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ENERGY MARKET AUTHORITY Review of Vesting Contract Financial Parameters for the Period January 2019 to December 2020

DRAFT

10 September 2018

PA Regional Office:

PA Consulting Group

55 Cambridge Parkway, Suite 903

Cambridge, MA 02142

Tel: +1 617 225 2700

Fax: +1 617 225 2631

www.paconsulting.com

Version no: 1.0

Prepared by: PA Consulting Group

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This report is prepared for the EMA in connection with PA's review of the Vesting Contract price

parameters for 2019 and 2020. PA has prepared this report on the basis of information supplied by the

EMA, data which is available in the public domain and proprietary information. While PA has prepared

this report with all due care and diligence and has no reason to doubt the documentation and

information received, it has not independently verified the accuracy of the information and documents

provided to us by the EMA. This report does not constitute any form of commitment on the part of PA.

Except where otherwise indicated, the report speaks as at the date hereof.

Third party use

PA makes no representation or warranty, express or implied, to any third party as to the contents of

this report and its fitness for any particular purpose. Third parties reading and relying on the report do

so at their own risk; in no event shall PA be liable to a third party for any damages of any kind,

including but not limited to direct, indirect, general, special, incidental or consequential damages

arising out of any use of the information contained herein.

DISCLAIMER

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CONTENTS

DISCLAIMER 1

1 INTRODUCTION 3

2 DETERMINATION OF FINANCIAL PARAMETERS 4

2.1 Exchange Rates 4

2.2 Selection of Comparator Companies 4

2.3 Risk-Free Rate 5

2.4 Proportion of Debt to Total Assets 5

2.5 Debt Premium 6

2.6 Corporate Tax Rate 6

2.7 Equity Beta 6

2.8 Market Risk Premium 6

2.9 MAS Core Inflation 7

2.10 Weighted Average Cost of Capital 7

APPENDICES 8

A EXCHANGE RATES 9

B LONG-TERM SOVEREIGN CREDIT RATINGS 12

C COMPARATOR COMPANY DATA 13

C.1 Comparator Company Overview 13

C.2 Potential Comparators Considered against the Selection Criteria 14

C.3 Financial Data of Comparator Companies 15

D RISK-FREE RATE 16

E MOODY'S BOND INDEX INFORMATION 17

F SOVEREIGN BOND YIELDS 18

G MARKET RISK PREMIUM 19

G.1 Summary of Approaches 19

G.2 International Benchmarks 19

H SINGAPORE MAS CORE INFLATION 20

I WACC CALCULATION BREAKDOWN 21

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The Singapore Energy Market Authority (“EMA”) implemented vesting contracts in January 2004 to

mitigate the exercise of power by large market participants. The contracts remove the incentive to

withhold generation capacity in the wholesale market by committing generators to sell a specified

quantity of electricity at a certain rate. The price is set at the approximate long-run marginal cost of an

efficiently configured, hypothetical new market entrant; one that uses the most economic generation

technology in Singapore, currently a natural gas-fired combined-cycle turbine, and contributes to more

than 25% of system demand.

The parameters of the vesting contract are reviewed on a biannual basis and managed by the EMA.

PA Consulting Group (“PA”) has been engaged to review the contract’s financial parameters, used to

determine the Weighted Average Cost of Capital (“WACC”) for the new entrant. This is in turn used to

discount the cash flows of the project when determining the long-run marginal cost.

This report sets out PA’s analysis, findings and recommendations for the financial parameters to be

used in the setting of the vesting contract price, covering the period 1st January 2019 to 31st December

2020. A summary of findings is as follows:

Table 1 Overview of Financial Parameters

Financial Parameter Value Unit Section Ref.

Exchange Rate 1.32 USD/SGD 2.1

Exchange Rate 1.61 EUR/SGD 2.1

Exchange Rate 1.21 EUR/USD 2.1

Risk-Free Rate 2.86 % 2.3

Proportion of Debt to Total Assets 0.47 2.4

Debt Premium 2.64 % 2.5

Corporate Tax Rate 17.00 % 2.6

Equity Beta 1.00 2.7

Market Risk Premium 6.53 % 2.8

MAS Core Inflation 1.44 % 2.9

Post-Tax Nominal WACC 7.13 % 2.10

1 INTRODUCTION

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This Section provides the Financial Parameters as determined by PA as well as the analysis or

rationale behind each individual assessment.

