Building Value. Securing the Future.

ANNUAL REPORT 2015/16 STANWELL ANNUAL REPORT 2015/16 | CHAPTER TITLE A TABLE OF CONTENTS ABOUT About Stanwell Energy 1 Chairman’s statement 3 STANWELL Chief Executive Officer’s review 5 Performance indicators 8 Stanwell is a diversified energy business. Asset performance 9 We own coal, gas and water assets, which Strategic direction 10 we use to generate electricity. We sell this electricity directly to business customers and The year ahead 12 we trade gas, coal and electricity products. Sell our energy for the best return 16 Our coal, gas and hydro power stations are located Simplify and streamline our business 20 at eight geographically dispersed sites across and have the capacity to generate more Secure our future 22 than 4,000 megawatts (MW), or more than half of Corporate governance 26 Queensland’s average daily electricity demand. Financial results 35 The safe and efficient operation of our plant is paramount to Stanwell. Our belief is that our people, Directors’ report 36 contractors and visitors who enter our sites and offices should be able to do so with the knowledge Auditor’s independence declaration 43 they will return home safely to family and friends Financial statements 44 each day. Notes to the consolidated financial statements 52 We are a proud generator of environmentally- responsible energy. Through our portfolio of hydro Directors’ declaration 115 power stations, we have the capacity to generate more than 160 MW of electricity with no greenhouse Independent auditor’s report 116 gas emissions. We also operate two of Australia’s most efficient coal-fired power stations: the supercritical 443 MW Tarong North Power Station and the subcritical 1,460 MW . In the past year we have invested more than $200 million in capital projects to ensure the plant at our sites operates as efficiently as possible and meets statutory and environmental ABOUT compliance requirements. We own and have access to competitively-priced fuel, which has assisted our transformation to a THIS REPORT diversified energy company. In cases where it provides a better return, we sell our coal or gas to customers instead of using it to generate electricity. This report provides an overview of the major As at 30 June 2016, we employed 694 people at our initiatives and achievements of sites and offices (30 June 2015: 698). Limited (Stanwell) as well as the business’ financial and non-financial performance for the year ended OUR VALUES 30 June 2016. At Stanwell, we are: Each year, we document the nature and scope of our • Safe – Everyone is a safety leader. We seek to strategies, objectives and actions in our Statement achieve Zero Harm Today in all our workplaces. of Corporate Intent, which represents our performance agreement with our shareholding • Responsible – We are reliable, we are accountable Ministers. Our performance against our 2015/16 for our actions, we make a positive contribution to Statement of Corporate Intent is summarised on our community and we are here for the long term. pages 16 to 25. • Commercial – Every one of us contributes to Electronic versions of this and previous years’ annual Stanwell’s financial stability and performance reports are available online at www.stanwell.com. through our decisions and actions.

B STANWELL ANNUAL REPORT 2015/16 | CHAPTER TITLE ABOUT STANWELL ENERGY

Stanwell Energy is the retail brand of Stanwell Corporation Limited and sells electricity to commercial and industrial customers in Queensland, New South Wales, Victoria and the Australian Capital Territory. The business, which was launched in December 2014 to address market liquidity challenges, continues to grow its customer base. Our customers range from medium to large independent businesses to some of Australia’s biggest multinational companies. Our growth is driven by our ability to listen to our customers and to tailor innovative and competitively priced products which are supported by one of the largest electricity generation portfolios in Australia. We are proud of our high level of customer service and we continue to have an extremely high success rate in retaining our existing customers.

STANWELL ANNUALSTANWELL REPORT ANNUAL 2015/16 REPORT | 2015/16ABOUT STANWELL | CHAPTER ENERGY TITLE 1 ENERGY PORTFOLIO GENERATION ASSETS Generation assets Fuel assets ENERGY A. Stanwell Power Station, Central Queensland – Coal Coal 1,460 MW (coal) PORTFOLIOGas Gas B. Tarong power stations, Southern Queensland – 1,843 MW (coal) Hydro Water C. Swanbank E Power Station, South East Queensland – Office 385 MW (gas) D. , Central Queensland – 34 MW (diesel) E. , North West Queensland – 302 MW (gas) F. Kareeya Hydro, Far North Queensland – 86.4 MW (hydro) G. Barron Gorge Hydro, Far North Queensland – 66 MW (hydro) H. Koombooloomba Hydro, Far North Queensland – 7.3 MW (hydro) I. Wivenhoe Small Hydro, South East Queensland – 4.3 MW (hydro) COAL ASSETS CAIRNS J. Meandu Mine, Southern Queensland – long-term coal supply to G the Tarong power stations K. Kunioon coal resource, South Queensland – potential future fuel HN ENERGY PORTFOLIO supply for the Tarong power stations GENERATION ASSETS TULLY Generation assets Fuel assets L. Curragh North Mine, Central Queensland – long-term agreement F A. Stanwell Power Station, Central Queensland – Coal Coal with Wesfarmers Curragh which provides low-cost1,460 MW coal (coal) to Stanwell Power Station, and a revenue stream for coal exports Gas Gas B. Tarong power stations, Southern Queensland – M. 1,843 MW (coal) Hydro Water Mineral Development Licence 306, Central Queensland – coal MOUNT ISA resource located near the Curragh North MineC. Swanbank E Power Station, South East Queensland – Office 385 MW (gas) E MACKAY WATER ASSETS D. Mackay Gas Turbine, Central Queensland – 34 MW (diesel) D N. Koombooloomba Dam, Far North QueenslandE. Mica –Creek captures Power water Statio n, North West Queensland – for use at Koombooloomba Hydro and Kareeya302 MWHydro (gas) power stations F. Kareeya Hydro, Far North Queensland – 86.4 MW (hydro) G. Barron Gorge Hydro, Far North Queensland – 66 MW (hydro) M ROCKHAMPTON GAS ASSETS H. Koombooloomba Hydro, Far North Queensland – L O. Kogan North Joint Venture, South East Queensland7.3 MW (hydr –o) pr ovides A up to four petajoules per annum of gas to I.Swanbank Wivenhoe Small E Power Hydro , South East Queensland – Q Station via the Roma to Brisbane Gas Pipeline4.3 MW (hydro) P. Roma to Brisbane Gas Pipeline – contractedCOAL capacityASSETS of 52 CAIRNS terrajoules per day J. Meandu Mine, Southern Queensland – long-term coal supply to G the Tarong power stations Q. K Comet Ridge agreement, Central QueenslandK. Kunioon – option coal re tosource secu, reSouth Queensland – potential future fuel B J HN long-term gas or to exit agreement for an agreedsupply payment for the Taro tong power stations TULLY Stanwell of $20 million P I F L. Curragh North Mine, Central Queensland – long-term agreement BRISBANE with Wesfarmers Curragh which provides low-cost coal to O Stanwell Power Station, and a revenue stream for coal exports C M. Mineral Development Licence 306, Central Queensland – coal MOUNT ISA resource located near the Curragh North Mine E MACKAY WATER ASSETS D N. Koombooloomba Dam, Far North Queensland – captures water for use at Koombooloomba Hydro and Kareeya Hydro power stations GENERATION ASSETS COAL ASSETS WATER ASSETS M ROCKHAMPTON GAS ASSETS A. STANWELL POWER STATION, Central J. MEANDU MINE, Southern Queensland N. KOOMBOOLOOMBA DAM, Far North Queensland – 1,460 MW (coal) – long-term coal supply to the Tarong Queensland – captures water for use at L O. Kogan North Joint Venture, South East Queensland – provides Power Stations Koombooloomba Hydro and Kareeya A up to four petajoules per annum of gas to Swanbank E Power B. TARONG POWER STATIONS, Southern Hydro power stations Q Station via the Roma to Brisbane Gas Pipeline Queensland – 1,843 MW (coal) K. KUNIOON COAL RESOURCE, Southern P. Roma to Brisbane Gas Pipeline – contracted capacity of 52 Queensland – potential future fuel supply GAS ASSETS C. SWANBANK E POWER STATION, South East for the Tarong Power Stations terrajoules per day Queensland – 385 MW (gas) O. KOGAN NORTH JOINT VENTURE, South L. CURRAGH NORTH MINE, Central K Q. Comet Ridge agreement, Central Queensland – option to secure D. MACKAY GAS TURBINE, Central East Queensland – provides up to four Queensland – long-term agreement with petajoules per annum of gas to Swanbank E B J long-term gas or to exit agreement for an agreed payment to Queensland – 34 MW (diesel) Wesfarmers Curragh which provides Stanwell of $20 million Power Station via the Roma to Brisbane P I E. MICA CREEK POWER STATION, North West low-cost coal to Stanwell Power Station, Gas Pipeline BRISBANE Queensland – 218 MW (gas) and a revenue stream for coal exports O P. ROMA TO BRISBANE GAS PIPELINE F. KAREEYA HYDRO, Far North Queensland M. MINERAL DEVELOPMENT LICENCE 306, – contracted capacity of 52 terrajoules C – 88 MW (hydro) Central Queensland – coal resource located per day near the Curragh North Mine G. BARRON GORGE HYDRO, Far North Q. COMET RIDGE AGREEMENT, Central Queensland – 66 MW (hydro) Queensland – option to secure long-term H. KOOMBOOLOOMBA HYDRO, Far North gas or to exit agreement for an agreed Queensland – 7.3 MW (hydro) payment to Stanwell of $20 million I. WIVENHOE SMALL HYDRO, South East Queensland – 4.3 MW (hydro)

2 STANWELL ANNUAL REPORT 2015/16 | ENERGY PORTFOLIO CHAIRMAN’S STATEMENT

Stanwell has reported another The challenge for State and Federal strong financial result in Governments and for the energy 2015/16. This result reflects sector is to ensure that the transition to lower emissions technologies the value of work done over occurs in an economically viable way the past five years to adapt that allows Australian consumers to and streamline the business. continue to have access to an Excluding impairment reversals efficient, affordable and reliable the business has returned a supply of energy. Net Profit after Tax of $161.6 million The increasing role of renewables (2014/15: $125.9 million). As a result in the generation mix, coupled of this improved profitability and our with the take up of batteries, will strong balance sheet, Stanwell will fundamentally impact on Stanwell’s pay a total dividend to shareholders business. As intermittent renewable of $311.6 million (2014/15: generation accounts for an $89.9 million) which includes a increasing proportion of Australia’s special dividend of $150.0 million. energy mix, the most efficient and Our diversified revenue streams of flexible fossil fuel generators will play electricity, coal and gas sales, along an increasingly important role in with a disciplined approach to cost maintaining system security. Those management, have underpinned generators which fail to adapt to the this strong financial result. In addition, new electricity market dynamics will the commissioning of the Queensland quickly become obsolete. liquefied natural gas (LNG) Curtis As the owner of two of Island plant resulted in an increase Queensland’s largest coal-fired in wholesale electricity demand in power stations, Stanwell recognises the Queensland market of more these challenges and is taking than four per cent for the year. action to ensure the business This contributed to improved has a long-term future. wholesale electricity prices and higher generation. Further growth This year, the Stanwell Board along in demand from LNG operations is with leaders from throughout our expected to continue through to business developed a new 2018 before stabilising. We will use corporate strategy. Our strategy this time to further transform our seeks to balance the energy market business in terms of its cost base, objectives of reliability, sustainability its portfolio strategy and its role in and affordability while responding to the Australian electricity market. the rapidly changing market dynamics. Our focus will be on ENSURING A LONG-TERM responding to customer FUTURE FOR THE BUSINESS requirements by offering innovative The Australian electricity market is energy products, ensuring our going through a period of generation portfolio is flexible in unprecedented change. This is meeting changing demand and is being driven by the increased operated as efficiently as possible. development of low emissions We will also use our assets and generation, a change in the attitude trading skills to consider and behaviour of customers, and a participating in commercially viable shift in social and political values. renewable energy projects.

STANWELL ANNUAL REPORT 2015/16 | CHAIRMAN’S STATEMENT 3 CHAIRMAN’S STATEMENT (CONTINUED)

During the first half of 2016, Our injury performance, as Stanwell is well positioned for the the measured by our Total Recordable challenges it faces. It has high developed mandates for its energy Frequency Injury Rate, increased quality, high performing assets, businesses, which reflect the from 7.67 in 2014/15 to 10.11 in trading expertise and strong changing energy landscape and 2015/16. This result is disappointing financial credentials. Our track the needs of the market. As part and unacceptable. There have, record of successful business of this process, clear targets have however, been improvements in transformation will stand us in been established to increase our other areas of safety performance good stead as we work together returns to our shareholders, which including high priority areas such as to ensure the business thrives in will contribute to a reduction in falling objects, working at heights the energy market of the future; Government debt. We intend to and eye and lung protection. There a market which will be far more exceed these requirements. continues to be a strong personal competitive and challenging commitment to health and safety than the one we know today. While we will deliver on the more among the workforce, along with immediate targets for the business, a reporting culture that enables us we are mindful that the changes to learn from safety incidents. we make must also ensure its relevance and profitability over the ACKNOWLEDGEMENTS longer term. Enhancing revenue, I joined the Stanwell Board as Dr Ralph Craven optimising costs, and reviewing and Chairman in October 2015. In my Non-Executive Chairman challenging capital expenditure will short time with the business, I have all be key, ongoing areas of focus. had the privilege of visiting our sites OUR GOAL IS ZERO HARM TODAY and talking to the many dedicated and passionate people who make In November 2015, we were deeply Stanwell great. saddened by the tragic death of Grahame Meyer at the Tarong I thank my fellow Board members, North Power Station. The accident our Chief Executive Officer Richard had a devastating effect both within Van Breda, his highly committed Stanwell and in the local community leadership team and the hard in which Grahame lived. working people at our sites and offices. All these valued people Grahame’s death serves as a stark have contributed to the outstanding reminder that there is still work to operational and financial be done on our Zero Harm Today performance of the business. journey and we must remain focused on safety in everything we do. I acknowledge the support of our shareholding Ministers, the Minister for Main Roads, Road Safety and Ports and Minister for Energy, Biofuels and Water Supply, The Honourable Mark Bailey MP, and the Treasurer, Minister for Aboriginal and Torres Strait Islander Partnerships and Minister for Sport, The Honourable Curtis Pitt MP.

