Technology drives competitive advantage in wind project development initiate with Buy EVENT OVERVIEW INVESTMENT VIEW. All figures are in AUD.

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1 WINDLAB LTD BUY Technology drives competitive advantage in wind project development initiate with Buy Utilities / Renewable Electricity 14 September 2017 INITIATION Ticker WND Stock Price $1.630 Target Price $2.88 Forecast Capital Return 76.7% Forecast Dividend Yield 0.0% Estimated Total Return - 12 Mth Forward 76.7% Company market data Market Cap. $109.6m Free Float (%) 61.2 Enterprise Value $85.2m 52 Week Range $ $1.92 Shares Out. 67.2m Avg. Daily Value Estimates changes $0.4m 2016a 2017e 2018e 2019e Core NPAT - new Core EPS dil. ( ) - new DPS ( ) - new All figures are in AUD unless otherwise specified. Share price performance Analyst Sean Kiriwan Windlab Ltd vs. AS51 (rebased index) sean.kiriwan@moelis.com EVENT We initiate coverage on Windlab (WND) with a BUY rating and a 12-mth forward target price of $2.88/share (implied est. 12-mth total return of +77%). OVERVIEW Established in 2003 to commercialise WindScape TM, a proprietary wind energy assessment technology developed by the CSIRO, WND is an integrated wind farm developer, owner and asset manager with assets in Australia, Africa and North America. WND s asset portfolio includes interests in existing operating assets that provide a recurring earnings base, as well as a portfolio of 48 development projects with a total potential capacity of 7,000MW. Of this, 9 projects with a combined capacity of 873MW hold development approvals and are expected to reach financial close over the next 3-4 years, delivering a mix of upfront development fees and ongoing asset management fees/equity distributions. INVESTMENT VIEW Supportive regulatory and market dynamics to drive demand for wind generation projects including international, national and state-based decarbonisation/renewable energy targets, as well as positive investment signals from high electricity and LGC prices and declining costs of generation. Competitive advantage from proprietary, wind energy assessment technology, Windscape TM, enables WND to continue to identify and develop high quality wind resources with optimal electricity generation and economic returns, potentially ahead of other competing projects. Integrated business model enables (i) value capture at key phases of the wind farm project lifecycle (ie. upfront development fee + ongoing asset management fees and equity distributions), and (ii) provides ability to retain ongoing equity interests for minimal capital outlay (if any) funded by revenue provided by upfront development margins. Experienced management team with proven track record who have completed the development of 1,033MW of operating capacity in Australia, South Africa and Canada. Strong FY17-FY18e EBITDA growth of 46% and 32% respectively, driven by the expected financial close of a no. of development projects, as well as a growing asset management and equity distributions earnings base. Trading at FY18e PE of 8.0x and EV/EBITDA of 4.4x, we view WND as very undervalued and expect stock price appreciation to be driven by material conversion of the pipeline and increases in recurring income. Y/E Dec a 2017e 2018e 2019e EBITDA EV/EBITDA 8.5x 5.8x 4.4x 2.9x Core NPAT Core EPS (Diluted) ( ) P/E 14.1x 11.7x 8.0x 5.3x EPS growth 323.7% 19.7% 46.0% 51.8% DPS ( ) Yield 0.0% 0.0% 0.0% 0.0% DPS growth Dividend Payout Ratio 0.0% 0.0% 0.0% 0.0% All figures are in AUD. MOELIS AUSTRALIA SECURITIES PTY LTD AFS LICENCE

2 Figure 1: Selected operating and late stage development projects EXECUTIVE SUMMARY We initiate coverage on Windlab (WND) with a BUY rating and a 12-month forward target price of $2.88/share, representing an estimated +77% total return over the next 12 months. Overview Established in 2003 to commercialise WindScape TM, a proprietary wind energy assessment technology developed by founders of WND at the CSIRO 1, WND is an integrated wind farm developer, owner and asset manager with assets in Australia, Africa and North America. WND s core business model is to identify and develop high quality wind energy projects utilising its extensive experience and proprietary wind energy assessment tools. Depending on the project, the company will either seek (i) a full exit from the project on or before financial close in exchange for a cash payment; or (ii) a partial cash payment and to retain an ongoing interest in the project and derive equity distributions once operational. WND also provides asset management services for both its own and third party wind farms. WND s geographically diverse portfolio includes interests in existing operating assets that provide a recurring earnings base that is expected to grow over time, as well as a portfolio of 48 development projects with a total potential capacity of over 7,000MW. Of this: Existing assets include 2 that are operating and provide ongoing payments in the form of equity distributions & royalties, with another under construction and due to commence operations 4Q CY17; and 9 projects with a total potential capacity of 873MW hold development approvals and are expected to reach financial close over the next 3-4 years, which will deliver a combination of upfront development/success fees and ongoing asset management fees/ equity distributions. Expected revenue stream Asset Location Stage Installed capacity (MW) Equity interest Attrib. capacity (MW) Develop. fee Asset mgmt. fee Equity distrib. Other Coonooer Bridge VIC Operating % 1 20 yrs 3.5% - West Coast One RSA Operating Royalty Ararat VIC Operating yrs - - Kiata VIC Construction % yrs 25.0% - Coopers Gap QLD Financing Success Kennedy Phase 1 QLD Financing % 29 Yes Yes Yes - Lakeland QLD Approvals % 100 Yes Yes Yes - Greenwich USA Financing % Success Msenge Emoyeni RSA Financing % 140 Yes Yes Yes - Iziduli Emoyeni RSA Financing % 82 Yes Yes Yes - Verdigre USA Approvals Success Ishwati Emoyeni RSA Financing % 140 Yes Yes Yes - Umsinde E. I & II RSA Financing % 280 Yes Yes Yes - Total 1, Source: Company, Moelis Analysis. Notes: denotes development fee that has already been received. Kennedy s 60.5MW capacity comprised of 43.5MW wind, 15MW solar photovoltaic, 2MW/4MWh battery storage. Umsinde Emoyeni comprised of Phase I and II and as such is considered as 2 projects. Coopers Gap achieved financial close during August 2017 with payment of the success fee expected in 4Q CY17. WND is actively focused on advancing its development projects, as well as asset management opportunities for both its own and third party renewable energy projects. 1 Commonwealth Scientific and Industrial Research Organisation 2