To minimize the volatility in calculations, the following financial parameters have been averaged over a

three-month period, leading up to and including the base month of May 2018:

• Exchange rates denominated in foreign currencies to Singapore dollars

• Data used in the calculation of the debt premium

• Monetary Authority of Singapore ("MAS") core inflation data

• The risk-free rate.

2.1 Exchange Rates

The exchange rates used in the calculation of the vesting contract parameters have been sourced

from Bloomberg and calculated as the three-month average of the midpoint of bid and ask prices,

leading up to and including the base month of May 2018. The USD/SGD, EUR/SGD, and EUR/USD

rates are 1.324, 1.606, and 1.213, respectively. See Appendix A for further details.

2.2 Selection of Comparator Companies

Several of the financial parameters have been determined, in part, by using comparable companies

with a risk and structural profile deemed similar to that of the hypothetical market entrant. The

parameters informed by the comparator panel include the equity beta and proportion of debt to total

assets. In order to identify appropriate comparators, PA started with all publicly listed electric utilities,

multi-utilities, and independent power producers and renewable electricity producers stored in

Bloomberg's publicly traded company database.

Using the following criteria, the full list was reduced to a small number of suitable companies from

which the panel was chosen:

1. Availability of Data – Only companies with five years of publicly available data were considered.

This data is used in determining capital structure attributes and comes from publicly filed financial

statements which are GAAP and/or IFRS-compliant.

2. Financial Health – No company that had experienced adverse financial health in the past five

years was considered. This included any firm that had undergone a significant reorganization,

acquisition or bankruptcy; or that had experienced significant losses, or had problems covering

interest payments on debt. Additionally, any company with greater than a 10% 5-year probability

of default, a forward-looking metric based on Bloomberg's Default Risk Model, was eliminated

from our panel. Companies in poor financial health are likely to have a different capital structure

and risk profile than the hypothetical entrant.

3. Location of Business – A company’s equity beta and structure will be impacted by where it

operates. For a company to be considered, the majority of its revenues had to be generated in

countries with a similar risk profile to that of Singapore. Risk was judged to be represented by a

2 DETERMINATION OF FINANCIAL PARAMETERS

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country’s credit rating issued by either S&P, Moody’s, or Fitch.1 See Appendix B for further

details.

4. Source of Revenues – Only companies that earned the majority of their revenues through

unregulated power activities were considered. Revenues coming from regulated sales or

alternative lines of business such as the provision of natural gas are exposed to different risks

and not directly comparable to merchant generation.

5. Generation Type – Companies without a majority of thermal generation assets were not

considered. All power companies are subjected to the effects of weather, fuel price uncertainty,

and regulatory activity; however, those with a majority of thermal assets will be affected differently

than those with a majority of nuclear or renewable assets.

See Appendix C for a list of the final companies used in the comparator panel, including data on equity

betas and debt-to-total assets ratios.

2.3 Risk-Free Rate

The risk-free rate is the return an investor would earn on a ‘risk-free’ asset, commonly represented by

a sovereign treasury bill or bond issued by a country with a strong credit rating. In the WACC

calculation, it is used as the underlying rate upon which the debt and equity premium are based.

PA has calculated the risk-free rate from the three-month average of the daily yield on a Singapore

Government bond, leading up to and including the base month of May 2018.

A 30-year Singapore Government Bond (Issue Code NA12100N) issued in April 2012 and maturing in

April 2042 was used as a proxy for the ‘risk-free’ asset, with the remaining maturity of nearly 24 years

approximating the risk-free rate of an asset in Singapore with a 25-year useful life. The risk-free rate

was calculated to be 2.86%. See Appendix D for further details.

2.4 Proportion of Debt to Total Assets

The proportion of debt to total assets is an indicator of financial leverage, expressed as a company’s

total debt relative to the market value of its equity plus its debt. It influences the outcome of the

WACC calculation by placing a greater emphasis on either the cost of equity or cost of debt.