4 STANWELL ANNUAL REPORT 2015/16 | CHAIRMAN’S STATEMENT CHIEF EXECUTIVE OFFICER’S REVIEW

REMEMBERING We did achieve some significant GRAHAME MEYER safety milestones throughout the year. Our safety performance during On the morning of 29 November our extensive overhaul program 2015, I received the phone call that improved markedly and this was no Chief Executive Officer wants to reflected by the Tarong Power receive, informing me that a person Station Unit 2 overhaul being the working at Tarong North Power safest on record for that site. Our Station had been fatally injured. efforts to educate and inform our That person was Grahame Meyer. people about the impact of alcohol Grahame had been working at and other drugs have resulted in a Stanwell sites in the South Burnett dramatic reduction in people for a number of years, was a attending our sites unfit for duty. member of our South Burnett community and was well known to A number of safety initiatives including many of our people. the prevention of falling objects and eye and hand injuries have resulted in This was an extremely painful time a marked reduction in the number of for Grahame’s family and friends, injuries and will continue to be a focus our people who knew and worked in future years. with him and the wider South Burnett and Stanwell communities. STRONG FINANCIAL No words from me will change the PERFORMANCE events of that day but it is important that we remember Grahame by Excluding impairment reversals learning from the investigation Stanwell delivered a Net Profit which followed the accident, and by after Tax of $161.6 million for the putting actions in place to ensure year (2014/15: $125.9 million). that such a tragic event never This strong result will enable the occurs again. business to pay a total dividend to shareholders of $311.6 million OUR 2015/16 (2014/15: $89.9 million) which SAFETY PERFORMANCE includes a special dividend of $150.0 million. Our 2015/16 safety performance as measured by the Total Recordable The profitability of our generation Injury Frequency Rate (TRIFR) of business was underpinned by a 10.11 did not meet our target of 7.67, range of factors including a well which we achieved in 2014/15. This balanced trading strategy supported is disappointing given the focus and by increased generation from our effort in ensuring that our people are reliable plant, particularly during the safe and reflects the continued focus peak and volatile summer period. we need to have on safety. Continued access to competitive fuel sources provides Stanwell with the flexibility to switch between generation fuels to maximise value, by either using fuel to generate electricity or selling it in the commodity markets.

STANWELL ANNUAL REPORT 2015/16 | CHIEF EXECUTIVE OFFICER’S REVIEW 5 CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)

In addition, a continuing reduction in Our Stanwell Energy brand A vast amount of work has costs, which we have delivered continues to go from strength to been undertaken to streamline year-on-year for the past five years strength. Our retail business allows the number of information as part of our focus on responsible us to contract our generation in technology systems across the cost management, has significantly times when there is limited interest business. This includes a new contributed to improved profitability from retailers in hedging directly Enterprise Resource Planning at a time when being agile and lean with generators. Our retail book system which will reduce the are keys to ongoing success. contains large and medium energy reliance on older systems and users throughout Queensland, deliver more cost efficient outcomes STRATEGY ACHIEVEMENTS New South Wales, Victoria and the across the business. Our corporate strategy for 2015/16 Australian Capital Territory. was based on three themes: SECURE OUR FUTURE SIMPLIFY AND STREAMLINE This year, we successfully certified SELL OUR ENERGY FOR THE OUR BUSINESS six out of seven new enterprise BEST RETURN After more than 60 years of agreements covering our sites and Stanwell invested a record operation, Mica Creek Power offices. For the remaining enterprise $203.3 million in capital projects Station ceased generation on agreement, we reached agreement during the year to ensure our plant 29 February 2016 following the with employees and received and equipment operates as closure of MMG’s Century Mine. certification from the Fair Work efficiently as possible when it is All units have been placed into Commission in late July 2016. required to do so. More than half of cold storage until mid-2017, when These new, simplified agreements this capital expenditure was MMG is forecast to commence are important in providing certainty invested in an unprecedented the commissioning of its Dugald to employees and the business. overhaul of four units at the Tarong River Project. The surface rights extension project and Stanwell power stations. Our decision two years ago to at Meandu Mine gained a significant In February 2016 Tarong Power consolidate facility management, number of regulatory approvals Station’s Unit 2 was returned to overhaul, asset and maintenance throughout the year and we are service after it was placed into cold management services under a aiming to commence mining storage in late 2012. The return to single contractor, UGL Limited, will operations in 2017. Having access to service of Unit 2 saw all five units at deliver benefits through improved lower cost coal in a 130 hectare area the Tarong site available for the first safety, innovation and cost to the east of the current mining area time in more than three years. efficiencies. The transition to this will assist the Tarong Power Stations alliance relationship has not been to become more cost efficient and During the Tarong North overhaul without its challenges but the sustain operations in an increasingly we also took the opportunity to relationship is starting to provide competitive market. replace the rotor and high pressure measurable improvements. turbine, which were damaged in 2014, along with an upgrade to the control system. Having Tarong North fully available is vital to our wider generation portfolio as it is Australia’s most efficient super critical coal-fired power station. Stanwell Power Station’s Unit 1 was taken offline in October 2015 for its statutory overhaul after a world record 1,087 continuous days of operation.

6 STANWELL ANNUAL REPORT 2015/16 | CHIEF EXECUTIVE OFFICER’S REVIEW In July 2014, Stanwell identified Stanwell is preparing for a decade Finally, I thank our people and an increase in saline water levels of change. For an energy business contractors for the hard work and in Meandu Mine’s drainage system, to survive in the future, it will need commitment they have given to the which exceeded the site’s to offer customers innovative business during the past year. I look Environmental Authority. products, operate a flexible forward to the year ahead when our Stanwell received a penalty generation portfolio to respond to people will play a central role in infringement notice from the market demand and be involved in transforming the business so that it environmental regulator as a result renewable energy projects. will continue to prosper in the future. and has implemented a range of actions to understand, monitor and SPECIAL THANKS manage this long-term issue. I wish to thank Stanwell’s Non-Executive Chairman, Dr Ralph Operating our sites within all Craven, and the Board of Directors environmental regulations is what for their support in overseeing the Richard Van Breda our neighbours, wider communities business over the past year and Chief Executive Officer and the environmental regulator preparing it for the inevitable have come to expect from Stanwell. challenges it faces in the future. In order to meet these expectations, I would also like to acknowledge we need to refocus our efforts in the the support of Shane Charles as year ahead to ensure we continue Chairman between July and to maintain our environmental and September 2015. social right to operate. In my role as Chief Executive WELL PLACED FOR THE FUTURE Officer, I am ably supported by an Over the past year, our people have experienced executive leadership worked together to reposition the team, which continues to seek business in the radically changing improvements across all aspects energy industry. A diversifying of the business. energy mix, led by an increase in I thank our shareholding renewables and technology Ministers for their continued innovations such as battery storage, support in working closely with will challenge the traditional the business on key initiatives and electricity generation model. projects. I also acknowledge the For energy companies with large support of our communities which coal-fired generators, such as is vital in maintaining our social Stanwell, the next decade right to operate. undoubtedly will be demanding but also rewarding.

STANWELL ANNUAL REPORT 2015/16 | CHIEF EXECUTIVE OFFICER’S REVIEW 7 PERFORMANCE INDICATORS

2015/16 2015/16 2014/15 ACTUAL TARGET ACTUAL Safety and environment performance Lost time injury frequency rate1 1.44 <2.56 2.56 Total recordable injury frequency rate2 10.11 <7.67 7.67 Notifiable safety incidents 20 0 16 Environmental enforcement actions3 1 0 0 Values interactions4 14,966 >7,000 11,240

Financial performance Earnings before interest and tax (EBIT) ($Million) 300.4 3 07.6 419.3 Net profit after tax – generation ($Million) 126.9 106.3 209.4 Net profit after tax ($Million) 170.2 157.7 254.9 Return on operating assets (%) 10.4 11.4 15.2 Return on equity (%) 12.9 11.9 18.4 Gearing (%) 35.0 29.8 30.1 Investment Capital expenditure ($Million)5 203.3 226.5 138.8 Operational performance NEM generators Availability (%) 89.1 >89.8 90.0 Forced outage factor (%) 1.9 <3.4 1.0

Notes to the key performance indicators 1. Lost time injury frequency rate (LTIFR) Number of lost time injuries in the period/number of hours worked in the period, multiplied by 1,000,000. Figures are based on a 12-month moving average and include employees, contractors and third party sites. 2. Total recordable injury frequency rate (TRIFR) Recordable injuries in the period/number of hours worked in the period, multiplied by 1,000,000. Figures are based on a 12-month moving average. TRIFR is a combination of lost time and medical treatment injuries. This includes employees, contractors and third party sites. 3. Environmental enforcement action An environmental regulator issuing an infringement notice, an environmental protection order, a program notice, a notice requiring the preparation and submission of a draft environmental management program, or the institution of any court proceedings. Environmental Impact Assessment processes are excluded from this definition. 4. Values interaction A conversation or interaction with a workmate about the safe, responsible or commercial behaviours that impact how we operate at Stanwell. 5. Capital expenditure Expenditure on capital projects.

8 STANWELL ANNUAL REPORT 2015/16 | PERFORMANCE INDICATORS ASSET PERFORMANCE

ENERGY SENT CAPACITY TARGETED AVAILABILITY PLANNED1 FORCED YEAR OUT (GWh) FACTOR (%) AVAILABILITY (%) OUTAGE OUTAGE (%) FACTOR (%) FACTOR (%)

Tarong Power Stations – coal – 1,843 MW 2015/16 9,659 71.6 88.0 83.6 14.3 2.1 2014/15 7,023 58.2 87.7 82.5 16.0 1.5

Stanwell Power Station – coal – 1,460 MW 2015/16 8,409 70.9 92.7 95.5 3.0 1.5 2014/15 8,072 68.3 92.9 96.9 2.7 0.4

Swanbank E Power Station – gas – 385 MW 2015/16 0 0 0 0 0 0 2014/15 938 69.1 86.3 89.4 8.4 2.2

Hydros – water – 163.7 MW 2015/16 419 29.3 86.5 92.0 7.6 0.4 2014/15 631 45.3 89.7 94.4 5.3 0.3

Mica Creek Power Station – gas – 218 MW 2015/16 191 18.0 93.1 85.6 8.4 6.0 2014/15 619 33.6 90.3 85.6 7.5 6.9

1 Includes planned and maintenance outage factors.

Asset performance calculations take into consideration the cold storage of Unit 2 at for 2014/15 and seven months of 2015/16. Unit 2 was returned to service in February 2016. Swanbank E calculations take into account the cold storage of the power station on 1 December 2014, while Mica Creek calculations take into consideration the withdrawal of generation units that are no longer required.

STANWELL ANNUAL REPORT 2015/16 | ASSET PERFORMANCE 9 STRATEGIC DIRECTION

MARKET OVERVIEW MARKET OUTLOOK • a future price on carbon may impact on the business but, The Queensland electricity market For 2016/17, the Australian Energy unless it is substantially higher passed two significant milestones in Market Operator has forecast a than the current pricing signals 2015/16. On 1 February 2016, further increase in demand of under the safeguard mechanism, Queensland electricity demand 2.3 per cent for the Queensland it is unlikely to affect the relative broke through the 9,000 MW barrier electricity market. This increase competitiveness of coal; and for the first time, with demand continues to be driven primarily by peaking at 9,097 MW in the the LNG industry as it gears up to • the proportion of renewables in afternoon. In late June 2016, a cold full production in 2018. No growth is the generation mix, along with front across the State saw demand forecast in 2016/17 for Queensland’s the rate at which batteries and peak at 8,011 MW, the first time it residential and commercial markets other new technology are has ever passed 8,000 MW in and an overall surplus of installed adopted, will determine the need Quarter 2 (1 April to 30 June 2016). capacity is expected to remain for for security of supply and the several more years. future of Stanwell’s coal-fired The liquefied natural gas (LNG) power stations. industry has been the major driver The external environment is behind the increase in average daily complex, competitive and Stanwell is well positioned to adapt electricity demand in Queensland, challenging. Regulation is influencing to this rapidly changing environment. adding approximately 600 MW of market capacity, the nature of the load to the Bulli and Surat regions. generation mix, consumer choices SHAREHOLDER MANDATE and retail price. Energy businesses Since January 2016, Stanwell has Rising demand and changes to the throughout the world are facing worked with Queensland Treasury supply mix resulted in an increase in unprecedented change. They Corporation on the Queensland the average Queensland wholesale must respond by transforming Government’s review of its electricity price to $59.99 per their business models or they government-owned generators, megawatt hour (MWh) in 2015/16, will eventually be forced out of Stanwell and CS Energy Limited. compared with $52.52/MWh in the market. 2014/15. The review was announced by Circumstances in South Australia the Queensland Government in and internationally reinforce the December 2015, along with the importance of a well planned, decision that the government-owned co-ordinated market approach to generators would not be merged. transitioning to a more diverse At the same time, the Queensland energy mix, with an increasing Government reaffirmed its proportion of renewables. Stanwell commitment to realise efficiency has an important role to play in this savings over five years from both transition, with its coal, gas and generators through a Shareholder hydro generation assets. Mandate which Stanwell received in July 2016. In the Queensland energy industry, a number of variables will determine The mandate acknowledges that the nature of the market to which the electricity market is undergoing Stanwell must adapt: fundamental changes, and supports Stanwell’s existing core the Queensland LNG industry will • operations in fuel management, alter the balance of supply and generation and trading. It also demand, and is likely to increase acknowledges the ongoing role for the wholesale price of electricity, coal-fired generation in Queensland although this may be tempered but precludes Stanwell from by a structural long-term decline developing, investing in or owning in oil prices; new generation capacity.

