Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — Merger or Acquisition (September 2005)
25 slides from Challenger's merger presentation, Sep 1, 2005
Slide 1: Challenger Infrastructure Fund: Acquisition of Inexus
«2 challenger Flranciat Services Group Challenger Infrastructure Fund Acquisition of Inexus 1 September 2005
Slide 2: Agenda
€ challenger Financial Services Group: . Summary . Inexus highlights . Funding and impact on CIF Bb GW NJ bS . Additional information
Slide 3: 1. Summary
Ail €3 challenger Financial Services Group 1. Summary
Slide 4: Consortium acquisition of 100% of Inexus for enterprise value of £465mm
challenger Financlal Services Group A CIF-led consortium has entered into an agreement for the purchase of 100% of Inexus Group (Holdings) Limited for an enterprise value of £465mm Consortium includes CIF (80%), Colonial First State (13%) and existing Inexus management (7%) Acquisition to be funded
Slide 5: Inexus is the largest independent gas transporter in the UK
challenger Financial Services Group: nexus is the largest Independent Gas Transporter (“IGT”) in the UK with 453,000 connections built and contracted e Designs, owns, operates, acquires and maintains gas and electricity networks _ 6 IGTs operate the last mile of distribution networks and focus on ne
Slide 6: Inexus meets all of CIF's investment criteria
© challenger Inexus meets al IF’s investmen criteria Revenue certainty until 2018 for 98% of revenue from current connections New connections benefit from a high degree of regulatory certainty until 2014 Market leader with 47% of existing connections * Yield accretive « Highly cash generative and mi
Slide 7: CIF portfolio composition
<2 challenger Financlal Services Group Classic utility assets 27.2% UK IGT Majority-owned Minority stake 53.6% 58.8% ABA The nd Broadeast North ON UK Browdoast Eesortial 182% 13.3% infrastructure: infrestructure 19.2% with growth 728%, Reliable cashflow Long tern contracted revanua 78% 1. £8 months
Slide 8: 2. Inexus highlights
€. challenger ‘Hinandal Services Group: 2. Inexus highlights
Slide 9: Quality essential infrastructure asset
a Quality essent rastructure asse « Twice the connections of nearest competitor @ 47% IGT market share and complete national coverage ¢ CIF has retained and incentivised existing management team 6 Management will invest £12.6mm in the business « Capex only committed after order book contracts have b
Slide 10: Inexus is the clear market leader in the UK IGT market
£2 challenger Financial Services Group Inexus is the clear market leader in the UK IGT market e 47% market share, nearly two fold its nearest competitor ~ e 453,000 connections built and contracted - 309,000 existing - 144,000 contracted nexus wGTC wBCGL Other e Nationwide coverage ¢ Highly diversif
Slide 11: Inexus' growth prospects are robust
2 challenger Financial Services Group Inexus’ growth p obust © 22% historic compound growth in connections * Stable forward order book, with 75% expected to be built in next three ear. e Gas built Electricity buitt mw Gas Contracted @ Clectricity Contracted 400 ; 150 126 90 30 20014 20024 20034 2004
Slide 12: Inexus' growth prospects are robust (cont'd)
Inexus’ growth robust (cont'd) Number of Dwellings a2 500,000 400,000 300,000 200,000 100,000 prospects are 5 @ 1946 1956 w Private Enterprise (Lecat Authorities 1966, 1976 1986 1996, 2006 @ Registered Social Landlords i Current Assumption | challeng er Financlat Services ns} Forecast UK new build h
Slide 13: Inexus' growth prospects are robust: electricity connections
43 Inexus’ growth pro €2 challenger Flnanclat Services Group ects are New business opportunity in electricity connections - Electricity sales twice that of gas business at same stage of development - Current market size estimated at 55,000 new connections p.a. Inexus is first to market with dual fue
Slide 14: Highly favourable regulatory regime
Highly favoural ble 14 £2 challenger Finsacial Services Group ulatory egime 98% of current gas revenues and 90% of contracted gas revenues are fixed in real terrns until 31 December 2018 (contracts signed prior to 1 January 2004) ~ Thereafter, the revenues migrate to Relative Price Control (“RPC”) a
Slide 15: Once built, connections are highly cash generative
€3 challenger Financlal Services Group Once built, conn ns are highly ash generative... « Excellent customer profile consisting of large UK gas shippers * Strong EBITDA margins of approx. 70% once built London energy li Powergen mScottish power mBritish Gas trading * Majority of the cost base is “Ot
Slide 16: Capex only committed after contract is secured
& challenger Financial Services Group . .. with capex only committed fter contra tis secured e Capex is discretionary and revenue driven ® Capex is only committed on an order once a contract is executed with the developer « The developer is typically responsible for excavation | e Completion rate ha
Slide 17: Aligned and highly experienced management team
£2 challenger Financial Services Group Aligned and hig xperienced management team e Majority of management team has been involved in the Group since start up, including Managing Director, Development Director and Asset Management Director e Management and staff will invest £12.6mm of their own money
Slide 18: 3. Consortium and CIF funding
€3 challenger Financial Services Group 3. Consortium and CIF funding
Slide 19: Acquisition funded through equity and debt
€3 challenger Financial Services Group * The Acquisition will be funded through a combination of equity and debt “« Consortium equity members include Colonial £25m and management £12.6m Senior debt 269 Payment to Vendor / 465 repayment of existing debt Subordinated debt —— “35 Cash Reserve 7 10 189
Slide 20: The acquisition will be funded via a combination of equity and debt
20 <3 challenger Financla! Services Group The acquisition will be funded via a combination of equity and debt CIF will contribute £152mm in equity, which it will initially fund via a bridge against its second instalment from CBA and Calyon and borrowings from Challenger CIF intends to undertake a 1:
Slide 21: CIF rights issue
CIF rights issue & challenger Financial Services Group Issue of approx. 60 million Class A Securities A$210 million fully paid Zi Lead Manager and Underwriter 1: 3 pro rata rights offer Fully underwritten by JPMorgan and sub-underwritten by Challenger Life Price of at least the IPO price of $3.50, f
Slide 22: Summary historical information
€2 challenger Finanelal Services. Group Summary hist nformation: (£ million) 2002A 2003A 2004A CAGR Revenue 15.6 19.2 22.9 21% EBITDA 9.8 13.6 16.2 29% EBITDA margin 63% 71% 71% Operating cash flow 8.7 17.0 21.2 56% Note: The summary numbers above have been prepared by Inexus management in accordanc
Slide 23: 4. Additional information
ee €2 challenger Financlal Services Group 4. Additional information
Slide 24: Inexus designs, constructs, owns and operates networks
€2 challenger Financial Services Group. « Inexus designs, constructs, acquires, owns, operates and maintains gas and electricity networks connecting new homes to gas and electricity systems throughout the UK Reguiated entities | Independent nes Linh Ae Networks: ORL) ip ‘Ownership oF ‘Ownership of M
Slide 25: Structure of transaction
€}2 challenger Flranclat Services Group Structure of tran * Majority ownership of Inexus via CIF2 « Post capital raising, fully diluted stapled securities (both Class A and Class 8) on issue of approx. 240mm * Class A securities represent approx. 62.5% 62.5% post capital raising 37.5% post capital r
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