3 Figure 2: Growing Recurring Revenue Base - Moelis Pro Forma Revenue Estimates ($m) growing recurring revenue base 2017e 2018e 2019e Project revenue Asset management Equity interests Other Source: Moelis. Note: Under equity accounting rules, WND only records net profits from equity interests, not revenue Investment thesis Supportive regulatory and market dynamics expected to drive demand for wind generation projects. Key factors include international, national and state based decarbonisation policies/renewable energy targets (eg. Australian RET and South African IRP each require ~5,000MW additional renewable capacity by 2020 & 2030 respectively; QLD is targeting 50% renewable penetration from current 5%) + positive investment signals from high wholesale electricity and LGC prices and declining costs of renewable generation due to advances in technology (including storage), scale and manufacturing efficiencies. Proprietary, wind energy assessment technology delivers competitive advantage. WND is the sole owner of WindScape TM, a proprietary wind energy assessment tool which enables it to identify and develop high quality wind resources with optimal electricity generation and economic returns, providing a competitive advantage against competing projects. Integrated business model (i) enables value capture at key phases of the wind farm project lifecycle (ie. upfront development fee + ongoing asset management fees and equity distributions), and (ii) provides ability to retain ongoing equity interests for minimal capital outlay (if any) funded by revenue provided by upfront development margins. Experienced management team with proven track record of wind farm identification and development and have successfully completed the development of 1,033MW of operating capacity in Australia, South Africa and Canada, including its most recently constructed project, Coonooer Bridge, which achieved a capacity factor of 46% for the 12 months of operation ended 30 May 2017, the highest of any Australian wind farm. Strong FY17-18e EBITDA growth of 46% and 32% respectively, driven by the expected financial close of a number of development projects, as well as a growing, recurring earnings base from asset management contracts and equity distributions from operating wind farms. Valuation and share price target We set our 12 month target price at $2.88/share, which is based on our risked, sum of the parts valuation, rolled forward at the cost of equity, less any dividends forecast to be paid over the next 12 months. Key risks Development risks: inability to secure required approvals or PPAs at acceptable terms which could in turn impact ability to secure funding/reach financial close. Key operational risks: include wind resource, asset availability, network access, pricing risk and counterparty risk. Political & regulatory risks: changes to existing regulation or the introduction of new regulations in the jurisdictions WND operates in could impact WND s project interests. FX risks: currency risks from capital costs which are typically priced in USD or EUR and earnings translations from projects in South Africa and USA. 3

4 TABLE OF CONTENTS Executive Summary... 2 Mega-what? Key Terms Explained... 5 Company Snapshot... 6 Key Financials... 7 Valuation & Share Price Target Key Investment Opportunities Key Risks Appendix

5 Figure 3: High level summary of key black revenue drivers MEGA-WHAT? KEY TERMS EXPLAINED Operating power generation assets primarily derive revenue through the sale of: Electricity (referred to as black revenue); and where applicable, Environmental credits (referred to as green revenue) which are generated by participating in government run renewable and clean energy schemes. A summary of the key terminology is provided below via an illustrated example of the key drivers for the generation of black revenue. 2 Installed capacity (MW) Scheduled/ unscheduled downtime (availability) Electricity sold (MWh) Electricity produced (MWh) Loss factors Capacity factor (%) Market constraints Quality & availability of energy resource Technology efficiency Black revenue Received price ($/MWh) Capacity charge Contract Merchant Source: Moelis Analysis Installed capacity: The maximum output of power achievable from a power generator. Power: the rate at which (electrical) energy is produced (or consumed) per unit of time (eg. an hour). A unit of power is measured in watts. Megawatt: 1,000,000 watts. Typically used to quantify a power generator s installed capacity eg. 100MW. Capacity factor: The ratio of actual electrical energy output to potential output, over a given period of time. Impacted by a range of factors including scheduled or unscheduled downtime (turbine/wind farm infrastructure availability), quality & availability of wind resource and turbine technology efficiency Market constraints: include dispatch and load requirements - the amount of electrical energy required at a specific point in time (for scheduled generators). Energy: the capacity to do work. In the context of electricity, energy is a measure of the volume of electricity produced over a given period of time and can be measured in kilowatt-hours (kwh), megawatt-hours (MWh) or gigawatt-hours (GWh). Eg. a wind farm with a 100MW nameplate installed capacity, operating at a 45% capacity factor (based on a potential output of 24 hours a day for 365 days) will produce 394,200MWh over the period of one year. Loss factors: can include (i) energy loss during transport of electricity between power stations and customers due to electrical resistance and the heating of conductors and (ii) electricity used in process of generating electricity and in the operation and maintenance of all components of the power station. Contracted pricing: Arrangement whereby the counterparty agrees to purchase electricity (or environmental credits) produced at a fixed price (eg. PPA). Merchant pricing: Sale of electricity (or environmental credits) at prevailing market or spot price in a wholesale market (where a power generator is connected to the grid, eg. National Energy Market(NEM)). Capacity charge: Where applicable, an arrangement whereby the counterparty agrees to pay a fixed charge each period, based on the amount of generation capacity made available, irrespective of actual electricity usage during that period. (eg. capacity charge payable in the South West Interconnected System but not in the NEM). 2 Key drivers for green revenue broadly similar except typically no capacity charge applicable for environmental credits. 5

