Statement of Corporate Intent 2018/19

7

STATEMENT OF CORPORATE INTENT 2018/19

with deletions of commercially sensitive material

Prepared by the Directors and management of Stanwell Corporation Limited for shareholding Ministers:  The Hon. Jackie Trad MP – Deputy Premier, Treasurer and Minister for Aboriginal and Torres Strait Islander Partnerships  The Hon. Anthony Lynham MP – Minister for Natural Resources, Mines and Energy • Stanwell Corporation Limited | Page 1 stanwell ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM TABLE OF CONTENTS PERFORMANCE AGREEMENT

PERFORMANCE AGREEMENT ...... 2 This Statement of Corporate Intent and all attachments are presented in accordance with Chapter 3, Part 8 of the Government Owned Corporations Act TOGETHER WE CREATE ENERGY SOLUTIONS ...... 3 1993 (Qld) (GOC Act). KEY PERFORMANCE INDICATORS ...... 4 In accordance with Chapter 1, Part 3, Section 7 of the GOC Act, the Statement of RESPONSE TO DI RECTIONS ...... 5 Corporate Intent represents a formal performance agreement between the Board of Stanwell Corporation Limited (Stanwell) and its shareholding Ministers with respect PROGRESS AGAINST SHAREHOLDER MANDATE ...... 6 to the financial and non-financial performance targets specified for the financial KEY ASSUMPTIONS AND RISKS ...... 7 year. The Statement of Corporate Intent represents agreement to the major activities, objectives, policies, investments and borrowings of Stanwell for 2018/19. CAPITAL EXPENDITURE ...... 9 This Statement of Corporate Intent is consistent with Stanwell's Corporate Plan FINANCIAL STATEMENTS ...... 10 2018/19 to 2022/23, submitted to shareholding Ministers and agreed in accordance APPENDIX A: STANWELL EMPLOYMENT AND INDUSTRIAL with Chapter 3, Part 8 of the GOC Act. RELATIONS PLAN 2018/19 ...... 15 In signing this document, Stanwell's Board undertakes to achieve the targets APPENDIX B: SPONSORSHIP, ADVERTISING AND CORPORATE proposed in the Statement of Corporate Intent for 2018/19. Major changes to key ENTERTAINMENT ...... 21 assumptions that underpin the performance outcomes detailed in this Statement of Corporate Intent, and which come to the Board's attention during the year, will be APPENDIX C: FINANCIAL STATEMENTS - QUARTERLY ...... 22 brought to the attention of shareholding Ministers. Any modifications to this Statement of Corporate Intent will be dealt with in accordance with the GOC Act. Stanwell, including its subsidiaries, will comply with all relevant policies and guidelines as issued by shareholders and Government, and formal directions as received from time to time. This Statement of Corporate Intent is signed on behalf of all the directors in accordance with a unanimous decision of the Board of Stanwell.

The Hon. Jackie Trad MP Date The Hon. Anthony Lynham MP Date Deputy Premier, Treasurer and Minister for Natural Resources, Minister for Aboriginal and Mines and Energy Torres Strait Islander Commercial-in-Confidence Partnerships

This document contains confidential information relating to the business affairs of Stanwell Corporation Limited. Release of its content is subject to the provisions of the Right to Information Act 2009. Any unauthorised disclosure of material contained in this document may diminish the commercial value of that information and may have an adverse impact on Dr Ralph Craven Date the business, commercial and financial affairs of Stanwell Corporation Limited. Non-Executive Chairman

Stanwell Corporation limited Page 2 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM

TOGETHER WE CREATE ENERGY SOLUTIONS : Enable the business to de-liver : by providing a safe workplace; : engaging and retaining e The unprecedented change within the Australian energy market continues. : high performing workforce; : ensuring complianco with Balancing the energy market requirements of security, affordability and : apphcable laws. regulatJons sustainability is a central focus for governments and the energy industry. : and company policies; and • R._.,.i -•llvet~ lo : securing ongoing support for • ow U'llDmen demands : Stanwell's operations and onwgy producta At Stanwell, we believe we have an important role to play as the market transitions : bus1noH direction. . '°' to meet the changing needs of consumers. We know that the key to Queensland's growth and prosperity is having access to Flexible and reliable electricity at an affordable price. We also recognise the need to transition to competitive a lower carbon economy. portfolio Our strategy is built on flexibility and adapting to changing market conditions. At its core, our strategy seeks to: • ensure our plant can flex to meet the demand patterns of a market in transition to a higher proportion of renewable energy; • renew our portfolio by participating in renewable energy through direct involvement with renewable projects and by power purchase agreements with Optimise costs, project proponents, in line with the Shareholder Mandate; and improve performance efficiencies and • work with large customers and renewable project proponents to develop maximu1e the Oexibd1ty innovative energy products to meet the changing needs of the market. and competitiveness of our existing portfolio to meet market demand. We recognise that we serve the people of Queensland in two ways. They are both

our customers and our owners. The return we provide on their investment is used to Participate in low Investigate opportunities deliver a broad range of government programs and services. for Stanwell to participate carbon energy m low carbon energy To this end, we will leverage our portfolio of low cost, efficient and reliable power solutions. stations to offer long-term and competitively priced contracts. Our assets will support the National Electricity Market, particularly as older coal-fired power stations in other states are retired. At the same time, we will explore opportunities to evolve and renew our portfolio. This will ensure the Queensland Government through Stanwell is able to deliver on its renewable energy aspirations in a way which safeguards reliability and Short term: Long term: affordability. Achieve security and affordability Meet consumers' changing needs On 6 June 2017. the Queensland Government announced that it will investigate a restructure for consumers; and sustained by evolving our products and of Government owned generators to deliver improved market outcomes. The Government is market share for Stanwell, by services. considering establishing a separate 'CleanCo' generator to operate Queensland's existing renewable and low-emissions energy generation assets and develop new renewable energy running our low cost power stations projects. Stanwell is assisting the Queensland Government, as required, with its review. at sustained high capacity.

