those of Tilt. We would
expect to see gearing levels at approximately 35% for Tilt, which is more indicative of the long-term optimal
gearing structure for Tilt based on the profile of its current operating portfolio and pipeline of projects and
long term average gearing over the life of the assets.
2.4 Specific equity risk premium
Northington has assumed that there is not additional systematic risk associated with the operating assets
of Tilt on the basis of their size, liquidity and asset diversification. We do not consider this assumption to
be reasonable for the following reasons:
 The operating portfolio of Tilt includes assets at various stages of life, with approximately 75% of
generation of the Australian portfolio contracted under PPA’s until 2030, beyond which Tilt will be
exposed to wholesale electricity prices. Accordingly, Northington has procured independent long term
pricing forecasts. In relation to the New Zealand assets, the prices are fixed until 2023, after which a
new price will be set based on ASX Futures prices.

There is considerable uncertainty surrounding long term pricing, with particular regard to the
regulatory environment and recent volatility of electricity prices. With increasing pressure on electricity
prices by government, uncertainty surrounding the future of the National Energy Guarantee and a
potential Royal Commission into the electricity market, we consider there is risk in the cash flows not
adequately addressed by Northington’s WACC calculation. Northington’s sensitivity analysis suggests
a movement in the forecast power prices of +/- 10% can have a NZ$0.23 impact in their estimated
value.

 A portion of Tilt’s revenue is based on merchant LGC prices, with Tilt becoming materially exposed to
LGC’s beyond 2020. With current Australian regulatory uncertainty in the market and the level of
renewable energy investment, the outlook for LGCs is uncertain to 2030. Northington has
acknowledged that some forecasters have assumed an LGC price trending to nil by 2030, however
they have assumed a real LGC price of approximately A$10 to 2030.

 Northington has extended the asset life of each site for a further 5 years beyond the design life, taking
into account a higher level of O&M expenditure. Northington has not, however considered any
degradation in performance over the extended period. Whilst Stage 1 of the Tararua windfarm is
expected to be extended for a new 5-year term, it has not been demonstrated whether the wind farm
will be able to generate at historical capacity factors without degradation. Based on our desktop
assessment, the extension of the asset life has a NZ$0.48 impact on the value per share for the
operating assets.

The factors outlined above demonstrate that Tilt is somewhat exposed to uncertainty and risks that have
not been captured in either the beta estimate or the equity market risk premium. Northington has made
assumptions within the cash flow forecasts which increases the risk profile and therefore should attract a
specific risk premium in the order of 0.5% to 1%.

16




2.5 Recalculated WACC
The following table presents our recalculated WACC for the operating assets, compared with that prepared
by Northington:

We make the following observations:
 The WACC ranges of 5.8% - 6.4% for Australia and 6.1% - 6.8% for New Zealand is substantially
lower than our estimated ranges of 6.7% to 8.0% and 7.2% to 8.6% respectively.
 Observed research analysts have assumed the following WACCs for the Tilt portfolio:

Analyst Date Australia New Zealand
Credit Suisse 12 September 2018 6.85% 7.61%
Forsyth Barr 6 July 2018 8.3%
Deutsche Bank 11 May 2018 7.3%
Cannacord Genuity 6 June 2018 8.9%

 Tilt has published in its annual report as at 31 March 2018 the discount rates used for their impairment
testing fair value calculations, a range of 7.1% to 8.1% for the Australian operations and 7.4% to 8.4%
for the NZ Assets. These discount rates were audited by PricewaterhouseCoopers.
 Whilst there is limited publicly available data in relation to the WACCs applied to other renewable
assets, the following table provides a summary of certain observed WACCs of comparable companies:

Company/Source Date Low High
DUET – Energy Developments
Limited IER
3 September 2015 Post Tax WACC:
8.75%
Post Tax WACC:
9.25%
Infigen Energy Limited –
Annual Report, impairment
testing
30 June 2018 11.7% (pre-tax) ~ c 8.2% post tax
Tilt Renewables Limited
WACC calculationLowHighLowHighLowHighLowHigh
Cost of equity
Risk free rate3.5%4.0%3.5%4.0%2.6%2.6%2.5%2.5%
Asset Beta0.500.600.500.600.500.600.500.60
Regearing ratio (D/E)53.8%53.8%53.8%53.8%82.0%82.0%82.0%82.0%
Equity beta0.690.830.770.920.790.940.911.09
Market risk premium6.0%6.0%7.5%7.5%6.5%6.5%7.0%7.0%
Specific risk premium0.5%1.0%0.5%1.0%0.0%0.0%0.0%0.0%
Cost of equity8.1%10.0%8.8%10.8%7.7%8.7%8.2%9.4%
Cost of debt
Cost of debt (pre tax)5.9%6.4%5.9%6.4%5.0%5.0%4.9%4.9%
Tax 30%30%28%28%30%30%28%28%
Cost of debt (post tax)4.1%4.5%4.2%4.6%3.5%3.5%3.5%3.5%
Capital structure
Proportion of debt35%35%35%35%45%45%45%45%
Proportion of equity65%65%65%65%55%55%55%55%
100%100%100%100%100%100%100%100%
WACC (post tax)6.7%8.0%7.2%8.6%5.8%6.4%6.1%6.8%
Source: Capital IQand GTCF calculations
Grant Thornton assessmentNorthington assessment
AustraliaNew ZealandAustraliaNew Zealand

17




Company/Source Date Low High
Powercor – Final distribution
determination 2016-2020
May 2016 6.11% - nominal vanilla WACC
New Zealand Commerce
Commission – WACC
estimates for Transpower
31 July 2018 5.22% vanilla WACC, 4.72% post-tax WACC
Grant Thornton Renewable
Energy Discount Rate Survey
January 2018 Mean WACC for Australian wind: 7.5%

The Energy Developments Limited (“EDL”) acquisition by DUET consisted of a portfolio of small scale
remote and clean energy power generation assets in Australia, Europe and the US. Clean energy
comprised approximately 59% of EDL’s revenue and generates power from waste coalmine gas or landfill
gas, with the energy being sold to the grid under PPAs or contracts for difference. The remaining revenue
was related to energy being sold to remote sites, including mine sites. As a significant proportion of EDL’s
revenue is derived from providing power to the resources sector, they are somewhat exposed to the
market fluctuations of that sector. Further, the generation facilities are of a small scale individually and
therefore reflects a higher risk profile to Tilt.
As discussed in section 5 below, Infigen is considered the most comparable listed company, albeit a
smaller proportion of its generation capacity is contracted when compared with Tilt. With a comparable
portfolio in terms of size, we consider the slightly higher premium on the WACC for Infigen is not
unreasonable compared with Tilt.
The Australian Energy Regulator has determined a regulatory vanilla WACC for Powercor of 6.11% for the
regulatory period 2016 – 2020 and the New Zealand Commerce Commission determined a vanilla WACC
for Transpower of 5.22%. Both Powercor and Transpower are regulated assets with significant certainty
around future pricing, with long term funding over assets with lives in excess of those for the windfarms,
we would expect that the WACC range for Tilt operating assets to be materially higher than that for these
regulated assets.
In January 2018, Grant Thornton released a Renewable Energy Discount Rate Survey, which gathered
secondary market transaction discount rate data across the globe. The average observed WACC in the
Australian market for wind assets was 7.5% and the average cost of equity was 10.0%.
Utilising the model prepared by Infratil, and our assessed WACC range for the operating assets (all else
remaining equal), the value per share determined by Northington would reduce by between NZ$0.37 and
NZ$0.51.
3 Discount rate - Dundonnell
Northington has valued the Dundonnell development project using a cost of equity of 9.5% to 10.5%,
representing a 2% premium on the cost of equity underpinning the Australian WACC calculation for the
operating assets. The premium is representative of Northington’s assessment of the remaining
development risk associated with the project.
Relative to the operating portfolio of Tilt, we do not consider that cost of equity allocated to the Dundonnell
project adequately reflects the risks of the project as follows:
 Based on the analysis provided above, we consider the base cost of equity (prior to any additional
specific risk premium relating to the Dundonnell project) to be in the range 8.1% to 10.0%;

18




 Whilst well advanced, the project is yet to reach financial close and therefore reflects a level of
development risk, as well as other material risks such as generation performance and pricing risk;
 The cost of equity estimated by Northington takes into account only development risk and does not
consider any additional risks from expected generation performance and the exposure to merchant
prices. Unlike the remainder of the Tilt portfolio of operating assets, only 37% of capacity has been
contracted by the Victorian Government on a contract for difference basis, with the remaining 63% yet
to be contracted. This is likely to further increase the discount rate assessment;
 The value derived by Northington is based on their expectations around long term power pricing and
LGC prices, the forecasts for which are uncertain based on current government energy policy
ambiguity, limited future for LGCs beyond 2030 and the profile of Victoria’s energy mix over the asset
life.
 Northington has assumed a capacity factor of 42% for the Dundonnell development which is above the
average capacity factor for the Tilt portfolio of 38%.

