ANNUAL REPORT 2013/14 About this report About Stanwell This report provides an overview of the major Stanwell is a diversified energy business. initiatives and achievements of Stanwell We own coal, gas and water assets, which Corporation Limited (Stanwell) as well as the we use to generate electricity; we sell business’ financial and non-financial performance electricity directly to business customers; for the 12 months ended 30 June 2014. and we trade gas and coal. Each year, we document the nature and scope With a generating capacity of approximately of our strategies, objectives and actions in our 4,200 megawatts, Stanwell is the largest Statement of Corporate Intent. The Statement electricity generator in Queensland. of Corporate Intent represents our performance We have the capacity to supply more agreement with our shareholding Ministers. than 45 per cent of the State’s peak Our performance against our 2013/14 Statement electricity requirements through our of Corporate Intent is summarised on page 5 coal, gas and hydro generation assets. and pages 8 to 15. As at 30 June 2014, we employed Electronic versions of this and previous years’ 710 people at our sites and offices. reports are available online at www.stanwell.com or from Stanwell’s Stakeholder Engagement team on 1800 300 351. Our mission Stanwell contributes to Queensland's prosperity through the safe and responsible provision of energy and commercial returns from business operations. TABLE OF CONTENTS Our values About Stanwell Our values – Safe, Responsible and Commercial – shape how we lead and Report from the Board 2 operate our business. Chief Executive Officer’s review 3 Together, they guide how we think, make Performance indicators 5 decisions and act on a day-to-day basis at Stanwell. Asset performance 6 Strategic direction 7 Simplify and streamline our business 8 Sell our energy for the best return 12 Secure our future 14 Corporate governance 16 Financial results 24 Directors’ report 25 Auditor’s independence declaration 31 Financial statements 32 Notes to the consolidated financial statements 38 Directors’ declaration 106 Independent auditor’s report 107 Glossary 108 POWER STATIONS – COMPETITIVE STABLE FUEL ASSETS – COAL, GAS INNOVATION AND STRONG TRADING AND RISK BEST-IN-CLASS FUEL SUPPLY AND HYDRO DEVELOPMENT MANAGEMENT TEAMS MAINTENANCE Energy portfolio Generation assets Coal assets Coal Water assets Gas Gas assets Hydro Office G CAIRNS N H F TULLY MOUNT ISA E MACKAY D M ROCKHAMPTON L A Q K B J P I BRISBANE O C GENERATION ASSETS COAL ASSETS WATER 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 power stations Koombooloomba Hydro and Kareeya B. TARONG POWER STATIONS, Southern Hydro power stations Queensland – 1,843 MW (coal) K. KUNIOON COAL RESOURCE, Southern Queensland – potential future fuel supply GAS ASSETS C. SWANBANK E POWER STATION, South East for the Tarong power stations Queensland – 385 MW (gas) O. KOGAN NORTH JOINT VENTURE, South East L. CURRAGH NORTH MINE, Central Queensland Queensland – provides up to four petajoules D. MACKAY GAS TURBINE, Central Queensland – long-term agreement with Wesfarmers – 34 MW (diesel) per annum of gas to Swanbank E Power Curragh which provides low-cost coal to Station via the Roma to Brisbane E. MICA CREEK POWER STATION, North West Stanwell Power Station, and a revenue Gas Pipeline Queensland – 302 MW (gas) stream for coal exports P. ROMA TO BRISBANE GAS PIPELINE F. KAREEYA HYDRO, Far North Queensland M. MINERAL DEVELOPMENT LICENCE 306, – contracted capacity of 52 terrajoules – 86.4 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 gas H. KOOMBOOLOOMBA HYDRO, Far North or to exit agreement for an agreed payment Queensland – 7.3 MW (hydro) to Stanwell of $20 million I. WIVENHOE SMALL HYDRO, South East Queensland – 4.3 MW (hydro) STANWELL ANNUAL REPORT 2013/14 | ABOUT THIS REPORT | ABOUT STANWELL 1 Report from the Board In 2013/14 Stanwell performed Our strong results reflect the hard We are focused on achieving strongly, ensuring the long-term work of the organisation in both commercial sustainability of our competitiveness of its existing restoring the profitability of our business through flexible portfolio assets and laying the foundation generation assets and diversifying our operations, diversification of revenue for future revenue growth. revenue streams into other energy streams and aggressive, but markets. appropriate, cost management. This success is the result of our deliberate strategic decision Another major achievement is the Our longer term financial goal is to to reposition Stanwell from significant reduction of more than achieve a return on equity of eight an electricity generator to a 50 per cent in the number of injuries to 10 per cent on our electricity diversified energy business. at our sites and offices. While generation business by 2017/18. commendable and encouraging, We