Stanwell Corporation limited Page 3 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM KEY PERFORMANCE INDICATORS

Indicator 2016/17 2017/18 2018/19 Corporate measures 2016/17 2017/18 2018/19 actual forecast actual forecast Sept Dec Jan Full year Sept Dec Jan Full YTD YTD YTD target YTD YTD YTD year target target target target target target target

Return on Gross Total recordable injury 5.32 <5.32 0 0 0 0 Fixed Assets (%) 1111 1111 1111 1111 frequency rate (TRIFR) • • Lost time injury Free Cash Flow 1.77 <1 .44 0 0 0 0 Yield (%)* I frequency rate (LT IFR) • • • • • • Environmental Return on gross fixed assets = enforcement actions 1.0 0 0 0 0 0 EBITDAIF Operating profit ($M) 540.1 609.1 142.9 275.7 455.6 552.3 Fair value of fixed assets+ Net additions+ Net working capital EBIT ($M) 594.6 798.9 179.0 346.5 558.0 683.9

EBITDAIF = Earnings before interest, tax, depreciation, amortisation, impairment EBITDAIF ($M) 691.6 801.8 192.5 374.5 602.9 749.0 and fair value movements; and excluding coal rebate revenue. Net profit after tax ($M) 375.2 519.0 11 6.9 224.8 362.9 441.7

Free cash flow ($M) 737.7 584.5 97.2 202.5 391.9 508.6 Free cash flow yield = Free cash fl ow Return on equity (%) 30.4 38.9 32.1 32.1 32.1 32.1 Fair value of fixed assets+ Net additions+ Net working capital Capital expenditure ($M) 160.8 145.8 64.1 129.0 156.8 208.6

Free cash flow = Operating cash flow (including working capital movements but excluding coal rebate revenue) less capital cash flow. Free cash flow is defined as cash flow available to pay tax and returns to debt/equity holders.

Stanwell Corporation Limited Page 4 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM RESPONSE TO DIRECTIONS

In late May and early June 2017, the Queensland Government announced a number of initiatives under its Powering Queensland Plan to address the energy market priorities of affordability, security and sustainability. Burdekin Hydro Power Station business case To give effect to these initiatives, Stanwell received a number of directions from On 2 June 2017, the Queensland Government announced its Powering North shareholding Ministers: Queensland plan that includes a $100 million reinvestment of Stanwell dividends to help fund a proposed hydro-electric power station at Burdekin Falls Dam. Return to service of Swanbank E Power Station On 13 June 2017, shareholding Ministers directed Stanwell to pay a dividend for On 31 May 201 7, shareholding Ministers issued a direction to Stanwell under the 2016/17 equivalent to 100 per cent of its audited adjusted Net Profit after Tax Electricity Act 1994. Citing its concern about the impact of increasing wholesale and (NPAT), adjusting the NPAT to reflect the retention of $100 million towards the cost retail electricity prices, the Queensland Government directed Stanwell to "undertake of the development of the Burdekin Hydro Power Station. all necessary actions in order to return Swanbank E Power Station to service from 1 January 2018".

I•--... - I .. ... - - .- ...... , • • - •• - ...... -ir -

On 4 June 2018, shareholding Ministers issued a direction to Stanwell under the ~ lectricity Ac_t 1994 direc~i~g Swanba~k E Power Statio~ to be available _for dispa~ch

Electricity bidding On 6 June 2017, shareholding Ministers issued a direction to Stanwell under the Electricity Act 1994 in relation to offers of ele · · iiilllili.perator during peak periods

On 27 October 201 7, shareholding Ministers issued a new direction to Stanwell under the · · · lines for generation capacity and pricing On 29 March 2018, shareholding Ministers issued a further direction to Stanwell under the El,,.,..t,.,,..,,,, · · · · or generation capacity and pricing . Stanwell has strictly complied with the spirit and intent of these shareholder directions.

Stanwell Corporation limited Page 5 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM PROGRESS AGAINST SHAREHOLDER MANDATE 1. Meeting or exceeding efficiency saving targets of $111 million (over the five years 2015/16 to 2019/20) The Shareholder Mandate (received on 19 July 2016) sets out shareholders' Since July 2016, Stanwell has made significant progress towards the efficiency expectations for Stanwell over the period 2015/16 to 2018/19. savings target outlined in the Shareholder Mandate (as measured against the Shareholders expect Stanwell to operate its generation business as efficiently and 2015/16 and 2016/17 targets submitted in the 2015/16 Corporate Plan). A range of · · • <:>v1,c:,n n,n · • management initiatives have ensured Stanwell is on track to deliver on this efficiency target: • management efficiencies in mining operations to reduce fuel costs; • a business-wide focus on reducing operating and corporate costs; and Specific areas of improvement have been identified for Stanwell. These are: • reductions in capital expenditure, particularly in relation to the deferral of capital projects, as well as mine related capital expenditure. 1 ■ Meeting or exceeding annual efficiency saving targets as detailed in the Shareholder Mandate. These are in addition to savings identified in the 2015/16 Efficiency saving 2015/16 2016/17 2017/18 2018/19 2019/20 Fiveyea1 to 2019/20 Corporate Plan. These will be achieved through three key areas: target ($m) actual actual actual forecast forecast total

reviewing and reducing corporate support roles; Fuel savings improving profitability; and (Meandu Mine) • • • reducing and reallocating capital. Operation and - corporate cost ■ ■ ■ savings - • • Capital expenditure 2 ■ Optimising support functions expenditure to a level that is commensurate Cost savings •27.1 •51.0 -17.2 •24.6 •21.2 141.1• with industry peers and in a manner which supports the corporate strategy. Wesfarmers settlement • • Coal rebate revenue price uplift ■ Determining optimal information technology requirements to meet • • • • 3 ■ T arong North Stanwell's corporate strategy and establishing an information technology insurance settlement roadmap. • • Total efficiency 27.1 101.0 29.2 36.6 33.2 227.1 savings

Note: OperatinQ and capital impacts from he return to seivice of swanbank E Power Station as well as revenue (measured as Gross Profit) have been ex d uded.