As a proxy for the capital structure of the hypothetical new entrant, PA has reviewed the median and

mean average (simple arithmetic mean) debt to equity ratios of the comparator companies. The

proportion of debt to total assets was calculated using the following formula:

E

D

E

Dassetstotaltodebtofproportion 1/

The median and mean capital structures for the panel companies over the past five fiscal years were

calculated to be 0.50 and 0.47, respectively. Utilizing the mean value, the proportion of debt to total

assets for the hypothetical market entrant is assessed to be 0.47. See Appendix C.3 for further details

on the comparator companies’ debt to total assets values over the five-year sample period.

1 Singapore receives the highest rating possible from all three agencies. For a country to be considered comparable, it must

have received similarly high ratings from at least two of the three. A similar credit rating has been taken as AAA – AA for S&P,

AAA – AA for Fitch, and Aaa – Aa2 for Moody’s. This list includes the United States, Canada, Australia and several European,

Middle Eastern, and Asian nations.

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2.5 Debt Premium

The debt premium is the return, over and above the risk-free rate, that a lender would require to invest

in a project or company. It is reflective of an investment’s perceived level of risk. As a means to

establish the premium, previous reviews have used the spread of a utility bond index against a

sovereign bond.2 To be consistent with previous determinations, PA selected the Baa Moody's Utility

Bond index as the appropriate benchmark. For the risk-free rate, a 30-year U.S. security was chosen,

as Moody’s Bond Indices contain instruments with as close as possible to 30-year maturities.

Taking the three-month average spread of the Baa Index against the US Government Bond results in

a debt premium of 1.51%. Upon review of feedback from market participants, it was determined that a

corporate bond-based debt premium did not fully reflect the borrowing conditions faced by generators

in Singapore. Consequently, PA surveyed an array of banks and lenders in the power market space to

determine an appropriate range for an all-in cost of debt for such a project. Considering both bank

feedback and the debt premium implied by corporate bond indices, a cost of debt of 5.5% has been

identified as an appropriately balanced all-in estimate for a generator in Singapore. This implies a debt

premium of 2.64%.

See Appendix E and F for details on Moody's Baa Bond Index and associated sovereign risk-free

rates.

2.6 Corporate Tax Rate

The corporate tax rate is set by the Singapore Ministry of Finance. It is currently 17.00% for 2018 and

the foreseeable future.

2.7 Equity Beta

Equity beta is a measure of an investment’s volatility with respect to stock market returns, where a

value of more than one equates to greater relative volatility. In coming to an initial determination on

the appropriate value, PA considered the five-year average equity betas, or “levered betas”, of the

comparator panel, leading up to and including the base month of May 2018.3

PA first considered the levered beta implied by the peer panel. To do so, the equity beta of each

comparator company was ‘unlevered’ according to the formula below and then relevered according to

the debt-to-equity ratio of the hypothetical market entrant (Section 2.4).

E

DTcequityasset 11/

The equity beta, based on the unlevered beta of the peer panel companies, relevered at a 47% debt-

to-total assets ratio (based on the mean debt-to-total assets of the comparator panel), was determined

to be 0.95. However, it is noted that generator returns would be expected to more closely correlate

with overall market returns in Singapore than in many other markets, given the lack of long-term

contracting in Singapore. Taking this into account, PA recommends that the value of equity beta be

set to 1.00.

See Appendix C.3 for further details on the initial equity beta calculation.

2.8 Market Risk Premium

Similar to the debt premium, the market risk premium is the return an investor would require, over and

above the risk-free rate, to purchase equity in a company or project. In coming to a determination, PA

2 The 2014 review employed empirical data from Singapore generators, among others, to adjust the benchmark-driven number.

3 Five-year equity betas were calculated using a weekly sample rate.

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has taken a broad view of several forward-looking approaches. This includes using the implied

premium in today’s Singapore stock market to determine a market risk premium specific to Singapore,

using a 2018 implied market risk premium as determined by Aswath Damodaran in his latest Equity

Risk Premium analysis, and observing recent local benchmarks used by regulators in comparable

regions.

Taking the mean of all data points, PA has determined the market risk premium to be 6.53%. See

Appendix G for further details.

2.9 MAS Core Inflation

A value for inflation is required to calculate the pre-tax real WACC included in Section 2.10. It has

been calculated based on three months of core inflationary data, as provided by the Monetary

Authority of Singapore (“MAS”), leading up to and including the base month of May 2018. Using this

method, the inflation figure was calculated to be 1.44%. See Appendix H for further details.