6 Figure 4: Summary of asset portfolio COMPANY SNAPSHOT Headquartered in Canberra, WND is an integrated wind farm developer, owner and asset manager with assets in Australia, Africa and North America. WND is the sole owner of WindScape TM, a proprietary wind energy assessment tool developed by the founders of WND at the CSIRO, that enables WND to efficiently identify and develop high quality wind resources in its target markets with considerably greater certainty, lower risk and optimal project economics. WND primarily generates income via (i) fees from the sale or part sale of projects prior to construction in the form of development margins or milestone-based success fees; (ii) asset management fees; and (iii) equity distributions or other commercial interests (eg. royalties) in operating assets. A summary of WND s key assets are provided in Figure 4 below Source: Company 6

7 KEY FINANCIALS Profit & Loss Our earnings estimates for WND are set out below: Figure 5: Moelis pro forma earnings estimates ($m) $m, year ending 31 Dec 2016a 2017e 2018e 2019e Revenue Project revenue (cash) Project revenue (non-cash) Asset management Other Equity interests Total Revenue Less: revenue from equity interests (0.6) (4.5) (11.5) Reported Revenue EBITDA Project (cash) Project (non-cash) Asset management Other Corporate (6.3) (6.3) (6.3) Equity accounted profits Operating EBITDA D&A (0.3) (0.3) (0.3) (0.3) EBIT Net finance costs (0.4) (0.6) (0.3) (0.2) Tax (1.6) (4.2) (5.2) (7.8) NPAT Source: Moelis estimates Notes: 1. Non-cash project revenue relates to fair value of carried interest recognised as gain on loss of control (based on % interest acquired) 2. Other includes royalties, consulting fees, expense reimbursement and government R&D grants It is noted that project revenue (eg. development margins, success fees) is recognised at financial close/divestment of a project and consists of: Cash consideration received; and/or Fair value of carried interest in project or subsequent milestone payments. Our FY17e revenue and EBITDA estimates of $23.1m and $14.7m are broadly in line with prospectus forecasts of $23.2m and $14.6m respectively. FY17 revenue includes expected receipt of cash payments for Moyeng ($4.2m received in April 2017), and Coopers Gap ($10.3m, reached financial close in August 2017) and Kennedy Phase 1 ($5.0m) reaching financial close (expected 4Q CY17) FY18-19 earnings growth driven by the following key assumptions: 100MW Lakeland achieving financial close in FY18 Two projects with a combined capacity of 222MW achieving financial close in FY19 FY19 includes option to purchase Greenwich from WND being exercised + receipt of success fee for Verdigre Commencement of new asset management contracts upon construction/operation of late stage projects 1/3 rd development margin received as cash with remainder 2/3 rd retained as equity interest unless otherwise indicated Our FY19 earnings estimates currently do not include the potential for Kennedy Phase II to achieve financial close in that period. Should that occur, it will result in a material uplift to earnings, given the potential scale (~1,200MW). 7

8 Figure 6: WND expected timing of key developments Source: Company Cash flow Key cash flow estimates for WND are summarised below: Figure 7: Moelis pro forma cash flow estimates ($m) Year Ending Dec 2016a 2017e 2018e 2019e Operating EBITDA Non-cash movements (8.1) (0.2) (13.7) (13.3) Net Interest (0.8) (0.6) (0.3) (0.2) Tax 0.0 (4.2) (5.2) (7.8) Change in WC 4.2 (2.0) 1.9 (2.6) Other (4.0) (0.0) 0.5 (0.0) Operating Cash Flow Capex (0.3) (0.2) (0.3) (0.4) Acquisitions Divestments Other 0.0 (0.2) (25.0) 0.0 Investing Cash Flow (0.3) (0.4) (25.3) (0.4) Equity Raised Dividends Paid Net Borrowings 6.7 (11.4) 0.0 (4.6) Other 0.0 (2.5) Financing Cash Flow (4.6) FX / Non Cash Items Change in Cash (22.6) 0.1 Source: Moelis estimates Strong operating cash flow generation expected in FY17 from receipt of cash payments for Coopers Gap ($10.3m), Kennedy Phase I ($5m) and Moyeng ($4m, received in April 2017) Financing cash flows in FY17e include $25m IPO and conversion of convertible notes inclusive of interest ($11.4m). IPO funds expected to be applied towards construction of Kennedy Phase I in FY18 Non-cash movements in FY18 and FY19 reflect assumed fair value of carried interests recognised as gain on loss of control for projects achieving financial close during the period 8

