GENERATING...7 Old pelton wheel at Kareeya Hydro, on display at front gate. 8 Lifting well in the...

GENERATING CHANGEANNUALREPORT

CHANGE



WITH THE RIGHT PEOPLE AND PRODUCTS TO SHAPE THE ENERGY MARKET, STANWELL IS DEVELOPING OPPORTUNITIES AND STRONG PARTNERSHIPS TO LEAD THE INDUSTRY INTO A LOWER EMISSIONS FUTURE.

GENERATING

ANNUAL REPORT 2009

CONTENTSHIGHLIGHTS 2A record profit result and the largest maintenance project in the history of Stanwell Power Station are among our highlights for 2008–09.

WHO WE ARE 3Stanwell trades more than 30% of Queensland’s electricity requirements. This section explains our core business, shareholders and corporate and operational strategies.

OUR DIRECTION 5Our vision is to reduce our carbon intensity, capitalise on the opportunities presented by emerging industry challenges and generate competitive rates of return for our shareholders.

YEAR IN REVIEW 6Our achievements and challenges in 2008–09 are summarised against our six key strategic objectives.

PERFORMANCE OVERVIEW 2008–09 8We measure our performance for the year against the strategies outlined in our Statement of Corporate Intent.

YEAR AHEAD 2009–10 10This section provides an overview of our key strategies for 2009–10, which will assist us in achieving our corporate objectives.

CHAIRMAN’S STATEMENT 12Denis Byrne, Stanwell’s Chairman, reflects on the strategic achievements of the year.

CHIEF EXECUTIVE OFFICER’S REVIEW 14Kim Wood, Stanwell’s Chief Executive Officer, provides a summary of the corporate and operational outcomes of 2008–09.

EXECUTIVE MANAGEMENT TEAM 16This section provides biography details for Stanwell’s Executive Management Team.

BOARD OF DIRECTORS 18This section provides biography details for Stanwell’s Board of Directors.

SOCIAL PERFORMANCE 20Stanwell is committed to providing a safe, equitable and socially responsible work environment, to ensure the best outcomes for our employees, contractors and the communities in which we operate. In this section we report against the three areas of:

Health and safety 21 Employee relations 24 Community relations 28

BUSINESS PERFORMANCE 31Developing, operating and trading generation assets are our key strengths. In this section, we examine the challenges and achievements for the year in the three areas of:

Operations 32 Market trading 37 Project development 40

ENVIRONMENTAL PERFORMANCE 43Reducing our environmental impact is crucial to our operations. In this section we assess our performance in areas such as emissions reductions and water usage.

ECONOMIC PERFORMANCE 48In 2008–09 Stanwell achieved a record after tax profit of $195.6 million and strong revenue and cash flow results.

CORPORATE GOVERNANCE 52This section outlines Stanwell’s corporate governance processes, which comply with the Corporate Governance Guidelines for Government Owned Corporations.

FINANCIAL REPORT 2009 62GLOSSARY 126ABBREVIATIONS 127INDEX 128

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1 Water pre-treatment plant pipes at Stanwell Power Station.

2 Stock image.

3 Mark Ligasacchi undertaking maintenance work on exciter shaft bearing at Kareeya Hydro.

4 Old spear removed from spear pit at Kareeya Power Station.

5 Auxiliary cooling water pipes at Stanwell Power Station.

6 Electrical Tradesperson Jeff Harbeck working on the boiler feed pump at Stanwell Power Station.

7 Old pelton wheel at Kareeya Hydro, on display at front gate.

8 Lifting well in the centre of Barron Gorge Hydro.

9 Old pelton wheel at Kareeya Hydro, on display at front gate.

10 Tully River.

11 Reheater tubes at Stanwell Power Station.

12 Mill balls used to pulverise coal at Stanwell Power Station.

ABOUT THIS REPORTThis annual report for Stanwell demonstrates how we are putting in place our revised strategy and, most importantly, the proactive steps we are taking to position the company ahead of unprecedented change in the energy market.

The report provides a detailed review of Stanwell’s financial and operational performance in 2008–09 against our strategy, objectives and targets as detailed in our Statement of Corporate Intent (SCI).

Our revised strategy, which we report against, is categorised into six key objectives:

Right people,Right markets,Right fuels,Right plant,Right organisation, andRight locations.

For a detailed review of our revised strategy, refer to Our direction page 5.

For each of the reporting sections, we have summarised our performance against the SCI and performance indicators and outlined our objectives for 2009–10.

The report also provides information on other important business processes such as our approach to corporate governance and risk management.

Stanwell is confident this annual report will assure our stakeholders that we are responsibly managing our business to deliver value to our shareholders and, ultimately, to the people of Queensland. Our stakeholders include, but are not limited to, shareholders, current and future employees, contractors, customers, local communities, suppliers, special interest groups, relevant authorities and current and prospective business partners.

To assist in reading our annual report, we have included a glossary of terms and an index at the back of the report. Electronic versions of this and previous annual reports are available online at www.stanwell.com. If you would like a hard copy, please contact Stanwell’s Corporate Communications.

Stanwell Corporate CommunicationsGPO Box 773Brisbane Qld 4001Ph: +61 7 3335 7448

With the right people and products to shape the energy market, Stanwell is developing opportunities and strong partnerships to lead the industry into a lower emissions future.

2 Stanwell Annual Report 2009 HIGHLIGHTS

HIGHLIGHTS

Achieved a record revenue result of $670.4 million—23.9% increase on the previous year. Year in review page 6.

Maintained triple certification against Australian standards for our quality, health and safety and environmental management systems. Health and safety page 21 and Environment page 44.

Secured options to access gas for future generation projects through the Gas Development Alliance Agreement and equity investment in Blue Energy Limited and the farm-in agreement with Icon Energy Limited. Project development page 40.

Undertook a major overhaul of Stanwell Power Station’s Unit 2, including upgrading the low pressure turbine and generator to deliver a 2.25% improvement in efficiency and completing more than 6,700 maintenance tasks over 59 days. Operations page 32.

Achieved an average plant availability of 94.53% across all operating sites—2.6% above budget. Operations page 36.

Recorded no Level 4 or 5 environmental incidents for the third consecutive year. Environmental performance page 44.

Financial highlights

Annual change (%) 2008–09 2007–08 2006–07 2005–06 2004–05

Total revenue ($’000) 23.9 670,367 540,949 515,357 424,193 371,429

Operating profit before income tax equivalent ($’000) 58.6 265,903 167,621 222,926 103,842 38,733

Operating profit after income tax equivalent ($’000) 44.3 195,605 135,590 155,762 72,889 29,180

Dividends declared ($’000) 61.7 148,944 92,105 122,301 60,617 23,564

Total assets ($’000) 0.7 1,930,734 1,916,387 2,626,402 1,692,790 1,635,834

Total liabilities ($’000) (17.7) 973,779 1,183,415 2,291,046 667,087 635,829

Total shareholders’ equity ($’000) 30.6 956,955 732,972 335,356 1,025,703 1,000,005

Return on total assets* (%) 93.3 14.5 7.5 10.7 7.0 3.4

Return on total equity** (%) (8.8) 23.1 25.4 22.9 7.2 2.9

Earnings per share (cents) 57.2 21.7 13.8 15.9 7.4 3.0

* Earnings before interest and tax/average total assets

** Operating profit after tax/average total equity

3Stanwell Annual Report 2009 WHO WE ARE

We trade more than 30% of Queensland’s electricity requirements. Our plant portfolio includes:

Stanwell Power Station, •Central Queensland – 1,400 MW;Kareeya Hydro, •Far North Queensland – 86.4 MW;Barron Gorge Hydro, •Far North Queensland – 60 MW;Mackay Gas Turbine, North •Queensland – 34 MW;Koombooloomba Hydro, •Far North Queensland – 7 MW;Wivenhoe Small Hydro, •South East Queensland – 4.3 MW; andEmu Downs Wind Farm, •Western Australia (50% interest) – 80 MW (being held for sale).

Stanwell trades the output of Gladstone Power Station in the National Electricity Market (NEM) and also has gas interests, including an equity stake in Blue Energy Limited.

Our coal supply agreement with Wesfarmers Resources includes the sharing of revenue from their coal exports.

Core business Stanwell bids its available generating capacity into the NEM, a wholesale market for the supply and purchase of electricity, managed by the National Electricity Market Management Company (NEMMCo). From 1 July 2009, the newly formed Australian Energy Market Operator (AEMO) will assume responsibility for operating the NEM as well as the wholesale and retail gas markets for south eastern Australia.

Within the NEM, electricity generators compete for the right to generate electricity into a central pool by submitting competitive price bids, to supply nominated quantities of generation, in certain timeslots throughout the day. Stanwell sells the electricity from our power stations into this market pool and is paid according to the spot price.

We also undertake financial transactions with counterparties, generally electricity retailers, in the electricity derivative market to manage the price risk that Stanwell is exposed to in the NEM.

Our customersAs an electricity wholesaler, Stanwell has a small number of valued wholesale customers, including Ergon Energy Queensland, AGL, Origin Energy, Energy Australia, Westpac, Country Energy and a range of other generators, energy retailing and trading companies.

Our shareholdersStanwell was formed on 1 July 1997 under the Government Owned Corporations Act (Qld) 1993 and registered under the Corporations Act (Cth) 2001. The State of Queensland holds all of our shares and we contribute to the fast-growing Queensland economy by providing dividends and income tax equivalents to the Queensland Government. Stanwell’s dividend to its Shareholding Ministers, relating to the 2008–09 year, will be $148.9 million (2007–08: $92.1 million).

WHO WE ARE

Stanwell is a Queensland Government Owned Corporation with an energy portfolio comprising coal, hydro and wind generation facilities across Queensland and in Western Australia.

Brisbane

Rockhampton

Emu Downs Wind Farm(80 MW)

* Wholesale trade only

Gladstone Power Station (1,680 MW)*

Kareeya Hydro (86.4 MW)

Koombooloomba Hydro (7 MW)

Wind

Hydro

Traditional

Offices

Barron Gorge Hydro (60 MW)

Wivenhoe Small Hydro (4.3 MW)

Stanwell Power Station (1,400 MW)

Stanwell Energy Park

Mackay Gas Turbine (34 MW)

4 Stanwell Annual Report 2009 WHO WE ARE

Stanwell’s two voting shareholders, as at 30 June 2009, were The Honourable Stephen Robertson MP, Minister for Natural Resources, Mines and Energy and Minister for Trade and The Honourable Andrew Fraser MP, Treasurer and Minister for Employment and Economic Development.

Vision for changeBy operating a diverse energy portfolio, Stanwell will:

reduce its carbon intensity,•capitalise on the opportunities •presented by emerging industry challenges, and generate competitive rates of return •for our shareholders.

We will achieve this by:protecting the health of our people;•balancing our plant types and fuel •sources to include gas, coal and renewables;improving the performance of our •existing assets;responding to market and customer •needs; andengaging talented people and •strengthening our regional presence.

We will realise this vision through six key strategic objectives:Right people,Right markets,Right fuels,Right plant,Right organisation, andRight locations.

This set of strategic objectives is an evolution of those from 2007–08 and recognises the need for Stanwell to maintain a market and customer focus when developing new products and managing our financial performance. We are placing greater emphasis on being agile and responsive to market needs.

Our people generating change Highly skilled, experienced and motivated people are the key to achieving our business goals and objectives. We employ more than 390 people across a range of professional, technical, trade and administrative roles and Stanwell values our employees’ extensive skills and experience.

Stanwell is committed to providing ongoing opportunities for staff training and development to ensure we have the necessary capabilities to meet our future requirements (Employee relations page 24).

Improving environmental performanceStanwell’s business strategy is centred on creating options to reduce our carbon intensity through a mixture of coal, gas and renewable energy resources.

With the introduction of the Commonwealth’s proposed Carbon Pollution Reduction Scheme and the Queensland Government’s Climate Smart 2050 strategy, Stanwell must continue to adapt its business to meet the needs and requirements of the energy market.

Stanwell’s demonstrated commitment to upgrade our plant to improve environmental performance and our ongoing exploration of cleaner forms of energy is the key to our future business operations.

With three of our hydro facilities located in Australia’s Wet Tropics World Heritage area, it is important that our management systems recognise the differing sensitivities of the ecosystems that surround our power stations.

Generating positive community outcomesStanwell prides itself on being an active participant in the communities in which we operate, supporting community-driven initiatives, including youth, education, sports and the arts.

Our sponsorship program provides opportunities for financial support and community engagement on both a regional and state level. The diverse nature of our operations enables us to deliver a range of socio-economic benefits, including local employment and training and the procurement of local goods and services.

GeneratorsCoal-fired, gas, wind, biomass and hydro generators.

Total capacity of more than 10,000 MW.

Stanwell has a Queensland based trading portfolio of more than 3,270 MW.

MarketsEnergy is traded on the National Electricity Market.

TransmissionPowerlink Queensland manages the transmission of electricity in Queensland and is licensed to operate Queensland’s high voltage transmission network, transporting electricity from the generators to the distribution networks and directly to large customers such as aluminium smelters.

DistributionENERGEX and Ergon Energy’s network of powerlines and power poles connects the high voltage transmission system to individual premises.

RetailersElectricity is sold to customers, including households and small business (other than excluded customers or receivers), who can choose their electricity retailer.

Consumers

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Electricity supply chain

5Stanwell Annual Report 2009 OUR DIRECTION

1. Right peopleStanwell seeks to provide its employees and contractors with a safe workplace and continues the drive to zero harm by focusing on continuous improvement in our safety leadership, safe practices, safe behaviours and the work environment.

We are equipping the business with the right capabilities by ensuring our people are skilled to meet our business needs. We will continue to provide professional growth and development opportunities and strong leadership.

2. Right marketsStanwell strives to be an industry leader through its strong commercial relationships and trading systems.

We are developing emissions trading processes and systems to ensure our plant continues to meet market needs.