We would therefore expect a materially higher cost of equity than that determined by Northington, based
on an additional specific risk premium of 2% to 3% above the cost of equity calculated for the operating
portfolio. The cost of equity range from 11.1% to 12.2% would result in a reduction in the value per share
of the Dundonnell project of approximately NZ$0.18.

If we utilise our assessment of WACC for the operating assets as well as the cost of equity we have
calculated for Dundonnell, the overall Northington valuation range would reduce to between NZ$1.87 to
NZ$2.46, which supports the Offer Price.

We do not consider this to be unreasonable given that Dundonnell is a development project which has not
yet gone to financial close (although it is at an advanced stage) and is susceptible to material exposure of
merchant prices.

The additional specific risk premium is supported by our analysis of the implied EV/MW multiples for
Dundonnell. The valuation of the Dundonnell project as prepared by Northington implies a value of A$0.28
million to A$0.37 million per MW. Comparing this to transactions of other similar stage wind farm
developments, the resultant value appears to be materially higher. Refer to Section 5.3 for details.

19




4 Asset life assumptions
The following table provides a summary of the asset life and contracted period for each of the Tilt wind
farms:

Source: IAR Northington, Infratil
Northington has assumed that beyond the useful life of the asset, there is an expectation that the assets
could continue to operate for a further 5 years. In making this assumption, Northington has acknowledged
that it is likely that O&M costs would increase during this period, however they have not considered any
degradation in performance over that period, with the capacity factor remaining the same as over the
useful life. Tararua 1 is nearing the end of its useful life and is currently subject to an extension of the
operations for a further 5 year period, however there is no evidence as to the success or otherwise of this
extension.
We have considered an alternate scenario where the operating life is extended for 5 years beyond the
useful life, however at a lower average capacity factor of c. 29% as against 38% over the useful life. This
represents a reduction in capacity by 25%. Research has found that wind turbines lose 1.6% of output
p.a., with an average loss of output over 20 years ranging from 22% to 60% of capacity, with a median of
33%
5
.
All else remaining equal this would result in a reduction in the value of the Tilt shares from approximately
NZ$0.08 (for the scenario with 5 years extension with reduced capacity) to NZ$0.48 (for the scenario
without useful life extension).

5 Implied market multiples
We have considered the reasonableness of Northington’s assessed valuation having regard to the implied
EV/ MW and EV/ EBITDA multiples, and have benchmarked these with peer companies’ trading multiples
as well as multiples observed in closely comparable transactions.


5
This is based on research done by a number of sources including Renewable Energy Foundation (The Performance of Wind Farms in the United
Kingdom and Denmark, Gordon Hughes (2012)) and Imperial College London (How does wind farm performance decline with age? Iain Staffell &
Richard Green (2013))
Asset life and contracted period for Tilt Wind Farms
Location
Commission
dateEnd of lifeProduction sold under PPALGCs sold under PPA
Australian assets
Snowtown (stage I)SAOct-08Mar-3389% contracted to Dec 2018 89% contracted to Dec 2018
Snowtown (stage II North and South) SANov-14Mar-40100% contracted to Dec 2030 100% contracted to Oct 2030
BlayneyNSWOct-00Jun-25100% contracted to Oct 2020 100% contracted to Oct 2020
CrookwellNSWJun-98Jun-23100% contracted to July 2023Uncontracted
Salt CreekVICAug-18Jul-43
50% contracted to Dec 2018, then
100% contracted to Dec 2030
Uncontracted
New Zealand assets
Tararua IHAYDec-99Dec-24100% contracted for asset life NA
Tararua IIHAYDec-04Dec-29100% contracted for asset life NA
Tararua IIIHAYDec-07Dec-32100% contracted for asset life NA
MahinerangiBENDec-11Dec-36100% contracted for asset life NA

20




5.1 Summary
Our opinion on the implied market multiples is summarised below:

 The EV/ EBITDA multiple of 10.2x-11.2x implied by Northington’s assessed valuation range does not
appear to be reasonable in light of the multiple implied by the investment by Mercury as well as the
trading multiples for the basket of comparable companies selected by Northington.
 The assessed equity value for the Dundonnell project of A$0.28 – A$0.37 million per MW does not
appear to be reasonable given the substantially lower value per MW implied by comparable
transactions like the Stockyard Hill acquisition in May 2017 and the Mt Emerald acquisition in June
2016 of between A$0.11-A$0.21 million per MW.

