This presentation was presented at the masterclass session during 11th Energy Storage World Forum in 2018, Berlin. Financing energy storage - Masterclass by Macqurie focuses on energy markets changes and how they affect corporations: - Adoption of battery storage - Typical revenue streams - Frequency response - DUoS & TRIADs - Overlooking UK Capacity Market If you’d like to get a deep industry insights and learn in person from energy storage professionals, join our next masterclass at https://energystorageforum.com/register

1.  MACQUARIE 2018
Energy Storage World Forum
Berlin, 15th May 2018
Financing energy storage - Masterclass
Jim Lee
Puneet Sharma

2. Macquarie at a glance
All figures at 31 March 2018 throughout presentation, unless otherwise stated. Billions are rounded to the nearest whole number. 1. At 31 March 2018.
Global financial group
Headquartered and listed in Australia
Top 10 Australian company
~€22 billion market capitalisation
14,469 employees in 25 countries1
€309.9 billion assets under management1
Genuine expertise creates market leading
positions across five business groups
Diverse business mix
Outcome-focused culture
Opportunity for clients, communities and staff
Accountability for outcomes
Integrity in everything we do
49 years of unbroken profitability
26 years MBL S&P ‘A’ credit rating
Strong funding and capital position
Long-term orientation
2

3. 25 countries14,469 people in
Offices
Regional head offices
At 31 March 2018. Includes staff employed at MIRA-managed fund assets and assets MacCap has invested in.
Pie charts based on net operating income for the year ended 31 March 2018, excluding earnings on capital and other corporate items. 3
27%
of total income
People
2,598
Americas
Assets under management
€159.2 million
employing 29,000+ people
29%
of total income
People
1,766
Europe,
Middle East
and Africa
Assets under management
€57.4 billion
employing 40,000+ people
People
6,67733%
of total income
Australia and
New Zealand
Assets under management
€61.1 billion
employing 4,500+ people
11%
of total income
People
3,428
Asia
Assets under management
€32.3 billion
employing 40,000+ people
Global financial group

4. PAGE 4
Complexity – the latest technologies allow
businesses to produce, store, actively manage
and use energy more efficiently
 We make energy work harder for your business with bespoke
energy solutions
 We make the upfront investment to unlock long-term benefits for
your business
Opportunity – the best technologies give greater
certainty and control over energy costs, increase
resilience and cut carbon emissions
 By working with us you gain a trusted, expert partner and our
interest are aligned
Decentralisation of energy is creating the need for an energy partner to deliver
holistic solutions
Energy Markets: what is changing?
Traditional Centralised Energy Infrastructure
Large-Scale
Generation
21st Century Distributed Energy Infrastructure
Transmission Distribution
Consumer
Energy
efficiency
Rooftop
solar
Distributed
storage
Smart
grid
District
heat
Energy Infrastructure Transition
Impact on corporates A dedicated partner for your Energy Solutions
Low carbon
transport

5. PAGE 5
Adoption of battery storage
Factors for scalability of battery storage
Apparent Opportunity
• Battery cell prices continue to decline due to the uptake of electric vehicles
• Renewable energy is introducing intermittency onto the grid
• Transmission operators are reducing baseload thermal generation
• Overall power usage is flat or increasing, but price volatility has significantly increased
Battery Opportunities
• Front of the meter : Batteries connected directly to the grid operating for their account
• Colocation: Batteries located alongside existing renewables projects to increase absorption
• Behind the meter: Batteries connected on the site of an end user (domestic or non domestic)
Crystallising the Opportunities
• A battery which is installed behind the meter can generate value through several means:
• Reducing system maintenance costs
• Reducing system balancing costs
• Reducing energy costs for the end user and market participants

6. PAGE 6
Revenue
Stream
Revenue
Payer
Revenue
received by
Revenue
Proportion
(% p.a.)
Contract
Tenure
Pricing
Method
Unit Pricing Description
Frequency
Regulation
TSO
Demand
Aggregator
25%- 35%
Depends on
jurisdiction
Auction £ / MW
TSOs use batteries to track and respond to
grid frequency in order to maintain 50 /
60Hz,depending on the region. The payment is
made on an availability rather than utilisation
basis.
Avoided
transmissio
n costs
Energy
Supplier
Customer 25%-30% 12 mths
Usually
published
Annually
£ / kW
Regulators allocate the cost of grid
maintenance onto power users, some of this
can be offset by utilising batteries at the right
time.
Avoided
distribution
costs
Energy
Supplier
Customer 8% -12% 1 mth
Published
1-3 years
£ / MWh
DNOs allocate the cost of network
maintenance onto power users based on time
periods
Capacity
Market
Subject to
jurisdiction
Customer /
Aggregator
2%-4% 1 - 15 years Auction £ / kw / year
Mechanism to ensure long term reserve
capacity. Fixed contracts for a wide variety of
technologies.
Demand
Trading
Energy
Supplier
Customer 10%-30%
15 - 30
mins
Market £ / kWh Opportunistically buy/sell energy
Balancing
Mechanism
Energy
Supplier
Customer 0 – 30% < 30 mins Market £ / kWh
Opportunistically bid / offer energy to help
balance the grid
Typical revenue streams
Characteristics of each revenue stream