2.10 Weighted Average Cost of Capital

The above parameters have led to the resulting WACC calculations:

• The post-tax nominal WACC is 7.13%

• The pre-tax nominal WACC is 8.59%

• The pre-tax real WACC of 7.05%

See Appendix I for a complete step-by-step breakdown of the WACC calculation.

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A EXCHANGE RATES 9

B LONG-TERM SOVEREIGN CREDIT RATINGS 12

C COMPARATOR COMPANY DATA 13

C.1 Comparator Company Overview 13

C.2 Potential Comparators Considered against the Selection Criteria 14

C.3 Financial Data of Comparator Companies 15

D RISK-FREE RATE 16

E MOODY'S BOND INDEX INFORMATION 17

F SOVEREIGN BOND YIELDS 18

G MARKET RISK PREMIUM 19

G.1 Summary of Approaches 19

G.2 International Benchmarks 19

H SINGAPORE MAS CORE INFLATION 20

I WACC CALCULATION BREAKDOWN 21

APPENDICES

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Source: Bloomberg as of 06.14.2018

Daily USD / SGD Exchange Rate Mid Price For March-May 2018

Date Mid Date Mid

3/1/2018 1.32 4/17/2018 1.31

3/2/2018 1.32 4/18/2018 1.31

3/5/2018 1.32 4/19/2018 1.31

3/6/2018 1.32 4/20/2018 1.32

3/7/2018 1.31 4/23/2018 1.33

3/8/2018 1.32 4/24/2018 1.32

3/9/2018 1.32 4/25/2018 1.33

3/12/2018 1.31 4/26/2018 1.33

3/13/2018 1.31 4/27/2018 1.32

3/14/2018 1.31 4/30/2018 1.33

3/15/2018 1.31 5/1/2018 1.33

3/16/2018 1.32 5/2/2018 1.34

3/19/2018 1.32 5/3/2018 1.33

3/20/2018 1.32 5/4/2018 1.33

3/21/2018 1.31 5/7/2018 1.34

3/22/2018 1.32 5/8/2018 1.34

3/23/2018 1.32 5/9/2018 1.35

3/26/2018 1.31 5/10/2018 1.34

3/27/2018 1.31 5/11/2018 1.34

3/28/2018 1.31 5/14/2018 1.34

3/29/2018 1.31 5/15/2018 1.34

3/30/2018 1.31 5/16/2018 1.34

4/2/2018 1.31 5/17/2018 1.34

4/3/2018 1.31 5/18/2018 1.34

4/4/2018 1.31 5/21/2018 1.34

4/5/2018 1.32 5/22/2018 1.34

4/6/2018 1.32 5/23/2018 1.34

4/9/2018 1.31 5/24/2018 1.34

4/10/2018 1.31 5/25/2018 1.34

4/11/2018 1.31 5/28/2018 1.34

4/12/2018 1.31 5/29/2018 1.35

4/13/2018 1.31 5/30/2018 1.34

4/16/2018 1.31 5/31/2018 1.34

A EXCHANGE RATES

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Daily EUR / SGD Exchange Rate Mid Price For March-May 2018