We continue to optimise our operations to reduce costs and increase returns to our shareholders.

3. Right fuelsStanwell is investigating options to reduce our carbon footprint and intensity with a mixture of cleaner coal, gas and renewable energy resources.

Our focus is to ensure long-term certainty of supply and fuel cost for Stanwell.

4. Right plantA challenge for Stanwell in 2010, as a coal-fired power generator, is to continue to lower our carbon intensity.

In response to the Commonwealth’s proposed Carbon Pollution Reduction Scheme and the Queensland Government’s Climate Smart 2050 strategy, Stanwell is dedicated to developing generation options with varying lifespans that will deliver a sustainable, long-term portfolio of lower carbon intensive plant while continuing to secure a cost effective electricity supply for Queensland.

We continue to focus on improved operation and maintenance of our power generation assets and on improving plant performance while lowering our carbon intensity.

5. Right organisationStanwell’s strong financial position provides opportunities for new projects and strategic partnerships.

We are continually looking at our systems to ensure we have the right processes to deliver our strategic goals and ultimately improve and maintain our relationships with our stakeholders in the areas in which we operate.

Stanwell will continue to work closely with other industries and partners to ensure we are well positioned to deliver further opportunities within the Queensland energy industry, as they emerge.

6. Right locationsAs a Queensland based and regionally focused corporation, Stanwell is securing sites that provide options for clean energy.

Stanwell is committed to building greater organisational capabilities in regional areas where we operate.

OUR DIRECTIOn

Stanwell’s focus is to create energy options for a lower emissions future and to ensure the long-term sustainability of existing assets.We are committed to meeting our vision to reduce our carbon intensity, capitalise on the opportunities presented by emerging industry challenges and generate competitive rates of return for our shareholders.

To ensure we achieve our vision and future goals, Stanwell has developed six strategic objectives:

Access staircase to Stanwell Power Station cooling towers.

6

Performance indicators

2008–09 2007–08

Indicator Budget ActualAnnual change (%)** Budget Actual

Financial

Total revenue ($m) 559.7 670.4 23.9 468.0 540.9

Earnings before interest and tax ($m)

177.1 278.5 65.2 160.9 168.6

Profit after tax ($m) 102.3 195.6 44.3 108.9 135.6

Net assets ($m) 860.2 957.0 30.6 1,062.9 733.0

Return on total assets (%) 11.3 14.5 93.3 9.6 7.5

Return on equity (after interest and tax) (%)

12.0 23.1 (8.8) 10.3 25.4

Debt/debt + equity (%) 20.1 21.2 40.1 5.7 15.1

Interest cover (times)* 9.7 22.1 (86.8) 30.4 167.8

Current ratio (times) 0.7 1.4 83.2 1.3 0.8

Operational

Annual availability (Stanwell Power Station) (%)

92.30 95.06 (0.4) 94.10 95.42

Forced outage factor (Stanwell Power Station) (%)

2.40 0.49 (70.8) 2.20 1.68

Health and safety

Lost Time Injury Frequency Rates

- employees 0 1.52 (50.7) 0 3.08

- contractors and employees 0 9.73 172.6 0 3.57

Environment

Environmental incidents

- Level 1, 2 or 3 - 93 72 - 54

- Level 4 or 5 0 0 0 0 0

* Interest cover has been calculated using net interest received.** Annual change (%) calculation for financial indicators is based on unrounded values.

Stanwell Annual Report 2009 YEAR IN REVIEW

In 2008–09, we put in place a range of strategies and action plans, which will have a long lasting impact on the performance of the organisation. These include preparing for emissions trading, aligning with the Queensland Government’s Climate Smart 2050 strategy, researching lower emission technology and responding to changes in the electricity industry structure and composition.

yEAR In REVIEW

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

Sales of electricityCoal revenue sharingarrangementsSales of coalInterest received/receivableOther

600

700

500

400

300

200

100

0

$m

Total revenuesSharing of export coal revenues from the Curragh North coal mine contributed to this year’s strong revenue result.

7Stanwell Annual Report 2009 YEAR IN REVIEW

Challenges and opportunitiesDeveloped strategic carbon risk management initiatives ahead of an emissions trading scheme, despite regulatory uncertainty (Market trading page 37).

Monitored renewable energy options and potential research and development opportunities (Project development page 40).

Continued the development of a revised Gladstone Interconnection and Power Pooling Agreement (IPPA) and associated arrangements, which is scheduled to be completed in late 2009 (Project development page 42).

Right peopleSuccessfully negotiated new workplace agreements for Stanwell Power Station, Kareeya and Barron Gorge hydros and the corporate offices (Employee relations page 25).

Recruited nine people into Stanwell’s Apprentice and Trainee Program in January 2009 (Employee relations page 24).

Recorded 11 lost time injuries for employees and contractors (Health and safety page 21).

Continued to implement EcoChoices initiatives within non-operational areas of the business to reduce and offset carbon emissions in the areas of office buildings and air and car travel (Environmental performance page 44 and 45).

Right markets Focused on our customers’ needs and increased our range of contracts tailored to individual customer requirements, creating mutually beneficial situations for both the customer and Stanwell (Market trading page 37).

Implemented a financial risk and valuation system to enable us to better manage our risks through more reliable product valuations (Market trading page 37).

Delivered a record net profit of $195.6 million (2007–08: $135.6 million) (Economic performance page 49).

Achieved average plant availability of 94.53% across all operating sites—2.6% more than budget (Operations page 36).

Right fuelsReviewed potential solar thermal, geothermal, biomass and wind projects (Project development page 40).

Funded and actively participated in a range of clean coal research and development initiatives (Project development page 40–41).

Achieved renewable energy production of 914.4 GWh sent out against a budget of 587.3 GWh (2007–08: 740.7 GWh) (Environmental performance page 47).

Reviewed the performance and cost of a broad range of low emission generation options and particularly the impact of recent global increases on capital costs (Project development page 40).

Right plantConducted our largest ever overhaul at Stanwell Power Station on Unit 2, including an upgrade of the low pressure turbine and a generator rewind, in October 2008 (Operations page 32 and 34).

Prepared for the installation of low NOx burners in August 2009 at Stanwell Power Station (Environmental performance page 44).

Continued to develop a water management strategy to manage our use of water and our impact on the environment (Environmental performance page 44 and 46).

Prepared for the Unit 1 generator rewind at Barron Gorge Hydro to commence in July 2009 (Operations page 33).

Right organisationContinued negotiations with Wesfarmers Resources to further monetise our coal assets (subject to investment approvals) (Project development page 40).

Acquired an equity interest in Blue Energy Limited and finalised a farm-in agreement with Icon Energy Limited (Project development page 40).

Addressed recommendations from stakeholder surveys to enhance stakeholder engagement practices (Community relations page 29).

Improved existing carbon reporting processes to meet new requirements under the National Greenhouse and Energy Reporting Act 2007 (Environmental performance page 44).

Right locationsPursued opportunities that examined the construction of a cleaner coal-fired power station in the Surat Morton Basin (Project development page 40).

Established the Sponsorships Regional Fund and realigned our approach to corporate giving to more effectively address regional social interests of education, environment and health and safety (Community relations page 28).

Recorded no Level 4 or 5 environmental incidents for the third consecutive year (Environmental performance page 44).

8 Stanwell Annual Report 2009 PERFORMANCE OVERVIEW

Strategic objectives

Initiative Outcome Results

Right fuels Monetise Stanwell’s existing mining development leases and finalise new coal sharing arrangements with Wesfarmers Resources.

Agreement with Wesfarmers Resources, which provides additional profits from export coal sales.

On track Finalising negotiations with Wesfarmers Resources to facilitate an expansion of exports from Curragh North mine (Project development page 40).

Right location Right plant Right fuels Right organisation

Undertake the feasibility study with joint venture partners examining the construction of a cleaner coal-fired power station in the Surat Morton Basin.

A new baseload power plant that provides the Stanwell portfolio with scale and renewal benefits.

Achieved Completed prefeasibility study into a low emission coal-fired power station and submitted a formal proposal to state and federal governments for funding consideration (Project development page 40).

Right plant Right fuels Right organisation

Identify upstream gas and gas generation opportunities in Queensland for new intermediate and/or peaking plant.

Development of one of the highest ranked gas opportunities, including a peaking plant in South East Queensland or intermediate plant in North Queensland.

On track Secured a gas development and alliance agreement and equity share in Blue Energy Limited and finalised a farm-in agreement with Icon Energy Limited (Project development page 40).

Right plant Finalise the new Gladstone Power Station Interconnection and Power Pooling Agreement (IPPA) arrangements with Rio Tinto.

The Gladstone Power Station IPPA and related agreements amended to reflect the Heads of Agreement.

On track Revised agreements substantially completed by mid-2009. Implementation may be subject to completion of dispute settlement process and regulator review (Project development page 42).

Right people Right plant Right fuels

Provide services under the Project Development Agreement (PDA) for the completion of the ZeroGen feasibility study.

The ZeroGen feasibility study completed as agreed under the PDA.

Achieved Master Services Agreement executed with ZeroGen.

Right plant Undertake a planned outage and overhaul of Unit 2 at Stanwell Power Station in September 2008, including the commencement of a low pressure turbine and generator upgrade.

Outage completed within agreed time and budget constraints, with continued improvement in the areas of asset performance, availability and reliability.

Achieved Completed major overhaul of Stanwell Power Station Unit 2, including low pressure turbine upgrade and generator rewind (Operations page 32 and 34).

pERfORMAnCE OVERVIEW 2008–09

Every year we document the nature and scope of our strategies, objectives and actions in our Statement of Corporate Intent (SCI). As a Queensland Government Owned Corporation, this document is part of our performance agreement with our Shareholding Ministers. The SCI is consistent with and complements our five-year Corporate Plan.

Our performance against our 2008–09 SCI is summarised below. A copy of the SCI will be tabled in the Legislative Assembly in accordance with Section 121 of the Government Owned Corporations Act 1993.

All business development projects are subject to investment approvals.

Circulating water pipes at Stanwell Power Station.

9Stanwell Annual Report 2009 PERFORMANCE OVERVIEW

Strategic objectives

Initiative Outcome Results

Right people Enhance Stanwell’s safety culture.

Zero incidents. Action required Recorded 11 lost time injuries (Health and safety page 21).

Fitness for Duty and Alcohol and Other Drugs programs rescheduled for implementation (Health and safety page 21 and 23).

Achieved Conducted staff training in incident investigation and root cause analysis (Health and safety page 23).

Right markets Right organisation

Improve Stanwell’s spot and contract trading strategy, including the development of portfolio based risk metrics and benchmarking tools, to incorporate a trading portfolio. Preparation for the introduction of an emissions trading scheme.

Co-optimised trading and hedge book.

A range of different cost (carbon price) models to determine the likely impacts of any future emissions trading scheme on generators and consumers.

Achieved Implemented financial risk and valuation system (Market trading page 37).

On track Continued work on implementing internal processes necessary to operate within an emissions trading scheme (Market trading page 37).

Right locations Develop and market the industrial precinct adjacent to Stanwell Power Station.

Environmental background studies and infrastructure and customer demand studies.

Business case for further industrial development.

On track Continued with investigations and studies into the development of the Stanwell Energy Park (Project development page 42).

Right people Right locations

Improve Stanwell’s performance against stakeholder expectations.

Improve and maintain key stakeholder perceptions.

Achieved Addressed recommendations from past stakeholder survey (Community relations page 30).

Maintained and enhanced stakeholder relations through strategic sponsorships and development of the Sponsorships Regional Fund (Community relations page 28 and 29).

Undertook a new stakeholder survey to benchmark changes in expectations and perceptions (Community relations page 29).

Right people Right organisation

Implement the Stanwell Climate Change Strategy 2007–12.

Stanwell positioned to adapt to climate change.

Reporting of greenhouse gas emissions in 2008–09 under the new Commonwealth legislation.

On track Implemented new reporting structures for National Greenhouse and Energy Reporting Act 2007 (Environmental performance page 44).

Right people Implement employee retention and attraction initiatives.

Stanwell has access to key employee skills and resources.

Achieved Continued with the Leadership Development Program, post graduate opportunities and career programs with universities (Employee relations page 24 and 25).

Right organisation Identify opportunities for improvement of Stanwell’s financial performance.

Costs optimised to generate better returns on Stanwell’s assets.

Achieved Increased return on total assets ratio by 93.3% from the previous year (Economic performance page 51).

10

yEAR AHEAD 2009–10

Strategy Actions Desired outcomes

Strategic objective: Right people—skilled people, strong leadership

Drive to zero harm by providing a safe workplace through demonstrated leadership, safe practices, safe behaviours and improvements to the work environment.

Implement initiatives that continue to improve our safety performance and eliminate hazards for the benefit of our employees and contractors.

Achieve zero major non-compliances on Occupational Health and Safety Management System audits.

Benchmark performance against industry organisations.

Ensure our skills meet our business needs. Perform a skills capability review to assess current organisational capability, in relation to the delivery of key objectives and outcomes.

Implement recommendations from the skills capability review.

Optimise Stanwell’s recruitment and retention strategies to ensure competitiveness.

Review Stanwell’s key employee processes to ensure alignment with our future needs.

Review attraction and retention policy.

Strategic objective: Right markets—profitable market growth

Engage our customers to develop positive long-term, commercial relationships.

Identify potential opportunities in the market and pursue these with existing and new customers, with the aim to improve gross margin.

Update our trading systems to flexibly manage our future trading needs.

Develop and trade new products that best meet our customers’ needs.

Implement electricity risk measurement and contract pricing system.

Develop and implement emissions trading processes and systems.

Implement systems and processes that allow Stanwell to comply with the proposed Carbon Pollution Reduction Scheme and associated emissions trading scheme.

Implement systems and processes to ensure compliance.

Determine Stanwell’s anticipated carbon permit requirements.

Match plant performance to portfolio and market needs.