Stanwell Corporation limited Page 6 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM 2. Optimise support function expenditure KEY ASSUMPTIONS AND RISKS In 2016/17, Stanwell undertook a review of corporate support functions at its The key assumptions underpinning Stanwell's strategic planning and key corporate performance indicators for 2018/19 include:

Demand and supply

Stanwell continues to review and optimise its resourcing capability as part of its Generator revenue is determined by dispatch, physical price and financial market outcom . . rt ..t ,<>rm' . . annual business planning process.

3. Determining optimal information technology requirements The Information and Communication Technology (ICT) Strategy delivered in 2016 in response to the Shareholder Mandate is progressing as planned. The ICT Strategy provides strategic clarity, prioritising the delivery of key enterprise projects while improving efficiency of technology service delivery. On the supply. side, generator behaviour. . . is modelled. taking. unde. rI~· The ICT Roadmap was revised in February 2018 (18 months after initial release) to reflect investment priorities. This was necessary for Stanwell to respond to changing market rules such as the Five Minute Settlement. Key enterprise projects, such as Movex replacement (roll out of Ellipse Enterprise Resource Planning at Stanwell Power Station) and Safe Works System (replaces the existing Permit to Work and Authority to Work systems), are progressing as planned. The SAP replacement project (roll out of Ellipse Enterprise Resource Planning at Swanbank and Mica Creek power stations) has been initiated, as the current SAP platform is reaching end of life. The impact of any industry restructure (for example, CleanCo) has not been included and, depending on the outcomes of any restructure, the budget may need to be recalculated.

Gas prices The commissioning and operation of three liquefied natural gas projects in Central Queensland over the past three years has seen an underlying increase in demand for both gas and electricity. The final LNG train is still ramping up to full production. As this occurs there will be a further commensurate increase in upstream electricity demand. Beyond this period, upstream electricity demand from the LNG industry is expected to plateau.

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Other constraints Assumptions and outputs 2018/19 Revenue modelling assumes that Stanwell's plant will be fully available during key Economic indices periods of the year. It also assumes that fuel will be available for generation and CPI (%)1 2.3 sales in line with contractual entitlements and current mine plans. Wages growth (% )2 3.0 Failure to achieve planned plant or fuel availability (or major plant or fuel supply Long term interest rates (% )3 failure during critical supply periods, particularly the summer months) may impact 6.43 on Stanwell's ability to achieve its revenue forecasts. Dividend payout ratio (% )4 100 Stanwell retains a strong focus on plant availability, in particular adopting a 'summer Weighted average cost of capital - post-tax nominal 5 readiness' program. Stanwell works closely with external fuel suppliers and its Weighted average cost of capital - post-tax nominal (CoCP ) internal mine operations group to ensure that production expectations are aligned and that sufficient fuel is available at key times. Electricity revenue Average realised price ($/MWh)6 1111 Carbon reduction policy _T_i_m_e_-w_e_i_g-ht_e_d_a_n_n-ua_l_p_o_o_l p-r-ic_e_(-$/_M_W_ h)7~------;.. - Federal and state energy policies have been the topic of public debate in recent Revenue: times, in light of high prices and system security issues. This debate is expected to continue, as policy makers attempt to deal with affordability, reliability and Net pool sales ($M) -- - C- on- t-ra_c_t -re_v_e_n-ue- /-(e_x_p_ens- _e_)_($_M_ ) ------==;.. - sustainability of the energy market into the future. In October 2017, the Federal Government released its National Energy Guarantee Volume of contracts: (NEG) as part of the Powering Forward Plan. The NEG proposes the Swap contracts (GWh) implementation of a reliability guarantee and an emissions guarantee on the basis Face value of swap contracts (wholesale and retail)($) of advice from the formed Energy Security Board. The guarantees are to be notionally levied on National Energy Market (NEM) retaile · Cap contracts (GWh) Face value of cap contracts (wholesale and retail) ($) Other revenue

The Queensland Government committed to investigating a renewable energy target for Queensland of 50 per cent by 2030. To help deliver on this commitment, the Government established the Renewable Energy Expert Panel to provide advice on credible pathways to achieving a 50 per cent renewable energy target for 1 Source: Deloitte Access Economics and BIS Shrapnel 2 Stanwell will comply with the Government Owned Corporations Wages Policy as existing EBAs Queensland by 2030. The Queensland Government has also announced that it will expire and require renegotiation facilitate the next wave of up to 400 megawatts of diversified renewable energy, 3 Long term interest rates are sourced from Queensland Treasury Corporation including 100 megawatts of energy storage, through a reverse auction. 4 The dividend forecast represents 100% of net profit after tax. However dividend paid may be adjusted to exclude any unrealised gains from the revaluation of Stanwell's financial instruments, any year end asset impairment adjustments that may arise during the testing of asset carrying values, any adjustments relating to rehabilitation and any other relevant adjustments resulting in unrealised gains that may arise. 5 Applying ·cost of Capital Principles - Government Owned Corporations' approach. 6 Average realised price per MWh is: T otal Operating Revenue' (Pool Sales and CFDs)/Energy sold (node) 7 Queensland Node Prices (real $) Stanwell Corporation limited Page 8 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM

Assumptions and outputs CAPITAL EXPENDITURE Coal exports for sale (kt) Budgeted capital expenditure for 2018/19 (for projects greater than $15 million): Coal export sales ($M) Project 2018/19 Total Shareholder Shareholder Gas for sale (TJ) 1111------($M) project approval approval Gas sales ($M) budget received required Coal rebate revenue ($M) SPS Unit 4 Major Exchange rate US$ 0.78 17.17 24.94 Overhaul ✓ Average reference price (USD$/tonne) SPS Unit 1 Major 2.50 24.19 Volume (million tonnes) 8.0 Overhaul ✓ Total coal rebate revenue ($M) - Swanbank C4 .. 20.25 44.90 ✓ NEM energy8 Inspection Overhaul TPS Unit 2 Major Energy generated (GWh) - ] 14.65 21 .66 Overhaul ✓ Energy sent out (GWh) TPS Unit 3 Major 24.89 25.10 Energy used (GWh) -- Overhaul ✓ Energy sold (GWh) SPS Control System 17.93 68.00 ✓ Contract volume sold (GWh) (includes cap position) -- Upgrade SPS Mid Life Condenser NEM operational -- 5.17 30.70 ✓ Retube (four units) Fuel costs ($/MWh sold) 1111] Greenhouse gas emissions (KtCO2e) 17,783 Dragline Major Overhaul 7.00 18.26 ✓ Greenhouse gas intensity portfolio (CO2kg/MWh sent out) 879 As per the current Shareholder Mandate, Stanwell will notify shareholding Ministers of capital investments greater than $10.0 million and seek shareholding Minister approval of all capital investments greater than $15.0 million.

8 NEM Portfolio excludes Mica Creek Power Station Stanwell Corporation limited Page 9 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM

Other capital expenditure

Project 2018/19 ($M) 2019/20 2020/21 2021/22 2022/23 Five year $M $M $M $M budget ($M) Overhauls Stanwell Power Station 19.7 23.9 23.7 26.1 26.2 11 9.6 Tarong Power Station 39.9 53.3 22.4 10. 1 30.7 156.4 Meandu Mine 7.0 11.3 18.3 Swanbank Power Station 20.3 16.6 9.4 46.3 Total overhauls 86.9 105.1 46.1 36. 2 66.3 340.6 Major projects/capital expenditure Stanwell Power Station - Control System Upgrade 17.9 8.4 0.4 26.7 Stanwell Power Station - High and intermediate pressure turbine overhauls 0. 1 8.0 8.8 8.9 7.5 33.3 Stanwell Power Station - Midlife condenser retube 5.2 0. 1 5.3 Stanwell Power Station - Low pressure turbine overhauls 0. 1 0.5 3.9 4.0 4.1 12.6 Tarong Power Station- High and intermediate pressure turbine overhauls 12. 1 6.3 6.5 24.9 Mine - Dozer replacement program 14.3 2.6 3.6 20.5 Mine - Tru ck and shovel replacement programs 12.1 11.1 30.3 53.5 Mine - Fleet ancillary equipment programs 0.4 6.6 2.1 4.2 13.3 Mine - Coal Handling Preparation Plan sustaining works 3.5 0.4 0.4 0.4 0.4 5. 1 ICT - Enterprise Program of Works 5.9 1.5 0.5 7.9 Mine - Development program 3.8 5.9 1.8 6.2 39.8 57.5 Total major projects 48.6 45.8 41.0 35. 3 89.9 260.6 Other projects < $10 million Hardware and software upgrades 15. 1 18.8 10.1 10.9 11 .1 66.0 Corporate - Other 0.2 0.2 0.2 0.2 0.1 0.9 Generation - Coal 28.8 18.3 13.0 4.0 12.8 76.9 Generation - Other 6.4 4.1 2.9 1.7 10.0 25.1 Gas supply strategy 5.0 4.8 3.9 7.5 7.7 28.9 Mining 17.6 13.6 4.8 9.8 4.0 49.8 Total other by site 73.1 59.8 34.9 34.1 45.7 247.6 Total capital expenditure 208.6 210.7 122.0 105.6 201.9 848.4

Stanwell Corporation Limited I Page 10 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM FINANCIAL STATEMENTS

Income statement

Escalated ($M) 2017/18 forecast 2018/19 September December March Full year YTD target YTD target YTD target target Electricity pool sales revenue Contract revenue/(payments) Fuel costs NEM electrici rofit 1,01 250.3 491.6 780.6 984.8 Environmental certificates I I I I Other revenue/(expenses) (39.6) (4.5) (8.7) (13. 1) (17.3) NEM gross ~rofit 1,005.7 248.6 488.7 774.6 975.8 Net Mica Creek gross profit 17.1 4.4 8.8 13.2 17.6 GROSS PROFIT 1 022.8 253.0 497.5 787.8 993.4 Operations and site support costs Corporate support costs Depreciation and amortisation OPERATING EXPENSES 418.2 Net mining expenses (2.0) Other operating revenue 6.5 OPERATING PROFIT 609.1 Non operating revenue/(expenses) Restructure costs - - - - Coal rebate 1111 1111 Fair value movement - derivatives I • • EARNINGS BEFORE INTEREST AND TAX 798.9 179.0 346.5 558.0 683.9 Net interest expense (57.4) (11.9) (25.2) (39.4) (52.8) Income tax (222.5) (50.2) (96.5) (155.7) (189.4) NET PROFIT AFTER TAX 519.0 116.9 224.8 362.9 441.7 Dividends provided for current year (519.0) (116.9) (224.8) (362.9) (441.7)

Stanwell Corporation Limited I Page 11 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Balance sheet