5.2 Comparable company multiples
Northington has benchmarked their implied EV/ EBITDA multiple against Mercury’s prior investment in Tilt
as well as traded multiples for a large basket of companies operating in the broader electricity generation
and distribution sector. Further, Northington has considered their assessed valuation to be reasonable
given the proximity to most of these benchmarks. In this regard, we note as follows:

 We have benchmarked the operating metrics of listed peers in the Australian and New Zealand
market with those of Tilt. Our analysis is summarised below:


Source: S&P Global, GTCF analysis
Note: Market capitalisation and Enterprise value as at 18 September 2018

We note the following in regard to the comparable company multiples:

 Infigen is considered the most comparable peer to Tilt. Infigen’s installed generation capacity and
development pipeline is similar to that of Tilt’s. However, Infigen is considerably more exposed to
wholesale electricity prices as the majority of its revenue is uncontracted, whereas most of Tilt’s
assets have 100% revenue contracted under a PPA. This is reflected in Infigen’s consensus multiple
vis-à-vis Tilt (6.4x FY19 EBITDA as against 9.8x for Tilt
6
).

However, we note that:
- Infigen is developing the Bodangora wind farm, which is currently in the commissioning process.
This project has already delivered electricity to the National Electricity Grid, and is undergoing the
addition of more turbines at present. The wind farm has a nameplate capacity of 113.2MW, and
60% of its production has been contracted with EnergyAustralia.
- Although Infigen’s total revenue contracted under a PPA is relatively low compared with Tilt, the
company also provides electricity under wholesale contracts to Commercial and Industrial users
(“C&I”). Together, the revenues under PPA contracts and C&I contracts reflects an increasing

6
As at 18 September 2018, sourced from S&P Global
Company Country
Market cap
(A$m) EV (A$m)
Installed generation
capacity (MW)
Generation volume
(GWh)
Implied capacity
factor (%)
Contracted electricity
production (%)
Development
pipeline (MW)
Tilt Renewables LimitedAustralia666.1 1,247.31636209438%
98% FY18, 84% (from
FY20)
3114 MW
(AU), 540 MW
(NZ)
NZ Windfarms Limited New Zealand31.8440.404910324%NANA
Infigen Energy LimitedAustralia550.02 1,060.56670191033%
21% FY18, 32%
(FY19e)
879.5
Windlab LimitedAustralia93.3287.95NANANANA7500
Genex Power LimitedAustralia82.06 174.845014533%100%720

21




proportion of revenue (43% in FY17, 66% in FY18 and expected to be 72% in FY19). Conversely,
while Tilt’s current contracts are covered by PPAs, the proportion of uncontracted revenue is
expected to increase in the long term as the PPA contracts expire
7
. All else remaining equal, the
inclusion of the Dundonnell project with 37% of contracted revenue will add to Tilt’s uncontracted
revenue.
- While there is a possibility that Tilt’s existing PPAs may be extended, there is a significant risk to
the extension as well as the term of the same.
- Although Tilt’s development pipeline is larger than Infigen, a large number of Tilt’s development
pipeline are in the early to mid-stages. Of the 3,114 MW of planned installed capacity in Australia,
only 1,600 MW has been consented. In New Zealand, out of the 540 MW of consented
developments, only the Waverley development (130 MW) is likely to be proceed in the near term.
If these developments were to proceed, Tilt would need to raise substantial additional equity in
addition to project debt to fund its development pipeline, as the total development cost of projects
in Australia and New Zealand, as disclosed in the Northington IAR is expected to be NZ$2 billion
and NZ$1 billion respectively.
- Given the above, we do not believe that the implied EV/ EBITDA multiple for Tilt should be
significantly greater than that for Infigen.