Operate our existing portfolio plant to a regime that best meets the needs of the market.

Average more than 92% portfolio availability.

Average less than 2.4% portfolio forced outage factor.

Maintain Stanwell Power Station summer availability at greater than 97%.

Manage costs to improve profitability. Reduce controllable costs across the organisation to improve the return to shareholders.

Provide an efficiency dividend to shareholders of $4 million in the form of cost savings.

Stanwell Annual Report 2009 YEAR AHEAD

Stanwell has made strategic moves throughout the year to diversify our generation portfolio and become a more agile and responsive organisation.In 2009–10 we will further strengthen our business through the six key objectives of right people, right markets, right fuels, right plant, right organisation and right locations.

All business development projects are subject to investment approvals.


11Stanwell Annual Report 2009 YEAR AHEAD

Strategy Actions Desired outcomes

Strategic objective: Right fuels—diversify our fuel mix

Create options to reduce Stanwell’s carbon footprint and CO2 intensity with a mixture of coal, gas and renewable energy resources.

Identify potential energy resources. Sign gas supply agreement for purchase of gas.

Secure participation in an Integrated Gasification and Combined Cycle project by December 2009.

Ensure long-term certainty of supply and fuel cost for Stanwell Power Station.

Use our equity in our fuel resources to ensure certainty of availability and price for Stanwell Power Station coal through to 2043.

Retain long-term resources giving price certainty for Stanwell Power Station coal supply beyond 2025, with excess resources monetised.

Define post-2025 cost structures.

Strategic objective: Right plant—lower our carbon intensity

Develop new project options with varying life spans that will deliver a sustainable long-term portfolio of lower CO2 intensive plant and secure cost effective electricity supply.

Investigate the best options for future gas generation in Queensland.

Complete a prefeasibility study for two sites.

Improve performance of Stanwell’s existing plant.

Continue to develop and implement performance improvements that have a positive impact on portfolio emission intensity.

Complete Barron Gorge Hydro Unit 1 generator rewind by November 2009.

Complete Stanwell Power Station Unit 3 low pressure turbine upgrade and generator rewind by December 2009.

Strategic objective: Right organisation—improve organisational capability and responsiveness

Identify and initiate partnerships to create growth opportunities.

Develop the capability to analyse and maintain suitable partnering arrangements, financing and ownership structures and apply them to new growth opportunities.

Work with the right partners in delivering opportunities.

Create an agile and responsive organisation.

Ensure we have the right systems and processes to deliver our Strategic Plan.

Complete business and organisational structure review.

Streamline reporting process.

Engage stakeholders to ensure a clear understanding of Stanwell’s business.

Improve and maintain key stakeholder perceptions in areas where we have, or intend to have, our operations.

Key stakeholders have a clear understanding of Stanwell’s business.

Strategic objective: Right locations—Queensland based, regionally focused

Secure sites and services for future generation.

Investigate and secure new sites and services that provide a range of options for the future.

Secure four sites suitable for gas generation.

Complete bid for sequestration rights.

Build greater organisational capability in regional areas where we operate.

Recruit to fill new or replacement positions into regional areas, where possible.

Investigate need and options for future office premises for Rockhampton and Cairns.

Maintain our right to operate. Manage our impact on the environment to meet legislative and permit conditions.

Install Stanwell Power Station Unit 3 low NOx burners by December 2009.

Maintain zero Level 4 and 5 environmental incidents.

Achieve no material external environmental audit non-conformances.

12 Stanwell Annual Report 2009 CHAIRMAN’S STATEMENT

Record financial resultsI have pleasure in reporting a record annual after tax profit of $195.6 million (2007–08: $135.6 million).

This strong financial result was also reflected in total revenue of $670.4 million (2007–08: $540.9 million) and operating cash flows of $191.9 million (2007–08: $140.8 million).

This performance is particularly pleasing given the softening contract and spot markets for electricity in 2008–09, as a result of easing water restrictions and lower than expected demand.

We continued to benefit from our coal revenue sharing arrangements with Wesfarmers Resources, which have added $131.2 million to our after tax profit result.

The business continued to perform well across other areas, including:

high reliability, with an average •availability of 94.53% across our portfolio;investment in upstream gas; •significant progress in investigating •clean coal opportunities in the Surat Morton Basin; andexecution of our emissions trading •strategy response and implementation plan.

A changing marketOver the next decade, the energy market will experience unprecedented change, driven primarily by the introduction of the proposed Carbon Pollution Reduction Scheme and emissions trading.

The regulatory framework for emissions reduction will alter the nature and structure of Queensland’s supply sector and change consumption patterns.

Against this setting, Stanwell has time to transition to a low emissions future and reduce our carbon footprint to minimise our exposure to an emissions trading scheme.

We remain conscious of our responsibility to continue to generate low cost and reliable baseload electricity, which is delivered primarily by the ongoing, high availability of our coal-fired Stanwell Power Station. Our asset management program ensures we continue to achieve efficiency gains at Stanwell Power Station that provide corresponding improvements in environmental performance.

As the electricity industry embarks on a period of significant change with the imminent introduction of the proposed Carbon Pollution Reduction Scheme, Stanwell is well positioned to lead the transition to a lower emissions future, with strong financial credentials, high performing plant and flexible growth strategies.

CHAIRMAn’S STATEMEnT

Chairman Denis Byrne

13Stanwell Annual Report 2009 CHAIRMAN’S STATEMENT

Developing energy optionsOur business development activities are centred on providing Stanwell and the State with a range of project options that can be further defined and developed in response to market challenges and requirements.

In particular, we are seeking project opportunities that increase our ability to respond quickly to government and market requirements.

The long development cycle of energy assets requires Stanwell to look to the longer term horizon and ensure we can take prudent early steps to meet market needs.

To this end, we are examining a range of renewable, gas and lower emissions project opportunities throughout regional Queensland, which will meet future energy demands and provide significant stimulus to local economies through the creation of jobs and local purchasing.

Our gas strategy was progressed this year, with an investment in Blue Energy Limited and a farm-in agreement with Icon Energy Limited. These long-term investments will assist in securing access to gas resources to facilitate the development of gas generation.

Diversifying our portfolio to include gas-fired generation is an important step to ensure Stanwell is well positioned for emissions trading and provides a valuable contribution to the Queensland Government’s gas scheme.

We advanced investigations into lower emissions technologies, with the completion of a prefeasibility study into the construction of a coal gasification plant, with carbon capture and storage, in the Surat Morton Basin. The study was conducted in partnership with private sector companies and we have engaged with the Commonwealth Government, the Global Carbon Capture and Storage Institute, the Queensland Clean Coal Council and the coal industry to gain support for this important project.

Health and safety—the cornerstone of our businessCentral to the Board’s commitment to ensuring a safe work environment is an unwavering belief that we can achieve a zero harm workplace for our employees, contractors and visitors. This is a long-term goal requiring constant improvements in the way we go about our operations.

A strong governance frameworkThe high levels of public accountability that apply to government owned corporations make corporate governance extremely important.

This year, we continued to review our corporate governance framework in light of these guidelines and principles and made the necessary revisions to our Board Handbook. We have also engaged an external third party to undertake a review of the performance of the Stanwell Board and Board committees. The outcomes from that review will be delivered and implemented by the end of 2009.

The Human Resources and Workplace Health and Safety Committee oversaw a year of significant workforce outcomes, with the completion of the renegotiation of enterprise bargaining agreements for Stanwell Power Station, Barron Gorge and Kareeya hydros and the corporate offices.

The year aheadI am optimistic about the opportunities that lie ahead for Stanwell as we take an active role in the significant change occurring within our industry.

Next year, we will continue to investigate gas based opportunities to position us well for the introduction of the Commonwealth’s proposed Carbon Pollution Reduction Scheme.

We will also look to monetise our remaining coal mining development leases, which will provide further diversification to our revenue stream.

On behalf of the Board, I thank our two Shareholding Ministers for their support: the Minister for Natural Resources, Mines and Energy and Minister for Trade, The Honourable Stephen Robertson MP; and the Treasurer and Minister for Employment and Economic Development, The Honourable Andrew Fraser MP.

I would like to acknowledge the efforts of my fellow Board colleagues and place on record my appreciation of the diverse, yet complementary skills they each bring to the Board.

Our strong financial and operational performance results this year have been made possible by our Chief Executive Officer, Kim Wood, and our highly capable management team.

I also extend thanks to our stakeholders, including customers, suppliers, business partners and local communities, for their ongoing support and contribution to our business.

I look forward to continuing with the momentum we have built this year, as we enter a year of significant change and tremendous opportunity.

Denis Byrne Chairman

14 Stanwell Annual Report 2009 CEO’S REVIEW

In contrast to this, our safety performance was well below expectations. Although employee safety outcomes showed continued improvement, there was an unacceptable decline in contractor safety outcomes. We have placed considerable focus on improvement in this area in the coming year.

We continued to provide strong dividends to the State. Our total revenue of $670.4 million is $129.5 million more than the previous year’s result. Profit after tax increased by 44.3% to $195.6 million due to strong results from sharing export coal revenues from the Curragh North coal mine.

This year we revised our strategy to reflect our desire to create a more agile and responsive presence and to ensure an increased focus on the market and our customers.

Building on our previous year’s strategy, Stanwell’s 2009–10 strategy redefines and expands our core objectives to target the ‘right’ people, markets, fuels, plant, organisation and locations.

Our strategy is in response to a number of factors, including the need to prepare for the introduction of the proposed Carbon Pollution Reduction Scheme, respond to the global credit situation and the impacts of climate change.

The appropriateness of our strategy was tested throughout the year, as we saw a softening of the contract and spot markets for electricity. Weather conditions during 2008–09 had a noticeable impact on the market, with milder summer temperatures only slightly increasing demand and increased rainfall leading to greater availability in the National Electricity Market.

Generating sustainable assets and infrastructureStrategic capital investments throughout the year have provided Stanwell with options to strengthen our portfolio and reinforce our commitment to sustainable generation options.

Stanwell acquired shares in Blue Energy Limited and signed a farm-in agreement with Icon Energy Limited as part of our strategy to secure the necessary inputs to develop gas-fired generation in Queensland. These acquisitions will assist us in making a valuable contribution to the Queensland Gas Scheme and support the State’s push for lower emission energy options for Queensland.

CHIEf ExECUTIVE OffICER’S REVIEW

Stanwell has performed well in financial, operational and corporate fields throughout 2008–09, against a backdrop of significant economic and environmental change.

Chief Executive Officer Kim Wood

15Stanwell Annual Report 2009 CEO’S REVIEW

We recognise the need to maintain baseload coal-fired generation capacity while improving the environmental performance of existing power stations. This year, the upgrade of the Unit 2 low pressure turbine and generator at Stanwell Power Station was completed. The improvement in efficiency will see a reduction in greenhouse gas emissions from this unit. We also undertook preparations for installing low NOx burners at Stanwell Power Station. Once complete, these burners will reduce the NOx emissions from the station, by 50% per unit.

Being part of the changeAs a member of the National Generators Forum, Stanwell has played a key role in monitoring, commenting on and guiding change in our industry.

In 2008–09, Stanwell maintained a voice in the national debate about greenhouse and energy policy related to the proposed Carbon Pollution Reduction Scheme and joined with the National Generators Forum and Queensland Resources Council in reviewing consultation papers for regulations under the National Greenhouse and Energy Reporting Act 2007.

Stanwell also took a lead role in successfully advocating for improvements to the Australian Energy Market Commission’s rule change proposals for cost allocation arrangements for transmission services.

We continue to support research into low emission technologies through projects with the Electric Power Research Institute and The University of Queensland, among others. These research projects inform our operational and environmental policies and objectives.

Generating a sustainable workforceOur leadership program continued to strengthen our workforce. Fourteen people completed the program in December 2008 and a further seven are participating in the 2009 program, comprising two female and five male employees.

Our first health and safety continuous improvement workshop gave employees and contractors from operational and corporate areas of Stanwell the opportunity to gain a better understanding of our safety system and how it impacts and supports all areas of our business.

The direct involvement of our people in developing and improving our health and safety systems was important in strengthening linkages between Stanwell teams and providing internal opportunities for learning and skills development.

Marking a first for the organisation, Stanwell welcomed two female trade apprentices into our apprenticeship and traineeship program. This sends an important message to the community about the diverse and interesting career options available at Stanwell and in the energy industry.

Keeping our regional focusStanwell established the Sponsorships Regional Fund this year, following a review of our social investment strategy. As a result, we have made significant contributions to the Central Queensland and Far North Queensland communities in which we operate, in the areas of education, environment and health and safety.

The Unit 2 outage at Stanwell Power Station was the largest outage in Stanwell’s history and saw more than 6,700 maintenance activities completed. Importantly, the outage employed a workforce of approximately 800 staff for nine weeks and, wherever possible, we purchased supplies, accommodation and catering from local businesses.

Recognising our peopleAs Chief Executive Officer, I have been fortunate to have worked with a committed and professional executive management team. This team has upheld Stanwell’s vision and shown commitment to taking our organisation forward. I look forward to working closely with them in 2009–10 to realise our objectives.

I must also recognise the efforts of our Board and our shareholders’ representatives; the Office of Government Owned Corporations and the Department of Employment, Economic Development and Innovation– Queensland Mines and Energy.

This has been a successful year for Stanwell and we could not have achieved these results without the commitment and professionalism of our employees and contractors—thank you for your hard work, support and dedication throughout the year.

Kim Wood Chief Executive Officer

16

ExECUTIVE MAnAGEMEnT TEAM

Stanwell Annual Report 2009 EXECUTIVE MANAGEMENT TEAM16

Garry ButtonBCom (UnSW), fCpA, ffTp, MAICD

Chief financial OfficerFebruary 2008–current

Garry joined Stanwell in February 2008 as Chief Financial Officer and is responsible for the strategic direction and operational performance of Stanwell’s finance, business improvement, financial risk management and procurement functions.

