9365206757

SGSP (Australia) Assets Pty Ltd

ABN 60126 327 624

Notes to the financial statements

For the year ended 31 December 2016 4 Critical accounting estimates and judgements (continued)

• JGN, JEN, ActewAGL and UED - Australian Energy Regulator ("AER") regulatory determinations and RAB multiples; and

• EGP and QGP - Capacity recontracting assumptions and associated contracted cash flow benefits.

6. Reasonably possible change in key assumptions

The recoverable amount for the following CGUs approximates their carrying value. Accordingly, any deterioration in the key assumptions would result in possible recoverabIe amount deficiencies.

• Zinfra - The market continues to be highly competitive and volatile which could impact revenue and EBITDA margin growth rates. The ability to malntain competitive margins as well as managing re-contracting risks for key customers remains a focus for the business.

• ActewAGL - The finał electricity decision appeal is yet to be handed down by The Australian Competition Tribunal (extension to 24 May 2017) and has multiple facets that could impact the rocoverable amount including but not limited to the value of tax imputation credits (gamma).

Management monitors these risks on an ongoing basis for any change in the assumptions supporting the forward profile of cash flows for these CGUs, including key elements of the discount ratę which can have a materiał impact on the recoverable amount.

(ii) Fair values in business combinations

Business combinations are accounted for using the purchase melhod of accounting. This method reąuires the application of fair va!ues for both the consideration given and the assets and liabilities acquired. The calculation of fair va!ues is often predicated on estimates and judgements including futurę cash flows, revenue streams and value in use cafculations. The determination of the fair vaiues may remain provisional for up to 12 months from the datę of acquisition due to the time necessarily required to obtain independent valuations of individual assets and to complete assessments of provisions.

(iii) Taxation

The tax expense and deferred tax balances assume certain tax outeomes and values of assets in relation to the application of the tax consolidation regime. These outeomes affect factors such as the quantification and utilisation of tax losses, Capital allowance deductions and the taxation treatment of transactions between members of the tax group.

The tax expense assumes that the tax group can carry forward and utilise income tax losses. In order to carry forward and utilise income tax losses and Capital losses, the tax group must satisfy either the "continuity of ownership test'¹ or "the same business test". Singapore Power International Pte Ltd ("SPl") divested 60% of its shareholding in the Company during the year ended 31 March 2014 resulting in failure of the "continuity of ownership test". As a result, the tax group is required to satisfy the "same business test" to carry forward, and subsequentty utilise, income tax losses and Capital losses. The tax group utilised all remaining income tax losses during the year ended 31 December 2015. However, the tax group continues to carry forward (unrecognised) Capital losses (refer notę 20) and will be required to satisfy the same business test in order to utilise these Capital losses.

The tax group has taken positions in relation to the income tax, Capital gains tax and other tax consequences of the acquisition by the Company of the ex-A(inta assets. This involves the exercise of judgements surrounding the calculation of tax bases for the tax group's assets and liabilities. Furthermore, the potential reversal of temporary differences also requires the use of estimates of futurę profitability, availability of taxable income on both revenue and Capital account and potential futurę changes in tax bases.

Assumptions are also madę about the application of income tax legislation. These assumptions are subject to risk and uncertainty and there is a possibility that changes in circumstances will alter expectations which may impact the amount of deferred tax assets and deferred tax liabilities in the balance sheet. In these circumstances, the carrying amount of deferred tax assets and deferred tax liabilities may change resulting in an impact on the earnings of the Group.