 Northington has also assessed their implied EV/ EBITDA multiple to be reasonable given that they are
in line with Australian electricity generation companies/ retailers as well as international renewable
energy companies, and lower than regulated utility companies. However, we believe that it is not
unreasonable for these companies to trade at a premium to Tilt’s EV/ EBITDA multiple, given the
following:
- Electricity generation and retailing companies like Origin or AGL are large, diversified operators
having an exposure to both conventional and unconventional sources of electricity production.
These companies have portfolios including generation assets with longer asset lives such as
hydro, gas and geothermal generation. Given their large retail base, these companies also have
significant exposure to retail electricity prices, and their risk profile is arguably different to Tilt on
account of the benefits of vertical integration enjoyed by these companies. Accordingly, we do not
consider these companies to be comparable to Tilt and would expect Tilt to trade at a significant
discount to these companies, on account of their scale and their risk profile.
- International renewable energy companies while undertaking a similar business to Tilt, are
significantly larger and more acquisitive, and are sometimes spread out across geographies.
These companies face different regulations and may face different operating conditions, resulting
in a limited degree of comparability with Tilt, which operates only in Australia and New Zealand.
- Contracted/ regulated utility companies have assets with a longer life and have relatively secure
cash flows. These companies are also highly scrutinised by the market and other regulatory
authorities and face a high degree of investor interest. Accordingly, we would expect these
companies to trade at a significant premium to Tilt.

 In addition, Northington has benchmarked their assessed valuation against the multiple paid by
Mercury.

In May 2018, Mercury paid NZ$2.30 per share for the 27% stake in Tilt held by TECT, which
represented a 24% premium to the trading price before the acquisition
8
and implied an EV/EBITDA
multiple of 10.3x. The TECT stake was the largest and only significant minority stake in Tilt and it was

7
Snowtown 1 expires in December 2018 and others in 2020/ 2023, resulting in 20% of electricity revenue and under 60% of LGC revenue
expected to be uncontracted by 2023
8
NZ$1.85 on 11 May 2018

22




acquired through a competitive sale process. The underlying share price at the time implied an
EV/EBITDA multiple of 8.5x.

We believe that the EV/EBITDA multiple offered by Mercury of 10.3x represents a ceiling to the value
that should be attributed to the c. 22% stake being acquired by the consortium, on account of the
following:
- The c 22% stake is of a similar size and the consortium already had a controlling interest in Tilt
before the offer.
- The time gap between the 2 offers was about 3 months, during which there was no fundamental
change to the Company’s operations.
- Tilt’s share price increased immediately following the acquisition. This can partly be attributed to
the Company’s announcements on the commissioning of the Salt Creek wind farm, which was
known and anticipated by the market; and a positive first quarter result, which was driven by wind
speeds. However, these announcements are in the nature of either expected or temporary
developments, which should not indicate a permanent/ fundamental shift in the share price.
- Based on market commentary following Mercury’s acquisition of the TECT stake and the
movement in Tilt’s trading multiple, it is reasonable to conclude that the market was factoring into
the share price, and therefore into the implied multiples, an expectation of a future offer for the
remaining shares in Tilt, thereby trading at a higher earnings multiple.
- In light of the above, we do not believe that the assessed valuation of Tilt shares should imply a
multiple higher than the multiple paid by Mercury in May 2018.

Conclusion on comparable company multiples
Taking into account the above, we would expect Tilt to trade at multiples that represent a discount to most
peers assessed by Northington, and believe that the takeover price of NZ$2.30 represents a ceiling on the
Offer Price for the minority stake.

5.3 Comparable transaction multiples
In addition to the above, we have also compared Northington’s implied EV/ MW multiple of Dundonnell to
those observed in comparable transactions in Australia and New Zealand. Northington’s implied EV/ MW
of A$0.28-A$0.37 million per MW for the Dundonnell project is at a substantial premium to acquisitions of
wind farms under development in Australia.

In our view, the Dundonnell project should not be valued at greater than A$0.21 million per MW, which was
paid for the acquisition of Stockyard Hill.