Prior to this, Garry held several senior financial and corporate roles within Queensland Rail, Fairfax and Unilever Australia. He is a Fellow of CPA Australia and the Finance and Treasury Association, where he is also a past national President and NSW Chapter Chairman. Garry is a director of Blue Energy Limited and non-executive director of 4 Walls Limited, a not-for-profit organisation.

Wayne CollinsBEng, BBus

Chief Operating OfficerMay 2008–current

Wayne has worked in the electricity industry for 28 years, in a variety of operations, engineering, managerial and business development roles, associated principally with power generation.

In May 2008, Wayne was appointed Chief Operating Officer of Stanwell, responsible for managing the organisation’s plant operations. He has been a senior executive with Stanwell for 12 years, with previous management roles in business services, asset management and technical services, and business development.

Kim WoodDipEng, BEng, MBA, fIEAust, CpEng

Chief Executive OfficerFebruary 2007–current

Kim took up his appointment as Chief Executive Officer at Stanwell in February 2007, bringing more than 20 years of management experience to the organisation. Prior to joining Stanwell, Kim held the position of Managing Director of the Northern Territory utility, Power & Water.

His previous roles include Managing Director of Datafast Telecommunications, Chief Executive Officer of Victorian electricity transmission business GPU PowerNet, Managing Director of City West Water, Managing Director of GEC Plessey Telecommunications, General Manager at Bell South, Regional Manager of Hewlett Packard and Engineering Officer with the State Electricity Commission. Kim has also been a Director of the Indigenous Housing Authority of the Northern Territory and has chaired the two gas subsidiaries of Power & Water.

John BampfyldeMBA, BSc (Geology)

General Manager TradingFebruary 2008–current

John joined Stanwell in February 2008 as General Manager of Trading and is responsible for physical and financial trading and market forecasting. Prior to joining Stanwell, he was Energy Risk Manager and Pricing Manager at Tarong Energy for two years.

During his career, John has worked for the Australian office of Risk Capital, a New York-based risk management consultancy specialising in energy and natural resources; Aquila Merchant Services, where he consulted in risk management and market operations in the USA; Trading Manager at EMCO during the New Zealand electricity market implementation; a natural resources Risk Manager, and a Eurobond derivatives market maker in London.

17Stanwell Annual Report 2009 EXECUTIVE MANAGEMENT TEAM 17

Derek HanniganBEng (Civil), MBA

General Manager Business DevelopmentApril 2008–current

Derek joined Stanwell eight years ago as Manager Group Procurement. This role was initially a strategic procurement function and later expanded to include the company’s energy resources functions.

Derek has overseen Stanwell’s Business Development division since October 2006 and was appointed General Manager Business Development in 2008. He is responsible for facilitating the development of strategy, the operational and strategic fuel and water needs of existing assets and investigating and securing investment opportunities in gas, clean coal, and renewable energy. He has worked previously as a consulting structural design engineer, a mechanical projects engineer for a mining company and a senior management consultant with PricewaterhouseCoopers.

Brad nevenMBA (HRM), ComDec, MAHRI, MIRSQ

General Manager Business ServicesMay 2008–current

Brad has worked for Stanwell for more than 10 years. His career with the corporation has included human resource and managerial roles, including Employee Relations Manager.

In May 2008, Brad was appointed General Manager Business Services, responsible for managing health and safety, risk, information and communication technology, land and property, environment and human resources.

Michael O’RourkeBLaw, BCom, GDip Applied finance and Management, GDip Company Secretarial practice

General Manager Corporate ServicesSeptember 2007–current

Michael joined Stanwell in 1998 as Legal Counsel and was responsible for the strategic direction and operational performance of Stanwell’s legal team. In 2002, Michael was appointed Stanwell’s Company Secretary/Legal Counsel. As Company Secretary, Michael reported through to the Stanwell Board on all legal and secretariat related matters.

After acting in the role since September 2007, Michael was appointed General Manager Corporate Services in January 2009. He is responsible for the internal departments of secretariat, legal, internal audit, corporate communications, stakeholder relations, insurance and quality.

18 Stanwell Annual Report 2009 BOARD OF DIRECTORS

BOARD Of DIRECTORS

Laurie GillespieGAICD

Chairman Human Resources and Workplace Health and Safety CommitteeAppointment tenure: 1 July 2006 to 30 September 2009

Laurie Gillespie is currently the Chairman of the company’s Human Resources and Workplace Health and Safety Committee.

Laurie is a former General Secretary of the Queensland State Service Union.

He has more than three decades of experience in the trade union movement as administrator and advocate in both the public and private sectors.

Laurie has also served two terms as a member of the Queensland Heritage Council, in the second instance as Deputy Chair. He is a former Councillor and currently Returning Officer of the National Trust of Queensland.

Barry KellyAppointment tenure: 1 July 1999 to 30 September 2009

Barry Kelly was the former Managing Director of Golden Circle Limited, during which time he was involved in a range of activities, including improving competitiveness and sales and implementing the strategic restructure of the pineapple industry.

Barry is a former Director of the Canned Foods Information Service Board, Food Science Australia Board, the Australian Food and Grocery Council (AFGC) Board, the Centre for Food Technology and Food Spectrum Pty Ltd.

Denis ByrneLLB

ChairmanAppointment tenure: 1 July 2006 to 30 September 2009

Denis Byrne practised commercial law for 28 years, with wide experience in the corporate, infrastructure and resources areas.

He is currently a Director of Jimfitz Custodian Pty Ltd, Asia Pacific Nickel Pty Ltd, Shenhua Australia Holdings Pty Ltd and Shenhua Watermark Coal Pty Ltd.

Denis served for 10 years on the Australian Takeovers Panel and seven years on the New Zealand Takeovers Panel. Denis was also President of the Queensland Law Society from 1985–86, President of the Law Council of Australia in 1988–89, former Managing Partner of Freehill Hollingdale & Page and inaugural Chairman of the Queensland Gas Appeals Tribunal. He also served as a member of the Prime Minister’s Rail Taskforce.

Denis was Chairman of a number of national committees within the horticulture industry and was also a Director of Horticulture Australia Limited from 2001 to 2004. He has served as Chairman of the Fisheries Research and Development Corporation (Commonwealth) and as a Director of Ball Solutions Group (a subsidiary of Ball Corporation US), Blue Energy Limited, ZeroGen Pty Ltd and Advanced Magnesium Limited.

Mark WilliamsonAssoc. Dip. Ind. Eng and MAICD

Appointment tenure: 5 July 2001 to 30 September 2011

Mark Williamson is Director Northern Region at SingTel Optus.

Mark has held senior executive roles in the electricity, IT, telecommunications and airline industries. His professional career has been primarily in sales and marketing and in general management at state, national and international levels.

Mark is an experienced director who has served on a number of boards, including North Queensland Cowboys Rugby League Club, Brisbane Marketing Ltd, Hamilton Island Airport Ltd, Brisbane Visitors’ and Convention Bureau, AFTA (Qld), Mackay Port Authority and Starlight Children’s Foundation (Qld).

19Stanwell Annual Report 2009 BOARD OF DIRECTORS

peter GreggBEc, MAICD, fellow of the finance and Treasury Association

Chairman Audit and Risk Management CommitteeAppointment tenure: 1 July 2006 to 30 September 2009

Peter Gregg is currently a Director of Skilled Group, QR Limited and Leighton Holdings Limited and Chairman of the company’s Audit and Risk Management Committee.

Peter is a former Chief Financial Officer and Director of Qantas and was responsible for group finance, investor relations, strategy, economics, IT services, shared services and strategic procurement.

Prior to being appointed Chief Financial Officer, he was Deputy Chief Financial Officer and Group Treasurer at Qantas. He was also Treasurer of Australian Airlines and has worked for the Queensland Government in various risk management roles.

Graeme Crow BCom, LL.B. (Hons)

Appointment tenure: 1 October 2008 to 30 September 2011

Graeme Crow is currently Chairman of the Rockhampton League’s Club and a panel Barrister to WorkCover Queensland, Suncorp, several other major insurers and a large international mining corporation.

Graeme is a Barrister who has practised in personal injury, commercial and estate litigation for the past 17 years.

Prior to his career in law, Graeme worked as an accountant with Coopers & Lybrand Brisbane prior to taking up an appointment as a Judge’s Associate.

After completing his Bachelor of Commerce in 1987, Graeme worked as a tutor in financial and managerial accounting and law at The University of Queensland and Queensland University of Technology and lectured and tutored in commercial and corporate law at CQUniversity.

David WatsonBCom (Hons), MA, phD, AAUQ, fCpA, fCA

Appointment tenure: 1 January 2007 to 30 September 2009

David Watson is currently the Chairman of Translation Research Institute Pty Ltd, the Translational Research Institute Project Control Group and the Primary Industries Productivity Enhancement Scheme Review. He is a Member of the Board of Major Brisbane Festivals Pty Ltd, The University of Queensland Senate Finance Committee, the Board of Nominations, Accounting Hall of Fame (USA), the Editorial Board of the Australian Accounting Review, the PIMC Equine Influenza Expert Review Panel and the Australian Agricultural College Corporation Consultative Group.

David has a distinguished career in accounting and financial management. He was Professor of Accounting and Business Finance at The University of Queensland and, before that, Associate Professor at the University of Illinois Urbana-Champaign.

David has an extensive publication record in management accounting, governance and public accountability.

He was the Federal Member for Forde (1985–87) and the Queensland Parliament Member for Moggill from 1989 until 2004. David has been a Cabinet Minister (Public Works and Housing) and a Parliamentary Secretary (Treasury).

In 2004, David was appointed a Commissioner for the Commission of Enquiry into the Integrity Management Systems in the Queensland Racing Industry.

He has broad experience in the utilities sector, having been a non-executive Director of Sun Retail Pty Ltd and Sun Gas Retail Pty Ltd.

20 Stanwell Annual Report 2009 SOCIAL PERFORMANCE

HEALTH AND SAFETY 21EMPLOYEE RELATIONS 24COMMUNITY RELATIONS 28

SOCIALPERFORMANCE

Old pelton wheel on display at Kareeya Hydro.

21Stanwell Annual Report 2009 HEALTH AND SAFETY

HEALTH AnD SAfETy

Safety resultsIn 2008–09, there were 11 lost time injuries (one employee and ten contractor), compared to four lost time injuries (two employee and two contractor) in 2007–08.

Stanwell recorded Lost Time Injury Frequency Rates (LTIFR) of 1.52 for employees and 21.13 for contractors, resulting in a combined LTIFR of 9.73 (compared with 3.57 in 2007–08).

Although the employee LTIFR was lower than the previous year, the contractor frequency rate increased significantly with the majority of contractor lost time injuries occurring during the Unit 2 outage at Stanwell Power Station.

The Unit 2 outage at Stanwell Power Station was the largest outage undertaken to date, involving approximately 800 workers covering shifts 24 hours a day. During the outage, four separate events resulted in eight lost time injuries.

The number of safety incidents was not an acceptable outcome and has driven a large number of improvements ahead of the next major Stanwell Power Station overhaul. These include changes to contractor pre-start requirements, improved contractor inductions, improved

contractor supervision, changes to allocation of work and increased use of permanent installations to reduce the risk of falling objects and the need for scaffolding.

DuPont has also been engaged to review elements of Stanwell’s overhaul and general safety performance.

OHS policyStanwell’s Occupational Health and Safety (OHS) Policy focuses on safe people, safe practices and safe work environments and promotes a workplace culture that raises awareness of individual responsibility for health and safety. Stanwell’s safety culture is achieved when these components are recognised and budgeted in conjunction with strong leadership.

Our policy integrates risk management into core business processes. Stanwell’s OHS management system meets AS/NZS 4801 standards and complies with statutory obligations.

Safe peopleImplemented in 2006, Zero Incident Process (ZIP) is a program that enables individuals to improve their attitude and thinking around day-to-day safety and wellbeing practices, personally and

professionally. The principles of ZIP have been maintained throughout Stanwell, with refresher courses for employees and ZIP training for new starters across the organisation.

A monthly award was introduced at Stanwell Power Station in October 2008 to reward safe behaviour. The award recognises behaviours that are a representation of Stanwell’s safety culture, such as promoting the importance of safe practices, identifying hazards, demonstrating ZIP core principles and suggesting safety improvements.

The Board Employee Excellence Awards have also been modified to include a safety category that recognises employees who demonstrate the attributes of a health and safety champion, while also influencing others in the implementation of Stanwell’s safety culture.

Preparations continued for the Fitness for Duty program. This program is aimed at preventing health and safety related incidents and issues resulting from fatigue, alcohol and other drugs in the workplace.

Safe practicesA wide range of safety improvements have been implemented this year, including more focused safety meetings, recognition of positive safety achievements and the development of an off-the-job safety focus.

Stanwell takes seriously its responsibility for the health and safety of employees, contractors and visitors. Our safety results for 2008–09 led to significant efforts to evaluate and improve our performance at all of our sites.

Boilermaker Darryl Schreiweis and Electrical Engineer Tim Hogan at Stanwell Power Station workshop.

22 Stanwell Annual Report 2009 HEALTH AND SAFETY

0

10

20

30

40

50

60

70

80

2008-09 2007-082006-072005-062004-05

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

63.5

0

38.5

0

4.50

10.2

2

18.0

011

.60

3.00 3.50

16.0

03.

91

EmployeesEmployees and contractors

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

EmployeesEmployees and contractors

2.91

6.92

6.08

10.4

6

4.29

5.79

3.08 3.

57

1.52

9.73

0

2

4

6

8

10

12

2008-09 2007-082006-072005-062004-05

Lost Time Injury Duration RateAn increased LTIDR resulted due to the days lost relating to an employee lost time injury.

Lost Time Injury Frequency RateAn increased LTIFR this year can be attributed to outage related contractor safety performance.

In December 2008, Stanwell held its first OHS continuous improvement review workshop. The workshop was an opportunity to review the system for its relevance, effectiveness and usability.

