1.In what situations would it be appropriate to increase the cost of debt and

the cost of equity by the "risk premium" as they have done?

2.Does the adjustment make sense? You can interpret this point quite broadly.

2.1.1 BUSII'IBSS as Usual The Business as Usual (BAU) scana Iio includes the uncertainty that investors and plant owners face regarding emissions radJction policy. The uncertainty arises because there is the View that a carbon mitigation policy may be introduced in the future. but the timing and extent of any policy are uncertain. There are two elements to the approach to modelling uncertainty. 1) Adjusting the weighted average cost of capital MAGG) fordi'ereht technology types A dlfferentWACC is applied to different technologies in recognition that more emissions-Intensive generators face greater investment risks than low embsions generators. Different generation technologies have a risk premium added to both the cost of debt and equity in proportion to the emissions intensity of the tech nclog y. Projects that are seen as greater risk (higher emitting generators) will likely have a smaller share of debt funding as compared to lower emittirlg generators. Some projects also have higher nance costs due to the market or project risks they face due to their sizeI complexity of technology or because they have a high proportion of upfront ca pital costs. For the BAU case the WAGS for different technologies are outlined in Table 3, Elemer'ts of the WAGG calculations were reviewed by the CEFC and ARENA. Table 3: Weighted cost 01 capital for dlerent technologies In the nu ceee Gene rumor Coal Gas CCGT Flenewahles Rlskvwmium Costof equity Cost of equity {including risk premium] MIA-lime wsccriguress-nawnarepre-rexamecaumrormsmn. Source: Reported the independent Review lute the Future Security at the National Electt'tclty Market. limestone mtttgatitm pelldee and seem-int ofelecu'iclty supply. p.22, 21 June 201