Our analysis is presented below:

 Stockyard Hill acquisition
- The Stockyard Hill transaction involves Goldwind’s acquisition of the Stockyard Hill development
from Origin Energy for A$110 million. The 530 MW wind farm is expected to be the largest wind
farm in Australia post construction. This wind farm has 100% of its revenue contracted under a
PPA with Origin for both electricity and LGCs up to 2030.
- Furthermore, as Goldwind is a strategic acquirer and has established projects in place including
White Rock Wind Farm (377 MW
9
), Gullen Range Wind Farm (165.5 MW), Mortons Lane Wind

9
Total include 202 MW of capacity for which construction will start in late 2018.

23




Farm (19.5 MW) and Gullen Solar Farm (10 MW). This acquisition also forms a part of a larger
portfolio of assets.
- As against this, the Dundonnell project is a 336 MW wind farm with only 37% of its revenue under
a PPA, and similar to the Stockyard Hill wind farm also forms part of a larger portfolio. In our
opinion, both acquisitions enjoy the benefits of being part of a larger portfolio of assets. Further,
the certainty surrounding the PPA materially de-risked the Stockyard Hill development.
- Accordingly, we do not believe that the Dundonnell project should be valued at a premium to the
Stockyard Hill project.

 Mt Emerald acquisition
- The Mt Emerald transaction involves Ratch Australia’s A$10 million acquisition of 50% interest in
Mount Emerald Wind Farm Pty. Mount Emerald is a 180 MW wind farm and is currently at the
final stages of construction. The project has 100% PPA offtake with Ergon Energy until 2030.
- Mt Emerald Wind Farm is located in Queensland and will be operational by the end of 2018.
Once the project is operational, it is expected to supply 1/3 of the power needs of Far North
Queensland.
- Given the size of the project relative to the Dundonnell project, we would expect the Dundonnell
project to be valued at a premium to the Mt Emerald acquisition. However, we note that at the
time of the acquisition, the Mt Emerald project was well advanced in its development phase and
had already secured the PPA before commencing construction of the wind farm. The project was
added to Ratch’s portfolio of wind farms and renewable pipeline. We consider that these factors
lower the risk from the project and attributes a higher value to the same.
- Considering the above factors, the Mt Emerald acquisition multiple represents a floor for the
implied valuation multiple of the Dundonnell project.

Given the above, we would expect the implied multiple for the Dundonnell transaction should be between
the Mt. Emerald transaction and the Stockyard Hill transaction, given the similar characteristics of the
projects.

Northington’s implied price per MW for the Dundonnell project is materially above these comparable
transactions, whilst at the same time being a higher risk asset in terms of merchant exposure and higher
capacity factor.

24




6 Share price analysis
6.1 Liquidity analysis
We have assessed the liquidity of the Tilt shares in order to assess whether these shares are
representative of the fair market value of the Company. In this regard, we note the following:

 The free float of the Company’s shares is highly limited at 28.8%
10
, as the majority of the outstanding
shares are closely held by Infratil and Mercury and are not traded. The free float of Tilt is lower than
most peers in Australia/ New Zealand, as set out below:


Source: S&P Global, GTCF calculations
 From September 2017 to August 2018, 25.5% of the Company’s total shares and 28.78% of the free
float shares were traded with a median monthly volume of 0.52%
11
of total shares. However in May
2018, c. 20% of the total shares were traded, excluding which would reduce the median monthly
volume to 0.44%. This implies that the liquidity of the stock is relatively low, and is not traded by large
segments of the market.
 Tilt complies with the full disclosure regime required by the ASX and NZX, and is covered by several
investment analysts in Australia and New Zealand who provide updates to the market on a regular
basis. As a result, the market is fully informed about the performance of Tilt.
 In the absence of a takeover or alternate transactions, the trading prices represent the value at which
minority shareholders could realise their portfolio investment. However despite being a publicly listed
company, in a low liquidity environment, an investor may find it difficult to dispose of a sizeable
shareholding in a short span of time at a fixed price.