Staff from operational and corporate areas of Stanwell came together in Brisbane for two days to discuss the organisation’s systems, identifying areas that were working well and opportunities for improvement.

The involvement of staff from across the organisation resulted in a broad range of ideas, a better understanding of what is important to different users of the system and an increased awareness of the variety of components within the system.

Workshop aims included the continued health and safety of workers and visitors, development of a consistent approach to managing health and safety across the whole business, meeting corporate governance requirements and improving the risk profile of Stanwell through proactive improvement strategies.

Communication and access to information were highlighted as important areas for improvements, the outcome of which is an initiative to close the identified gaps in communication and ensure system components are better understood and accessible to staff. Many of the identified improvements are being incorporated into the system’s maintenance processes.

Generating safety improvements

The first health and safety continuous improvement workshop aimed to ensure a consistent approach to managing health and safety across the business and to protect the wellbeing of employees, contractors and visitors.

SAFETYElectricians Steve Diehm and Jeff Hickman from Stanwell Power Station.

23Stanwell Annual Report 2009 HEALTH AND SAFETY

The first OHS corporate standards continuous improvement review workshop was conducted in December 2008 (Generating safety improvements page 22) and training in incident investigation and root cause analysis began, with additional sessions planned for 2009–10.

Auditing our systemsTwo health and safety management system surveillance audits were completed in November 2008 and April 2009, and it was found that the system continued to comply with AS/NZS 4801. The auditor noted that improvements to Stanwell systems and processes reflected the considerable amount of work being undertaken. There were no major non-conformances.

Targeting zero harmStanwell continued to prepare for the final roll out of the Authority to Work (ATW) system at Stanwell Power Station. ATW is a significant re-engineering of work authorisation, hazard management and work planning systems at a daily, routine work level. The project is breaking new ground in the electricity industry by challenging entrenched work and safety practices.

Implementation of the ATW system at Stanwell Power Station is scheduled for December 2009. This will bring the station into line with other major Stanwell production sites.

Safe work environmentAn industry working group has been established to identify improvements and hazard controls to prevent falls and falling objects within the industry. The initial meeting of this group was held at Stanwell Power Station during the Unit 2 outage.

Employee health and wellbeing initiativesThe health and wellbeing of our people are important to Stanwell. Through the Stanwellbeing program, a range of health and wellbeing initiatives are offered to all employees (Employee relations page 25).

What we set out to achieve this year How we performed

Begin implementation of Fitness for Duty program and Alcohol and Other Drugs (AOD) process to address the effects of AOD in our workplaces through education, awareness and support.

Action required Progress preparations. This project has been delayed to allow additional consultation with the workforce. It will now be implemented within the 2009–10 financial year.

Target zero harm. Action required Recorded 11 lost time injuries (see Safety results page 21).

Finalise implementation of the Authority to Work system at Stanwell Power Station.

Action required Rescheduled for December 2009 following completion of Unit 3 overhaul.

Retain compliance certification against AS/NZS 4801:2001–Occupational Health and Safety Management Systems.

Achieved Maintained certification compliance levels as confirmed by external audit.

Improve incident investigation processes. Achieved Conducted incident investigation training and root cause analysis, with more training and analysis scheduled for 2009–10.

What we want to achieve next year

Enhance the Zero Incident Process with complementary improvement initiatives.

Implement recommendations from DuPont review.

Implement Fitness For Duty program.

Undertake arc flash analysis to determine appropriate flame retardant clothing and PPE for the different ranges of arc flash energy.

Conduct compliance/improvement audits against corporate health and safety standards.

Conduct safety culture survey.

Retain AS/NZS 4801:2001 certification.

Implement ongoing systems, practices and work environment improvements.

24

focusing on regional employmentOver the past 18 months, Stanwell has concentrated locally on workforce planning requirements and increased its Rockhampton employment numbers.

In 2008, 11 positions were created or relocated to Rockhampton across a variety of professional and administrative roles.

In the first six months of 2009, 15 additional positions were recruited into Stanwell’s Rockhampton business in information technology, facilities management, finance and health and safety roles.

This is part of a long-term objective for Stanwell to grow its regional business with the full complement of qualified, locally based staff.

Attracting, developing and retaining a highly competent workforceThis year, Stanwell began a second Capability Review to determine the company’s future skills requirements and identify gaps in the existing skills base. Recommendations from this review will be implemented in 2009–10.

Stanwell has a range of initiatives in place as part of a strategy to attract a skilled workforce to the energy industry, such as hosting engineering students and lecturers from CQUniversity at Stanwell Power Station to demonstrate engineering career opportunities.

Strategies to retain and develop our existing workforce include annual performance and development reviews for all employees and avenues to investigate further training and development opportunities that support their role and the corporation’s strategy.

This year, three employees completed the Introduction to Power Plant course, as part of the Generating Skills Program.

The program was developed in conjunction with the three Queensland Government generators and three Queensland universities. Now in its second year, the first students have already graduated with a Masters of Engineering in Power Generation.

powering up apprentices and traineesStanwell has maintained its commitment to apprentices and trainees. In January 2009, Stanwell welcomed nine people into its Apprentice and Trainee Program. For the first time, these included two female apprentices in the roles of Systems Electrician and Fitter and Turner (Stanwell the choice for bright spark page 27).

Stanwell’s Apprenticeship and Traineeship Program offers one year trainee positions, two year school based trainee positions and four year apprentice placements. There are currently 32 people enrolled in the program.

Participants receive hands-on experience under guidance from mentors, while developing skills within their chosen field. Opportunities for full-time employment are provided on completion of the program.

Stanwell Annual Report 2009 EMPLOYEE RELATIONS

Stanwell’s employee relations strategy seeks to attract and retain the best people, identify the skills needed to deliver on the business’ objectives, enable employees to develop and use these skills and provide a workplace environment that encourages achievement and safe work practices. Our current workforce includes more than 390 employees and approximately 124 contractors.

EMpLOyEE RELATIOnS

Stanwell trainee Brooke Packer outside Stanwell Power Station.

25Stanwell Annual Report 2009 EMPLOYEE RELATIONS

Developing our leaders of tomorrowSeven employees are participating in the 2009 Leadership Development Program. The program is designed to further develop the company’s managers.

The program offers participants the opportunity to accelerate personal and professional development, with a focus on leadership capabilities, through initiatives such as:

professionally accredited business •courses,coaching programs,•involvement in special company •projects,exposure to guest speakers and •networking opportunities, andtechnical skills training.•

In December 2008, 14 people successfully completed the 2008 Leadership Development Program. Many have now moved on to more senior roles and special projects within the company and provide ongoing support and encouragement to new program participants.

Securing conditions of employmentExtensions and variations to the four existing workplace agreements covering the corporate offices, Stanwell Power Station and Kareeya and Barron Gorge hydros were progressively finalised during 2008–09. All were carried out within Cabinet Budget Review Committee approved frameworks.

promoting employee health and wellbeingThrough the Stanwellbeing program, employees are given access to a range of health and wellbeing initiatives, including annual flu vaccinations, health assessments, first aid training, cancer screenings, ergonomic assessments and a range of educational literature and fact sheets addressing key health and wellbeing topics.

This year:181 employees took up Stanwell’s •offer of a flu vaccination;180 employees undertook a health •assessment;two people completed a basic first aid •course funded by the company, which was in addition to Stanwell nominated first aiders;23 employees received a cancer •screening; and57 people received an ergonomic •assessment.

Ensuring equal employment opportunities Our Equal Employment Opportunity (EEO) Management Plan for 2008–09 was approved by the Office of the Public Service Commissioner. The plan establishes goals, objectives and training requirements to encourage responsible workplace relationships.

This year, we conducted EEO discrimination and harassment refresher training for all employees, in line with our biannual training schedule. We continued to provide EEO discrimination and harassment training as part of our induction process for all new employees.

Equity Referral Officer (ERO) training was finalised for our new EROs, with at least one representative located at each site for employee support.

2004

–05

32

2005

–06

34

2006

–07

52

2007

–08

66

2008

–09

30

Number of terminationsAnnual turnover rate

Workforce Numbers*

2004

–05

358

2005

–06

367

2006

–07

360

2007

–08

368

2008

–09

395

Employee turnoverOur turnover has reduced significantly over the last financial year. This is attributed to Stanwell’s attraction and retention activities.

* Workforce numbers do not include positions within the organisation that were vacant at the time of reporting and that are intended to be filled in the future.

Workforce numbers*Our workforce numbers have increased due to filling vacant positions.

26 Stanwell Annual Report 2009 EMPLOYEE RELATIONS

Employees by occupation

Occupation Number of employees EEO target group*

Managerial 56 17

Professional** 164 63

Trade or related*** 126 18

Clerical**** 49 37

* The EEO target group incorporates employees (including graduates) from any of the following categories: females, non-English speaking background, Aboriginal and Torres Straight Islander (ATSI) and people with a disability.

** Professional roles are those that require a Bachelor degree or higher qualification.

*** Trade or related perform, or assist in the performance of, a variety of tasks and operate a variety of production machinery or plant. Most occupations in this major group have a level of skill commensurate with an Australian Qualifications Framework Certificate III or higher qualification. In some instances, relevant experience is required in addition to the formal qualification. Associate professionals are included under Trade, previously reported against professional.

**** Clerical roles are those required to perform secretarial and other administrative tasks.

EEO numbers

EEO* Number of employees as at 30 June 2009

Position category

Females 106 Managerial, professional, trade or related, clerical

Males 289 Managerial, professional, trade or related, clerical

Non-English speaking background

21 Managerial, professional, clerical

Aboriginal and Torres Strait Islander (ATSI)

3 Professional, clerical

People with a disability 20 Managerial, professional, trade or related, clerical

* Employees have the option not to respond to our EEO questionnaire. As at 30 June 2009, 22 employees had not responded. The number of people that chose not to respond to each of the EEO categories are:

– Non-English speaking background: 37 – ATSI: 61 – People with a disability: 49

The EEO Management Plan details strategies to encourage target group members to look at possible opportunities within the corporation.

Stanwell invites employees to identify as a member of a target group, on joining the organisation.

Career development programs

Positions Number of positions as at 30 June 2009

Trainees 11

Apprentices 21

Graduate development 11

Paraprofessional 5

Legal internship 1

Co-op engineers 4

Total 53

Approximately 14% of the workforce is involved in a formal career development program.

The graduate development program ensures that Stanwell has ongoing access to key capability disciplines such as mechanical and electrical engineering and in the areas of professional skills such as OHS, environment, information and communication technology and trading. Graduate development will be assisted by the opportunities provided by the post graduate development courses designed specifically for the power generation industry.

27Stanwell Annual Report 2009 EMPLOYEE RELATIONS

Lisa Stevenson is one of nine apprentices and trainees welcomed into the 2009 Apprentice and Trainee Program at Stanwell.

She is completing a systems electrician apprenticeship at Stanwell Power Station, following the completion of a pre-vocational 10 week course at TAFE—a vital stepping stone and the trigger for her interest in the electrical industry.

“An electrical apprenticeship was something out of the ordinary for a female and something I was always interested in,” she said.

“I decided to apply for the electrical apprenticeship at Stanwell Power Station because I felt that Stanwell had a good reputation in the community and was a company that I would fit in with.”

Stanwell’s apprentices and trainees were placed by the Gladstone Area Group Apprenticeships Ltd (GAGAL), a specialist in apprenticeship training and placement in the area.

This year, the program comprises two fitter and turner apprentices, one systems electrician apprentice, three Certificate III Business Traineeships and three Bilfinger Berger Services Community Apprenticeship Program participants.

Stanwell the choice for bright spark


Implement employee attraction and retention initiatives.

Achieved Continued a range of programs, including the Leadership Development Program, post graduate programs and career programs with universities and the Queensland Minerals and Energy Academy.

Negotiate certified agreements for Kareeya and Barron Gorge hydros and Stanwell Power Station.

Achieved Successfully negotiated a new agreement for Stanwell Power Station.

Achieved Renegotiated Kareeya and Barron Gorge hydros agreements in June 2009.

Finalise the certified agreement for the Rockhampton and Brisbane offices.

Achieved Finalised new agreement for the Rockhampton and Brisbane offices in October 2008.

Expand and enhance existing organisational development programs, particularly in the area of trainee and apprenticeships.

Achieved Recruited nine people into Stanwell’s Apprentice and Trainee Program in January 2009.

Maintained graduate development program.

Complete the second Capability Review and implement action plans from the review recommendations.

On track Commenced Capability Review, with recommendations to be implemented in 2009–10.


Complete Capability Review of all positions to identify training and recruitment requirements.

Improve recruitment process efficiency.

Expand human resource tools to more efficiently report and record data.

Nine people were welcomed into this year’s Apprentice and Trainee Program. Lisa Stevenson (far left) with Chief Executive Officer Kim Wood (far right) and Chief Operating Officer Wayne Collins (second left) and Stanwell apprentices and trainees (left to right) David Casey, Cody Powell, Sterling Broadhurst, Sheldon Olive, Danica Treacy and Brooke Packer. Absent: Stephanie Pascoe and Mark Rosengreen.

SPARK

28

Reviewing and redirecting our social investment strategyFollowing a review of Stanwell’s social investment strategy and major corporate sponsorships, the company realigned its approach to corporate giving, as of 1 July 2008, to more effectively address Stanwell’s social interests.

Under this new structure, the Sponsorships Regional Fund was created and a management committee established, comprising key representatives from both site and corporate offices.

Considerable corporate sponsorship funds were diverted to our regional centres in Central and Far North Queensland to ensure that our support remains regionally focused and relevant to the communities in which we operate.

Our key areas of support were redefined as follows:

Education• —support for youth in areas of educational and self development, with particular focus on regional Queensland and support for educational opportunities to improve the outlook for skilled engineering and other professions related to Stanwell’s core business;Environment• —support for positive environmental initiatives, particularly those aligning with Stanwell’s business direction and/or those that are of benefit to our regional communities; andHealth and safety• —support for initiatives that seek to promote a healthy, active and safe lifestyle

and which demonstrate Stanwell’s commitment to a positive work-life balance and to the communities in which we operate.