Escalated ($M) 2017/18 forecast 201 8/19 September YTD December March Full year target YTD target YTD target target ASSETS Cash and cash equivalents 49.9 50. 1 50.1 48.4 47.5 Receivables - Cash Management 704.6 775.1 296.9 452.6 545.4 Trade and other receivables 199.5 191.0 197.9 209.9 168.4 Inventories 159.3 176.7 177.7 167.7 189.7 Other current assets 163.9 171.6 182.0 188.8 180.2 Derivative financial assets 139.9 139.9 139.9 139.9 139.9 Total current assets 1,417.0 1,504.4 1,044.4 1,207.2 1,271 .0 Derivative financial instruments 61 .5 61.5 61.5 61.5 61.5 Property, plant and equipment 2,259.3 2,270.4 2,279.9 2,255.6 2,255.4 Intangible assets 103.4 104.0 104.4 104.9 105.3 Exploration and evaluation 9.4 9.4 9.4 9.4 9.4 Retirement benefit surplus 17.8 17.8 17.8 17.8 17.8 Other non-current assets 36.8 36.8 36.8 36.8 36.8 36.8 2,488.3 2,500.0 2,509.9 2,486.0

LIABILITIES Trade and other payables 184.7 175.0 181.2 178.1 172.3 Derivative financial instruments 245.8 245.8 245.8 245.8 245.8 Current tax liabilities 63.5 60.6 17.4 21.3 12.4 Provisions 543.3 543.3 24.1 24.1 466.0 Other current liabilities 2.4 2.4 2.4 2.4 2.4 Total current liabilities 1,039.6 1,027.1 470.9 471.7 898.9 Borrowings 822.1 822.1 822.1 822.1 822.1 Derivative financial instruments 68.4 68.4 68.4 68.4 68.4 Deferred tax liabilities 259.0 256.4 253.7 251.1 248.5 Provisions 338.7 335.9 336.6 339.2 Total non-current liabilities 1,488.1 1,482.7 1,480.8 1,480.8

Stanwell Corporation Limited I Page 12 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM

Escalated ($M) 2017/18 forecast 2018/19 September YTD December March Full year target YTD target YTD target target EQUITY Contributed equity 1,214 .7 1,214.7 1,214 .7 1,214.7 1,214.7 Reserves (50.6) (50.6) (50.6) (50.6) (50.6) 438.5 576.7 213.6

Net derivative assets (liabilities) (11 2.8) 164.7 175.1

Stanwell Corporation Limited I Page 13 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Cashflow statement

Escalated ($M) 2017/18 forecast 201 1/19 September December March Full year YTD target YTD target YTD target targ.!!_ Cash fl ows from operating activities Cash receipts in the course of operations 3,1 79.2 659.8 1,308.6 2,011.3 2,614.0 Cash payments in the course of operations (2,251 .8) (461.0) (903.5) (1,356.0) (1,759.7) Net financing costs paid (62.8) (8.7) (17.0) (27.6) (37.4) Income tax paid (277.2) (55.6) (147.7) (205.6) (250.9) Net cash provided by operating activities 587.5 134.5 240.4 422.1 566.0 Cash flows from investing activities Payments for property, plant and equipment (145.7 ) (64.1) (129.0) (156.8) (208.6) Net cash used in investing activities (145.7) (64.1) (129.0) (156.8) (208.6) Cash fl ows from financing activities Dividends paid (260.6) (519.0) (519.0) (519.0) Net cash provided by/(used in) financing activities (260.6) (519.0) (519.0) (519.0) Net incre ase/(decrease) in cash held 204.8 70.4 (407.6) (253.7) (161.6) Cash at the beginning of the period 549.7 754.5 754.5 754.5 754.5 Cash at the end of the period 754.5 824.9 346.9 500.8 592.9

Cash & Cash Equivalents 49.9 49.9 50.1 48.3 47.5 Receivables - Cash Management 704.6 775 296.8 452.5 545.4 TOTAL 754.5 824.9 346.9 500.8 592.9

Stanwell Corporation Limited I Page 14 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM APPENDIX A: STANWELL EMPLOYMENT AND INDUSTRIAL 2. Remuneration arrangements RELATIONS PLAN 2018/19 Chief Executive Officer and senior executives' remuneration as at 1 January 2018 Senior executive remuneration complies with senior executive remuneration This Employment and Industrial Relations Plan applies to Stanwell and its guidelines. subsidiary companies.

Employer 1. Employment and industrial relations philosophy and Chief Executive Officer / 1 Base salary superannuation direction Senior Executives 2 contributions Industrial relations strategy Richard Van Breda Stanwell's vision is 'Together we create energy solutions'. This vision informs our $643,598 $64,360 strategic focus, which in the short term is to deliver secure and affordable energy for (Chief Executive Officer) consumers and maintain market share, by running our low cost power stations at Andrew Richardson sustainable high capacity factors. Longer-term, by evolving our products and $39 1,737 $39,174 services, we will meet the changing need of consumers. (Chief Operating Officer)

To deliver on these objectives, Stanwell has structured its strategic approach Jenny Gregg around four themes: (Executive General Manager $333,817 $33,382 • deliver innovative energy products; Business Services) • Operate a flexible and competitive portfolio; Michael O'Rourke $337,371 $33,737 • Participate in renewable energy (to the extent permitted by the Shareholder (Chief Financial Officer) Mandate); and Steve Quilter • Enable the business to deliver by providing a safe workplace; engaging and (Executive General Manager Trading $337,909 $33,791 retaining a high performing workplace; ensuring compliance with applicable and Commercial Strategy) laws, regulations and company policies; and securing support for our operations and business direction. Enterprise agreements Enterprise agreements remain the principal source of terms and conditions for employees. There are seven enterprise agreements currently operating at Stanwell. All enterprise agreements include productivity increases, incentive payments and effective training systems to ensure a focus on Stanwell's strategic outcomes. All enterprise agreements have been approved by the Fair Work Commission. Stanwell last renegotiated its seven enterprise agreements in 2015 and 2016. The enterprise agreements and their expiry dates are described further below. Negotiations to replace the Tarong Power Stations and Corporate Offices enterprise agreements commenced in 2018.