6.2 Premium for control is not applicable to a minority stake
We note that Northington’s assessed valuation of the Company has been undertaken on a control basis. A
control value is typically higher than the equivalent value for a minority stake as a controlling shareholding
would give rise to benefits such as:

 the ability to make strategic decisions;
 the ability to make dividend payment decisions;
 the ability to realise synergistic benefits;

10
We understand that post the exercise of options by Mercury, the free float has reduced to c. 22%.
11
Excluding May 2018, the median volume traded is 0.44%
Liquidity assessment
Free Float as at
19 Sep 2018
Median volume traded
as a % of total shares
1
Tilt Renewables Limited28.79%0.52%
NZ Windfarms Limited52.67%1.05%
Infigen Energy Limited72.67%3.52%
Windlab Limited48.73%2.45%
Genex Power Limited58.11%2.58%
Trustpower Limited21.90%0.42%
Meridian Energy Limited48.86%0.92%
Mercury NZ Limited46.06%1.35%
Contact Energy Limited99.79%2.33%
Genesis Energy Limited48.31%1.08%
AGL Energy Limited99.51%5.92%
Origin Energy Limited99.50%5.47%
ERM Power Limited76.82%3.28%
Note 1: Between September 2017 and August 2018

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 access to cash flows;
 access to tax benefits; and
 control of the board of directors of the company.

However, in the case of Tilt, Infratil and Mercury control 78% of the share capital of the Company (as a
result of the exercise of the option by Mercury as part of offer), and together can influence the activities
and strategic direction of the Company or pass special resolutions. In such a situation, we do not expect
that the seller of a <25% stake in a closely held company would receive a substantial premium over the
trading price for the stake to be sold.

6.3 Premia indicated by the May 2018 TECT offer and the TLT JV takeover offer in August
2018
In May 2018, Mercury obtained a 19.99% stake in the Company from TECT Holdings Limited, with an
option to acquire an additional 6.8% stake. This offer was made at a price of NZ$2.30, implying a premium
of 24% to the trading price before the offer
12
.

Evidence from Australian studies (Officer, Bishop and Dodd for example) indicates that premiums for
control on successful takeovers have frequently been in the range of 20% to 40% and that the premiums
vary significantly between transactions.

We would not expect a substantial premium to be paid to acquire a minority stake in the Company.
Accordingly, we do not consider the premium paid by Mercury in May 2018 to be unreasonable.

While Mercury offered a premium to acquire the TECT stake in May 2018, there was no further premium
included in the TLT JV takeover offer in August 2018. We do not consider this to be unreasonable owing to
the following:

 The Mercury acquisition of the TECT stake in May 2018 was part of a competitive process. In a press
release at the time of the transaction (15 May 2018), Infratil had confirmed its bid for this stake:
“Infratil tabled a proposal to acquire the 26.7% stake held by TECT in Tilt as part of an expedited
process run by TECT and its advisors.”
 The trading price before the offer in August 2018 (NZ$2.13 as at 14 August 2018) was higher than the
trading price before the offer in May 2018 (NZ$1.85 as at 11 May 2018). Following Mercury’s
acquisition of the TECT stake, the share price increased to levels in line with the price just prior to the
TLT JV takeover offer. During the period between the offers in May and August 2018, there was
ongoing takeover speculation for the remaining shares in the media and in broker research. In the
absence of any other material company announcements during that period, it is likely that the traded
price prior to the TLT JV takeover offer already incorporated a certain premium for control on the basis
that the market expected an imminent takeover offer by either Infratil or Mercury.

6.4 Conclusion on premium over share price
Based on the circumstances surrounding the Mercury acquisition of the TECT stake and the subsequent
takeover offer, when considering the implied premium for control paid by the TLT JV, it is reasonable to
utilise the price just prior to Mercury acquisition of the TECT stake as the reference price. Based on the
reference price as at 11 May 2018, the implied premium for control for the 22% stake is 24%.

12
NZ$1.85 on 11 May 2018

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Considering that a minority stake is to be acquired in a closely held business with the TLT JV partners
collectively controlling c. 78%, and with a price benchmark available for the acquisition of a similar stake,
we do not believe that the seller of a 22% stake would receive a premium over and above the Offer Price.
We therefore believe that the TLT JV partners’ NZ$2.30 represents a reasonable premium to the trading
price of Tilt shares prior to the announcement of the offer.