9 Balance Sheet An overview of WND s balance sheet is provided below Figure 8: Moelis pro forma balance sheet estimates ($m) Year Ending Dec 2016a 2017e 2018e 2019e Cash Inventory Current Receivables PPE Intangibles Other Total Assets Current Payables ST Debt LT Debt Provisions Other Total Liabilities Net Assets Equity & Reserves Retained Profits (7.5) Shareholders Equity Minorities Total Equity Source: Moelis estimates Cash decreases in FY18 to reflect $25m equity contribution towards construction of Kennedy Energy Park Phase I Inventory increases over forecast period to reflect capitalised development costs for specific projects. These capitalised costs are subsequently written off as direct costs (inventory realisation costs) upon disposal of the project interests. Increase in Other Assets reflect recognition of investments in associates based on assumed fair value of carried interest when a project reaches financial close 9

10 Figure 9: Risked SOTP valuation summary Component Project interests Source: Moelis estimates VALUATION & SHARE PRICE TARGET We initiate coverage on WND with a BUY rating and a 12-month forward target price of $2.88/share, representing an estimated +77% total return over the next 12 months. Our target price is based on our risked sum-of-the-parts (SOTP) valuation ($2.54/share), grown by the cost of equity, less any dividends forecast to be paid in the next 12 months. Method Risk weighting applied Risked valuation ($m) We highlight the following key assumptions and commentary in relation to our valuation approach: Capex of (AUD equivalent of) $ m/MW depending on a various factors including location (access, proximity to transmission), technology (wind, solar, battery) and scale. Capacity factors of 45% for wind component and 30% for solar component. We note The Coonooer Bridge wind farm achieved a capacity factor of 46% in the 12 months ended 30 May Management have indicated that they expect to achieve capacity factors exceeding 45% on many of its near term projects. We believe this is achievable given the quality of the wind resources identified by the WindScape technology, as well as the advances in wind farm technology (relative to older windfarms) eg. larger turbines, higher hub heights etc. Electricity & LGC prices as summarised below, which are largely based on base load futures prices by state, with long term prices escalated at CPI (Australia: 2.5%, South Africa: 6.0%). We note that apart from Coonooer Bridge (operating, 3.5% interest) and Kiata (under construction, expected start Q4 CY2017, 25% interest) projects in VIC, a significant proportion of the modelled projects are not estimated to start generating revenue until CY onwards, when our pricing assumptions are considerably lower than current spot prices / near term base load future prices. Notwithstanding this, our analysis suggests attractive returns are still able to be generated, partly due to the assumed quality of WND s portfolio. Figure 10: Pricing assumptions Attrib. capacity (MW) Key assets Operating & under construction DCF % Coonooer, Kiata Kennedy Phase I + Lakeland DCF 60-80% Kennedy Phase I, Lakeland Late stage RSA development DCF 35% Msenge, Iziduli, Ishwati, Umsinde 1&2 Kennedy Phase II DCF 15% ,200.0 Kennedy Phase II Identified LT pipeline Multiple na 9.7 3,866.5 Various Success fees DCF 50-90% 19.3 na Coopers Gap, Kennedy Phase I, Greenwich, Verdigre Asset management DCF % 22.0 na Coonooer, Kiata, Ararat + new developments Royalties DCF 100% 4.6 na West Coast One Corporate DCF 100% (39.9) na na Enterprise value ,845.9 Add: net cash 25.5 Less: minority interests (1.2) Equity valuation Equity valuation per share 2.54 A$/MWh, 31 Dec y/e 2017e 2018e 2019e 2020e LT (real) Electricity prices VIC QLD RSA (PPA, real) LGC Price Coonooer Bridge PPA (bundled, real) Source: Moelis. Note: It is assumed the Australian LRET scheme ceases post 2030, as per the current policy. 10