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Chief Executive Total fixed Other 2016/17 3. Employment conditions and workforce planning 5 Officer/ remuneration benefits 4, performance Sources of employment conditions Senior Executives 3 payment made 6 Employment conditions for employees are derived from a number of sources. These include: Richard Van Breda $707,958 $95,884 (Chief Executive Officer) $9,346 • Legislation, for example: the Fair Work Act 2009 (Cth), the Government Owned Corporations Act 1993 (Old) and the Electricity Act 1994 (Old), Andrew Richardson • Enterprise Agreements, (Chief Operating $430,911 $7,704 $31,644 • Alternative Employment Arrangements which are provided for under Enterprise Officer) Agreements, Jenny Gregg (Executive • The Electrical Power Industry Award 2010, General Manager $367,199 $6,997 $47,757 • Common law contracts, and Business Services) • Stanwell policies and procedures. Michael O'Rourke $371 ,108 $47,914 (Chief Financial Officer) $6,337

Steve Quilter (Executive General $371 ,700 $4,723 $46,200 Manager Trading and Commercial Strateg)') 1. Includes cash salary plus salary sacrifice items.

2. Employer superannuation contribution is 10% of base salary.

3. Total Fixed Remuneration (TFR) is the sum of columns 1 to 3.

4. Other benefits paid including, but not limited to, Private Health Insurance reimbursement.

5. All senior executives have access to a pool car park, associated costs for this are not included in this table.

6. This is the actual payment made in September 2017, relating to performance in the preceding financial year. Employer superannuation (10%) is paid in addition to these incentives.

Stanwell Corporation Limited Page 16 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Workforce numbers

Employment Category 30 June 31 December 30 March 30 June (full time equivalent): 2017 2017 2018 2018 (forecast) Standard Hour Permanent 355 371 374 374 Full Time Permanent Part-time 42 40 43 43 Other Contract (alternative 258 255 255 255 employment arrangements) Senior Executive Contract 5 5 5 5 Graduates (In House) 4 4 5 5 Apprentices (In House) 0 0 0 0 Trainees (In House) 0 0 0 0 Casual Employees 0 0 0 0 Total Directly Employed 664 675 682 682 Workforce: Apprentices (Group) 30 37** 37 37 Trainees (Group) 6 6 6 6 Total 700 718 725 725 (full time equivalent):

•• Note: this total includes apprentice numbers following the 2018 intake in late January and early February 2018.

Stanw ell Corporation Limited Page 17 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Enterprise agreements The table below sets out the awards or enterprise agreement applying to Stanwell and the number of employees covered by each enterprise agreement: IAw ard/ agreement Scope (as at 1 January 2018) Expiry date Jurisdiction Current status I Electrical Power Industry Award Employees classified Not applicable Federal The modern award is currently used to apply the "Better Off Overall Test" for the approval of the enterprise agreements. Tarong Power Stations Tarong Power Station and 1 August 2018 Federal Stanwell has commenced negotiations for a Enterprise Agreement 2015 Tarong North Power Station replacement to this enterprise agreement. (218 employees) Stanwell Corporation Limited Corporate Office employees 18 August 2018 Federal Stanwell has commenced negotiations for a Corporate Offices Enterprise (227 employees) replacement to this enterprise agreement. Agreement 2015 Stanwell Power Station Stanwell Power Station 1 March 2019 Federal A new enterprise agreement was negotiated and Enterprise Agreement 2015 employees approved in 2015. Negotiations to replace the (1 53 employees) agreement will commence in late 2018. Mica Creek Enterprise Mica Creek Power Station 1 March 2019 Federal A new enterprise agreement was negotiated and Agreement 2015 mechanical and technical approved in 2015. Negotiations to replace the employees, trades and water agreement will commence in late 2018. treatment (6 employees) Kareeya Power Station - Kareeya Power Station 1 April 2019 Federal A new enterprise agreement was negotiated and Enterprise Agreement 2015 employees approved in 2015. Negotiations to replace the (12 employees) agreement will commence in late 2018. Barron Gorge Power Station - Barron Gorge Power Station 1 April 2019 Federal A new enterprise agreement was negotiated and Enterprise Agreement 2015 employees approved in 2015. Negotiations to replace the (11 employees) agreement will commence in late 2018. Swanbank Power Station Swanbank Power Station 11 March 2020 Federal A new enterprise agreement was negotiated and Enterprise Agreement 2016 (23 employees) approved in 2016. Negotiations to replace the agreement will commence in late 2019.