Date Mid Date Mid

3/1/2018 1.62 4/17/2018 1.62

3/2/2018 1.63 4/18/2018 1.62

3/5/2018 1.63 4/19/2018 1.62

3/6/2018 1.63 4/20/2018 1.62

3/7/2018 1.63 4/23/2018 1.62

3/8/2018 1.62 4/24/2018 1.62

3/9/2018 1.62 4/25/2018 1.62

3/12/2018 1.62 4/26/2018 1.61

3/13/2018 1.63 4/27/2018 1.61

3/14/2018 1.62 4/30/2018 1.60

3/15/2018 1.62 5/1/2018 1.60

3/16/2018 1.62 5/2/2018 1.60

3/19/2018 1.62 5/3/2018 1.60

3/20/2018 1.61 5/4/2018 1.60

3/21/2018 1.62 5/7/2018 1.59

3/22/2018 1.62 5/8/2018 1.59

3/23/2018 1.62 5/9/2018 1.60

3/26/2018 1.63 5/10/2018 1.59

3/27/2018 1.62 5/11/2018 1.60

3/28/2018 1.62 5/14/2018 1.59

3/29/2018 1.61 5/15/2018 1.59

3/30/2018 1.62 5/16/2018 1.58

4/2/2018 1.61 5/17/2018 1.58

4/3/2018 1.61 5/18/2018 1.58

4/4/2018 1.61 5/21/2018 1.58

4/5/2018 1.61 5/22/2018 1.58

4/6/2018 1.62 5/23/2018 1.57

4/9/2018 1.62 5/24/2018 1.57

4/10/2018 1.62 5/25/2018 1.56

4/11/2018 1.62 5/28/2018 1.56

4/12/2018 1.62 5/29/2018 1.55

4/13/2018 1.62 5/30/2018 1.56

4/16/2018 1.62 5/31/2018 1.56

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Daily EUR / USD Exchange Rate Mid Price For March-May 2018

Date Mid Date Mid

3/1/2018 1.23 4/17/2018 1.24

3/2/2018 1.23 4/18/2018 1.24

3/5/2018 1.23 4/19/2018 1.23

3/6/2018 1.24 4/20/2018 1.23

3/7/2018 1.24 4/23/2018 1.22

3/8/2018 1.23 4/24/2018 1.22

3/9/2018 1.23 4/25/2018 1.22

3/12/2018 1.23 4/26/2018 1.21

3/13/2018 1.24 4/27/2018 1.21

3/14/2018 1.24 4/30/2018 1.21

3/15/2018 1.23 5/1/2018 1.20

3/16/2018 1.23 5/2/2018 1.20

3/19/2018 1.23 5/3/2018 1.20

3/20/2018 1.22 5/4/2018 1.20

3/21/2018 1.23 5/7/2018 1.19

3/22/2018 1.23 5/8/2018 1.19

3/23/2018 1.24 5/9/2018 1.19

3/26/2018 1.24 5/10/2018 1.19

3/27/2018 1.24 5/11/2018 1.19

3/28/2018 1.23 5/14/2018 1.19

3/29/2018 1.23 5/15/2018 1.18

3/30/2018 1.23 5/16/2018 1.18

4/2/2018 1.23 5/17/2018 1.18

4/3/2018 1.23 5/18/2018 1.18

4/4/2018 1.23 5/21/2018 1.18

4/5/2018 1.22 5/22/2018 1.18

4/6/2018 1.23 5/23/2018 1.17

4/9/2018 1.23 5/24/2018 1.17

4/10/2018 1.24 5/25/2018 1.17

4/11/2018 1.24 5/28/2018 1.16

4/12/2018 1.23 5/29/2018 1.15

4/13/2018 1.23 5/30/2018 1.17

4/16/2018 1.24 5/31/2018 1.17

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Fitch Moody's S&P

Australia AAA Aaa AAAu

Canada AAA Aaa AAA

Denmark AAA Aaa AAA

Germany AAA Aaa AAAu

Netherlands AAA Aaa AAAu

Sweden AAA Aaa AAAu

Norway AAA Aaa AAA

Singapore AAA Aaa AAAu

Switzerland AAA Aaa AAAu

United States AAA Aaa AA+u

Luxembourg AAA Aaa AAA

Finland AA+ Aa1 AA+

Austria AA+ Aa1 AA+

Hong Kong AA+ Aa2 AA+

France AA Aa2 AAu

New Zealand AA Aaa AA

United Kingdom AA Aa2 AAu

Kuwait AA Aa2 AA

South Korea AA- Aa2 AA

B LONG-TERM SOVEREIGN CREDIT RATINGS

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C.1 Comparator Company Overview

Capital Power Corporation (TSX:CPX)

Capital Power is a growth-oriented North American power producer headquartered in Edmonton,

Alberta. The Company develops, acquires, owns, and operates power generation facilities using a

variety of energy sources. Capital Power owns approximately 4,500 megawatts (MW) of power

generation capacity across North America. Approximately 1000 MW of owned generation capacity is

in advanced development in Alberta, North Dakota, and Illinois. The Company’s power generation

operations and assets are owned by Capital Power L.P. (CPLP) and Capital Power (US Holdings) Inc.,

both wholly owned subsidiaries of the Company.