11 Opex of A$20/MWh (or equivalent of), escalated at CPI (Australia: 2.5%, South Africa: 6.0%). Opex assumptions include operations and maintenance costs (O&M) which are typically contracted under long term arrangements on a $/MWh basis. Our assumed opex of A$20/MWh aims to capture this, as well as an allowance for entire project lifecycle costs. Country specific WACC for our project interests DCF calculations. For Australian project cash flows we apply a post-tax WACC of 6.9% (Rf rate= 4.5%) and for South African project cash flows we apply a post-tax WACC of 9.3% (Rf rate = 8.5%). For the remaining DCF analysis, we apply a corporate level post-tax WACC of 8.6%. Project specific risk weightings between %. AUD:USD of 0.75, ZAR:AUD of For identified LT pipeline projects, a nominal value of A$2.5k/MW. We have also considered the valuation of Kennedy Phase II which has a potential capacity of 1,200MW of wind energy generation and additional solar generation and on-site storage. As discussed further below, WND has completed extensive studies and is expecting to submit an application for full development approval in late Further, the Queensland government has recently committed $150m to fund the $500m high voltage transmission line (subject to the completion of a feasibility study) which will connect projects in the region to the NEM. In addition, as part of its offtake agreement for Kennedy Phase I, the counterparty, QLD government-owned CS Energy, also has a first right of offer for Kennedy Phase II s production (electricity & LGCs). We view both these developments as a positive endorsement of the project (and region) by the QLD government and government-owned utility and consider it meaningful steps towards de-risking the development of the project. As such, we consider it appropriate to be included as part of our valuation range, with appropriate risk weightings. Corporate costs assume a level of overheads to support ongoing management and development of projects. If WND decided to focus on its existing portfolio and not pursue further development projects, we would expect this figure to be lower. Sensitivity Analysis A summary of the key sensitivities to our valuation range is provided below. Figure 11: Target price sensitivity to key risk weightings Late stage RSA dev. risk weighting (%) Source: Moelis Analysis. Kennedy Phase II risk weighting (%) 5.0% 10.0% 15.0% 20.0% 25.0% 25.0% % % % % Figure 12: Target price sensitivity to Australian received prices Australian LT electricity price ($/MWh) Australian LT LGC price ($/MWh) Source: Moelis Analysis. Note: Sensitivity analysis does not apply to Coonooer Bridge and West Coast One operations which are both locked into long term power purchase agreements. 11

12 Figure 13: Target price sensitivity to Australian projects cost of equity and debt Australian projects cost of equity (%) 10.0% 10.5% 11.0% 11.5% 12.0% Australian project cost of debt (%) 5.5% % % % % Source: Moelis Analysis. Note: Assumes 65% debt and 35% equity funding at project SPV level. Trading comparables In wind farm development, WND s key competitors to date have largely been private players. Passive equity investors, independent power producers and utilities typically acquire late stage development/ready for construction projects or windfarms that are already operational. Figure 14: Selected private wind farm developers Company Selected projects Capacity (MW) Location Wind Prospect / Hallett I, II, IV, V 350 SA Continental Wind Partners Snowtown I, II Boco Rock I SA NSW Mainstream Renewables Loeriesfontein 2 Noupoort Jeffrey s Bay Roaring 40s (Hydro Tasmania, China Light & Power) RES Wind Power Source: Bloomberg, Moelis. Musselroe Woolnorth I, II, III Waterloo Ararat Taralga Waubra Bald Hills Wonthaggi RSA RSA RSA TAS TAS SA VIC NSW VIC VIC VIC A summary of listed trading comparables of companies engaged in renewable energy development and generation is provided below. Figure 15: Trading comparables Company Mkt cap EV EV/EBITDA P/E A$m A$m 2018e 2019e 2018e 2019e Australia & NZ - Renewable Energy Generation Agl Energy 16,071 19, Origin Energy 13,657 21, Infigen Energy 735 1, Tilt Renewables Ltd 579 1, nm 0.6 Carnegie Clean Energy Ltd na na na na Genex Power Ltd na 6.9 na nm Average 5,204 7, Median 657 1, International - Renewable Energy Development/Generation Iberdrola Sa 65, , Brookfield Renewable Partner 13,789 34, nm nm Edp Renovaveis Sa 9,111 16, Acciona Sa 6,207 14, Northland Power Inc 4,225 11, Transalta Renewables Inc 3,750 4, Capital Power Corp 2,798 5, Terraform Power Inc - A 2,378 8, nm nm Boralex Inc -A 1,771 4, nm 43.1 Alterra Power Corp nm nm Average 10,970 21, Median 3,988 9, Source: Bloomberg 12

13 KEY INVESTMENT OPPORTUNITIES #1 Supportive regulatory and industry dynamics In our view, some of the key themes and drivers for WND include: Supportive regulatory policies & agreements in its key markets which will increase penetration of and demand for renewable energy generation. Attractive economics of renewable generation: Cost of renewable generation expected to continue to decline due to advances in technology (including storage), scale and manufacturing efficiencies. It is also noted current Australian spot prices suggest attractive returns for merchant exposure however we are mindful of the trade-off being price and tenor. Supportive regulatory environment at international and national level The increasing demand for renewable energy generation is being driven by, inter alia, various international and national regulatory policies & agreements. Australia Under the Paris Agreement, Australia has committed to an emissions reduction of 26-28% below 2005 levels by This will likely require a change to the current generation mix (given the emissions intensity of the electricity generation sector) and potentially some form of emissions reduction scheme or clean energy target (as suggested by the recent Finkel review) to replace the RET when it expires. Figure 16: Australia's emissions target and projections Source: IFN Investor Presentation (May 2017), Department of Environment and Energy, Australia s Emissions Projections According to the Clean Energy Regulator, the 33,000GWh (Australian) RET by 2020 will require approximately an additional ~5,000MW of renewable generation capacity to be committed between 2017 and Figure 17: Capacity required to meet LRET demand Source: Clean Energy Regulator, Tracking towards 2020: encouraging renewable energy in Australia (April 2017) 13