7. PAGE 7
 Frequency response is used by NG for real time
control of demand & supply
 Frequency response is split into two categories
1. Mandatory frequency response – for existing
generators
2. Commercial frequency response – consisting of
FFR & others
 At the moment, storage projects are only eligible to
participate in Commercial frequency response
projects
 Frequency Response (both Mandatory &
Commercial) can be subdivided into three main
types:
1. Primary response – from 10s to 30s following
loss of 0.8Hz
2. Secondary response – from 30s to 30m – loss
of 0.5Hz
3. High response – 10s onwards – decrease in
generation
Frequency Response
Frequency services are a significant part of the project revenues
Dynamic
Frequency
Response
(DFFR)
continuousl
y regulates
frequency
Static
Frequency
Response
(SFFR)
contains &
recovers
frequency
after a fault
DFFR SFFR
Type Pre-fault Post-fault
Operation Continuously responds to
small deviations
Only activated on
deviation from normal
range
Requirements - Response <2s
- Maintain for 30m
Primary: Full output in 10s,
sustain for 30s.
Secondary: Full output in
30s sustain for 30m.
Frequency Constant Approx. 8x–12x / year

8. PAGE 8
 NG uses “TRIADS” as a methodology to
calculate transmission charges
 DNOs have time based tariffs based on
demand on their system
 C&I consumers pay TNUoS & DUoS based
on their consumption pattern
 On-Site generation reduces electricity
import thereby reducing overall electricity
costs – including TNUoS & DUoS charges
 Additionally the battery provides peak-
shifting capability charging when prices are
low & discharging when high
DUoS & TRIADs
Storage reduces consumption – avoiding DUoS & TNUoS for consumers

9. PAGE 9
 Introduced to encourage investment in new
generation.
 15 year contract for new build (3 year
refurbished, 1 year existing)
 Under the Capacity Mechanism the plant is free
to provide other balancing services
 During the term of the contract the battery may
be called upon to provide capacity service –
giving a notice of 4hours
 The results of the 2016 T-4 Capacity Market
Auction are as follows:
— 3.2GW of storage projects were awarded a
capacity market contract
— The Aggregate Bidding Capacity is
52.42GW, 75.13% of the participants
received a capacity agreement for delivery in
2020/21
UK Capacity Market
UK CM will form a small part of the project revenues
Source: Aurora Energy Research

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11. Energy Solutions

12. PAGE 11
Introducing Green Investment Group
Among Europe’s
largest team
of green infrastructure
investors
38+
green infrastructure
investment
specialists
30+
structuring, technical,
asset management and
green reporting
specialists
Led over
£15bn
of investment into
UK green
infrastructure
Established
track record
Established
global brands
In-house operational,
technical and policy
expertise
Deep relationships
with infrastructure
focused investors
Strong relationships
with policy makers and
governments in UK
and internationally
…creating a clear market leader in green energy
investment

13. PAGE 12
Energy Solutions is an expert team specialising in developing, funding
and delivering distributed energy infrastructure
Energy Solutions
Keep energy assets off your balance
sheet, by investing through our
proprietary Energy Services Agreement
(ESA)
Deliver low cost, additional, green
energy corporate PPAs leveraging our
unique position in the value chain
Finance and install battery storage
and reduce peak time energy costs
through our proprietary PPA
Attributes Products
01
02
03
Ongoing monitor and report on the
green impacts of the measures you
take, drawing on pioneering methodology
End-to-end technical and funding
solution from project development to
construction
Flexible, tailored finance solutions to
meet your corporate objectives
Energy
Solutions
Making energy
work harder
for you

14. PAGE 13
Off balance sheet “pay as you save” funding solution
Our returns are directly linked to the energy savings achieved
Energy Services Agreement (ESA)
Plan
Deliver
Design
• Understand your energy needs and aspirations.
• Analyse energy data, walk sites & formulate a proposal.
• Engage key decision-makers & teams across the business.
• Finalise contracts & begin design & construction of project.
• Customer payments based on savings achieved.
• Measurement & verification of savings achieved.
• Investment Grade Audit to formalise the proposal.
• Agree legal heads of terms and commercial assumptions.
• Detailed ESA proposal, that we are prepared to stand behind.
Heating and cooling Lighting and services
Controls and systems Building envelope
Resilience and flexibility Power generation
The ESA offer Harnessing multiple technologies