Source: S&P Global

TransAlta Corp. (TSX:TA)

TransAlta is a power generation and wholesale marketing company focused on creating long-term

shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted

portfolio of assets in Canada, the United States and Australia. Its focus is to efficiently operate

facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years,

TransAlta has been a responsible operator and a proud contributor to the communities in which it

works and lives. TransAlta has been selected as one of Canada's Top 50 Socially Responsible

Companies since 2009 and is recognized globally for its leadership on sustainability and corporate

responsibility standards by FTSE4Good.

Source: S&P Global

SSE plc.

SSE plc engages in the generation, transmission, distribution, and supply of electricity. The company

operates through three segments: Wholesale, Networks, and Retail. It generates electricity from gas,

oil, coal, water, and wind. The company transmits and distributes electricity to approximately 3.7

million homes and businesses across the north of the central belt of Scotland and also central

southern England; owns and maintains 132 kilovolts (KV), 275kV, and 400kV electricity transmission

network; and manages 130,000 kilometers of overhead lines and underground cables, 106,000

substations, and approximately 100 subsea cables. It also produces, stores, distributes, and supplies

gas; and offers other energy-related services. In addition, it engages in electricity and utility

contracting, telecommunications, energy trading, insurance, and property holding businesses, as well

as provision of corporate and maintenance services. The company was formerly known as Scottish

and Southern Energy plc and changed its name to SSE plc in September 2011. SSE plc was

incorporated in 1989 and is based in Perth, the United Kingdom.

Source: S&P Global

C COMPARATOR COMPANY DATA

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C.2 Potential Comparators Considered against the Selection Criteria

Source: Bloomberg, S&P Global, 2017 Annual Reports and 10Ks

Capital Power Co. Transalta Corp. SSE plc. NextEra Energy NRG Energy

Brookfield

Renewable

Partners

Northland Power Atlantic Power Calpine Corp.

1. Availability of Data - Company must have publicly available data for reporting years 2013 through 2018

Pass Pass Pass Pass Pass Pass Pass Pass

Fail - Now privately

owned, delisted

from public

exchanges in Mar.

2018

2. Location of Business - The majority of the company's revenues should come from countries with a similar risk profile to Singapore

Pass Pass Pass Pass Pass Pass Pass Pass

3. Financial Health - Company must not have experienced adverse financial conditions in the past five years

Pass Pass Pass Pass Pass Pass Pass

Fail - Negative

earnings through

last five years;

eliminated dividend

in 2016

4. Generation Type - The majority of a company's generating assets should be thermal technology

Pass Pass Pass Pass Pass

Fail - Almost

entirely renewable

portfolio

Fail - Only 46% of

portfolio is thermal

generation

5. Source of Revenues - The majority of company's revenues should come from non-regulated generating activity

Pass Pass Pass

Fail - 70% of 2017

revenue came from

regulated generation

business (FPL)

Fail - Only 33% of

2017 revenue came

from power

generation business

Result of Selection Criteria

Passed all criteria

and selected to

form panel

Passed all criteria

and selected to

form panel

Passed all criteria

and selected to

form panel

Failed criteria 5 and

removed from panel

Failed criteria 5 and

removed from panel

Failed criteria 4

and removed from

panel

Failed criteria 4

and removed from

panel

Failed criteria 3

and removed from

panel

Failed criteria 1

and removed from

panel

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C.3 Financial Data of Comparator Companies

5y Avg

Debt/Assets5y Beta R

2 Effective

Tax Rate

Unlevered

Beta

3/31/20142

3/31/2015 3/31/2016 3/31/2017 3/31/2018

Capital Power Co. 0.37 0.34 0.36 0.36 0.42 0.37 0.85 0.20 15.0% 0.568

Transalta Corp. 0.56 0.52 0.50 0.48 0.45 0.50 1.29 0.21 15.0% 0.693

SSE 0.50 0.46 0.51 0.58 0.60 0.53 0.79 0.26 19.0% 0.409

5-year median debt-to-total assets 0.502 R2-weighted average unlevered Beta 0.55

5-year mean debt-to-total assets 0.468 Re-levered Beta (at 0.50 gearing) 0.95

1Values reflect average debt to total assets ratios for 12-month period ending on date displayed.