14 Whilst it is acknowledged that there are more than enough approved projects to meet the target, we note that projects with a higher quality wind resource and superior economics are more likely to secure funding and progress through to construction and operations. It is also noted a number of Australian States have independently proposed renewable energy targets which will encourage the development of renewable energy projects. Figure 18: Australian State / Territory renewable energy targets Source: TLT investor presentation Figure 19: Penetration of renewable energy by state Source: Clean Energy Australia Report 2016 As can be seen from the tables above, there is a large opportunity in Queensland given the current ~5% renewables penetration relative to the proposed 50% target. 14

15 WND currently has 3 QLD projects in its near term developments portfolio 460MW Coopers Gap (achieved financial close in August 2017 with success fee expected to be paid in 4Q CY17), as well as 58MW Kennedy Phase I and 100MW Lakelands, which it is targeting financial close in 2017 and 2018 respectively Further, as outlined above, the Queensland government released in June 2017 its Powering North Queensland Plan which includes a proposal to build a new 500km high voltage transmission line in the north of the state which will unlock 2,000MW of renewable energy projects including WND s 1,200MW Kennedy Phase II project. The Queensland Government has committed $150 million towards the construction of the transmission infrastructure, subject to completion of a feasibility study (expected over the next 6-12 months). South Africa South Africa s Integrated Resource Plan (IRP) is targeting 17,925MW of renewable energy generation capacity by Of this, 8,400MW is comprised of wind energy which has seen 3,357MW procured to date via the Renewable Independent Power Producer Procurement Program (REIPPPP). This suggests a further ~5,000MW of wind generation capacity will be required to achieve the target. Figure 20: South African renewable energy targets MW Total RE Onshore wind IRP Target by ,925 8,400 Ministerial Determinations 14,725 6,360 Procured 6,377 3,357 Operational 2,738 1,274 Source: Independent Power Producer Office (South Africa), November 2016 The IRP is currently being updated and it is understood that there is potential for increased allocations to some renewable sources given the increasing cost competitiveness in recent years (see further below). There have been 4 bidding rounds to date however 37 renewable energy projects including 12 wind farm developments from rounds 3 and 4 have been unable to reach financial close due to the Eskom halt. In August 2016, Eskom (South African national electricity utility) halted progress of the REIPPPP by refusing to sign new PPAs until the government agreed to give Eskom more control over electricity price negotiations during the auction process. WND s management are of the view that this halt is likely to remain until African National Congress party elections complete in December

16 Attractive economics of renewable generation The cost of renewable generation is expected to continue to decline due to advances in technology (including storage), scale and manufacturing efficiencies. Advances in wind turbine technology variable speed turbines, larger turbines, taller hub heights, larger rotor diameters and bigger generators Figure 21: Growth in the size and height of wind turbines Source: Company, International Energy Agency, Technology Roadmap: Wind energy, 2013 edition have enabled reductions in the cost of wind energy production partly due to the increased capacity factor which is expected to continue as illustrated below. Figure 22: Levelised cost of energy (LCOE) in Australia Source: Company, Bloomberg New Energy Finance. Note: The levelised cost of electricity is a measure of the average cost of producing electricity from a specific generating technology, representing the cost per MWh of building and operating a generating plant in order to breakeven over an assumed financial life 16

17 Current Australian spot prices suggest attractive returns available for producers with merchant exposure Figure 23: Annual volume weighted average wholesale spot prices ($/MWh) YTD QLD NSW VIC SA Source: Australian Energy Regulator Figure 24: Spot LGC prices, last 3 years ($/MWh) Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Source: Bloomberg 17

18 however, we are cognisant of the trade-off between price and tenor - contracting a higher proportion of a project s production via a long term PPA will typically enable a project to sustain a higher level of gearing, at a lower cost of debt (given the higher certainty of cash flows) however it also means reducing exposure to potentially favourable merchant conditions. Figure 25: Trade-off between price and tenor Source: Source: IFN investor presentation (May 2017) In South Africa, increasingly competitive renewable energy tariffs compared with average tariffs charged by the national electricity utility Eskom is also driving renewable energy development. Figure 26: Average Eskom price vs utility scale wind & solar PV tariffs Source: GreenCape, Renewable Energy Sector: Market Intelligence Report

19 #2 Diversified exposure to each phase of wind energy project lifecycle Brief history and business model WND was established in 2003 to commercialise WindScape, a proprietary wind energy assessment tool developed by the founders of the company at the Commonwealth Scientific and Industrial Research Organisation (CSIRO). WND initially produced and sold WindScape maps to third party developers however in 2005, management made a strategic decision to internalise the WindScape technology and utilise it solely for the benefit of WND and its partners. Between , WND operated as a pure play wind farm developer and generally sought a full exit from projects on or before financial close. Since 2012, WND has successfully transitioned to an integrated wind farm developer, owner and operator, with an asset portfolio that includes recurring revenues from asset management contracts and ownership and commercial interests in operating wind farms. The evolution of WND s business model is summarised below: Figure 27: Evolution of WND's business model 2003 Windlab established to commercialise WindScape Production and sale of WindScape maps to third party developers Pure play wind farm developer where entire equity stakes in project sold down on or before financial close (includes success fees from partnered projects) 2012-current Source: Company, Moelis Analysis Figure 28: Service offering over wind farm project lifecycle Integrated operator across full wind farm lifecycle with asset management contracts and ownership interests in operating wind farms As illustrated in Figure 28 below, WND operates across the full wind farm project lifecycle including site identification & acquisition, permitting, financing, commercial structuring, construction management and asset management of operating wind farms. Source: Company WND employs an end-to-end approach to wind farm development with the majority of activities performed in-house and some specialist tasks such as electrical connection to local electricity networks and environmental assessment studies performed by external contractors. 19