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7 Sources of information, disclaimer and consents
7.1 Sources of information
In preparing this report Grant Thornton Corporate Finance has used various sources of information,
including:
 TLT JV Offer Document
 Northington Partners Independent Adviser’s Report dated 17 September 2018
 Annual reports/ consolidated accounts of Tilt for FY18
 Press releases and announcements by Tilt on the ASX
 Financial model prepared by Infratil
 CEO and CFO reports for the last 6 months before the announcement of the Proposed Transaction
 S&P Global
 Various industry and broker reports
 Other publicly available information
In preparing this report, Grant Thornton Corporate Finance has also held discussions with, and obtained
information from, Management of Infratil and its advisers.
7.2 Limitations and reliance on information
This report and opinion is based on economic, market and other conditions prevailing at the date of this
report. Such conditions can change significantly over relatively short periods of time.
Grant Thornton Corporate Finance has prepared this report on the basis of financial and other information
made publicly available by the Company, and other publicly available information. Grant Thornton
Corporate Finance has considered and relied upon this information. Grant Thornton Corporate Finance
has no reason to believe that any such information is false or that any material information has been
withheld. Grant Thornton Corporate Finance has evaluated the information published by the Company
through inquiry, analysis and review, and nothing has come to our attention to indicate the information
published is materially misstated or would not afford reasonable grounds upon which to base our report.
Nothing in this report should be taken to imply that Grant Thornton Corporate Finance has audited any
information used by us, or has in any way carried out an audit on the books of accounts or other records of
the Company.
This report has been prepared to assist the Directors of Infratil and Mercury in communicating with the Tilt
Shareholders in relation to the Proposed Transaction. This report should not be used for any other
purpose. In particular, it is not intended that this report should be used for any purpose other than as an
expression of Grant Thornton Corporate Finance’s opinion as to whether the Proposed Transaction is in
the best interest of the Company’s shareholders.
Infratil has indemnified Grant Thornton Corporate Finance, its affiliated companies and their respective
officers and employees, who may be involved in or in any way associated with the performance of services
contemplated by our engagement letter, against any and all losses, claims, damages and liabilities arising

28




out of or related to the performance of those services whether by reason of their negligence or otherwise,
excepting gross negligence and wilful misconduct, and which arise from reliance on information made
available by the Company, which the Company knew or should have known to be false and/or reliance on
information, which was material information the Company had in its possession and which the Company
knew or should have known to be material and which it did not provide to Northington Partners for the
purpose of the Independent Advisor’s Report. Infratil will reimburse any indemnified party for all expenses
(including without limitation, legal expenses) on a full indemnity basis as they are incurred.
7.3 Consents
Grant Thornton Corporate Finance consents to the issuing of this report in the form and context in which it
is included in statements by the TLT JV or any member of the TLT JV to Tilt Shareholders in connection
with the Proposed Transaction. Neither the whole nor part of this report nor any reference thereto may be
included in or with or attached to any other document, resolution, letter or statement without the prior
written consent of Grant Thornton Corporate Finance as to the form and content in which it appears.

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Appendix – Glossary
$ or A$ Australian Dollar
ASIC Australian Securities Investment Commission
ASX Australian Securities Exchange
CAGR Compounded Annual Growth Rate
C&I Commercial and Industrial users
Company Tilt Renewables Limited
Corporations Act Corporations Act 2001
DCF Discounted Cash Flow
EBITDA Earnings before interest, tax, depreciation and amortisation
EDL Energy Developments Limited
EPC Engineering, procurement and construction
EV Enterprise Value
FSG Financial Services Guide
FYXX Financial year ended 30 June 20XX
GTAL Grant Thornton Australia Limited
GTCF, Grant Thornton, or Grant Thornton
Corporate Finance
Grant Thornton Corporate Finance Pty Ltd
GWh Gigawatt hour
Infratil Infratil Limited
Independent Adviser’s Report Report prepared by Northington Partners, issued on 17 September 2018
LGC Large-scale generation certificates
Mercury Mercury NZ Limited
MW Megawatt
MUFG MUFG Bank Ltd
MWg Megawatt hour
Northington Partners Independent Adviser/Expert
NAB National Australia Bank Limited
NSW New South Wales
NZ New Zealand
NZ$ New Zealand dollars
NZX New Zealand Stock Exchange
O&M Operating and maintenance
Offer Price NZ$2.30 per Tilt share
pa Per annum
PPA Power Purchase Agreement
Proposed Transaction
Takeover offer by whereby Infratil and Mercury, through their joint venture
seek to acquire all outstanding shares of Tilt
QLD Queensland
SA South Australia
TAMRP tax-adjusted market risk premium
TECT TECT Holdings Limited
Tilt or the Company Tilt Renewables Limited
TLT JV Unincorporated Joint venture between Infratil and Mercury
Trustpower Trustpower Limited
WACC Weighted Average Cost of Capital