Investing in our communitiesIn 2008–09, we maintained support for our existing major sponsorships (Australian Women’s Water Polo team, Beacon Foundation and Life Stream Foundation) and committed to sponsor the Central Queensland Comets Rugby League Development Squad (to December 2010).

Australian Women’s Water Polo teamStanwell’s partnership with the Australian Women’s Water Polo team helped the team attend and compete in numerous local and international competitions, including the Beijing Olympics in August 2008, where they were awarded the Bronze medal.

The Beacon FoundationThe Beacon Foundation provides support and education programs for school leavers, aimed at developing independence and fostering a desire to achieve personal success.

As part of our support for Beacon, Stanwell conducted student and teacher industry tours at our power stations and offices; co-hosted with Salvation Army Employment Plus (a pilot Employment Pathways program), including mock job interviews; provided guest speakers at various Beacon events, and attended No Dole program charter signing ceremonies.

Life Stream RockhamptonLife Stream is a not-for-profit organisation delivering community services to people with an intellectual disability.

Stanwell Power Station employees and Central Queensland Comets representatives assisted at Life Stream Rockhampton events, including annual Interschool Multi Sport Expos at CQUniversity in August 2008 and June 2009.

These events are aimed at building community awareness and encouraging students with a physical or intellectual disability to take part in a range of sports that provide pathways to social participation outside of school.

Stanwell continued to provide office space to Life Stream in Rockhampton to assist with the expansion of their services to Central Queensland.

We raised more than $33,000 for the Beacon and Life Stream foundations through the annual Stanwell Classic industry lawn bowls day in October 2008.

Central Queensland Comets Rugby League Development SquadStanwell’s sponsorship of the Central Queensland Comets Rugby League Development Program supported specialised development sessions, talent identification programs and playing requirements for young footballers, such as development squad camps and a referees’ course.

Stanwell Annual Report 2009 COMMUNITY RELATIONS

COMMUnITy RELATIOnS

Competitors at the 2009 Stanwell Power Station Rocky River Run.

29

Employee supportEmployee-driven support of charitable programs has meant staff members have personally committed to community initiatives, including:

Stanwell Power Station’s Live Wires •team, who competed in the local Cancer Council’s Relay for Life for the sixth consecutive year, in May 2009, and raised $6,026.85, which was matched dollar for dollar by the company;in February 2009, Stanwell employees •raised $15,720 for bushfire and flood appeals, which was subsequently matched dollar for dollar by the company; andin November 2009, male employees •participated in the annual Movember campaign to raise funds and awareness to help men tackle health issues.

Other major initiatives

Blackwater International Coal Centre Opening

Stanwell is a foundation sponsor and assisted with the development and installation of a power station display model in the centre. The facility showcases all aspects of the Australian coal industry and is a combined education, tourism and community centre.

Rotary Club of Rockhampton Stanwell Power Station Rocky River Run

The event attracted approximately 460 registered entrants, including representatives from Stanwell and local Stanwell-sponsored organisations. Proceeds from the event were directed to local charities working for the prevention of youth suicide.

Southern Cross Soloists SunWater and Stanwell Winter Music School

The week-long event in July 2008 was attended by more than 100 talented young high school music students from around the State.

Tennis Queensland Stanwell Far North Queensland Regional Development Program

Launched in April 2009, the new initiative provides practical assistance to encourage physical activity and healthy eating in schools and communities, as well as increased opportunities to play tennis for all members of the community and professional development for leading regional junior tennis players.

Other sponsorships entered into during 2008–09 included:

Education

regional trade and career expos •and conferences,industry and educational programs, and •awards presentations.•

Environmental

site tours,•rafting and tourism activities, and• environmental and community •service initiatives.

Health and safety

support for local sporting clubs •and health programs.

Engineering the futureStanwell recognises the value of promoting careers in the energy industry and advancing the development of the next generation of engineers, to improve the long-term outlook for our core business and the industry.

During the financial year, Stanwell supported several educational initiatives, including the:

Power Engineering Alliance Bursary, •which assists undergraduate students undertaking studies in areas of engineering relevant to the energy sector;Queensland Minerals and Energy •Academy, a joint venture between the Queensland Resources Council and the Queensland Government that aims to attract school leavers into careers in the resources sector;Engineering Link Group, a not-for-profit •organisation established to facilitate the introduction of secondary school students to the discipline of engineering through practical projects (see Training the next generation of engineers page 30);

Smithfield and North Rockhampton •state high schools’ Engineering Technology Hubs; andPower Generation Skills Development •Program, a joint collaboration by the three Queensland Government owned generators and leading Queensland universities.

promoting local goods and servicesDuring the Stanwell Power Station Unit 2 outage, from August to October 2008, supplies were purchased locally wherever possible, representing a significant injection into the region’s economy.

Providing local accommodation, transportation, catering and other goods and services for the workforce meant considerable additional business for suppliers (see Health and safety page 21 and Operations page 34).

At Kareeya and Barron Gorge hydros, Stanwell continued to provide scheduled water releases to support local commercial rafting activities on the Tully and Barron rivers.

Enhancing our approach to stakeholder engagementDuring the year, we commissioned an independent consultant to undertake a stakeholder survey to gauge our management of the matters that are important to our key stakeholders. This continued research that was conducted in 2007 and 2008 and will contribute to the refinement of our stakeholder engagement plans for the upcoming year.

Previous research revealed Stanwell’s most important stakeholders feel significant progress has been made to improve on the organisation’s corporate strategy and stakeholder engagement.

The key findings of the 2009 survey confirm this high level of performance has been maintained.

Stanwell Annual Report 2009 COMMUNITY RELATIONSSponsorship expenditure by region

Far North Queensland community sponsorships ($67,127)

Central Queensland community sponsorships ($229,804)

State-wide sponsorships ($207,000)

National sponsorships ($65,570)

Sponsorship expenditure by region

Far North Queensland community sponsorships ($67,127)

Central Queensland community sponsorships ($229,804)

State-wide sponsorships ($207,000)

National sponsorships ($65,570)

Sponsorship expenditure by regionStanwell’s community sponsorship activities supported health and safety, education and environmental initiatives and organisations in the communities in which we operate.

30 Stanwell Annual Report 2009 COMMUNITY RELATIONS

In 2008–09, Stanwell supported the development of aspiring young engineers through its sponsorship of the annual Engineering Link Project, held at Rockhampton’s CQUniversity on 23–26 September 2008.

The three-and-a-half day course provided an opportunity for local high school students, from grades 11 and 12, to experience the world of engineering.

The program attracted 56 students from 17 schools throughout Central Queensland and incorporated civil, electrical, structural, environmental, military and mechanical engineering tasks.

Stanwell Power Station Mechanical Engineer, Kylie Dickenson, led 28 course participants through an exercise that involved developing a model car that could travel one metre in one second. Other engineering challenges included building string bridges, recycling paper and recovering water from a cup of tea.

The Engineering Link Project is a practical way the industry can encourage the next generation of engineers, by helping young people obtain hands-on engineering experience and understand how their school studies can be applied in the workforce.

Training the next generation of engineers

Stanwell Power Station Mechanical Engineer, Kylie Dickenson, ran a practical engineering exercise for school students at the annual Engineering Link Project in September 2008.


Establish a new sponsorships fund and management committee to ensure social investment is regionally focused and relevant to the communities in which we operate.

Achieved Established Sponsorships Regional Fund and charter outlining objectives, composition and responsibilities.

Established management committee with key representatives from site and corporate offices.

Realign our approach to corporate giving to more effectively address our social interests of education, environment and health and safety.

Achieved Applied agreed assessment criteria to corporate giving initiatives to ensure alignment with our social investment strategy.

Further develop the social investment monitoring capabilities of the stakeholder database system.

Achieved Used database effectively to record sponsorship contacts, activities and outcomes to improve monitoring and reporting processes.

Address recommendations from stakeholder surveys to enhance stakeholder engagement practices.

Achieved Identified appropriate actions and implemented improvements.


Review major sponsorship commitments, in line with our social investment strategy.

Enhance stakeholder engagement practices to incorporate current stakeholder priorities and perceptions.

Communicate Stanwell’s carbon management strategy to stakeholders.

Assess the socio-economic impact of Stanwell’s operations in the Central Queensland region.

TRAIN

31Stanwell Annual Report 2009 BUSINESS PERFORMANCE

BUSINESS PERFORMANCE

OPERATIONS 32MARKET TRADING 37PROJECT DEVELOPMENT 40

Mill balls used to pulverise coal at Stanwell Power Station.

32 Stanwell Annual Report 2009 OPERATIONS32

OpERATIOnS

With the imminent implementation of a national emissions trading scheme, Stanwell’s early investment to reduce emissions intensity from Stanwell Power Station will provide even greater business benefits. In the coming year, we will continue to implement the current committed emissions reduction projects and undertake studies into further emissions reduction initiatives.

Stanwell power StationFor 2008–09, Stanwell Power Station achieved a total availability of 95.06% (2007–08: 95.42%) against a budgeted availability of 92.3%, with a forced outage factor of 0.49% (2007–08: 1.68%). The total generation from Stanwell Power Station was 8,631.7 GWh, which was lower than expected as a result of lower than forecast demand throughout the year.

Stanwell Power Station completed its major planned outage for Unit 2 in October 2008. The 59 day outage was the largest ever conducted at Stanwell Power Station in terms of work scope, duration, expenditure and on site workforce (Health and safety page 21 and Community relations page 29).

As well as the completion of more than 6,700 routine maintenance tasks, a significant element of the outage was the low pressure turbine and generator upgrade, which improved turbine efficiency by 2.25% and, when complete on all four units, will further reduce greenhouse gas emissions from the station by approximately 170,000 tonnes a year.

Following floods in Central Queensland that caused an increase in salinity levels within the Fitzroy River, the Environmental Protection Agency (EPA) approved an application by Stanwell to temporarily increase Stanwell Power Station’s water discharge allowances.

This increase enabled Stanwell Power Station to counteract the impact of higher salinity water on operations and ensured the station continued to be able to maintain normal production throughout this event. During this period, Stanwell cooperated with the EPA to implement a monitoring program of the downstream waterways to ensure there were no unacceptable environmental outcomes (Water used and water intensity at Stanwell Power Station page 46).

Kareeya Hydro Kareeya Hydro made a significant contribution to North Queensland’s power supply, with station availability of 89.57% and 495 GWh sent out (2007–08: 92.05% and 490 GWh) to the Queensland electricity grid.

A number of important maintenance and improvement activities were completed in 2008–09, including:

horizontal penstock inspection •and dewater,plant management strategy •development and review,development of the work scope for •the repair and upgrade of the Tully River Bridge,installation of air quality monitoring •in the Kareeya spear pit, anda Tully River aquatic study.•

Work will begin in 2009–10 on the development of a Water Resource Plan and a Resource Operations Plan for the Tully River, in conjunction with the relevant governing bodies. Proactive safety improvement initiatives will continue, with further upgrading of access and guarding across the site.

Mechanical Tradesperson Owen Johnson at Stanwell Power Station.

Stanwell has always managed its generation assets to maximise availability and reliability. This year we again delivered high reliability and availability across our main plant portfolio.

33Stanwell Annual Report 2009 OPERATIONS 33

Two independent inspections were conducted on the Koombooloomba rubber dam—an inflatable rubberised tube fitted along the crest of the spillway that allows the dam to manage an additional 25,000 ML. These inspections indicated the rubber dam was safe to use for the 2008–09 wet season. The inspections also recommended a small number of actions to further improve safety. These will be implemented before the 2009–10 wet season.

Barron Gorge HydroIn 2008–09, Barron Gorge Hydro availability was 91.58% (against a budget of 93.00%), with 264 GWh sent out to the Queensland electricity grid.

Preparations for the rewind of Unit 1 generator were completed, with the rewind to commence in July 2009. The Unit 2 rewind will be carried out in July 2010. This is the final stage of the Barron Gorge Hydro life extension activities, which commenced in 2005.

This project will extend the life, improve the reliability of the generating units and increase the maximum electrical output capacity of the generators.

An amendment to the Water Licence was obtained to allow an increase in the maximum permitted station flow. This change will ensure that during periods of high river flow, the generators (once they have been rewound) can operate continuously at a 10% higher capacity (33 MW each).

During 2008–09, other completed improvement work included development and review of the Plant Management Strategy, upgrades to the fire detection system and replacement of the workshop five tonne crane.

Emu Downs Wind farmIn 2008–09, Emu Downs Wind Farm availability was 91.05% (against a budget of 98.00%), with 127.9 GWh sent out to the Western Australian energy market.

Main bearing failures impacted on the availability performance against budget. The asset is currently being held for sale (Financial report page 64).

Koombooloomba Hydro Koombooloomba Hydro continued to operate as scheduled. External access and guarding improvements were completed, along with the installation of air quality monitoring in the spear pits. The Nitchiga Creek level monitoring project, to improve the forecasting of water availability, was also completed.

Wivenhoe Small HydroThe 2008–09 year has been challenging for Wivenhoe Small Hydro due to the implementation of the South East Queensland Water Grid and an operational regime, which potentially restricts current and future water releases from the dam into the Brisbane River. This has significantly impacted production from Wivenhoe Small Hydro and restricted output to levels well below average.

1999

–00

4.68

94.4

00.

92

1997

–98

3.03

94.7

02.

27

1998

–99

94.6

72.

762.

57

2000

–01

2.30

95.7

02.

00

2003

–04

3.55

94.6

81.

77

2005

–06

4.01

94.2

31.

76

2006

–07

3.11

94.7

22.

17

2007

–08

2.90

95.4

21.

68

2008

–09

4.45

95.0

60.

49

2002

–03

2.86

96.6

70.