Stanwell Corporation Limited Page 18 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Productivity initiatives Other policies and practices include: Each of the seven enterprise agreements contains productivity initiatives. Stanwell • job-sharing; reports to the relevant Shareholding Ministers on a quarterly basis with respect to • time off in lieu of payment for overtime; the outcome of each enterprise agreement's productivity initiatives. • paid part-time study leave; Other employment conditions • leave without pay at the discretion of the company; The following work practices are also available to employees of Stanwell and may • a range of special leave arrangements based on individual circumstances at the provide employees with the flexibility to manage the balance between work, family discretion of the company; and and lifestyle: • phased-in retirement. Part-time Employees have the ability to apply for reduced working arrangements hours following parental leave under their applicable 4. Workplace health and safety enterprise agreement and the National Employment Stanwell complies with all relevant health and safety legislation, including the Work Standards. Health and Safety Act 2011 (Qld) and related standards, codes of practice, Australian standards and industry guidelines. Flexible work hours Compressed hours are available so that employees are able to work a nine-day fortnight or a four-day week, 5. Equal employment opportunity and anti-discrimination depending on the enterprise agreement applicable to the employee. Further flexible work arrangements are Stanwell complies with the equal employment opportunity and anti-discrimination provided through Stanwell procedures. Employees may provisions in accordance with Public Service Act 2008 (Qld} through its various also manage their own start and finish times with the policies and procedures, such as procedures detailing the recruitment, selection agreement of management. and promotion of staff and formal and informal processes for resolving issues of discrimination and harassment. Reduced working year Purchased leave arrangements are provided in Stanwell purchased leave procedures with the ability to purchase 6. Redundancy provisions leave (between two and four weeks per year). All of Stanwell's enterprise agreements contain redundancy provisions. Stanwell currently has a redundancy agreement that focuses on redeployment and retraining Paid maternity/ Employees are able to apply for periods of paid and but provides for the following in case of retrenchment: paternity/ adoption unpaid leave under the National Employment Standards leave and under their applicable enterprise agreement with 14 • a minimum of between one and four weeks notice of retrenchment depending on weeks paid maternity leave (separate to the Federal continuous service (plus an additional week notice depending on age and Government paid 18 weeks). continuous service); • three weeks per year of service severance payment limited to 75 weeks; Telecommuting (work Stanwell provides the ability to work from home with the • 13 weeks early separation payment; from home) agreement of management. • pro rata long service leave for each year of service; Domestic and Family Stanwell provides Domestic and Family Violence leave • payment of accrued annual leave; and Violence (DFV) with pay (with a minimum of ten days) to employees who • outplacement and retraining support. are experiencing DFV. Further leave with or without pay may be granted if required. The T arong Power Stations Enterprise Agreement 2015 provides for a further four weeks' pay in addition to the above.

Stanwell Corporation Limited Page 19 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Stanwell's enterprise agreements provide for 'no forced retrenchments'.

7. Superannuation Stanwell contributes a minimum of 9.5 per cent of Ordinary Time Earnings in accordance with current Superannuation Guarantee legislation. Stanwell will ensure that further increases in the minimum Superannuation Guarantee will be passed on to employees. Standard contribution rates into Defined Contribution fu nds may vary depending on underpinning employment contract arrangements and enterprise agreements. For employees covered under a Stanwell Alternative Employment Arrangement contract and legacy Tarong employees, the standard employer contribution is 10 per cent. For legacy Stanwell and CS Energy Swanbank employees who contribute 5 per cent, the employer contribution is 10 per cent. For legacy CS Energy Mica Creek employees who contribute 4 per cent, the employer contribution is 11 per cent. The defined benefit fund, which is now closed to new members, provides lump sum benefits to its members based on years of service and average salary. Stanwell manages its contributions to this fund in accordance with the long term projected financial position of the fund . Stanwell may vary its contribution rates and it is also prepared to provide lump sum contributions to the fund in periods of low investment returns. Any surplus from defined benefit funds that may arise from time to time remains within the fund. The company will continue to follow advice as received from actuarial reviews. The fund is regulated by the Australian Prudential Regulation Authority under the Superannuation Industry (Supervision) Act 1993.

8. Consultation Stanwell has undertaken consultation on this plan with employees, relevant unions, Shareholder and Structural Policy Division within Queensland Treasury and Trade, the Department of Natural Resources, Mines and Energy and the Office of Industrial Relations. The Employment and Industrial Relations Plan is supported by the relevant Government agencies.

Stanwell Corporation Limited Page 20 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM APPENDIX B: SPONSORSHIP, ADVERTISING AND CORPORATE ENTERTAINMENT

Activity Description/benefit 2017/18 Year to date forecast September 2018 II December 2018 11 March 2019 II June 2019 SPONSORSHIPS Support for community projects and activities that contribute to a vibrant, prosperous, Community partnership inclusive community that make a genuine 290,000 72,500 145,000 217,500 290,000 funds/sponsorships quality of life contribution to the communities that host Stanwell assets Support for employees to engage with one another while participating in charity Employee engagement 10,000 2,500 5,000 7,500 10,000 fundraising events that benefit our local communities TOTAL SPONSORSHIPS9 300 000 75 000 150 000 225 000 300 000 ADVERTISING Other (total) advertising below 2,281 750 1,500 2,250 3,000 $5,000 TOTAL ADVERTISING 2 281 750 1 500 2 250 3 000 CORPORATE ENTERTAINMENT Events over $5,000 Energy Trading and Commercial Industry networking event (Queensland) 7,000 7,000 7,000 Strategy Bowls Day 6,000 Energy Trading and Commercial Promotional and marketing activities/events 18,000 4,219 9,118 13,858 18,080 Strategy Retail Total over $5,000 24,000 4,219 16,118 20,858 25,080 Other (total) below $5,000 4,500 1,200 2,400 3,600 4,800 TOTAL CORPORATE ENTERTAINMENT 28,500 5,419 18,518 24,458 29,880 Corporate entertainment total Staff and stakeholder functions 6,500 1,500 3,500 5,000 6,500 Total below $5,000

9 Stanwell does not provide donations.

Stanwell Corporation Limited Page 21 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM APPENDIX C: FINANCIAL STATEMENTS - QUARTERLY