20 Figure 29: WND revenue streams Revenue stream Project revenue Asset management fees Equity & other commercial interests Source: Company, Moelis Analysis In our view, the key benefits of WND s integrated business model include: Diversified exposure to each stage of the wind farm project lifecycle enabling value to be captured at each stage (upfront development margin fee, ongoing asset management fees and equity distributions); Effective risk & capital management from continuity of project involvement throughout each stage; Revenue synergies from ability to offer ancillary services such as asset management; Avoidance of having to pay development premium when acquiring project from another developer; Ability to retain ongoing interest for minimal capital outlay (if any, see Figure 41, p28) Strong signal to incoming investors that project metrics are achievable; and Ability to incorporate operational experience and learnings into current and future projects. Revenue model WND key revenue streams and exposures are summarised below: Brief description & commentary Development fees One off payment from sale of equity interest in project at or prior to financial close. Since 2015, WND has achieved development margins of $270k-$490k/MW compared to the industry benchmark of $250k/MW 3. For selected projects, WND may elect to receive part of the development fee as equity interest in the project. Carried interests in recent projects range from 16-25% of total equity. Success fees Success fee usually typically negotiated on projects sold prior to financial close and are payable upon completion of certain development milestones. Historical success fees have ranged between $5k-$90k/MW depending on the underlying contractual arrangements and WND s ongoing involvement. Ongoing fee for provision of wind farm management services including construction management, electricity market operations, contract management, performance management, community engagement and back office services. Services provided to both WND s and third party projects. Ongoing equity distributions from profits generated by sale of electricity and environmental credits based on contracted or spot market pricing. Royalty payments typically based on % of revenue. Figure 30: Moelis Pro Forma Revenue Estimates growing recurring revenue base 2017e 2018e 2019e Project revenue Asset management Equity interests Other Source: Moelis. Under equity accounting rules, WND only records net profits from equity interests, not revenue 3 Bloomberg New Energy Finance 20

21 #3 Competitive advantage from proprietary wind energy assessment technology WindScape overview WND is the sole owner of WindScape, a proprietary, industry leading atmospheric wind modelling and wind energy analysis technology. WindScape was originally developed at the CSIRO by WND s co-founders Dr Nathan Steggel and Dr Keith Ayotte who continue to serve on WND s executive management team and have continued to enhance and expand its functionality in the past 15 years. WindScape comprises a suite of tools which are used for: Wind farm site prospecting: WindScape used to identify and rank all potential wind farm locations in a given area and selectively pursue the best project opportunities while avoiding costs of pursuing suboptimal projects; and Wind farm project design and optimisation: WindScape used to rapidly develop priority projects in a cost effective manner. WindScape s prospecting functionality works by: applying sophisticated computer models of the interaction between the atmosphere and topology of an area to publically available historical weather data (wind speed, wind direction, temperatures and humidity) collected by third parties (typically government organisations or meteorological agencies), using a high performance computer cluster that perform iterative calculations across hundreds of central processing units which are maintained at WND s headquarters in Canberra. This enables the generation of significantly higher resolution wind maps in a time and cost effective manner. The Appendix includes an illustration of how the Coonooer Bridge wind farm was found. Once a potential wind farm site is identified, WindScape is used to develop a site specific virtual wind farm which models the layout of a site including placement of turbines and associated infrastructure, at a desktop level. Figure 31: Example of a virtual wind farm at Coonooer Bridge, Victoria Source: Company 21

22 The WindScape advantage Figure 32 below summarises the key advantages WindScape provides in a typical wind farm development process. Figure 32: WindScape advantage in wind farm development process Dev. stage Key steps Considerations WindScape advantage Prospecting Identify potential sites or broad regions of high wind resource utilising wind maps Travel to region may be required to search for land formations which contribute to forming high wind speeds Acquisition Secure monitoring and land access rights from landholder(s) Validation Initial project feasibility assessment Install wind monitoring mast to collect weather data over a period of months or years, at one or select few locations Other preliminary studies include environmental, planning, infrastructure and market (offtake & pricing) Approvals & permitting Offtake & financing Source: Company, Moelis Analysis Solicit bids for supply of turbine and key infrastructure Execution of final leases with land owners Apply for all planning & environmental permits Assess, negotiate and conclude off-take agreements for sale of electricity and LGCs, as applicable Negotiate debt finance and equity sell down Industry standard maps typically have a relatively low resolution (3-10kms) and can miss key topographic features that accelerate wind to high average and consistent wind speeds that will deliver cost competitive electricity Prospecting activities and generation of high resolution maps can be time consuming and costly Stakeholder engagement Meteorological masts costly to install, requires land access and is speculative and opportunistic in nature Single point measurement rarely representative of wind resource across a prospective site, particularly when used over long distances, steep slopes or over strongly varying surface types Optimal turbine technology selection Environmental considerations Key planning & construction risks Optimising project yield and project layout WindScape generates broad area, high resolution maps (100 square metres or better) covering vast areas, enabling cost & time effective identification of areas that could ordinarily be hidden in lower resolution maps WindScape enables prioritising of funding and resources to highest quality sites Virtual wind farms generated by WindScape at the desktop level present valuable planning tool that assist with stakeholder engagement WindScape HDSM combines fine-scale info about how flow is altered by local terrain and surface type (water bodies, crops, tree etc.) with regional-scale models, to account for broad variations in wind climate Virtual wind farm (see above) helps identify any environmental, planning or construction risks early in the piece WindScape enables selection of optimal/most suitable turbine for local wind characteristics WindScape provides advantage for assessing optimal site capacity for PPA bid or equity return hurdles and other investment decisions 22