23-31 financial data reflects most recent available for May 2018 base month.

Debt to Total Assets Ratio1

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Date Mid Date Mid

3/1/2018 2.82 4/17/2018 2.81

3/2/2018 2.78 4/18/2018 2.77

3/5/2018 2.74 4/19/2018 2.80

3/6/2018 2.77 4/20/2018 2.84

3/7/2018 2.79 4/23/2018 2.88

3/8/2018 2.84 4/24/2018 2.82

3/9/2018 2.88 4/25/2018 2.87

3/12/2018 2.92 4/26/2018 2.92

3/13/2018 2.90 4/27/2018 2.90

3/14/2018 2.85 4/30/2018 2.88

3/15/2018 2.82 5/1/2018 2.88

3/16/2018 2.82 5/2/2018 2.92

3/19/2018 2.87 5/3/2018 2.92

3/20/2018 2.88 5/4/2018 2.91

3/21/2018 2.87 5/7/2018 2.93

3/22/2018 2.84 5/8/2018 2.95

3/23/2018 2.82 5/9/2018 2.97

3/26/2018 2.84 5/10/2018 2.93

3/27/2018 2.81 5/11/2018 2.88

3/28/2018 2.75 5/14/2018 2.88

3/29/2018 2.72 5/15/2018 2.94

3/30/2018 2.72 5/16/2018 2.94

4/2/2018 2.73 5/17/2018 2.98

4/3/2018 2.76 5/18/2018 2.97

4/4/2018 2.75 5/21/2018 2.98

4/5/2018 2.80 5/22/2018 2.98

4/6/2018 2.82 5/23/2018 2.95

4/9/2018 2.83 5/24/2018 2.96

4/10/2018 2.82 5/25/2018 2.97

4/11/2018 2.82 5/28/2018 2.96

4/12/2018 2.82 5/29/2018 2.96

4/13/2018 2.82 5/30/2018 2.90

4/16/2018 2.82 5/31/2018 2.91

Daily Yield on Singapore 30-Year Government Bond

(issued 4/2012, ID: EJ1043680)

D RISK-FREE RATE

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Moody's Baa Utility Bond Index for March - May 2018