10 STANWELL ANNUAL REPORT 2015/16 | STRATEGIC DIRECTION The mandate sets clear performance Stanwell’s short-term strategic targets for the business: focus is to capitalise on the forecast growth in electricity demand in • Stanwell must meet or exceed Queensland. Longer term, we will the efficiency saving targets protect and increase the value of detailed in the Government’s our business while the economy 2015/16 Mid-Year Review of transitions to a different energy $110.0 million over the five years outlook with a higher proportion commencing 2015/16. of renewables. • We must optimise spending on support functions to a level Our strategy has four elements that is commensurate with which are detailed on pages industry peers. 12 to 15: • We must also determine the optimal information technology requirements to meet our business needs and establish an information technology roadmap.

STANWELL’S INNOVATIVE FLEXIBLE AND STRATEGIC RESPONSE ENERGY COMPETITIVE Stanwell is well positioned to PRODUCTS PORTFOLIO adapt to the rapidly changing energy market and deliver on shareholder expectations and performance targets. Stanwell must monitor, anticipate and adapt it’s business to respond to unprecedented global change if it PARTICIPATE IN ENABLERS is to continue to thrive and deliver RENEWABLE on this commitment. ENERGY Our business strategy has been developed in the following context: • to ensure security of electricity supply, in view of the intermittent nature of supply and demand; • to safeguard the value of the business, on behalf of its owners, the people of Queensland; and • to ensure sustainable dividends to the Queensland Government.

STANWELL ANNUAL REPORT 2015/16 | STRATEGIC DIRECTION 11 THE YEAR AHEAD

OBJECTIVES INITIATIVES

Deliver commercial Organic growth of Stanwell’s retail business, targeting a broader range of value through the customer types and load1 within the commercial and industrial market segment Stanwell Energy (as defined in the 2014 business plan) retail business Monitor the changing industrial landscape and take value creation opportunities INNOVATIVE ENERGY Customised and niche retail offering based on customer requirements and PRODUCTS commercial benefit to Stanwell

Investigate retail Explore commercially viable strategic relationships as a means of accessing opportunities through smaller customer segments1 partnerships and wholesale support

Manage Stanwell’s Participation in commodity markets where we have an underlying exposure, underlying exposure as appropriate to global commodity markets

Develop expanded Provide commercial packaged offering to customers – e.g. commodity linked commodity trading in pricing and commodity trading services as part of a retail offering line with customer requirements

Develop products Target commercial medium to long-term retail and wholesale contracts. and energy solutions This will include existing major and potential new loads to facilitate new or existing load growth Explore alternative commercial energy solutions, incorporating customer owned embedded generation or storage (including for remote sites)

1 Customers that use equal to or greater than 2.5 GWh per year (at an aggregate customer level).

12 STANWELL ANNUAL REPORT 2015/16 | THE YEAR AHEAD OBJECTIVES INITIATIVES

Ensure flexible Investigate and evaluate opportunities to improve generation plant ramping generation plant rates and load ranges that meets market demand Investigate the cost and complexity of energy storage to provide a ramp rate boost for existing machines

FLEXIBLE AND Investigate seasonal plant shutdowns COMPETITIVE Investigate change in operating regimes and alternative start-up approaches PORTFOLIO Revise asset life planning

Optimise plant costs Re-assess plant efficiency opportunities Reduce operating costs through increased automation

Optimise overhaul costs

Reduce fuel and Secure fuel supplies for future operations mine costs Optimise operations at Tarong Power Station/Meandu Mine for changing generation profile

Secure commercial Implement strategies to secure a commercial water supply for Stanwell’s water supply generation assets arrangements Investigate options for Bulk Water Supply Agreement for Swanbank and Tarong Power Stations with Seqwater

Realise best Monitor and develop opportunities for export coal sales value from our coal portfolio Seek commercial resolution of Wesfarmers amended coal supply agreement dispute

Realise best Assess long-term generation strategy for Swanbank E Power Station value from our gas portfolio Monitor and develop opportunities for sales of gas into domestic or LNG gas markets

STANWELL ANNUAL REPORT 2015/16 | THE YEAR AHEAD 13 THE YEAR AHEAD (CONTINUED)

OBJECTIVES INITIATIVES

Engage in the transition Identify and evaluate sources of large scale generation certificates to lower emissions from the electricity industry Gradually build a portfolio of renewable energy power purchase agreements and protect long-term where commercial and beneficial to Stanwell’s overall position market share

PARTICIPATE IN Explore opportunities Identify Stanwell’s value to renewable projects RENEWABLE to be a facilitator, ENERGY manager or aggregator of market interface for Identify and implement external projects renewable projects

Negotiate with For each potential project, undertake evaluation of commercial attractiveness, renewable project project timing and interaction with the market and with Stanwell’s portfolio proponents in relation to providing land, operations and maintenance, and other support services

14 STANWELL ANNUAL REPORT 2015/16 | THE YEAR AHEAD OBJECTIVES INITIATIVES

Achieve operational Achieve annual efficiency savings, targeting $111.0 million over the five year period efficiencies from 2015/16 to 2019/20

Provide a safe Continue to improve safety culture, performance, systems and processes workplace Reduce our Total Recordable Injury Frequency Rate compared to the 2015/16 result ENABLERS Deliver improvement in contractor safety through the facilities, overhauls and asset Stanwell’s maintenance and management contract strategy is supported Engage and retain Maintain engagement in Stanwell’s values (Safe, Responsible and Commercial) by an ongoing a high performing and associated behaviours commitment to workforce the following Ensure our behaviour, practices and processes are aligned to deliver on business business strategy enablers Deliver initiatives that increase efficiency and commercial returns, and progress towards cultural improvement and alignment

Ongoing support and development of leaders to assist them in retaining and engaging a high performing workforce

Ongoing review and optimisation of the organisational structure to support delivery of business objectives

Ensure compliance Ensure ongoing compliance with applicable legislation, standards and licences, with applicable laws, with no material breaches regulations and company policies

Ensure Stanwell’s Ensure compliance with applicable legislation, standards and licences, with no environmental right material breaches to operate

Improve and Commence implementation of a five-year information technology strategy to: simplify business • maintain cost effective business system platforms that are fit-for-purpose systems • maintain a prioritised schedule of work to reduce the risk, cost and complexity of information and business systems • maintain assets (hardware and software) in line with vendor maintenance and support agreements

Secure ongoing Secure support for our activities by proactively communicating Stanwell’s support for business model and associated requirements to shareholding Ministers on Stanwell’s strategy Stanwell’s communication of business issues, key projects, operations or strategy and operations Build each asset’s links with its local community to ensure our key opinion leaders: • have a relationship of trust with the management of their local Stanwell asset • perceive the asset benefits the community

Maintain a positive relationship with Traditional Owners

Secure environmental approvals that align with commercial operating requirements

Monitor and lobby for changes to the National Electricity Market that support the business’ strategy

STANWELL ANNUAL REPORT 2015/16 | THE YEAR AHEAD 15 SELL OUR ENERGY FOR THE BEST RETURN

We optimise financial OPTIMISE GROSS MARGIN ENSURE ASSET PERFORMANCE SUPPORTS TRADING REQUIREMENTS returns by finding INCREASE OUR TRADING REVENUE Ensuring our plant is available to alternative outlets for Stanwell’s trading strategy for meet trading requirements is a our energy, expanding 2015/16 was supported by the fundamental goal of the availability and reliability of our business. Our generation our trading activities generation portfolio. This resulted portfolio operating within the and diversifying our in positive returns on both National Electricity Market wholesale electricity sales and achieved average availability and revenue streams. contracts for the year. reliability factors of 89.1 per cent Stanwell operates its generation and 98.0 per cent respectively. portfolio in line with an integrated In 2015/16 we invested spot and contract trading $203.3 million in capital projects strategy. This strategy focusses at our sites to improve equipment on capitalising on periods of productivity and maintain plant high demand to optimise integrity and performance. business value through current This included more than and future years. $100 million on overhauls which We increased our trading revenue are important in meeting our for the year to $1,525.5 million legislative requirements, compared with $1,118.8 million for preserving the value of our 2014/15. The increase in trading assets and ensuring we can revenue was, in part, a reflection operate safely, reliably and of higher wholesale electricity efficiently to meet both current prices due to increased demand and future market requirements. from the operation of liquified This involved expenditure on an natural gas plant in Central unprecedented four major Queensland, which resulted overhauls, three units at Tarong in higher spot and contract and one at Stanwell Power electricity prices. Station, within a period of 12 months. In response to increasing demand in the Queensland We increased our market, Stanwell successfully returned Unit 2 at Tarong Power Station to service in February trading revenue to 2016, with Unit 4 at Tarong returning in July 2014. This meant that all five units at the Tarong site were available for the first time since late 2012. Unit 2 and Unit 4 were placed in cold $1,525.5m storage in response to the oversupplied electricity market and subdued wholesale in 2015/16. electricity prices.

16 STANWELL ANNUAL REPORT 2015/16 | SELLCHAPTER OUR TITLEENERGY FOR THE BEST RETURN OBJECTIVE WHAT WE SET OUT TO ACHIEVE HOW WE PERFORMED Optimise gross Increase our trading revenue Achieved margin Ensure asset performance supports trading requirements Achieved Reduce fuel and mine costs Achieved Secure commercial water supply arrangements Ongoing Seek alternative Expand exposure to direct retail markets Achieved outlets for our energy Develop retail alliances Ongoing Expand trading activities into new markets and commodities Ongoing Execute commercial long-term hedging contracts Ongoing Ensure back office processes support trading activities Ongoing Diversify revenue Realise best value from our gas portfolio Achieved Realise best value from our coal portfolio Achieved

In April 2016, Tarong North Power Maintaining our hydro power Due to a forecast earlier and longer Station was taken offline for one of stations in Far North Queensland summer and against a backdrop the largest outages Stanwell has remains a priority due to their of increasing demand in the undertaken. During the overhaul, we flexibility in responding quickly to Queensland market, our summer also took the opportunity to update market volatility. Barron Gorge readiness program was extended to the control system, replace the Hydro Power Station was closed include November 2015 and March auxiliary boiler, overhaul the steam for five weeks in August and 2016. During this period, our feed pump and install a new turbine September 2015 for a objective was to have all plant rotor to restore the unit to its full once-in-five-year cleaning and available to meet volatility driven by capacity of 443 MW. This followed repair of its 411-metre penstock, a narrowing between supply and damage to the turbine in June 2014 which transports water from demand and subsequent high which reduced the unit’s capacity to Kuranda Weir to the power station wholesale electricity prices. 380 MW for the past two years. for electricity generation. At Kareeya Meandu Mine delivered 4.5 million The total cost of this project was Hydro Power Station, a major tonnes of coal to the Tarong Power $60.0 million. overhaul was undertaken on Unit 1 Stations in 2015/16 (2014/15: between August and October 2015 In August 2015, Stanwell Power 3.5 million tonnes), reflecting the and a new intake building was built. Station’s Unit 1 was taken offline for return of the site’s five units to its major overhaul after a world In February 2016, generation at full availability. record 1,087 days of continuous Mica Creek Power Station (not operation. In June 2016, Unit 2 was connected to the National Electricity taken offline for one of the largest Market) reduced to zero for the first ever overhauls at Stanwell Power time in 60 years, as the site’s sole Station. The 53-day overhaul customer ceased mining operations. included the replacement of all the As a result, we placed all of the condenser tubes and a mid-life power generation units in cold replacement of the control system. storage until the customer requires The four-year installation program electricity for mining operations from for the condensers and new control mid-2017 onwards. systems will finish in 2018 and 2019 respectively.