23 In our view, WND s experience and ability to utilise its proprietary WindScape technology provides the company with a distinct advantage and benefits including: Quicker site identification Optimal site selection Greater certainty on site potential prior to expending human and financial capital on traditional validation methods which facilitates: Reduced costs Reduced risk Reduced development time frame Improved engagement with key stakeholders; and Optimal financial returns for its projects. While it is acknowledged turbine efficiencies have been increasing over time as the technology improves, it is noted WND s Coonooer Bridge wind farm achieved a capacity factor of 46%, which was the highest of any wind farm in Australia in the twelve months ended 30 May Figure 33: Australian wind farm capacity factors, 12 months ended 30 May 2017 Source: Company, AEMO Competitive benchmarking WND also uses its WindScape technology to benchmark the competitiveness of its projects against existing and potential competing projects in its target markets. The price at which a wind project produces power is largely driven by: Wind speed, which has a cubic relationship with energy produced by a wind farm and is the key variable for determining electricity output from a given turbine; Capital costs, which are comparable between projects, other than the cost of grid connection. Grid connection cost is a function of a project s proximity to existing infrastructure, as well as the size of the project and the grid capacity at the point of connection; and Funding costs, at a project level, which are principally driven by the existence and quality of offtake contracts and are broadly comparable between competing projects. WND is able to assess the competitive position of its project by modelling the wind speeds of competing projects using its proprietary WindScape technology and estimating grid connection cost from publicly available data. 23

24 Validation of the technology WND s 15 year operating history has provided it with the opportunity to compare WindScape s estimates to the wind data collected on site by 50 meteorological masts erected and maintained across Australia, North America and Africa. This has enabled WND to continue to refine and enhance its WindScape technology. Figure 34: Example of comparison of WindScape output vs actual measurement Source: Company Further, an independent review by the UK Met Office in 2014 on the efficacy of WindScape as a wind energy site prospecting tool concluded that: WindScape was found to be an efficient and elegant solution, and may be considered to be state-of-the-art in commercial wind energy site prospecting ; and In their experience of global wind energy project developers site prospecting and selection, WND remains unique in retaining in-house exclusivity of modelling tools and expertise such as the WindScape system. 24

25 Figure 36: Key management team Name & Position #4 Experienced management team with proven track record project identification and development Over its 15 year operating history, WND has successfully completed the development of approximately 1,033MW of operating capacity across multiple jurisdictions. Figure 35: Completed projects Asset Main owner Location Stage Installed capacity (MW) Oaklands Hill AGL VIC Operating 67 Collgar UBS IIF, REST WA Operating 206 West Coast 1 GDF Suez, Investec RSA Operating 94 Amakhala Emoyeni Tata, Exxaro RSA Operating 134 Bull Creek Bluearth AB, Canada Operating 29 Coonooer Bridge Eurus Energy VIC Operating 20 Kiata John Laing VIC Construction 30 Coopers Gap AGL, PARF QLD Construction 453 Total 1,033 Source: Company, Moelis Analysis WND s management team has extensive wind energy development and operational expertise. Overview of experience Roger Price Executive Chairman and Chief Executive Officer Rob Fisher Chief Operating and Financial Officer Dr Nathan Steggel Co-Founder and Technical Director Dr Keith Ayotte Co-Founder and Chief Scientist Peter Venn Managing Director, Africa Source: Company 30 years experience across multinational and start-up companies in Australia and the USA Operational experience includes senior engineering, manufacturing and international business development roles across the telecommunications, transport and energy sectors Previously CEO of Reino International, an Australian venture backed start up providing innovative and technically advanced transport solutions to the global market Currently director of Audinate Group and a Partner and Director of Innovation Capital Chartered accountant with 15 years in senior finance roles with fast growing companies in Australia and internationally Experience includes project finance, capital raisings, M&A and international tax structuring Previous roles include Project Financial Controller with an ASX listed property developer Co-founder of Windlab and lead developer of WindScape with over 15 years wind industry experience Previously employed as a post-doctoral fellow at leading research institutions in the UK (EnFlo) and Australia (CSIRO s Wind Energy Research Unit) Co-founder of Windlab with over 30 years experience in the fields of meteorology, wind flow in complex terrain and computational fluid dynamics Previously employed at Environment Canada, NCAR and CSIRO 15 years of technology sales and commercial management experience Previously in charge of SAS Institute s energy sector in the Middle East, Africa & Asia Pacific 25