DUET Group : Multinet Credit Rating Update

ABN 99 108 013 672

AFS Licence No. 269286

ABN 15 108 014 062

AFS Licence No. 269287

ABN 22 120 456 573

Level 15, 55 Hunter Street

SYDNEY NSW 2000

GPO Box 5282

SYDNEY NSW 2001

AUSTRALIA

27 June 2013

Telephone +61 2 8224 2750

Facsimile +61 2 8224 2799

Internet www.duet.net.au

DUET Group (DUET) notes the attached press release issued today by Standard & Poor's Ratings Services (S&P) affirming Multinet Gas' BBB- investment grade credit rating with a change in the outlook from stable to negative.

DUET's Chief Financial Officer, Mr Jason Conroy, commented that "We are pleased that Multinet Gas' investment grade credit rating has been affirmed by S&P. DUET plans to actively manage both capital expenditure and operating costs over the medium term with the goal of returning Multinet Gas' credit rating outlook to stable."

For further information, please contact:

Investor Enquiries: Media Enquiries:

GM Operations and Investor Relations Public Affairs Manager

Tel: +61 2 8224 2727 Tel: +61 407 966 083

Email: n.kuys@duet.net.au Email: benw@coswaypr.com.au

SYDNEY (Standard & Poor's) June 27, 2013-Standard & Poor's Ratings Services said today that it has revised its outlook on Multinet Group Holdings Pty Ltd.'s financing arm Energy Partnership (Gas) Pty Ltd. (Multinet) to negative from stable, and affirmed the 'BBB-' issuer credit rating on the company.
The outlook revision reflects our view that the allowed return on capital and revised tariff path stemming from recent regulatory determination mean Multinet is less likely to improve its financial metrics to a level we consider is consistent with the rating over the next one-to-two years. While we expect Mulitnet's 100% shareholder, DUET (BBB-/Stable), to mitigate this impact through greater equity contributions over time, Multinet nevertheless has virtually no headroom to withstand any underperformance at the current rating level.
In March 2013, the Australian Energy Regulator (AER) released its final decision for Multinet. In addition to a return on capital of just 7.0%, the structure of tariff path is to result in negative adjustments to the tariffs until 2014, when the tariffs will revert to a CPI-plus-trajectory. In response, DUET has indicated it will provide equity contributions progressively over the next few years. Even so, this action is expected to result in Multinet's ratio of FFO to debt being about 6%, which is at the very bottom of our expected range for the rating.
The rating on Multinet reflects our opinion of the company's "excellent" business risk profile, which is based on high cash flow certainty and stability from Multinet's regulated natural-monopoly operations. Multinet's gas networks are subject to low operational risk, given the group's underground pipes are less exposed to weather damage than competitors' are. Partially offsetting these strengths are the company's weak financial metrics and exposure to weather-driven volumetric risk.
"The negative outlook reflects the group's continuing weak financial metrics over the next two years, that fall short of our previous expectations, notwithstanding the planned equity support," said credit analyst Andrew Choi. "There is minimal financial headroom to withstand any underperformance, with FFO to debt forecast at about 6% over the next two years."
The rating could be lowered by at least one notch if we believed Multinet would be unable to achieve FFO to debt of at least 6% over the medium term. This could occur if there is an unexpected decline in gas volume or if the planned level of equity support from the shareholder did not occur or was delayed.
"The outlook may be revised to stable in the next 12-to-18 months if Multinet can show it has built adequate buffer against our minimum expected financial metrics," said Mr. Choi. "Such buffer may be indicated by the company achieving FFO to debt of at least 6.5% and achieving the expected FFO interest cover of about 2x."

Media Contact:

Richard Noonan; richard.noonan@standardandpoors.com; 613 9631 2152

Credit analysts:

Andrew Choi; andrew.choi@standardandpoors.com
Richard Creed; richard.creed@stnadardandpoors.com
Standard & Poor's Ratings Services, part of McGraw-Hill Financial (NYSE:MHP), is the world's leading provider of independent credit risk research and benchmarks. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With
over 1,400 credit analysts in 23 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information and independent benchmarks that help to support the growth of transparent, liquid debt markets worldwide.
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

distributed by