15. PAGE 14
Businesses benefit from upfront savings and improved margins
How the ESA payment worksHow electricity is paid for today
How the ESA works for you
10,000,000
kWh/yr
consumed
Utility Company Billed
£1,000,000
paid to
Utility
Supplier
Paid at
10p/kWh
ESA Payment
5,000,000
kWh/yr
consumed
£500,000
paid
to Utility
Supplier
Paid at
10p/kWh
5,000,000
kWh/yr
saved
Paid
under ESA
Business see a
significant net
cost reduction
Paid at
discount
Customer Benefit
How the business benefits
 Savings over 15 years project life
 Cash flow and EBITDA benefits
from year one
 Off Balance Sheet services
agreement (IFRS 16 compliant)
 Full alignment between GIG
and Customer
Illustrative example only

16. PAGE 15
 Asset replacement,
risk transfer and
security of supply
 Gain a trusted partner
 A simple solution to
procure
Energy manager
ESA Benefits
 Positive P&L impact
without negative
balance sheet impact
 Retain capital to
invest in core
operations
 Reduce energy and
maintenance costs
 Accelerate the
savings
CFO
 Unlocks critical project
investment using third
party funding
 Increase the resilience
of facilities and
operations
CEO
 Better working
environment
Staff
 Accelerate reduction
in CO2 emissions
 Access our market-
leading green
certification and
reporting capability of
the Green Investment
Group
Environment

17. PAGE 16
Commercial structure
Off balance sheet funding for energy saving projects
ESA Structure
Installation, Operation and
Maintenance Agreement
Energy Services
Agreement
Independent verification of the
achieved energy savings for
benefit of finance and Host
Equipment Purchase Agreement
& Service Agreements
OEM & Subcontractors
Green SPV
Construction &
Operations (ESCO)
Measurement &
Verification
Host Site (Offtaker)
Finance (GIG)
Investment &
ownership
We will fund and own
the distributed
energy assets
We will enter into
contracts to design,
install, operate and
maintain the assets
We will guarantee
service levels and be
paid for energy
savings actually
delivered which will be
measured and verified

18. GridSecure

19. PAGE 18
What is GridSecure?
A turn-key battery solution where the benefits of storage are shared
We install a battery and
start to receive a Service
Payment
We trade the battery’s
capacity to maximise
cashflows
In year 7, the Service
Payment steps down
c.80%
Revenues Generated Revenues Shared
Net Customer Share
Net GridSecure Share
Service Payment
Off-site
Revenues
On-site Savings
What is the Service Payment?
The Service Payment covers:
- The fixed cost of operating
and maintaining the battery
- 7 year financing from
Macquarie
The cashflows cover
the Service Payment
and are then shared
From year 10, the
Customer keeps all
the cashflows

20. PAGE 19
Our Partners and Customers
Constant Power Consumers
Businesses which cannot easily adjust demand
during peak periods
The Key players
1
Material Energy Consumers
Sectors such as manufacturing, data centres, retail
2
3
Sensitivity to Power Outages
Businesses currently stuck with inefficient back-up
generation
Batteries can enable a business to shift demand
to off-peak periods
Batteries can make a big difference to the
bottom line
Batteries can provide rapid back-up power
during brown outs
GridSecure
GridSecure is a framework between Upside Energy, BYD and Macquarie.
Each party offers a margin reduction in exchange for a savings share.
1) The Service Payment becomes low and affordable for the Customer
2) The Customer and GridSecure both have equity in the project
3) Our trading activities will be transparent to the Customer
Targeted Customers

21. PAGE 20
Contract structure
End Customer
Installer
ManufacturerFunder Operator
Managed Services
Agreement
The contract structure is built around simplicity for the Customer
o The Customer signs:
i. Installation
Agreement
ii. Managed Services
Agreement.
o Managed Services
Agreement comprises
financing, procurement and
operation of the battery
o Installation Agreement
covers design and install of
the battery and external
maintenance (where
appropriate)
Key Roles
- Provision of
funding
- Billing and
Invoicing
- Revenue Share
Settlement
Key Roles
- Generation of 3rd
party revenue
streams
- Customer
interface
- Reporting and
Monitoring
Key Roles
- Delivery of
battery to site
- Commissioning
- Provision of
warranty
- Annual checks
- Battery Systems
maintenance
Key Roles
- Installation of
battery
- Civils work
- Commissioning
- External Civils
maintenance
Installation
Agreement

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