Income statement

Escalated ($M) 2017/18 2018/19 forecast September December March June guarter Electricity pool sales revenue Contract revenue/(payments) gl gl Fuel costs NEM electrici~ gross ~rofit 1 011 .5 250.3 241.3 J289.0 204.2 Coal export sales Gas sales* ■ ■ Environmental certificates Other revenue/( expenses) ] ] ] NEM gross rofit 1,005.7 248.6 240.1 285.9 201 .2 Net Mica Creek gross profit 17.1 4.4 4.4 •4.4 •4.4 GROSS PROFIT 1 022.8 253.0 244.5 290.3 205.6 Operations and site support costs Corporate support costs Depreciation and amortisation OPERA TING EXPENSES (418.2) (110.4) (112.0) (110.7) (109.2) Net mining expenses (2.0) (0.5) (0.5) (0.5) (0.5) Other operating revenue 6.5 0.8 0.8 0.8 0.8 OPERA TING PROFIT 609.1 142.9 132.8 179.9 96.7 Non operating revenue/( expenses) Restructure costs - - - - Coal rebate -- - - - Fair value movement - derivatives • • • • EARNINGS BEFORE INTEREST AND TAX 798.9 179.0 167.5 211.5 125.9 Net interest expense (57.4) (11 .9) (13.3) (14.2) (13.4) Income tax (222.5) (50.2) (46.3) (59.2) (33.7) NET PROFIT AFTER TAX 519.0 116.9 107.9 138.1 78.8 Dividends provided for current year (519.0) (116.9) (107.9) (138.1) (78.8) *Due to the return to service of Swanbank E Power Station in January 2018, no further gas sales are assumed from 2018/19 onwards. However, an allowance is included to cover short-term market sales and purchases.

Stanwell Corporation Limited Page 22 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM Balance sheet

Escalated ($M) 2017/18 11 201 8/19 forecast II September December March II June Quarter auarter auarter auarter ASSETS Cash and cash equivalents 49.9 50.1 50. 1 48.4 47.5 Receivables - Cash Management 704.6 775.1 296.9 452.6 545.4 Trade and other receivables 199.5 191.0 197.9 209.9 168.4 Inventories 159.3 176.7 177.7 167.7 189.7 Other current assets 163.9 171.6 182.0 188.8 180.2 Derivative financial assets 139.9 139.9 139.9 139.9 139.9 Total current assets 1,417.0 1 504.4 1 044.4 1,207.2 1,271 .0 Derivative financial instruments 61.5 61.5 61.5 61.5 61.5 Property, plant and equipment 2,259.3 2,270.4 2,279.9 2,255.6 2,255.4 Intangible assets 103.4 104.0 104.4 104.9 105.3 Exploration and evaluation 9.4 9.4 9.4 9.4 9.4 Retirement benefit surplus 17.8 17.8 17.8 17.8 17.8 Other non-current assets 36.8 36.8 36.8 36.8 36.8 Total non-current assets 2,488.3 2,500.0 2,509.9 2,486.0 2,486.2 TOTAL ASSETS 3 905.3 4 004.4 3 554.3 3 693.2 3 757.2 LIABILITIES Trade and other payables 184.7 175.0 181.2 178.1 172.3 Derivative financial instruments 245.8 245.8 245.8 245.8 245.8 Current tax liabilities 63.5 60.6 17.4 21.3 12.4 Provisions 543.3 543.3 24. 1 24.1 466.0 Other current liabilities 2.4 2.4 2.4 2.4 2.4 Total current liabilities 1,039.6 1 027.1 470.9 471 .7 898.9 Borrowings 822.1 822.1 822.1 822.1 822.1 Derivative financial instruments 68.4 68.4 68.4 68.4 68.4 Deferred tax liabilities 259.0 256.4 253.7 251 .1 248.5 Provisions 338.7 335.9 336.6 339.2 341.8 Total non-current liabilities 1,488.1 1,482.7 1,480.8 1,480.8 1,480.7 TOTAL LIABILITIES 2,527.7 2,509.8 1,951.7 1,952.5 2,379.6

NET ASSETS 1,377.6 1,494.6 1,602.6 1,740.7 1,377.6

Stanwell Corporation Limited Page 23 1111111ll1llll·~l·Hlllmlt1·11:1~-

Escalated ($M) 2017/18 2018/19 forecast September December March June uarter uarter uarter uarter EQUITY Contributed equity 1,214.7 1,214.7 1,214.7 1,214.7 1,214.7 Reserves (50.6) (50.6) (50.6) (50.6) (50.6) Retained earnings 213.6 330.6 438.5 576.7 213.6 TOTAL EQUITY 1,377.6 1,494.6 1,602.6 1,740.7 1,377.6 Net derivative assets (liabilities) (112.8) 164.7 175.1 181 .9 173.3

Stanwell Corporation Limited Page 24 ►i&iil:ii:iiii-1 i·i•jii@Nif1 •1i:PM

Cash flow statement

Escalated ($M) 2017/18 20_18/19 forecast = September December March June guarter guarter guarter auarter Cash flows from operating activities Cash receipts in the course of operations 3,179.2 659.8 648.8 702.7 602.7 Cash payments in the course of operations (2,251 .8) (461.0) (442.5) (452.5) (403.7) Net financing costs paid (62.8) (8.7) (8.3) (10.6) (9.8) Income tax paid (277.2) (55.6) (92.1) (57.9) (45.3) Net cash rovided b o erating activities 587.5 134.5 105.9 181 .7 143.9 Cash fl ows from investing activities Payments for property, plant and equipment (145.7) (64.1) (64.9) (27.8) (51.8) Net cash used in investin activities 145.7 64.1 64.9 27.8 51.8 Cash fl ows from financing activities Dividends paid (260.6) (519.0) Net cash Rrovided by/(used in) financing activities (260.6) (519.0) Net increase/(decrease) in cash held 204.8 70.4 (478.0) 153.9 92.1 Cash at the beginning of the period 549.7 754.5 824.9 346.9 500.8 Cash at the end of the ~eriod 754.5 824.9 346.9 500.8 592.9

Cash & Cash Equivalents 49.9 49.9 50.1 48.3 47.5 Receivables - Cash Management 704.6 775.0 296.8 452.5 545.4 TOTAL 754.5 824.9 346.9 500.8 592.9

Stanwell Corporation Limited Page 25 ,~ stanwell