47

2001

–02

2.23

96.7

11.

06

2004

–05

4.55

94.4

70.

98

0

20

40

60

80

100

2008-092007-082006-072005-062004-052003-042002-032001-022000-011999-20001998-991997-98

Stanwell Power Station historical availability and outage factors

Availability %Planned outage factor %Forced outage factor %

Stanwell Power Station historical availability and outage factors

Availability %Planned outage factor %Forced outage factor %

1999

–00

4.68

94.4

00.

92

1997

–98

3.03

94.7

02.

27

1998

–99

94.6

72.

762.

57

2000

–01

2.30

95.7

02.

00

2003

–04

3.55

94.6

81.

77

2005

–06

4.01

94.2

31.

76

2006

–07

3.11

94.7

22.

17

2007

–08

2.90

95.4

21.

68

2008

–09

4.45

95.0

60.

49

2002

–03

2.86

96.6

70.

47

2001

–02

2.23

96.7

11.

06

2004

–05

4.55

94.4

70.

98

0

20

40

60

80

100

2008-092007-082006-072005-062004-052003-042002-032001-022000-011999-20001998-991997-98

Stanwell Power Station historical availability and outage factorsStanwell Power Station availability was 2.76% above budget for 2008–09.

34 Stanwell Annual Report 2009 OPERATIONS

Each year, Stanwell Power Station undertakes a major overhaul of one of its four generator units. Each unit has a 350 MW generating capacity and the unit scheduled for maintenance is taken off-line for the duration of the outage. Our other sites are scheduled to operate and provide extra capacity throughout the outage, so we can maintain energy generation and supply.

During 2008–09, Stanwell Power Station’s Unit 2 outage was completed. This was the largest maintenance project in Stanwell’s history, due, in large part, to the low pressure turbine and generator upgrade. This upgrade improved turbine efficiency by 2.25% and is part of Stanwell’s strategy to reduce greenhouse gas emissions from our existing assets.

Thorough planning and project management saw the outage completed ahead of schedule.

Maintenance tasks for the Unit 2 overhaul were determined from health and safety audits conducted the previous year.

Tasks completed during the outage included boiler and electrical maintenance and parts replacement and upgrade.

A workforce of approximately 800 was required, filling shifts 24 hours a day, 7 days a week, for 59 days. Full health and safety inductions were conducted for 550 contractors.

Wherever possible during the planning and implementation stages, we used local businesses for the supplies needed to maintain this large workforce. The $20.7 million Unit 2 upgrade project contributed significantly to the local economy.

The outage was completed successfully, one day ahead of schedule. Four incidents throughout the 59 day event resulted in eight lost time injuries. Strategies to improve health and safety during future outages have been developed and fed into Stanwell’s operating procedures, as part of our commitment to continuous improvement and zero harm.

Generating change to improve environmental performance

Stanwell Power Station’s Unit 2 replacement generator rotor. The overhaul of Unit 2 involved upgrading the low pressure turbine and generator, which improved turbine efficiency by 2.25%.

CHANGE

35Stanwell Annual Report 2009 OPERATIONS


Undertake a major overhaul of Stanwell Power Station Unit 2.

Achieved Completed in October 2008.

Implement the low pressure turbine upgrade and generator rewind on Stanwell Power Station Unit 2.

Achieved Completed in October 2008.

Commence air heater basket replacement at Stanwell Power Station.

Achieved Completed on Unit 2 in October 2008.

Prepare for implementation of low NOx burners on Unit 3 in 2009–10.

Achieved Works to commence as part of the Unit 3 outage in August 2009.

Implement changes to improve maintenance effectiveness at all production sites.

On track Plant Management Strategy reviews to be completed at all sites by July 2009.

Achieved Developed and implemented improved work management processes at each site.

Achieved Implemented improvements to maintenance reporting.

On track Commenced critical review of work backlogs.

Prepare for the generator rewind of both units at Barron Gorge Hydro.

Achieved Work to commence in July 2009.

Review and possibly extend ash storage area at Stanwell Power Station.

Achieved Tenders for extension of ash storage area at Stanwell Power Station called in June 2009. Extension works to be completed by December 2009, in line with production requirements.


Undertake a major overhaul on Stanwell Power Station Unit 3.

Implement the low pressure turbine upgrade and generator rewind on Stanwell Power Station Unit 3.

Replace air heater baskets on Stanwell Power Station Unit 3.

Implement low NOx burners on Stanwell Power Station Unit 3.

Rewind of Barron Gorge Unit 1 generator.

Better understand carbon trading implications and begin to factor into asset life plans.

36 Stanwell Annual Report 2009 OPERATIONS

Year

Energy sent out

(GWh)

Capacity factor

(%)Budgeted

availability

Availability (12 month average)

(%)

Planned outage factor

(%)A

Forced outage factor

(%)

Coal (tonnes) or water (ML)

used and returned to river

(hydros only)*

Stanwell Power Station (1,400 MW) 2008–09 7,845 68.7 92.3 95.06 4.45 0.49 2,914,0892007–08 8,713 76.5 94.1 95.42 2.90 1.68 3,254,110 2006–07 8,842 77.8 92.2 94.72 3.11 2.17 3,249,854 2005–06 9,463 83.1 93.9 94.23 4.01 1.76 3,444,352 2004–05 9,109 80.1 94.5 94.47 4.55 0.98 3,495,319

Kareeya Hydro (86.4 MW) 2008–09 495 67.1 86.5 89.57 8.78 1.65 498,0162007–08 490 64.8 88.9 92.05 5.39 2.56 490,000 2006–07 620 81.8 93.7 94.97 3.50 1.53 I620,000 2005–06 381 50.7 90.4 B83.61 11.01 5.38 381,000 2004–05 360 50.8 74.4 76.67 16.9 6.43 360,000

Barron Gorge Hydro (60 MW) 2008–09 264 50.5 93.0 91.58 7.95 0.47 416,5002007–08 256 48.8 91.3 96.36 2.15 1.49 384,000 2006–07 235 44.7 88.9 95.09 1.96 2.95 352,500 2005–06 98 17.6 45.2 C24.23 75.19 0.58 147,000 2004–05 176 33.5 86.8 86.87 12.44 0.69 264,000

Koombooloomba Hydro (7 MW) 2008–09 22.7 38.2 92.5 87.96 5.97 6.07 396,5652007–08 23.6 41.5 89.5 91.63 6.37 2.00 355,972 2006–07 29.2 61.4 88.8 H80.73 12.02 7.25 785,875 2005–06 9.3 17.9 84.4 D44.23 2.18 53.59 157,218 2004–05 15.3 25.1 84.2 88.59 0.00 11.41 288,863

Wivenhoe Small Hydro (4.3 MW) E 2008–09 4.1 10.9 95.0 93.2 2.01 4.79 99,5622007–08 4.6 11.6 93.1 96.61 3.29 0.10 114,519 2006–07 4.6 12.1 93.1 96.63 2.25 1.12 123,393 2005–06 7.5 19.9 96.1 99.08 0.04 0.88 167,341 2004–05 18.6 48.8 96.1 95.31 2.03 2.66 251,855

Mackay Gas Turbine (34 MW) 2008–09 0.1 N/A N/A 99.05 0.64 0.312007–08 0.3 N/A N/A 98.73 0.00 1.27 2006–07 0.4 N/A N/A 72.91 0.26 G26.83 2005–06 0.5 N/A N/A 79.72 0.27 20.01 2004–05 0.3 N/A N/A 75.98 24.02 0.00

Emu Downs Wind Farm (80 MW)J 2008–09 127 38.3 98.0 91.05 0.37 8.582007–08 262 38.3 98.0 97.34 0.73 1.93 2006–07F 184 39.6 95.5 96.34 0.73 2.93

* Water use figures are calculation based as opposed to measured flow.

A Stanwell’s planned outage factor calculation includes the planned outage factor and maintenance outage factor, using Energy Supply Association of Australia definitions.

B Upgrade project defect rectification works and plant AVR/exciter faults.

C Greater time than expected on mid-life electrical and control refit.

D Turbine inlet valve failure and turbine overspeed damage. Transmission line (22kV) damaged during Cyclone Larry.

E Wivenhoe Small Hydro uses water releases for other primary purposes without commanding dedicated water releases.

F Data is from the period of practical completion—20 October 2006.

G Failed gas generator reduced output to 50% capacity for the first half of 2006–07.

H Dam gate rail repairs and transmission restraints reduced Koombooloomba Hydro’s output.

I Based on 1 MWh = 1 ML water used.

J 100% of the energy sent out (Stanwell owns a 50% share in the wind farm).

Asset performance

37Stanwell Annual Report 2009 MARKET TRADING

Weather influences the electricity spot market Spot prices have been relatively soft during the 2008–09 financial year, largely as a result of lower than expected demand, increased generation availability and new plant coming into the market. The average Queensland 30 minute spot price was $34.03/MWh, a 35% decline from the previous year’s average spot price of $52.34/MWh.

Mild summer temperatures led to demand being only slightly higher than last financial year and substantially lower than NEMMCo forecasts. Average demand was 6,004 MW and the maximum Queensland demand was 8,677 MW, set on 9 February 2009. This maximum demand was a new Queensland record and an increase of 595 MW over the previous year’s maximum.

Mild winter drives contract prices lowerA weakening in the electricity contracts market occurred during the year, caused initially by a mild winter and further compounded by the uncertainty surrounding the implementation of the proposed CPRS and the global financial crisis. The announcement in May 2009 of the deferral of the proposed scheme saw contract prices drop further.

A notable increase in trading in Renewable Energy Certificates occurred with the Commonwealth Government’s extended Mandatory Renewable Energy Target (MRET) providing greater certainty in this market.

Changing regulatory environmentAs a member of the National Generators Forum (NGF), Stanwell took a lead role in facilitating improvements to the Australian Energy Market Commission’s rule change proposal on cost allocation arrangements for transmission services.

The successful outcome of the new rule change will see Stanwell protected from the cost burden on Kareeya Hydro for the new Chalumbin line, by allocating the cost of the new Chalumbin line into the prescribed Transmission Use of Service.

With respect to the CPRS development, Stanwell has been actively involved in the debate surrounding both greenhouse and energy policy, through its role in the NGF.

Stanwell has taken a leading role in the development of NGF’s position on a number of market issues, including participating as Deputy Chair of the Market Working Group.

Improving our productsIn 2008–09, we significantly improved our information management systems, integrating risk measurement, forecasting and valuation processes to more accurately value tailored products.

This year we focused on working closely with our customers to build mutual strategic relationships. As a result, we helped our customers to manage their risks more efficiently and leverage our portfolio’s capabilities through tailored forward contracts.

This year, the impact of water shortages on generation availability throughout the National Electricity Market (NEM) eased, particularly in Queensland. This resulted in a softening of the contract and spot markets for electricity. Significant regulatory change is on the horizon with the Carbon Pollution Reduction Scheme (CPRS) proposed to be introduced in 2011, which has caused market participants to be hesitant about entering into forward contracts.

MARKET TRADInG

Stanwell Power Station, Central Queensland.

38 Stanwell Annual Report 2009 MARKET TRADING

2004

–05

0

2,000

4,000

6,000

8,000

10,000

MW

$0

$10

$20

$30

$40

$50

$60$/MWh

Annual average available generation (MW)Annual average demand (MW)Annual time weighted average spot price ($/MWh)

Queensland annual average available generation, demand and spot price

2008

–09

2007

–08

2006

–07

2005

–06

$/MWh

2004

–05

0

2,000

4,000

6,000

8,000

10,000

MW

$0

$10

$20

$30

$40

$50

$60$/MWh

Annual average available generation (MW)Annual average demand (MW)Annual time weighted average spot price ($/MWh)

Queensland annual average available generation, demand and spot price

2008

–09

2007

–08

2006

–07

2005

–06

$/MWh

Queensland annual average available generation, demand and spot priceThe upward pressure on spot prices in 2008–09 reduced due to the relief in the drought in Queensland since early 2008. In addition, the relatively high availability of generation plant contributed to the significant drop in spot price compared to the previous two years. Demand was also below expectations due to milder climatic conditions.

Demand growth versus installed capacity and spot priceLow volatility in demand and supply throughout the year resulted in only a small number of pool price excursions above a $100/MWh daily average price. The spikes above this level were caused mainly by forced outages, network issues and high NSW demand.

0

2,000

4,000

6,000

8,000

10,000

12,000 $300

$250

$200

$150

$100

$50

$0

Jul 0

8

Au

g 0

8

Sep

08

Oct

08

No

v 08

Dec

08

Jan

09

Feb

09

Mar

09

Ap

r 09

May

09

Jun

09

Average daily demand (MW)Average daily availability (MW)Average daily price ($/MWh)

Demand growth versus installed capacity and spot price

MW$/MWh

MW $/MWh

0

2,000

4,000

6,000

8,000

10,000

12,000 $300

$250

$200

$150

$100

$50

$0

Jul 0

8

Au

g 0

8

Sep

08

Oct

08

No

v 08

Dec

08

Jan

09

Feb

09

Mar

09

Ap

r 09

May

09

Jun

09

Average daily demand (MW)Average daily availability (MW)Average daily price ($/MWh)

Demand growth versus installed capacity and spot price

MW$/MWh

MW $/MWh

Contract forward curve movement over 2008–09Going into the year, contract prices reflected the expected additional generation costs due to the scheduled introduction of the Commonwealth Government’s proposed CPRS. Contract prices dropped dramatically when the scheme start was delayed by a year (to 1 July 2011) and it was changed to incorporate a low fixed cost of carbon for the first year. In addition, lower spot market volatility put downward pressure on contract prices during the second half of the year.