Date Mid Date Mid

3/1/2018 4.41 4/17/2018 4.49

3/2/2018 4.46 4/18/2018 4.54

3/5/2018 4.48 4/19/2018 4.60

3/6/2018 4.53 4/20/2018 4.64

3/7/2018 4.54 4/23/2018 4.64

3/8/2018 4.52 4/24/2018 4.66

3/9/2018 4.55 4/25/2018 4.71

3/12/2018 4.53 4/26/2018 4.69

3/13/2018 4.52 4/27/2018 4.65

3/14/2018 4.48 4/30/2018 4.63

3/15/2018 4.51 5/1/2018 4.68

3/16/2018 4.52 5/2/2018 4.68

3/19/2018 4.53 5/3/2018 4.68

3/20/2018 4.57 5/4/2018 4.69

3/21/2018 4.60 5/7/2018 4.69

3/22/2018 4.55 5/8/2018 4.72

3/23/2018 4.57 5/9/2018 4.74

3/26/2018 4.58 5/10/2018 4.70

3/27/2018 4.53 5/11/2018 4.69

3/28/2018 4.52 5/14/2018 4.70

3/29/2018 4.48 5/15/2018 4.78

4/2/2018 4.49 5/16/2018 4.78

4/3/2018 4.53 5/17/2018 4.81

4/4/2018 4.54 5/18/2018 4.78

4/5/2018 4.59 5/21/2018 4.77

4/6/2018 4.53 5/22/2018 4.77

4/9/2018 4.53 5/23/2018 4.73

4/10/2018 4.52 5/24/2018 4.69

4/11/2018 4.51 5/25/2018 4.65

4/12/2018 4.54 5/29/2018 4.65

4/13/2018 4.53 5/30/2018 4.63

4/16/2018 4.52 5/31/2018 4.60

E MOODY'S BOND INDEX INFORMATION

DRAFT

18


Yield on 30-Year U.S. Government Bond for March - May 2018

Date Mid Date Mid

3/1/2018 3.08 4/17/2018 3.02

3/2/2018 3.14 4/18/2018 3.06

3/5/2018 3.15 4/19/2018 3.10

3/6/2018 3.15 4/20/2018 3.15

3/7/2018 3.15 4/23/2018 3.14

3/8/2018 3.12 4/24/2018 3.18

3/9/2018 3.16 4/25/2018 3.21

3/12/2018 3.13 4/26/2018 3.16

3/13/2018 3.10 4/27/2018 3.12

3/14/2018 3.06 4/30/2018 3.12

3/15/2018 3.06 5/1/2018 3.13

3/16/2018 3.08 5/2/2018 3.15

3/19/2018 3.09 5/3/2018 3.12

3/20/2018 3.13 5/4/2018 3.12

3/21/2018 3.12 5/7/2018 3.12

3/22/2018 3.06 5/8/2018 3.13

3/23/2018 3.06 5/9/2018 3.16

3/26/2018 3.09 5/10/2018 3.11

3/27/2018 3.03 5/11/2018 3.10

3/28/2018 3.02 5/14/2018 3.13

3/29/2018 2.97 5/15/2018 3.20

3/30/2018 2.97 5/16/2018 3.22

4/2/2018 2.96 5/17/2018 3.25

4/3/2018 3.01 5/18/2018 3.20

4/4/2018 3.04 5/21/2018 3.20

4/5/2018 3.07 5/22/2018 3.20

4/6/2018 3.02 5/23/2018 3.15

4/9/2018 3.01 5/24/2018 3.13

4/10/2018 3.02 5/25/2018 3.09

4/11/2018 3.00 5/28/2018 3.09

4/12/2018 3.04 5/29/2018 2.97

4/13/2018 3.03 5/30/2018 3.03

4/16/2018 3.02 5/31/2018 3.03

F SOVEREIGN BOND YIELDS

DRAFT

19

G.1 Summary of Approaches Approach Resulting Market Risk Premium

Dividend Growth Model 1 8.25%

Implied Market Risk Premium (Damodaran) 2 5.08%

Average of International Benchmarks (see G.2) 6.27%

Mean of approaches 6.53%

1 Source: Bloomberg - Country Risk Premium, March-May 2018

2 Source: Equity Risk Premium (ERP): Determinants, Estimation, and Implications - The 2018 Edition, pg. 87. Damodaran,

2018.

G.2 International Benchmarks Country Benchmark

New Zealand3 7.00%

Australia4 6.50%

United Kingdom5 5.30%

Average 6.27%

3 Source: April 2017 NZCC Cost of Capital Determination - EDBs and Airports

4 Source: AER - AusNet Services 2017-22 - Rate of Return Fact Sheet

5 Source: UK Regulators Network - Cost of Capital - June 2018 Update

G MARKET RISK PREMIUM

DRAFT

20

Month Days in Month Index Year on Year Growth

March 2018 31 103.94 1.52

April 2018 30 104.21 1.32

May 2018 31 104.22 1.49

Weighted Average 104.12 1.44

Source: Monetary Authority of Singapore - http://www.mas.gov.sg/statistics/other-statistics.aspx

H SINGAPORE MAS CORE INFLATION

DRAFT

21

Equity Beta Weighted Cost of Equity

(β) rf + (β x rm) CoE x (1-g) (WCoE) WCoE + WCoD

Risk-Free-Rate Weighted Cost of Debt

(rf) (WCoD)

CoD x g

Market Risk Premium

(rm)

Debt Premium

(DP) (DP + rf) x (1 - Tc)

Risk-Free-Rate WACC / (1 - Tc)

(rf)

Corporate Tax Rate

(Tc)

Cost of Equity

(CoE)

9.39%

((1 + WACC) /

(1 + MAS)) - 1

Nominal Post-Tax

WACC

7.13%

Real Pre-Tax

WACC

7.05%

2.64%

2.14%

17.00%

2.86%

MAS Core Inflation

53.15%

1.44%

Gearing Ratio

(g)

46.85%

Nominal Pre-Tax

WACC

8.59%

1.00 4.99%

2.86%

6.53%

Post-Tax Cost of Debt

(CoD)

4.57%

1- Gearing Ratio

(1-g)

I WACC CALCULATION BREAKDOWN

22

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