STANWELL ANNUAL REPORT 2015/16 | SELL OUR ENERGY FOR THE BEST RETURN 17 SELL OUR ENERGY FOR THE BEST RETURN (CONTINUED)

SECURE COMMERCIAL WATER SUPPLY ARRANGEMENT Water is a critical input for the generation of electricity and a significant cost to the business. Therefore, it is essential that we secure water at commercial rates. The Tarong Power Stations source their 29,270 megalitre (ML) annual water allocation from Boondooma Dam, through a commercial water supply agreement with SunWater. Other statutory agreements are also The coal stockpile at Tarong Power Station in place for bulk water supply from Seqwater to the Tarong, Tarong North and Swanbank power REDUCE FUEL AND MINE COSTS A trial of automated mine trucks, stations up to June 2018. Meandu Mine’s surface rights started at Meandu Mine in April 2013 As the statutory bulk water supply extension is a key project under the by global engineering firm Hitachi, continued throughout the year. agreements are surplus to our Life of Mine plan to lower fuel costs. requirements, Stanwell is in Regulatory approval is well The three truck trial has assisted with rehabilitation work at the mine discussions with Seqwater to progressed to expand the mine’s reduce the cost of the agreements surface rights area by approximately by moving almost 300,000 base cubic metres of earth. Stanwell is to better align with our 130 hectares. The extension area is business requirements. adjacent to two current mine pits currently in discussions with Hitachi and will provide Stanwell with to potentially extend the trial for a Long-term commercial agreements access to more economical fuel further two years ending in 2019. remain in place with SunWater for the supply of Stanwell and Barron Gorge to sustain the operations of the Downer Mining, which operates Hydro power stations. Stanwell owns Tarong Power Stations. In January Meandu Mine under a mine and operates Koombooloomba Dam 2016, Stanwell entered into an services agreement with Stanwell, which is the fuel source for Kareeya agreement with the land owner for had its agreement extended for a Hydro Power Station. the conversion of hoop pine further two years, until June 2020. plantation land into the surface The original agreement, which SEEK ALTERNATIVE OUTLETS rights area. Mining operations within began in January 2013, has been FOR OUR ENERGY the surface rights area are expected highly beneficial to both Stanwell to commence within 12 months. and Downer Mining through a joint EXPAND EXPOSURE TO DIRECT RETAIL MARKETS We continue to modernise our fleet delivery approach focussing on Through our electricity retailing at Meandu Mine with the purchase safety, financial performance and business, Stanwell Energy, we of two new open-bowl scrapers, operating efficiencies. have successfully increased our a water truck and a new dozer. retail exposure by expanding our The new machinery increases the target market to include a wider productivity of our mining operations, spread of commercial and industrial reducing maintenance costs and the customers across Queensland, overall cost of the coal we produce. New South Wales, Victoria and Australian Capital Territory.

18 STANWELL ANNUAL REPORT 2015/16 | SELL OUR ENERGY FOR THE BEST RETURN For 2015/16, retail tender responses ENSURE BACK OFFICE PROCESSES REALISE BEST VALUE FROM OUR increased by 28 per cent and the SUPPORT TRADING ACTIVITIES COAL PORTFOLIO number of customer meters that We continue to develop and Stanwell has a long-term agreement we monitor increased by more than implement in-house settlement with Wesfarmers Curragh for the 100 per cent compared with the systems to support our energy supply of competitively-priced coal previous year. trading activities in their from Curragh Mine (near Blackwater respective markets. in Central Queensland) for generation DEVELOP RETAIL ALLIANCES at Stanwell Power Station. Stanwell’s wholesale energy team In May 2016, Stanwell revised its engages with a variety of retailers Trading Risk Management Policy The agreement includes the operating in the National Electricity to provide better flexibility in times option to receive additional coal to Market, including Stanwell Energy. of market and structural change. be used for generation at Stanwell We support entry into contracts Financial risk management models Power Station or to be exported. underpinning the revised policy with other second-tier retailers to In addition, Stanwell receives a were developed and implemented. ensure we maximise value from revenue stream which is based on our generation portfolio and DIVERSIFY REVENUE the total volume of coal exported facilitate retail market diversity from Curragh Mine. This contributed and customer choice. REALISE BEST VALUE FROM OUR more than $61.9 million to our GAS PORTFOLIO pre-tax profit result for 2015/16. EXPAND TRADED PRODUCTS INTO Gas sales contributed strongly to NEW MARKETS AND COMMODITIES our financial results in 2015/16. We continually work with our This was a result of our increased retail and wholesale client base trading activity in both the in a variety of markets to offer Wallumbilla Hub and Brisbane Short innovative and tailored energy Term Trading Market, and through solutions that meet our customers’ bilateral gas sales agreements. energy needs and provide an appropriate commercial return for During the year, we sold more Stanwell. Stanwell has investigated than 10 petajoules (PJ) of gas the profitability and risk profile of through bilateral gas sales trading associated commodities agreements, traded approximately such as coal and gas and engaged 630,000 terajoules of gas through with customers for other the Wallumbilla Hub and sold related commodities. approximately 1.6 PJ of gas transport capacity on the Roma LONG-TERM HEDGING CONTRACTS to Brisbane pipeline. Long-term contracts continue to be Our partner in the Kogan North a target for Stanwell as they protect Joint Venture, Arrow Energy, the value of our generation portfolio. successfully completed the drilling We actively engage with large of nine new wells which are industrial customers to provide expected to be operational by the long-term and cost effective energy end of 2016. We invested further solutions for their operations. capital in the joint venture to maintain the gasfield production in readiness for the return to service of Swanbank E Power Station.

STANWELL ANNUAL REPORT 2015/16 | SELL OUR ENERGY FOR THE BEST RETURN 19 SIMPLIFY AND STREAMLINE OUR BUSINESS

We create value from DELIVER OPERATIONAL The appointment of UGL in July the way we operate COST EFFICIENCIES 2014 consolidated 80 separate Corporate and operational existing contractors and more our portfolio, with reviews conducted in recent than 400 suppliers across the an ongoing focus years have helped the business business. Over the past two years to continue reducing its operating, the relationship has delivered on improving cost corporate and site-support costs. many benefits including efficiency and performance In light of the Shareholder improvements, and significant Mandate received in July 2016, cost savings and reductions in efficiencies from we will continue to seek further administration. Going forward, our core business efficiencies from across the Stanwell and UGL will be working business over the next four years together to deliver the next operations. to meet the targets required by generation of improvements in our shareholders. safety, innovation and value for money. IMPROVE AND SIMPLIFY We have commenced a project BUSINESS SYSTEMS to upgrade the Ellipse system Stanwell’s relationship with that supports key functions at UGL Limited (UGL), its sole the Tarong Power Stations and contractor for facility management, corporate offices, including overhaul, asset and maintenance finance, supply chain and asset management services at our maintenance. The upgrade is sites, was extended for one year scheduled to be completed in and now has an expiry date of December 2016 and will reduce 30 June 2019. support costs and risks associated with obsolete systems at those sites. Further project work is underway to implement this system across other sites. 400 suppliers across the business have been consolidated since the appointment of UGL.

20 STANWELL ANNUAL REPORT 2015/16 | SIMPLIFYCHAPTER ANDTITLE STREAMLINE OUR BUSINESS OBJECTIVE WHAT WE SET OUT TO ACHIEVE HOW WE PERFORMED Simplify and streamline Deliver operational cost efficiencies. Ongoing our business Improve and simplify business systems Ongoing Maximise the value of Mica Creek Power Station Ongoing Continue to rationalise gas investments Ongoing

MAXIMISE THE VALUE OF CONTINUE TO RATIONALISE Stanwell also continues to hold MICA CREEK POWER STATION GAS INVESTMENTS a 7.66 per cent investment in Blue Energy Limited. We continue to explore options to Stanwell continues to hold and maximise the value of Mica Creek monitor its stake in two upstream Power Station in Mount Isa. In gas investments. February 2016, generation at Mica We hold an option with Comet Creek Power Station reduced to Ridge Mahalo Pty Ltd. This option zero for the first time in 60 years, provides Stanwell with the flexibility as the site’s sole remaining to either enter into a long-term gas customer ceased mining sale agreement for up to 10 years operations. As a result we have or receive a cash consideration that placed all of the power generation represents the present value of units in cold storage until the our initial investment. customer requires electricity for mining operations from mid-2017 onwards.

Tarong Power Station

STANWELL ANNUAL REPORT 2015/16 | SIMPLIFY AND STREAMLINE OUR BUSINESS 21 SECURE OUR FUTURE

At Stanwell, providing PROVIDE A SAFE WORKPLACE Through our goal of Zero Harm Today, we have a firm belief that a safe workplace, CONTINUE TO IMPROVE OUR SAFETY PERFORMANCE, SYSTEMS all injuries and occupational engaging and AND PROCESSES illnesses can be prevented. We aim to achieve this through On 29 November 2015, retaining a high continuous learning and Grahame Meyer was fatally improvement in our safety performing workforce injured in a workplace accident leadership, behaviours, systems at Tarong North Power Station. and securing and plant. Stanwell and UGL have worked ongoing support Our Total Recordable Injury closely with all relevant authorities Frequency Rate for 2015/16 for our operations in investigating the tragedy and of 10.11 did not meet our key both companies are determined and corporate performance indicator target to do all they can to prevent such of less than 7.67. While our direction are all key an accident occurring again. achievement against this This incident devastated the to our success. performance indicator is Stanwell community. Grahame disappointing, it does not reflect had worked for contracting the effort and commitment companies at our Tarong site for shown across the business to a number of years. The safety of improve and effectively manage any person entering our sites is health and safety risks. fundamental to meeting our core value of ‘Safe’ and this tragic loss During the financial year and has been felt deeply at the site through to the end of 2016, and across our business. we have had to complete an unprecedented number of major overhauls at our coal-fired stations. Four major overhauls were done in 2015/16 with two more scheduled for completion before December 2016. The focus for many leaders Safety remains paramount and each overhaul has included a clear and direct focus on health and teams this year and safety, making strategic improvements in light of lessons has been on improving learned from earlier outages. In this way, we have continued to improve health and safety as interactions through higher each overhaul occurs. The Tarong site recorded its trust relationships. safest ever overhaul result during the Unit 2 overhaul at the beginning of 2016.

22 STANWELL ANNUAL REPORT 2015/16 | SECURECHAPTER OUR TITLE FUTURE OBJECTIVE WHAT WE SET OUT TO ACHIEVE HOW WE PERFORMED

Provide a safe Continue to improve our safety performance, systems and processes Not achieved workplace Engage and retain Improve cultural alignment to Stanwell values and objectives Ongoing a high performing workforce Finalise new Enterprise Agreements Achieved Increase employee engagement in achieving business objectives Ongoing

Secure ongoing Secure shareholder and stakeholder support for our activities Achieved support for Stanwell’s operations and Ensure Stanwell’s environmental right to operate Achieved corporate direction Ensure compliance with applicable laws, regulations Not achieved and company policies

During the year, we continued our ENGAGE AND RETAIN A HIGH In January 2016, we appointed focus on the risk of working while PERFORMING WORKFORCE nine apprentices and five trainees affected by alcohol or other drugs. at Stanwell, Tarong, Barron Gorge Our prevention strategy focussed IMPROVE CULTURAL ALIGNMENT TO Hydro and Kareeya Hydro power STANWELL VALUES AND OBJECTIVES on awareness and mental health stations. This brought the total impacts. Expert speakers We continue to provide opportunities number of apprentices and trainees addressed our people, support for employees to participate in to 36 across the business. We mechanisms were reviewed and a training programs, delivered also appointed two graduates robust testing regime was in place in-house and externally, that are in mechanical engineering and across our sites and offices. The tailored to the business. The focus environment, taking the graduate strategy has delivered a 40 per cent for many leaders and teams this year program to five people. Our reduction in the number of people has been on improving interactions graduates are currently working testing confirmed positive to alcohol through higher trust relationships. across our corporate and and other drugs from our peak Significantly, more than 85 per cent operational sites as they build result in 2014. of our leaders have participated in their skills and learn our business. a Leading at the Speed of Trust As part of our strategy to improve program, with leaders introducing the health and wellbeing of our the lessons learned to their teams people, we offer comprehensive on team planning days. voluntary health checks to all employees across all locations. We took a new approach to our During Safe Work Month (October strategy development this year, 2015), we also held an awareness engaging a broad group of thought program on health and wellbeing, leaders from across Stanwell in the highlighting aspects such as mental preparation of scenarios for Board health, drugs, physical, financial and consideration. This has resulted in family life health. The sessions were greater collaboration and diversity well received and further sessions in thinking about our strategy were subsequently held for the development. family and friends of our people in the regions in which we operate.

STANWELL ANNUAL REPORT 2015/16 | SECURE OUR FUTURE 23 SECURE OUR FUTURE (CONTINUED)

FINALISE NEW The objective of the action plan is The control of vegetation ENTERPRISE AGREEMENTS to have our people engaged as encroaching on the corridor During the year, six of our seven we implement our new corporate underneath the 22 kilovolt powerline enterprise agreements (EAs) that strategy which shapes the future from Koombooloomba Dam to were up for renegotiation were direction of the business. Kareeya Hydro Power Station was finalised and approved. This reviewed. This strategy is a critical included Stanwell Power Station, SECURE ONGOING SUPPORT FOR element of the hydro power station’s Mica Creek Power Station, STANWELL’S OPERATIONS AND Environmental Management Plan, corporate offices, Tarong Power CORPORATE DIRECTION with changes approved by the Wet Station, Barron Gorge and Kareeya ENSURE STANWELL’S Tropics Management Authority. Hydro power stations. For the ENVIRONMENTAL RIGHT TO OPERATE Stanwell successfully negotiated EA, we In addition to maintaining positive and provided input into the received certification from the Fair relationships with the communities development of the Barron Work Commission on 28 July 2016. in which we operate, Stanwell is Resource Operations Plan and The EAs, which were negotiated in committed to having open and associated water licensing line with the Government Owned transparent interactions with amendments. There were no Corporation Wages and Industrial our regulators, including the material impacts on the operations Relations Policy 2015, provide Department of Environment and of Barron Gorge Hydro Power certainty to our employees and Heritage Protection, the Department Station as a result of these the business by securing the of Natural Resources and Mines developments. terms of their employment. and the Wet Tropics Management The Tarong Black Creek Dam Authority to ensure we maintain our INCREASE EMPLOYEE ENGAGEMENT Diversion Channel was recognised environmental right to operate. IN ACHIEVING BUSINESS OBJECTIVES for its excellence in civil construction In February and March 2015, The Environmental Policy and at the Queensland 2015 Civil we conducted an employee Environmental Management System Contractors Federation Earth engagement survey to understand Manual were reviewed and updated Awards. The rainwater-diversion how engaged and motivated our during the year. Both these channel extends the life of the employees were and where we documents reflect our commitment Tarong Power Stations’ ash storage can focus our efforts to ensure to a full environmental compliance facility and significantly reduces Stanwell is a place where people culture where environmental risks the risk of ash storage overflow want to work. are managed to ensure that we entering Meandu Creek. continue to operate within our site In response to the survey results, approvals and other relevant we launched an employee environmental requirements. engagement action plan to further empower our people by focussing At Meandu Mine this year, on three key themes: we successfully rehabilitated 36 hectares with native flora, trust and confidence in senior • which was almost double our management; target of 19 hectares for the year. • streamline decision making; and • management of poor performance.