are confident the business can Sadly, Stanwell’s Chairman, the these results are only a step in the achieve this in 2015/16 – two years Honourable Warwick Parer A.M., journey to achieving our goal of ahead of our original target. passed away suddenly in Zero Harm in everything we do. March 2014. Thank you to our shareholding At a state and federal government Ministers: the Treasurer and Minister Warwick will be remembered for level, there have been several major for Trade, The Honourable Tim his many years of public service policy announcements that may have Nicholls MP; and the Minister for and long contribution to the people a significant impact on Stanwell. Energy and Water Supply, The of Queensland whom he proudly Honourable Mark McArdle MP – represented as a Senator from In December 2013, the Queensland for their continued stewardship of 1984 to 2000. Government announced that it would the business. examine options for future ownership Warwick was appointed Chairman of government-owned assets, We would like to acknowledge the of the Stanwell Board in 2012. including Stanwell, and that it will efforts of the Chief Executive Officer, During his tenure, he oversaw the seek a mandate from the people of Richard Van Breda, his leadership transformation of the business, Queensland at the next state team and all Stanwell employees. within one of the most disruptive election before implementing any sale It is through their hard work and and difficult trading markets process. The government is yet to commitment that we have been able in Australia. finalise its policy plan regarding future to reshape and renew our business This year, Stanwell achieved its ownership. Against this backdrop, the and restore the financial viability of our short-term goal of returning its Board is focused on ensuring electricity generation assets. electricity generation business to Stanwell is commercial, safe and Warwick would have been proud of profitability for the first time since responsible and continues to what Stanwell achieved in 2013/14. 2009/10. The generation business maximise value. It is important that we continue to recorded a net profit after tax of In July 2014, the Federal Government maximise the value of our business $54.3 million — a turnaround of successfully repealed the carbon tax for the benefit of our employees, $158.1 million from the $103.8 million which removed a significant cost from our shareholders and the people loss in 2012/13. Furthermore, the Stanwell’s business. Stanwell is also of Queensland. Board is pleased to report that the supportive of any measures that consolidated business achieved a net encourage competition and assist in profit after tax of $127.8 million securing lower cost energy sources (2012/13: $7.4 million). These results that underpin economic growth. have been achieved against a backdrop of subdued electricity Looking forward, conditions in the market conditions which have Queensland electricity market are Russell Kempnich challenged the profitability of expected to improve and we Director merchant generators. anticipate an uplift in demand for electricity in line with the On behalf of the Stanwell Board commissioning of the liquefied natural gas plants in Queensland. 2 STANWELL ANNUAL REPORT 2013/14 | REPORT FROM THE BOARD Chief Executive Officer’s review This year, we began to fully The new contractor was chosen In addition, based on forecast coal realise the benefits of our in part for its superior safety requirements, a new Life of Mine plan transformation from a baseload performance and, as a result, I expect for Meandu Mine is expected to deliver merchant generator to a to see a major improvement in the an $865 million reduction in total mine diversified energy business. safety performance of our business. costs over the life of the mine. This will provide a reduction in fuel costs to the We have returned our core generation Strong financial results adjacent Tarong power stations against business to profitability by significantly the previous Life of Mine plan. reducing operational costs, reviewing The business delivered a consolidated our workforce structures, improving net profit after tax result of The appointment of a single contractor the efficiency of systems and $127.8 million (2012/13: $7.4 million). to provide facility management, processes, and getting the best In addition, the return to profitability overhaul, asset and maintenance return for our energy resources. of our generation business is an management services at our operating sites will reduce costs and improve At the same time, we have created outstanding accomplishment, productivity and safety. These services further value by flexing our portfolio given the difficult trading conditions were previously provided by numerous to meet the market and maximising characterised by an oversupply of contractors.