Powercor Australia LLC -- Moody's Disclosures on Credit Ratings of Powercor Australia LLC

Moody's current ratings on Powercor Australia LLC and its affiliates are:

BACKED Senior Unsecured (domestic currency) ratings of A3

BACKED Senior Unsecured MTN (domestic currency) ratings of (P)A3

Underlying Senior Unsecured (domestic currency) ratings of A3

Underlying Senior Unsecured MTN (domestic currency) ratings of (P)A3

RATINGS RATIONALE

The A3 rating of PALLC reflects the underlying credit strengths of PAL. PAL's key credit strengths are its low business risk, the predictable regulatory environment in which it operates, and the stable and predictable cash flows derived from its regulated electricity distribution network business. These strengths are tempered by the expected deterioration in its financial profile.

Over the next 3 years, PALLC's financial profile is expected to weaken from its strong position of recent past. Whilst higher average interest margin is expected to press the company's interest coverage level, impact to overall credit profile is tolerable due to the improving financial leverage position. Moody's expects PALLC's Funds from Operation (FFO) / Interest to moderate from around 3x to mid-2x level, while Debt to Regulated Asset Base (RAB) to improve to around 80% over the period. Moody's notes that PALLC's coverage ratios do not include customer contributions for customer-specific capital expansion works which, when included, would be supportive for its financial profile at the A3 rating level.

Peer Comps:

The T&D companies operate under consistent regulatory regimes and face similar business risks. As a result, their credit ratings are differentiated predominantly by their relative financial strengths. Compared with other rated Australian transmission and distribution (T&D) peers, such as ETSA Utilities, PALLC's interest coverage (excluding any customer contribution) and financial gearing (as measured by FFO/Debt) are notably weaker, albeit still at levels that are considered tolerable for its A3 rating. On the other hand, PALLC is expected to generate a higher portion of its earnings from regulated activities when compared to ETSA, which is supportive of its overall credit profile.

Rating Outlook

The outlook on the underlying A3 rating is stable and reflects PALLC's stable cash flow and Moody's expectation that its operating and financial profile will not experience any material change over the next 12-18 months.

What Could Change the Rating - Up

An upgrade could occur upon a better-than-expected improvement in its financial performance, leading to material de-leveraging of its financial profile. Financial metrics Moody's would look for include: FFO/Interest about 4 times, FFO/Debt about 20%, RCF/Debt about 15%, and Debt/RAB 60-70%.

What Could Change the Rating - Down

A downgrade could occur if the company experienced significant deterioration in its financial metrics on a sustained basis: FFO/Interest lower than 2.5-2.6 times, and Debt/RAB above 80-85%.

PALLC's underlying rating could come under downward pressure upon a material negative change in the credit profile of its shareholders. A possible scenario is the investment activities of the parents leading to an increased risk of higher cash flow demands on PALLC.

The principal methodology used in rating Powercor Australia LLC was Regulated Electric and Gas Networks published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

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Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Spencer NgAsst Vice President - Analyst Corporate Finance Group Moody's Investors Service Pty. Ltd. Level 10 1 O'Connell Street Sydney NSW 2000 Australia JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 Terry Fanous Managing Director Corporate Finance Group JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 Releasing Office: Moody's Investors Service Pty. Ltd. Level 10 1 O'Connell Street Sydney NSW 2000 Australia JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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