24 STANWELL ANNUAL REPORT 2015/16 | SECURE OUR FUTURE Stanwell Power Station contractor Alex Finnegan

ENSURE COMPLIANCE WITH The investigation into the Following investigations to identify APPLICABLE LAWS, REGULATIONS non-compliances has revealed that the causes of these events, we AND COMPANY POLICIES acid mine drainage, is responsible undertook a detailed review of In July 2014, Stanwell identified an for the increase in salinity and that compliance at our Meandu and increase in the volume and the issue has periodically occurred Tarong sites and took a number of concentration of saline and acidic at the mine since 2005 in periods actions to strengthen the sites’ water streams in the Meandu Mine of high rainfall. environmental compliance systems. drainage system. This has resulted Stanwell has implemented a in three releases of water within the number of actions to manage this mining area (but still contained long-term issue in line with our entirely within Stanwell land) that environmental obligations, with this were not compliant with the site work overseen by a recently Environmental Authority. appointed project director. These breaches were reported to During the year we identified the Department of Environment and seven environmental compliance Heritage Protection which, after a breaches, all of which were site visit and a show-cause process, administrative in nature and caused issued Stanwell with a Penalty no environmental harm. Infringement Notice and fine of $11,385 in December 2015. Stanwell immediately notified the Department of Environment and Heritage Protection about the events.

STANWELL ANNUAL REPORT 2015/16 | SECURE OUR FUTURE 25 CORPORATE GOVERNANCE

KEY AREAS OF FOCUS AND • continued with an independent • the key risks to Stanwell are ACHIEVEMENT IN 2015/16 review of the daily rebids identified and managed; and submitted by Stanwell’s Stanwell’s governance • ethical values and behaviours spot traders to ensure arrangements are reviewed and responsible decision-making compliance with the National continuously by the Stanwell are promoted through a fair and Electricity Rules; Board and relevant Board just culture. reviewed, tested and refreshed Committees. During the year, • Further information on Stanwell’s Stanwell’s Business Resilience the following activities were corporate governance practices, Framework and responses to undertaken to enhance Stanwell’s including key policies and business interruption events to governance arrangements: copies of the Board and ensure that Stanwell has the Board Committee Charters, is • the Board Charter, the Board ability to respond, to and recover available on the Stanwell website Committee Charters, the Board from, an event while still (www.stanwell.com). Handbook and the Delegations continuing to maintain critical Framework were all reviewed business operations; Stanwell has adopted all of the to ensure that Stanwell’s principles outlined in the Corporate governance arrangements • successfully conducted a Controlled Failover Exercise Governance Guidelines for remain appropriate as Stanwell’s Government Owned Corporations circumstances change; for disaster recovery of critical Information and Communication and believes that, throughout the • development of a Risk Technologies (ICT). The exercise reporting period, its governance Appetite Statement that will provided validation that ICT arrangements have been consistent protect the interests of Stanwell’s infrastructure, communications with these principles. stakeholders, guide strategic networks and business systems This Corporate Governance direction, support the would continue to operate in Statement sets out each of these achievement of business the event of a business principles and how Stanwell has objectives and establishes an interruption; and addressed them. appropriate approach to, and • confirmed that the strategy in culture of, risk management PRINCIPLE 1 – FOUNDATIONS OF within the corporation; relation to capital and funding remains appropriate and that MANAGEMENT AND OVERSIGHT commenced the integration of • financial risk activities are ROLE AND FUNCTION OF THE BOARD the Risk Appetite Statement’s undertaken within an appropriate The Board’s primary function guiding principles into Stanwell’s compliance framework. Risk Management Framework; is to ensure that Stanwell and its controlled entities have an undertook a comprehensive APPROACH TO • appropriate corporate governance review of the framework within CORPORATE GOVERNANCE structure which creates and which Stanwell manages the Stanwell defines governance as protects shareholder value. risks arising from its trading ‘the system by which the The Board derives its authority to activities, to ensure that it is Corporation is directed, managed act from Stanwell’s Constitution. aligned to the risk appetite’s and held to account’. It incorporates guiding principles in relation to culture, structure and processes for The Board’s responsibilities are set credit and market risk; decision-making, accountability, out in a formal Charter which the Board reviews annually. • established an executive Trading control and behaviour. It provides Governance Committee to have the framework within which: These responsibilities include oversight of, and to ensure that • the Board is accountable to but are not limited to: Stanwell’s trading strategies will shareholding Ministers for the monitor the progress achieve business objectives and • successful operation of Stanwell; of Stanwell’s commitment that risk identification systems to the elimination of work- and management practices • the strategies and goals of related injuries and continue to be robust and Stanwell are set and agreed; occupational illnesses; remain appropriate;

26 STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE • review and approve corporate DELEGATION OF AUTHORITY These principles govern strategies, the annual budget and The Constitution allows the Board decision-making and ensure that financial plans; to delegate any of their Directors’ the financial transactions of Stanwell • make decisions in relation to powers as permitted by the are executed within the scope of major corporate initiatives above Corporations Act 2001 (Cth) delegated authorities and balance the Chief Executive Officer’s and the Government Owned effective oversight by the Board (CEO) approval threshold; Corporations Act 1993 (Qld), with appropriate empowerment and accountability of Stanwell’s senior oversee and monitor including delegation to a committee • executives and employees. organisational performance and of Directors or any other person the achievement of Stanwell’s on the terms and subject to COMMITTEES OF THE BOARD strategic goals and objectives; any restrictions that the Board may decide. The Board has established • ensure the adequacy and two committees: the People and effectiveness of key aspects The delegation of the Board’s Safety Committee and the Audit of Stanwell’s financial specific standing powers and and Risk Management Committee. management, reporting and limits of authority are documented These committees assist in the accounting practices; in the Board Delegations of execution of the Board’s role and Authority Policy, the Audit and Risk • oversee the review and update allow detailed consideration of of corporate governance Management Committee Charter complex issues. Committee arrangements and processes as and the People and Safety members are chosen for their necessary to support Stanwell’s Committee Charter. skills and experience. commitment to best practice The general approach adopted by The roles, responsibilities and corporate governance; the Board to the delegation of its delegated authorities of each • monitor and influence Stanwell’s powers and authorities is that: committee are set out in their culture, values, reputation and • decisions related to specific respective committee charters. ethical standards; matters are reserved for Each year, the charters are reviewed and, where appropriate, • appoint and assess the the Board; updated to take account of changes performance of the CEO and • certain powers and limits of senior executives; and other developments in the authority are delegated to committees’ areas of responsibility. • approve Stanwell’s Risk specified persons; and Each committee meets several Appetite Statement and risk • subject to the above, the Board times a year, depending on management strategy; delegates its power and authority committee workload requirements. • review and oversee systems of to manage and supervise the The role and membership of each risk management, internal control management of the day-to-day committee are described in more and legal compliance; operations of Stanwell to the detail below. • oversee the process for CEO and, through the CEO, identifying and managing to other senior executives People and Safety Committee Stanwell’s business critical and employees. As at 30 June 2016, the People and risks and the control, monitoring The principles by which the CEO Safety Committee comprised the and reporting mechanisms in sub-delegates the power and following directors: place; and authority vested by the Board are Russell James Kempnich • report to and communicate documented in the Stanwell CEO (Chairman) with Stanwell’s shareholding Manual of Authorities. Ministers. Ralph Howard Craven Jacqueline Elizabeth King

STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE 27 CORPORATE GOVERNANCE (CONTINUED)

The committee’s primary function EXECUTIVE REMUNERATION Directors are appointed by the is to assist the Board to oversee AND PERFORMANCE REVIEW Governor-in-Council. Appointments the development and monitoring Each year, the Board, with the are for a specified period. of policies and practices which assistance of the People and Safety The Board held nine meetings relate to: Committee, undertakes a formal between 1 July 2015 and 30 June • health, safety and welfare process of reviewing the 2016. The table on page 41 of this of employees; performance of the CEO and senior report details the number of Board executives. The rate of remuneration the Board’s performance of its and Board committee meetings • increases for the CEO and senior governance of Stanwell; held during the year that each executives is determined with director was eligible to attend and the work environment, conditions • regard to market salary movements the number of meetings attended and performance of employees; and individual performance. At-risk by each director. and performance incentive payments for • relationships with external the CEO and senior executives are DIRECTOR INDUCTION AND stakeholders. capped at 15 per cent of total fixed CONTINUING EDUCATION remuneration, with the amount Stanwell has a comprehensive Audit and Risk payable tied to the achievement of director induction program in place, Management Committee pre-determined Board-approved which includes the provision of key As at 30 June 2016, the Audit and corporation, business division and corporate documents, facilitation Risk Management Committee individual performance targets. of site visits and meetings with comprised the following directors: The CEO is not present at the senior executives. Board meeting or People and Karen Elisabeth Smith-Pomeroy The induction program is modified Safety Committee meeting when (Chairman) as required to ensure that it is the CEO’s own remuneration and appropriate for the new directors’ Dominic Joseph Condon performance are being considered. qualifications and experience. Ralph Howard Craven Further details about the CEO and Stanwell provides continuing senior executive remuneration are The committee’s primary function is education to the Board through a disclosed on pages 107 and 108. to assist the Board to: combination of internal and external • review and monitor Stanwell’s PRINCIPLE 2 – STRUCTURE THE presentations, workshops with financial management and BOARD TO ADD VALUE management and site visits. These educational activities assist directors reporting processes; At 30 June 2016, the Board to gain a broader understanding of • review and oversee systems for consisted of five independent, Stanwell’s business. Directors are risk management, internal control non-executive directors. The also encouraged to keep up to date and legal compliance; names, qualifications and relevant on topical issues and to participate skills, experience and expertise • oversee the process for: in professional and self-development of the directors who held office - identifying and managing activities. Activities undertaken - during the financial year and up significant business risks; and by directors that assist their to the date of this report, along responsibilities to Stanwell are - implementing appropriate and with their terms of appointment, - paid for by the corporation. adequate control, monitoring are set out on pages 38 to 40. and reporting mechanisms; The Board considers that, and individually and collectively, the • monitor and assess the directors bring a level of skill, performance of the internal and knowledge and experience that external audit functions. enables the Board to discharge its role and responsibilities effectively.

28 STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE DIRECTOR INDEPENDENCE ACCESS TO MANAGEMENT The principles underlying Stanwell’s The Board has considered the Each director has access to the Code of Conduct are: associations of each of the directors CEO in the event that they require 1. We contribute to a safe and is of the view that all directors additional information. Each director workplace and strive to achieve are independent. The basis for this is encouraged to contact the CEO Zero Harm Today. decision is that all directors are or Company Secretary prior to a independent of management or any Board meeting to discuss any 2. We act ethically at all times. material business or other interest matters that require clarification. 3. We treat others with fairness and that could interfere with: respect and value diversity. BOARD EVALUATION the exercise of objective, • The Board evaluates its 4. We identify conflicts of interest unfettered or independent performance, the performance of and manage them responsibly. judgement; and individual directors, the Chairman 5. We respect and maintain privacy • the director acting in the best and the Board committees at and confidentiality. interests of Stanwell. regular periods. The People and 6. We comply with this code, the Safety Committee is responsible for The materiality of any relationship law, Stanwell’s contractual assessing the framework and the between a director and Stanwell or commitments and Stanwell’s processes used for conducting the any other interest which may impact policies and procedures. a director’s independence will be performance evaluations. 7. We immediately report any judged according to the significance During the year, performance breaches of this code, the of the relationship to the director in evaluations of the Board’s law or Stanwell’s policies the context of their activities as a committees were undertaken. and procedures. whole. The Board applies a The results of these evaluations conservative assessment of the were returned to the Board The code is supported by the significance of any relationship for discussion. following detailed policies that when determining materiality. together form the Stanwell Code As part of the Board’s commitment of Conduct Policy Framework: ACCESS TO INDEPENDENT to continuously improving its PROFESSIONAL ADVICE governance practices, the last • Confidential Information Policy; agenda item of every Board Directors are entitled to seek • Conflict of Interest Policy; independent professional advice at meeting is a critique of the • Fair Treatment Policy; Stanwell’s expense. The process for Board’s performance. obtaining such advice requires the • Fraud Prevention Policy; PRINCIPLE 3 – PROMOTE relevant director to consult with the • Gifts and Benefits Policy; Chairman or the Company ETHICAL AND RESPONSIBLE • Health and Safety Policy; Secretary where the Chairman is DECISION-MAKING Information Systems conflicted, to facilitate the advice. CODE OF CONDUCT – THE WAY • WE WORK AT STANWELL Usage Policy; The Board can conduct or direct • Compliance and Regulatory any investigation to fulfil its Stanwell has a Code of Conduct Management Policy; responsibilities and can retain, at that applies to its directors, the corporation’s expense, any employees and contractors. • Privacy Policy; legal, accounting or other services The code promotes ethical and • Trading in Securities Policy; and it considers necessary to perform responsible decision-making and • Whistleblower Protection Policy. its duties. requires high standards of honesty, integrity, fairness and equity in all aspects of employment with Stanwell. The behaviour this fosters is integral to supporting Stanwell’s values and governance practices.

STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE 29 CORPORATE GOVERNANCE (CONTINUED)

When commencing work with Any director with a conflict of The Audit and Risk Management Stanwell and thereafter on a interest in a matter being Committee is responsible for biennial basis, all Stanwell considered by the Board must assessing whether the internal employees, contractors and declare their interest and, unless audit function is independent of directors are required to complete a the Board resolves otherwise, management and is adequately training course that takes them they may not participate in resourced and funded. through the seven principles of the boardroom discussions or vote The overall objective of Stanwell’s Code of Conduct and a summary of on matters in respect of which internal audit function is to assist their obligations under each of the they have a conflict. the Stanwell Board and all levels policies in the Code of Conduct of management to discharge their Policy Framework. TRADING IN SECURITIES responsibilities in maintaining The Trading in Securities Policy Stanwell’s Whistleblower Protection Stanwell as a well-controlled, deals with the manner in which Policy is designed to support and economic, efficient and effective Stanwell’s directors and employees protect employees and contractors corporation that complies with can trade in securities. This policy who disclose illegal, unethical or statutory obligations. is specifically designed to raise non-compliant conduct by other awareness of the prohibitions on The internal audit function operates employees. The policy formalises insider trading contained within under the terms of the Internal Audit Stanwell’s commitment to the Corporations Act 2001 (Cth), Charter. The charter is reviewed protecting the confidentiality and to ensure Stanwell personnel periodically by the Audit and position of its employees and understand these requirements Risk Management Committee contractors who wish to raise and the restrictions on trading and formalises and communicates serious matters that affect the while in possession of the purpose, role, authority, integrity of Stanwell. price-sensitive information. responsibilities, scope and AVOIDANCE OF CONFLICTS operational framework of the OF INTEREST PRINCIPLE 4 – SAFEGUARD internal audit function. INTEGRITY IN FINANCIAL The Board is conscious of its REPORTING Authority has been granted to the obligation to ensure that directors internal audit function for full, free The Audit and Risk Management avoid conflicts of interest (actual, and unrestricted access to any and Committee assists the Board in potential or perceived) between all of Stanwell’s records, physical overseeing the reliability and their duties as directors of Stanwell properties and personnel relevant integrity of financial reporting and their other interests and duties. to any function under review. practices, accounting policies, All directors are required to provide auditing and external reporting. To provide for the independence written disclosure on appointment The committee provides advice of the internal audit function, its of any business or other relationship to the Board on financial personnel report to the Group that he or she has directly, or as a statements, financial systems Manager Internal Audit, who reports partner, shareholder or officer of a integrity and business critical risks. functionally to the Audit and Risk company or other entity that has an It also oversees compliance with Management Committee and interest in Stanwell or another applicable laws, regulations and administratively to the Chief related entity. At least annually, corporate policies. Financial Officer (CFO). or when relevant changes occur, directors are required to update The internal audit function is these disclosures. The Company established by the Stanwell Secretary ensures that copies Board and its responsibilities of all disclosures, including updated are defined by the Audit and disclosures, are provided to Risk Management Committee. each director.

30 STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE Following the conclusion of In accordance with the As at 30 June 2016, the Audit and audits, the Group Manager Corporations Act 2001 (Cth), when Risk Management Committee Internal Audit prepares and presenting financial statements for consisted of three members. issues to management a formal approval, the CEO and the CFO Other directors who are not Internal Audit Report of findings provide a written statement to members of the committee, the and recommendations. the Board to the effect that: auditors and other senior executives As a Government Owned • the financial records of Stanwell attend meetings by invitation. Corporation, Stanwell’s external for the financial year have audit is performed by or on behalf been properly maintained in PRINCIPLE 5 – MAKE TIMELY of the Queensland Auditor-General. accordance with section 286 AND BALANCED DISCLOSURES The external auditor’s role is to of the Corporations Act 2001 In line with the requirements of provide an independent opinion that (Cth); and the GOC Act, shareholding Stanwell’s financial reports are true • Stanwell’s financial statements Ministers are advised in a timely and fair and comply with applicable and notes to the financial manner of all issues likely to have regulations. The Auditor-General statements comply in all material a significant financial, operational, has unfettered access and can respects with the Australian employee, community or examine and report to Parliament Accounting Standards and environmental impact. on the efficiency and effectiveness present a true and fair view of Stanwell also regularly assesses of any aspect of public sector the company’s financial position the key information requirements finances and administration. and performance. of its stakeholders. Internal audit and external audit In addition, the CEO and CFO state RELEASE OF INFORMATION operate, perform and report as to the Board in writing that: separate, independent functions PUBLICATION SCHEME • the assurances given above Stanwell is committed to providing The Group Manager Internal and the integrity of Stanwell’s the public with information Audit and representatives of financial statements are founded about Stanwell in a timely and the Auditor-General meet on a sound system of risk open manner. periodically with the Audit and management, compliance As a Queensland Government Risk Management Committee and internal control which Owned Corporation, Stanwell without management present. implements, in all material has adopted the Queensland respects, the policies and Government’s ‘push’ model for processes adopted by the the routine and proactive release Board; and of information into the public • to the extent that they relate to domain via Stanwell’s Release financial reporting, the risk of Information Publication management, compliance Scheme, which can be and internal control systems are viewed at www.stanwell.com. operating effectively in all material respects and that nothing has occurred since 30 June 2016 that would materially change the above statements.

STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE 31 CORPORATE GOVERNANCE (CONTINUED)

PRINCIPLE 6 – RESPECT THE PRINCIPLE 7 – RECOGNISE AND Stanwell’s Trading Risk RIGHTS OF SHAREHOLDERS MANAGE RISK Management Policy provides the governance framework that ensures Stanwell is committed to ensuring Risk Management originates that electricity market and credit that its shareholding Ministers at Board level and cascades risk exposures are measured, are continually and appropriately through the corporation via policies, managed and controlled within informed of its performance delegated authorities and the parameters of Stanwell’s and activities. Communication committee structures. The Board risk appetite. is undertaken through a number sets the foundation for risk of forums. These include: management via its articulated All breaches of Stanwell’s risk Risk Appetite Statement. It is appetite are reported through to • Statement of Corporate also responsible for overseeing the Board via the Stanwell Intent, Corporate Plan and the establishment of systems compliance breach reporting Quarterly Reports. The for risk management including mechanism and/or the reporting Statement of Corporate Intent the key frameworks and mechanisms contained within each and Corporate Plan provide a policy components. underlying policy framework. transparent set of agreed performance criteria and Stanwell’s Risk Appetite Statement Stanwell has a robust system of risk strategic objectives on which to articulates the level of risk the management and internal control report to shareholding Ministers Board is willing to accept in pursuit which, together with its governance and their representatives via the of Stanwell’s strategic objectives. structure, is designed to ensure that Quarterly Report. The Statement The Risk Appetite Statement the material risks of conducting its of Corporate Intent (with considers the most significant risks business are effectively managed. commercially sensitive to which Stanwell is exposed and The Audit and Risk Management information deleted) is tabled in provides guidance on the approach Committee provides advice Parliament and published on to managing these risks. These and assistance to the Board by Stanwell’s website; guiding principles are based on the regularly monitoring Stanwell’s key drivers of value creation and • an Annual Report (containing systems of risk management, value destruction and include a those matters outlined in Section internal control, compliance and mixture of both qualitative and 120 of the GOC Act) is prepared regulatory management. and issued to shareholders and quantitative measures. Stanwell’s Business Resilience and interested stakeholders and is At an aggregate level, Stanwell’s Risk Management Policy, Risk published on Stanwell’s website; risk appetite is qualitatively defined Management Framework and Risk and as ‘conservative’. However, as Evaluation Matrix are based upon the electricity market within which • briefings to shareholding ISO 31000:2009 Risk Management Stanwell operates is characterised Ministers and their Principles and Guidelines. representatives are conducted by a propensity for high price on a regular basis for the volatility often driven by unforeseen The Risk Management Framework purpose of disclosing business events and external factors that clearly communicates and provides activities and performance drive supply/demand imbalance, the necessary foundations and against agreed targets. it is consequentially exposed to organisational arrangements for and accepts, a higher level of risk managing risk across the business. in order to achieve its gross The Framework outlines how profit targets. Stanwell ensures that it manages risk consistently within its risk appetite. It illustrates how risk management is embedded in Stanwell’s organisational systems to ensure it is integrated at all levels and work contexts.

32 STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE It describes the elements and Stanwell’s Compliance and At 30 June 2016, the People processes that guide all levels of Regulatory Management System and Safety Committee consisted the organisation in effectively is based upon the International of three members. Other directors managing risk, making it part of Standard ISO 19600:2014 who are not members of the day-to-day decision-making and Compliance management systems committee and other senior business practices. – Guidelines. The Board approved executives attend meetings Compliance and Regulatory by invitation. Risk controls and associated Management Policy outlines actions are captured and monitored Details of the remuneration paid Stanwell’s commitment to ensuring using a corporation-wide to directors and senior executives that the organisation is able to meet information technology tool which are set out in note 20 on page 109 all of its compliance obligations integrates reporting of events, and page 110 of this report. and appropriately respond to any audits, risks, compliance obligations compliance and/or regulatory and breach reporting. GOVERNMENT OWNED issues. Any compliance issue CORPORATIONS ACT Stanwell conducts annual reviews and/or breach is recorded, REQUIREMENTS of its business interruption risks monitored and escalated using and implements appropriate a corporation-wide information GOVERNMENT DIRECTIONS AND planning to mitigate those risks. technology tool, which ensures NOTIFICATIONS These plans are tested by periodic prompt attention and analysis. Section 120(e) of the GOC Act business continuity and disaster requires Stanwell to provide in recovery exercises that are PRINCIPLE 8 – REMUNERATE its Annual Report particulars of any designed to provide a sound degree FAIRLY AND RESPONSIBLY directions and notifications given of resilience should Stanwell need The fees paid to directors for to Stanwell by shareholding to respond to and recover from a serving on the Board and on the Ministers that relate to the relevant crisis while continuing to maintain committees of the Board are financial year. business critical operations. determined by shareholding During the 2015/16 financial year, Stanwell’s response to the risk of Ministers and advised to Stanwell. Stanwell’s shareholding Ministers fraud is consistent with the Crime The People and Safety Committee did not issue any formal directions and Corruption Commission’s oversees, and provides advice to or notifications. guide to best practice in fraud and the Board on, employment DIVIDEND POLICY corruption control and includes strategies and frameworks. It makes regular fraud risk assessments, recommendations to the Board on Stanwell’s Dividend Policy takes the annual review of the fraud Enterprise Agreement (EA) into account the return that control plan and the effective frameworks as well as remuneration shareholders expect from operation of fraud prevention and settings for non EA employees and their investment and the cash detection controls. In addition, the the remuneration and other terms of requirements of the business. internal audit function performs employment for senior executives. forensic data analysis, When increasing senior executive unannounced audits and a rolling remuneration or awarding incentive program of audits focusing on the payments, the Board must comply effectiveness of fraud prevention with the Policy for Government and detection controls. Owned Corporations Chief and Senior Executive Employment Arrangements Version 2.

STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE 33 CORPORATE GOVERNANCE (CONTINUED)

On 16 May 2016, the Board • the Plant Engineer Power of Stanwell recommended to Systems travelled to Shanghai, shareholders a dividend amount China to conduct a quality equivalent to 100 per cent of inspection of the new generator Stanwell’s net profit after tax and transformer protection adjusted for asset impairment system equipment for Stanwell reversals resulting from the testing Power Station; of asset carrying values. • the CFO and the General For the 2015/16 financial year, Manager Corporate Services Stanwell will also pay a special travelled to London, United dividend of $150.0 million. Kingdom to present to London based insurers offering Industrial OVERSEAS TRAVEL and Special Risk insurance During the 2015/16 year: cover; and • the Tarong Power Station Asset • the CFO travelled to Boston, Engineer and the Instrument United States of America, to Control and Technical Support attend the Harvard Business Engineer attended the factory School’s High Potential acceptance and full integration Leadership Program. testing of the Tarong North CORPORATE ENTERTAINMENT AND Power Station Integrated Control HOSPITALITY (INDIVIDUAL EVENTS and Monitoring System Migration OVER $5,000) Project at the Toshiba Fuchu Factory, Tokyo, Japan; Event Date Cost ($) Energy Trading 26 5,053 • the Principal Turbine Engineer and Commercial November and the Turbine Asset Engineer Strategy Bowls Day 2016 travelled to Tokyo, Japan to meet – Industry charity fundraising event. various Toshiba design engineers to discuss issues in relation to the remaining life of the Toshiba supplied equipment at the Tarong North Power Station;

34 STANWELL ANNUAL REPORT 2015/16 | CORPORATE GOVERNANCE FINANCIAL RESULTS STANWELL CORPORATION LIMITED ABN 37 078 848 674 • 30 JUNE 2016

TABLE OF CONTENTS Directors’ report 36 These financial statements are Auditor’s independence declaration 43 the financial statements of the consolidated entity consisting Financial statements of Stanwell Corporation Limited Statements of comprehensive income 44 and its subsidiaries. The financial Balance sheets 45 statements are presented in the Statements of changes in equity 47 Australian currency. Statements of cash flows 50 Stanwell Corporation Limited Notes to the consolidated financial statements is a company limited by shares, Summary of significant accounting policies 52 incorporated and domiciled in Australia. 1 Financial risk management 56 2 Revenue 63 Its registered office is: 3 Other income and expense items 64 Stanwell Corporation Limited 4 Cash and cash equivalents 65 42 Albert Street Brisbane QLD 4000 5 Trade and other receivables 66 6 Inventories 66 Stanwell Corporation Limited is 7 Derivative financial instruments 68 a Queensland based integrated wholesale energy provider. 8 Available-for-sale assets 76 9 Property, plant and equipment 78 The financial statements were authorised for issue by the directors 10 Intangible assets 83 on 30 August 2016. The directors 11 Exploration and evaluation 85 have the power to amend and 12 Retirement benefit surplus 85 reissue the financial statements. 13 Other assets 89 14 Trade and other payables 91 15 Finance lease liabilities 92 16 Provisions 93 17 Borrowings 96 18 Tax 98 19 Reserves 104 20 Key management personnel disclosures 105 21 Joint operations 110 22 Contingencies 111 23 Commitments 112 24 Related party transactions 113 25 Events occurring after the reporting period 114 Directors’ declaration 115 Independent auditor’s report to the members 116

STANWELL ANNUAL REPORT 2015/16 | CHAPTER TITLE 35 Stanwell Corporation Limited DIRECTORS’ REPORT 2016

The directors present their report on PRINCIPAL ACTIVITIES the consolidated entity consisting of The Group’s principal activity during Stanwell Corporation Limited and its the 2016 financial year was the subsidiaries (together referred to as operation of a diversified energy the ‘Group’) at the end of the 2016 portfolio which included: financial year. • the generation and sale of electricity; and • trading of gas, coal and electricity products.

FINANCIAL RESULTS 2016 2015 $’000 $’000 Profit before income tax 243,204 365,233 Profit after income tax 170,235 254,936 Profit attributable to members of the Group 170,235 254,936

DIVIDENDS – STANWELL While these initiatives achieved tangible The Queensland Government CORPORATION LIMITED results, the Total Recordable Injury expects the Group to operate its The directors recommend that a Frequency Rate, which reflects the assets efficiently and effectively to dividend of $311,629,000 be paid proportion of lost time and medical maximise value and to deliver stable in respect of the 2016 financial year treatment injuries sustained at our and appropriate cash returns which (2015: $89,930,000). operating sites and corporate offices will contribute to the reduction in against total hours worked, deteriorated Government debt. REVIEW OF OPERATIONS over the course of the reporting Central to achieving this will be the Safety period. This result does not reflect Group’s ability to evolve its business Safety is a core value and the focus the significant effort and commitment while continuing to derive value from its this year is on our commitment to shown across the Group’s operating existing revenue streams. Accordingly, achieving and sustaining Zero Harm sites to improve and effectively manage the Group’s strategy seeks to balance Today. Tragically, on 29 November health and safety risks. the energy market objectives of 2015, a worker was fatally injured in reliability, sustainability and affordability Strategy an incident at Tarong North Power while responding to rapidly changing With changing demand patterns, Station. The Group provided assistance electricity market dynamics. The growth of the liquefied natural to the relevant authorities who strategy seeks to achieve this by: gas industry (LNG) and continued investigated the incident. The Group development of the renewable energy • responding proactively to consumer has finalised its internal investigation industry, the Australian electricity demand for energy products; and the recommendations from that market is undergoing a period of • maximising the flexibility and investigation are being implemented. unprecedented change. competitiveness of the Group’s In support of Stanwell’s commitment The challenge for State and Federal existing portfolio of assets; and to Zero Harm Today, a number of Governments and for the energy sector • participating in the renewable energy initiatives were implemented during is to ensure that the transition process market where there is a commercial the reporting period including an to lower emission technologies occurs benefit to do so. awareness program on the impacts in an economically viable way that The Group will continue to focus of alcohol and other drugs in the allows Australian consumers to continue on achieving operational efficiencies, workplace, strengthening the Group’s to have access to an efficient, affordable improving safety and simplifying safety leadership skills and investing and reliable supply of electricity. business systems to help enable in improvements to the physical work the implementation of its strategy. environment and systems.

36 STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT Stanwell Corporation Limited DIRECTORS’ REPORT 2016

Market Operations Meandu Mine’s surface rights The Group delivered a strong Net Profit Against a back drop of increasing extension is a key project that will after Tax result (excluding impairment demand in the Queensland market, the secure continued access to sufficient reversal) of $161.6 million, more than Group has focused on ensuring the economic coal for the Tarong Power a 28 per cent increase compared with maximum availability to generate during Stations. The extension area of the 2014/15 result of $125.9 million. high demand periods. As a result, 130 hectares is adjacent to two current Including a special dividend of during the peak summer demand mine pits. Regulatory approvals are $150.0 million, the Group will provide period, the Group recorded availability progressing and mining operations total dividends of $311.6 million to and reliability factors of 90 per cent and are expected to commence in the the Queensland Government. 98 per cent respectively. extension area within 12 months. On 1 February 2016, a new 30-minute During the reporting period, the Group The Group exercised an option to record was achieved when electricity invested $203.3 million to maintain extend the Meandu Mine Mining demand peaked at 9,097 megawatts. plant integrity and performance. This Services agreement with Downer The LNG industry has been the major included capital expenditure of more Mining for two years with a nominal driver behind the increase in average than $100 million on power station unit expiry of 2020. The contract extension daily demand in Queensland which overhauls, including the successful has achieved a reduction in contract averaged 6,174 megawatts in 2015/16 return to service of Tarong Power administration costs and supports a compared with 5,920 megawatts in Station Unit 2 after three and a half longer-term focus on improving mine 2014/15. years in cold storage. planning, equipment utilisation, safety The rising demand resulted in an During the mid-life overhaul of and environmental performance. All average Queensland wholesale Tarong North Power Station, the units at the Group’s Mica Creek Power electricity price of $59.99 per control system was upgraded and a Station in Mount Isa have been placed megawatt hour, compared with new rotor and turbine were installed into cold storage until the site’s sole $52.52 per megawatt hour in 2014/15. to restore the unit to its full capacity customer requires electricity for mining operations from 2017 onwards. The The increase in demand was a factor of 443 megawatts. Group is continuing to explore options in the Group’s decision to have the In August 2015, Stanwell Power to maximise the value of this asset. Tarong power stations’ five units Station’s Unit 1 was taken off-line for available after placing two units in cold a major overhaul (including replacing SIGNIFICANT CHANGES IN THE storage in 2012. Increased electricity condenser tubing) after a world record STATE OF AFFAIRS demand is forecast to continue until the 1,087 days of continuous operation. There have been no significant changes LNG industry reaches full production In June 2016, the Group commenced in the state of affairs of the Group and then this demand is expected to the overhaul of Stanwell Power during the 2016 financial year. level out. Station Unit 2. During this outage, the The Group’s priority over the next condenser tubes were replaced and the MATTERS SUBSEQUENT TO THE three to five years is to capitalise on control system was upgraded. These END OF THE FINANCIAL YEAR any opportunities that occur in the components will also be progressively There has been no matter or wholesale electricity market as a result upgraded on the remaining Stanwell circumstance which has arisen since of the tightening between electricity Power Station units during their next 30 June 2016 that has significantly supply and demand. scheduled major overhaul. affected, or may significantly affect: Kareeya Hydro Power Station’s Unit (a) the Group’s operations in future 1 underwent a major overhaul and financial years; Barron Gorge Hydro Power Station (b) the results of those operations was taken off-line for five weeks to in future financial years; or allow the cleaning and repair of the (c) the Group’s state of affairs in 411 metre penstock (which transports future financial years. water from Kuranda Weir to the power station for electricity generation).

STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT 37 Stanwell Corporation Limited DIRECTORS’ REPORT 2016

ENVIRONMENTAL REGULATION During the 2015 reporting period, DIRECTORS The Group is subject to a broad there was an increase in the volume The following persons were directors range of environmental regulation and concentration of saline and of Stanwell Corporation Limited during under both Commonwealth and State acidic water streams in Meandu the whole of the financial year and up legislation. The primary environmental Mine’s drainage system. This caused to the date of this report: Commonwealth legislation governing releases of water from within the mining • Dominic Condon; and the Group’s activities in Queensland is area that exceeded the electrical • Russell Kempnich the Wet Tropics of Queensland World conductivity limit specified in Meandu The following persons were directors Heritage Area Conservation Act 1994 Mine’s Environmental Authority. These of Stanwell Corporation Limited during and the primary State legislation is exceedances were reported to the part of the financial year: the Environmental Protection Act 1994 regulator which issued the Group with and the Wet Tropics World Heritage a Penalty Infringement Notice and a • Dr Ralph Craven was non-executive Protection and Management Act 1993. fine of $11,385 in December 2015. Chairman and director for the period 1 October 2015 and up The Group operates under an The non-compliant water releases to the date of this report; Environmental Management System caused no environmental harm as and a Compliance and Regulatory they were contained entirely within the • Jacqueline King was a Management System. Together, Tarong site. There were no reportable non-executive director for the these systems provide the framework releases of high conductivity water period 1 October 2015 and up to and guidance for the management during the 2016 reporting period. the date of this report; of environmental activities, enabling Discussions and meetings have • Karen Smith-Pomeroy was a the effective and efficient provision occurred with the Regulator on the non-executive director for the of environmental advice, and ensure Group’s short and long-term actions period 1 October 2015 and up to that the appropriate monitoring and to manage the acid, saline and the date of this report; reporting of environmental compliance metalliferous drainage across the Tarong • Shane Charles was Chairman occurs. As a result, during the period and Meandu sites. As provided in the and non-executive director for covered by the report, the directors Environmental Protection Act 1994, the the period 1 July 2015 to have remained fully informed of any regulator has requested that the Group 30 September 2015; and breaches of environmental regulation prepare an Environmental Evaluation • Paul Breslin was a non-executive that required notification to a regulator. with the primary focus of determining director for the period 1 July 2015 During the reporting period, the the source and extent of the acid mine to 30 September 2015. Group reported seven environmental drainage at Meandu Mine and the compliance breaches to the regulator. potential for environmental harm. These were the result of a failure to Carbon Emissions Reporting report and monitor against environmental and Expenditure obligations across Stanwell’s sites. The Group is subject to the reporting No environmental harm was caused requirements of the National by these reporting breaches. Greenhouse and Energy Reporting Act 2007 (NGER Act). The NGER Act requires the Group to report its annual greenhouse gas emissions and energy production and use. The Group began reporting under the NGER Act during the 2009 financial year and is now in its seventh reporting year. The Group has implemented systems and processes for the collection and calculation of the data required and submits annual reports to the Clean Energy Regulator.

38 STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT Stanwell Corporation Limited DIRECTORS’ REPORT 2016

INFORMATION ON DIRECTORS Dominic Joseph Condon Jacqueline Elizabeth King B.Com, B.Econ, GAICD, MBA, WHS, TDD, GAICD, Dr Ralph Howard Craven independent non-executive Director. independent non-executive Director. BE PhD, FIEAust, FIPENZ, FAICD, Chairman and independent Mr Condon was appointed a Ms King was appointed a non-executive Director. non-executive director of Stanwell on non-executive director of Stanwell 11 December 2014 and is a member on 1 October 2015 and is a member Dr Craven was appointed Chairman of the Audit and Risk Management of the People and Safety Committee. and non-executive director of Stanwell Committee. on 1 October 2015 and is a member Ms King has an extensive background of the Audit and Risk Management Mr Condon is managing director and in industrial relations, work health and Committee and People and Safety founding partner of Chase Commercial, safety, and skills and training at senior Committee. a commercial real estate agency levels working in industry, government specialising in industrial, commercial and peak councils. She is a Graduate Dr Craven has broad experience in and retail property in the wider South Member of the Australian Institute of energy, resources, infrastructure and East Queensland market. Company Directors and is currently agribusiness, having worked in these studying her Bachelor of Laws (Honours) sectors for more than 35 years. His Prior to entering the commercial at Queensland University of Technology. professional background encompasses property market more than 12 years electricity and gas businesses, mining, ago, Mr Condon worked as an Ms King provides consultancy commodities trading, the management accountant in Brisbane. services to Future Skills, an industry of large scale system operations at the Mr Condon is a fellow of the Urban training company specialising in national level and the delivery of major Development Institute of Australia, the delivery of post trade electrical infrastructure projects. Graduate Member of the Australian and health and safety training in the energy and construction industries in Dr Craven is currently a non-executive Institute of Company Directors and Queensland and Northern Territory. director and Chairman of Genex Power member of the Real Estate Institute She is also a consultant to Future Skills Limited and a non-executive director of Queensland. International, which is contracted by of Senex Energy Limited and AusNet Russell James Kempnich the Commonwealth Government to Services Limited. Some of his previous BEng (Mech), MAICD, provide skills assessments for overseas roles include being a non-executive independent non-executive Director. qualified electrical workers seeking director and Chairman of Invion Limited to migrate to Australia for visa and and Corporation Limited, Mr Kempnich was appointed a licensing purposes. Ms King was the non-executive Deputy Chairman of non-executive director of Stanwell on founding Chief Executive Officer of Arrow Energy Limited, non-executive 1 July 2011 and is Chairman of the both organisations before stepping director of Mitchell Services Limited People and Safety Committee. down from her role in 2015. Ms King and a non-executive director on the Mr Kempnich is an engineer with has previously held the position of Council Board of the International more than 30 years’ experience in Assistant Director of the Australian Electrotechnical Commission. coal resource evaluation, process Council of Trade Unions’ Education plant design, construction and Dr Craven has international experience and Campaign Centre, Senior Industrial commissioning gained both in Australia from roles in Switzerland, Canada Officer of the Australian Council of and internationally. and as Chief Executive Officer of Trade Unions, and senior roles in the Transpower New Zealand Limited. Mr Kempnich was a founding partner, Queensland Government including Other senior executive roles include past Managing Director, non-executive Senior Policy Advisor to the Minister being General Manager of Shell Coal Chairman and non-executive director of for Employment, Training and Industrial Pty Ltd and Executive Director of the former Australian Stock Exchange Relations and Chief of Staff to the NRG Asia Pacific Limited. listed Sedgman Limited. Minister for Industrial Relations.

STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT 39 Stanwell Corporation Limited DIRECTORS’ REPORT 2016

Karen Elisabeth Smith-Pomeroy Paul Breslin Philips David FIPA, FFin, GIA(Cert), GAICD, BSc (Hons), BEcon EMBA, MEng (Studies), BSc independent non-executive Director. independent non-executive Director. (Engineering), GAICD, MIE(Aust), CAHRI, Ms Smith-Pomeroy was appointed Mr Breslin was appointed a Acting Executive General a non-executive director of Stanwell non-executive director of Stanwell Manager Production. on 1 October 2015 and is Chairman on 5 July 2012 and was Chairman Mr David has held several of the Audit and Risk Committee. of the Audit and Risk Management leadership roles in Stanwell since Ms Smith-Pomeroy has more Committee. The term of Mr Breslin’s joining in July 2011 and has more than 30 years’ experience in the appointment as a director expired than 34 years of experience in financial services sector, and was on 30 September 2015. the Queensland energy industry. most recently a senior executive with He specialises in the operation, INFORMATION ON OFFICERS Suncorp Group, including a period maintenance, asset management as Chief Risk Officer of Suncorp Richard Paul Van Breda and performance management of Bank. She has a specialty in risk BCompt (Hons), CA(Z), power stations spanning a diverse and governance and a detailed CA(Aus), Dip. Fin. Serv, GAICD, range of fuel sources, including coal, understanding of a number of Chief Executive Officer. gas, biomass, hydro and wind. industry sectors. Mr Van Breda was appointed Ian James Gilbar Ms Smith-Pomeroy is currently a Chief Executive Officer in July 2012. BEng (Electrical), member of Queensland Treasury Mr Van Breda has been involved Acting Executive General Manager Corporation Capital Markets Board, in the energy industry since 2001. Safety and Asset Services. and a non-executive director of He originally joined Stanwell in 2002 As Acting Executive General Manager InFocus Wealth Management and was appointed Chief Financial Safety and Asset Services, Mr Gilbar and National Affordable Housing Officer in 2005. He joined Tarong is responsible for managing the Consortium Limited. In addition, she is Energy Corporation Limited in the role organisation’s health, safety and a Queensland Advisory board member of Chief Financial Officer in April 2008. environment, asset management, of Australian Super and an audit After the restructure of the Queensland engineering services, and asset project committee member of Queensland Government owned electricity delivery and governance. Department of Infrastructure, Local generators in July 2011, he was Mr Gilbar has worked for Stanwell for Government and Planning. appointed Chief Financial Officer more than 17 years and has 30 years’ Ms Smith-Pomeroy is a former director at Stanwell. experience in the electricity industry of Corporation Limited Mr Van Breda is a non-executive in various engineering and technical and CS Energy Limited. Director of the Competitive Energy management roles. Association Limited. Shane Paul Charles LLB, Prior to this, Mr Van Breda was a Chairman and independent partner with Deloitte Zimbabwe and non-executive director. spent three years with Anglo American Zimbabwe, which held a diverse range Mr Charles was appointed Chairman of mining and manufacturing interests. and non-executive director of Stanwell on 11 December 2014. He was a member of the Audit and Risk Management Committee and People and Safety Committee. Mr Charles resigned from the role of Chairman and non-executive director on 30 September 2015.

40 STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT Stanwell Corporation Limited DIRECTORS’ REPORT 2016

Jennifer Jayne Gregg As Stanwell’s Chief Financial Officer, COMPANY SECRETARY MBA, BA, Grad Cert (BAdmin), GAICD, Mr O’Rourke is responsible for the Karen Anne Buckley Executive General Manager – internal functions of financial risk BA, Grad Cert Law, GAICD, GIA (Cert). Business Services. and services, business reporting and Ms Buckley was appointed company Before commencing with Stanwell commercial analysis, secretariat, secretary on 1 July 2011. Ms Buckley in July 2011, Ms Gregg worked with corporate services, legal, internal audit has extensive governance experience of Tarong Energy Corporation Limited and supply chain management. both listed companies and Government in the role of General Manager People Stephen Gray Quilter Owned Corporations’ statutory and and Communication. Through her BEng (Mech), MBA, regulatory compliance obligations. diverse career, Ms Gregg has gained Executive General Manager Energy experience in the utilities, human Trading and Commercial Strategy. Michael Thomas O’Rourke services and health sectors in broader LLB, BCom, GDip AppFin, GDip CSA. leadership roles and within the human Mr Quilter joined Stanwell in February Mr O’Rourke was appointed company resources field. 2012 as Swanbank Power Station Manager and was appointed General secretary in 2002. Mr O’Rourke is Ms Gregg was appointed to her current Manager of Stanwell’s gas and hydro the Chief Financial Officer of Stanwell role of Executive General Manager generation portfolio in May 2013. In a Corporation Limited. Business Services in September career spanning more than 20 years in 2012. Her current responsibilities MEETINGS OF DIRECTORS the energy industry both in Queensland include community and stakeholder The numbers of meetings of the and New South Wales, Mr Quilter has engagement, information and business Company’s Board of directors and worked in various operational roles systems, human resource management of each Board committee held during including senior engineering positions. and organisational development. the 2016 financial year, and the Mr Quilter was appointed Executive numbers of meetings attended by Michael Thomas O’Rourke General Manager Energy Trading and each director were: LLB, BCom, GDip AppFin, GDip CSA, Commercial Strategy in July 2016. Chief Financial Officer. Mr Quilter was Acting Executive General Mr O’Rourke joined Stanwell in 1998 Manager Energy Trading and Commercial and has held a number of management Strategy during the year ended 30 June positions in the areas of legal, marketing 2016. In this role, he is responsible for and trading, secretariat, corporate the trading of Stanwell’s generation in communication and land and property the National Electricity Market. He also management. oversees the development of commercial strategies targeted at diversifying In September 2012, Mr O’Rourke revenue streams and creating value was appointed to the position of from Stanwell’s various fuel resources. Chief Financial Officer.

Meetings of Board committees Board meetings People and Audit and Risk of directors Safety Committee Management Committee A B A B A B Dr Ralph Craven 7 7 2 2 3 3 Dominic Condon 9 9 4 4 Russell James Kempnich 9 6 3 3 Jacqueline King 7 7 2 2 Karen Smith-Pomeroy 7 7 3 3 Shane Charles 2 2 1 1 1 1 Paul Breslin 2 2 1 1

A = Number of meetings held during the time the director held office or was a member of the committee during the year. (This includes one meeting held at short notice). B = Number of meetings attended.

STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT 41 Stanwell Corporation Limited DIRECTORS’ REPORT 2016

INDEMNIFICATION AND AUDITOR’S INDEPENDENCE INSURANCE OF OFFICERS DECLARATION A copy of the auditor’s independence Indemnification and insurance declaration as required under section In accordance with its Constitution, 307C of the Corporations Act 2001 is the Group has entered into a standard set out on the following page. form Deed of Access, Insurance and Indemnity with the current directors ROUNDING OF AMOUNTS of the Group to indemnify them to the The Company is of a kind referred to maximum extent permitted by law in Instrument 2016/191, issued by the against all liabilities which they may Australian Securities and Investments incur in the performance of their duties Commission, relating to the ‘rounding as directors of the Group, except for off’ of amounts in the directors’ report. a liability for a pecuniary penalty order Amounts in the directors’ report have or a compensation order under the been rounded off in accordance with Corporations Act 2001. that Instrument to the nearest thousand The indemnity is made available to dollars, or in certain cases, to the current and former directors of the nearest dollar. Group for a period of seven years from This report is made in accordance with the date of their resignation. To the a resolution of directors. extent permitted by law, the indemnity covers liability for legal costs. In accordance with the standard form Deed of Access, Insurance and Indemnity referred to above, the Dr Ralph Craven Group has, during the 2015 financial Non-executive Chairman year, paid an insurance premium in respect of the directors and executive officers of the Group. In accordance with normal commercial practice, the insurance contract prohibits disclosure Karen Smith-Pomeroy of the nature or the liability covered Non-executive Director by, or the amount payable under, the contract of insurance. 30 August 2016 No claims have been made by Brisbane any director or officer of the Group pursuant to these indemnities.

42 STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ REPORT Stanwell Corporation Limited AUDITOR’S INDEPENDENCE DECLARATION 2016

To the Directors of Stanwell Corporation Limited

This auditor’s independence declaration has been provided pursuant to section 307C of the Corporations Act 2001.

Independence Declaration As lead auditor for the audit of Stanwell Corporation Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been - (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit.

N GEORGE CPA (as Delegate of the Auditor-General of Queensland)

Queensland Audit Office Brisbane

STANWELL ANNUAL REPORT 2015/16 | AUDITOR’S INDEPENDENCE DECLARATION 43 Stanwell Corporation Limited STATEMENTS OF COMPREHENSIVE INCOME 2016

44 STANWELL ANNUAL REPORT 2015/16 | STATEMENTS OF COMPREHENSIVE INCOME 2016 Stanwell Corporation Limited BALANCE SHEETS 2016

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46 STANWELL ANNUAL REPORT 2015/16 | BALANCE SHEETS 2016 Stanwell Corporation Limited STATEMENTS OF CHANGES IN EQUITY 2016

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114 STANWELL ANNUAL REPORT 2015/16 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2016 Stanwell Corporation Limited DIRECTORS’ DECLARATION 2016

In the directors’ opinion: (a) the financial statements and notes set out on pages to are in accordance with theCorporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in the corporate structure. The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of directors.

Dr Ralph Craven Karen Smith-Pomeroy Non-executive Chairman Non-executive Director

Brisbane 30 August 2016

STANWELL ANNUAL REPORT 2015/16 | DIRECTORS’ DECLARATION 115 Stanwell Corporation Limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 2016

Independent auditor’s report to the members of Independence Stanwell Corporation Limited The Auditor-General Act 2009 promotes the independence I have audited the accompanying financial report of Stanwell of the Auditor General and all authorised auditors. Corporation Limited, which comprises the balance sheets as The Auditor-General is the auditor of all Queensland public at 30 June 2016, the statements of comprehensive income, sector entities and can be removed only by Parliament. statements of changes in equity and statements of cash The Auditor-General may conduct an audit in any way flows for the year then ended, notes comprising a summary considered appropriate and is not subject to direction of significant accounting policies and other explanatory by any person about the way in which audit powers are information, and the directors’ declaration of the company to be exercised. and the consolidated entity comprising the company and the The Auditor-General has for the purposes of conducting an entities it controlled at the year’s end or from time to audit, access to all documents and property and can report time during the financial year. to Parliament matters which in the Auditor General’s opinion Directors’ Responsibility for the Financial Report are significant. The directors of the company are responsible for the In conducting the audit, the independence requirements preparation of the financial report that gives a true and fair of the Corporations Act 2001 have been complied with. I view in accordance with Australian Accounting Standards confirm that the independence declaration required by the and the Corporations Act 2001, and for such internal control Corporations Act 2001, which has been given to the directors as the directors determine is necessary to enable the of Stanwell Corporation Limited, would be in the same terms preparation of the financial report that gives a true and fair if given to the directors as at the time of this auditor’s report. view and is free from material misstatement, whether due to fraud or error. Opinion In my opinion the financial report of Stanwell Corporation Auditor’s Responsibility Limited is in accordance with the Corporations Act 2001, My responsibility is to express an opinion on the financial including - report based on the audit. The audit was conducted in (i) giving a true and fair view of the company’s and accordance with the Auditor-General of Queensland Auditing consolidated entity’s financial position as at 30 June Standards, which incorporate the Australian Auditing 2016 and of their performance for the year ended on Standards. Those standards require compliance with that date; and relevant ethical requirements relating to audit engagements (ii) complying with Australian Accounting Standards and and that the audit is planned and performed to obtain the Corporations Regulations 2001. reasonable assurance about whether the financial report is free from material misstatement. Other Matters - Electronic Presentation of the Audited An audit involves performing procedures to obtain audit Financial Report evidence about the amounts and disclosures in the Those viewing an electronic presentation of these financial financial report. The procedures selected depend on the statements should note that audit does not provide auditor’s judgement, including the assessment of the risks assurance on the integrity of the information presented of material misstatement of the financial report, whether electronically and does not provide an opinion on any due to fraud or error. In making those risk assessments, information which may be hyperlinked to or from the the auditor considers internal control relevant to the financial statements. If users of the financial statements are company’s preparation of the financial report that gives concerned with the inherent risks arising from electronic a true and fair view in order to design audit procedures presentation of information, they are advised to refer to the that are appropriate in the circumstances, but not for the printed copy of the audited financial statements to confirm purpose of expressing an opinion on the effectiveness of the the accuracy of this electronically presented information. company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. N GEORGE CPA (as Delegate of the Auditor-General of Queensland) Queensland Audit Office Brisbane

116 STANWELL ANNUAL REPORT 2015/16 | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS Registered office Level 13, 42 Albert Street GPO Box 800 Brisbane Qld 4001 stanwell.com