$0

$40

$50

$60

$70

$80

Qld Calendar 2010 ($/MWh)Qld Calendar 2011 ($/MWh)

Contract forward curve movement over 2008–09

MW

Jul 0

8

Au

g 0

8

Sep

08

Oct

08

No

v 08

Dec

08

Jan

09

Feb

09

Mar

09

Ap

r 09

May

09

Jun

09

$/MWh

$0

$40

$50

$60

$70

$80

Qld Calendar 2010 ($/MWh)Qld Calendar 2011 ($/MWh)

Contract forward curve movement over 2008–09

MW

Jul 0

8

Au

g 0

8

Sep

08

Oct

08

No

v 08

Dec

08

Jan

09

Feb

09

Mar

09

Ap

r 09

May

09

Jun

09

$/MWh

39Stanwell Annual Report 2009 MARKET TRADING


Build more strategic relationships with our customers, enabling us to leverage our flexible and integrated generation portfolio through smart forward contracts that manage our customers’ risks.

On track Increased the number of contracts tailored to customer requirements.

Implement integrated information management systems, including enhanced risk measurement, forecasting and valuation systems.

Achieved Implemented a financial risk and valuation system.

Prepare strategies, systems and procedures to manage the risks and opportunities for the emissions trading scheme scheduled for 2011.

On track Progressed internal management for the implementation of an emissions trading scheme.


Continue our drive to build strategic relationships with customers that result in transactions that manage both parties’ risks.

Embed the risk measurement and valuation systems into our strategic and tactical decision making, ensuring the best decisions for creating value.

Further prepare strategies and systems ahead of the forthcoming emissions trading scheme.

40

Our investigations in 2008–09 centred on the technical and commercial aspects of lower emissions coal using coal gasification, carbon capture and storage technologies and the associated sequestration of CO2 into underground reservoirs.

Stanwell’s involvement in the Wandoan Power Project in the Surat Morton Basin, a project using GE Energy technology in Integrated Gasification Combined Cycle with carbon capture and storage, will enable Stanwell to facilitate deployment and remain abreast of emerging technology.

We have also been active in acquiring access to long-term gas supplies through a farm-in agreement with Icon Energy Limited (Iconic deal generates energy options page 41) and an interest in Blue Energy Limited, which includes an Alliance Agreement for the development of gas reserves for future gas-fired power projects.

In 2008–09, Stanwell undertook preliminary studies into geothermal and solar thermal project opportunities in Queensland and evaluated a range of renewable technologies in readiness for the introduction of the proposed CPRS. In addition, we have undertaken studies for a possible hydro power station in North Queensland.

Stanwell owns coal resources in Mineral Development Licences (MDLs) 162 and 306 and has an option over additional resources in Mining Lease 80110, currently held by Wesfarmers Resources. Studies have shown there are sufficient reserves within Mining Lease 80110 for the future needs of Stanwell Power Station and the expansion of exports from Curragh North mine. Stanwell is nearing completion of negotiations with Wesfarmers Resources to facilitate an expansion, conditional on approval from Shareholding Ministers.

Right research, right developmentA major focus for Stanwell is identifying and developing low emission technologies, as well as ongoing operations support for our existing assets.

This year, we continued to support a range of research memberships and collaborative research efforts, including a significant new post-combustion capture demonstration project being coordinated by the Electric Power Research Institute.

We are supporting the establishment of the National Clean Coal Initiative by providing advice on the cost of generation technologies and research and development needs.

We also actively participate in the National Generators Forum (NGF) and its working groups and other government and industry reference groups aimed at keeping abreast of technology developments and costs. Stanwell chairs the NGF environment sub group and has significant input into the emissions trading sub group. Stanwell is on the industry reference group for federally funded studies into the cost and deployment barriers for low emission technologies.

Building on its internal reviews of renewable energy technology options for Queensland, Stanwell continued to identify research and development needs and appropriate investment opportunities, in line with project development objectives.

Stanwell Annual Report 2009 PROJECT DEVELOPMENT

pROJECT DEVELOpMEnT

During the year, Stanwell delivered on its strategy to establish a portfolio of development options that will assist the organisation in adapting to the Commonwealth Government’s proposed Carbon Pollution Reduction Scheme (CPRS) and in being competitive in a future carbon constrained market that features an emissions trading scheme.

Drilled stem steel at ATP 626.

41Stanwell Annual Report 2009 PROJECT DEVELOPMENT

Our other research commitments included:

Lower emissions technologies

EPRI – Coal Fleet for Tomorrow Investigating advanced coal and carbon capture technologies.

Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC)

CO2CRC research into geological storage of CO2 and new CO2 capture technologies for power plants.

Centre for Low Emission Technology (cLET) Research into processing the syngas produced from coal gasification to improve efficiency and lower costs.

The University of Queensland Investigating storage of CO2 in underground coal seams.

Existing assets

EPRI Various programs on boiler life and availability, steam cycle chemistry and maintenance improvement.

Welding Trades Institute of Australia Improving welding techniques and materials for use in power plants to lower long-term maintenance costs.

To ensure we have access to the right fuels into the future, Stanwell’s gas strategy is to investigate suitable gas supply arrangements to create future options for lowering the carbon intensity and responsiveness of our generation portfolio.

Stanwell entered into a farm-in agreement with Icon Energy Limited in early 2009. This deal further consolidates Stanwell’s previous investment in gas exploration company, Blue Energy Limited and significantly enhances our gas generation strategy.

Under the farm-in agreement with Icon, Stanwell made an initial payment of $6 million to Icon for a pilot study in permit area ATP 626, to establish gas content and recovery rates.

ATP 626 permit is located in southern Queensland and provides the potential to establish a strong and low cost upstream position from diversified sources.

Subject to the results of Stage 1, Stanwell can elect to spend up to $30 million in Stage 2 to secure a minimum proven and probable (2P) reserve of 340 PJ, whereby Stanwell will earn a 50% interest in the four blocks of ATP 626 permit known as the Lydia Prospect.

A stapled Gas Supply Agreement, which is conditional on successful completion of Stage 2, provides the right for Stanwell to acquire up to 225 PJ of gas from the Lydia Prospect area over a period of 15 years.

The Stage 1 pilot study commenced in April 2009 and drilling of the three wells required for the pilot has been completed. Results to date have shown quality gas saturations.

Iconic deal generates energy options Drilling and exploration during Stage 1 of the pilot study identified quality gas saturations at ATP 626 permit.

ENERGY

42

Stanwell Energy parkStanwell has continued with investigations and studies into the development of the Stanwell Energy Park. This year, the traditional owners of the area, the Darumbal people, completed cultural heritage zoning maps of the area. These maps will assist Stanwell in meeting its duty of care in protecting cultural heritage items within Stanwell Energy Park.

We continue to work with Rockhampton Regional Council and Rockhampton Regional Development Limited to investigate opportunities for developing light to medium industrial land adjacent to the Capricorn Highway. As part of these investigations, a number of baseline environmental studies are underway, including flora and fauna, air quality and flood modelling.

Gladstone Interconnection and power pooling Agreement (IppA)During the year, Stanwell liaised with representatives of the owners of Gladstone Power Station and Boyne Island Smelter to renegotiate and redraft the key agreements in relation to the operation of the station in the NEM and supply of electricity to the smelter. Stanwell is seeking to resolve outstanding issues early in the new financial year so that the various agreements can be executed.

Stanwell Annual Report 2009 PROJECT DEVELOPMENT


Further monetise our coal assets by finalising new arrangements with Wesfarmers Resources.

On track Negotiation of a comprehensive package with Wesfarmers Resources well advanced.

Pursue opportunities, examining the construction of a cleaner coal-fired power station in the Surat Morton Basin.

On track Pursuing a number of options with private sector entities.

Identify and create investment opportunities in upstream gas and gas generation in Queensland.

Achieved Acquired equity interest in Blue Energy Limited and finalised farm-in agreement with Icon Energy Limited. Other opportunities being progressed.

Finalise the Gladstone IPPA arrangements. On track Revised agreements are nearing completion. Implementation subject to final agreement by all Gladstone Power Station participants and regulator review and approval.

Investigate the potential of renewable based technologies in Queensland.

Achieved Reviewed the potential for solar thermal, geothermal, biomass and wind projects, identifying the focus for Stanwell.

Continue to support clean coal research and development and deployment activities, including the National Clean Coal Initiative.

Achieved Funded and actively participated in a range of research and development initiatives.

Review the performance and generation cost of a broad range of low emission generation options and particularly the impact of recent global increases on capital costs.

On track Generation performance and cost modelling has been progressively updated and used for economic analysis of carbon policy initiatives.


Commence a feasibility study into a hydro power station in North Queensland.

Conclude negotiations with Wesfarmers Resources aimed at expansion of exports from the Curragh mine and monetise MDLs 162 and 306.

Position Stanwell for access to renewable energy sources and project development opportunities.

Remain active in investigating the viability of deploying cleaner coal technology in Queensland.

Continue to investigate gas farm-in opportunities to prove up long-term reserves.

(All business development projects are subject to investment approvals.)

43Stanwell Annual Report 2009 ENVIRONMENTAL PERFORMANCE

ENVIRONMENTALPERFORMANCE

44

Insert intro para here.

Stanwell Annual Report 2009 ENVIRONMENTAL PERFORMANCE

Evolving climate change policy and regulation

Stanwell is committed to supporting cleaner generation technologies in Queensland by improving plant operations and actively participating in a range of project development opportunities. We continued to implement our Climate Change Strategy 2007–12, a five year strategy to respond to climate change in the areas of policy and regulation, generation investment and climate adaptation.

Policy and regulationStanwell has developed a comprehensive energy and greenhouse gas reporting system in line with the new National Greenhouse and Energy Reporting Act 2007 (NGER Act), which provides a single reporting framework for greenhouse and energy data. Our reporting system was assessed for compliance in June 2009 and the results will be received in early 2009–10, with reporting to be completed by the 31 October 2009 deadline. Stanwell has been involved in industry-wide consultation to improve the implementation of the NGER Act across the electricity industry.

Through its EcoChoices program, Stanwell has established a range of measures to reduce or offset carbon emissions in the areas of office buildings, and air and car travel, similar to Queensland Government policies (EcoChoices strategies table page 45). EcoChoices is Stanwell’s employee program designed to reduce and offset the environmental impacts of our business.

Generation investmentDuring the year, the Commonwealth Department of Climate Change audited Stanwell Power Station’s actions under the Generator Efficiency Standards (GES) Agreement. The report indicates the station has met its commitments under the GES, with only minor non-conformances.

Climate adaptationStanwell’s Climate Change Adaptation working group is undertaking a range of initiatives to ensure a risk based approach to climate adaptation matters is incorporated into Stanwell’s business planning and operation. This involves:

obtaining climate change model •predictions (temperature, rainfall, humidity, etc.) and using these in asset life planning processes;using specialist modelling services to •forecast cost-of-carbon curves;including carbon cost forecasts in •asset life planning processes;developing emission recording and •calculation tools to support the corporation’s emissions and energy reporting obligations;including emission trading in the •specification for the electricity trading deal capture and settlements software; andtailoring research and development •expenditure to focus on technologies that are more applicable to a carbon constrained economy.

Delivering on our environmental commitmentsThermalStanwell Power Station implemented measures to automatically manage NOx emissions, ahead of the installation of low NOx burners on all units. The low NOx burner installation will commence with Unit 3 in August 2009 and, when installed, NOx emissions are expected to reduce by approximately 50% per unit below current levels.

HydroDuring the year, Stanwell developed new data management and reporting systems and began water storage and discharge reporting associated with our hydro electric facilities. This was in response to Bureau of Meteorology requirements under the Water Act 2009.

Barron Gorge Hydro can now operate at its maximum design capacity of 66 MW (an increase of 6 MW) and generate more renewable energy, following approval this year from the Department of Natural Resources and Water to increase the station’s water extraction rate from Tinaroo Dam.

EnVIROnMEnTAL pERfORMAnCE

Environmental incidents

Year Incidents

2004–05 7*

2005–06 4*

2006–07 0**

2007–08 0**

2008–09 0**

* Major incidents. Incidents assessed under the previous classification of ‘Major’ or ‘Minor’. In 2006–07, Stanwell modified its classification system based on Levels 1 to 5.

** Refers to Level 4 or 5 incidents.

Stanwell continued to improve its environmental performance during 2008–09, undergoing an external audit to recertify the business environmental management system to ISO14001.


EcoChoices strategies

Activity Strategies

Air travel Look for alternatives to air travel, for example, video conferencing or consolidating travel where possible to reduce the number of trips.

Vehicle and mobile plant and equipment Car pool where practicable to reduce the number of Stanwell fleet cars used.

Electricity and resource use within office areas*

Reduce energy consumption, including physical changes such as replacing incandescent lighting with energy efficient lighting and behavioural changes such as turning off computers and lights at night and reducing printing.

* Currently excludes electricity use in Stanwell Power Station office areas.

Environmental incidents by site 2008–09

Levels 1–3 environmental incidents are classified as an event, usually contained to the site, which has minimal environmental effects. This also includes non-compliances with business systems. Levels 4–5 environmental incidents are classified as an event leading to material or serious environmental harm and may result in prosecution.

Level 1, 2 or 3 Level 4 or 5

Stanwell Power Station 66 0

Kareeya Hydro and Barron Gorge Hydro 23 0

Mackay Gas Turbine 0 0

Stanwell Energy Park 3 0

Corporate 1 0

2004

–05

840

2005

–06

852

2006

–07

807

2007

–08

825.

1

2008

–09

852.

3*

Carbon intensity (kg/MWh)The increase in carbon intensity can be attributed to the sale of Windy Hill and Toora wind farms in late October 2007. Carbon intensity considers several factors, including the production efficiency of our thermal power stations combined with the production mix from our thermal and renewable sites.

* Includes Stanwell Power Station, Mackay Gas Turbine and Rocky Point Cogeneration Plant. These measurements apply the emission factor from the National Pollutant Inventory Emission Estimation Technique Handbook for Fossil Fuel Electricity Power Generation.

SOx and NOx emissionsThe reduction in estimated emissions is due to the reduction of coal consumed during the 2008–09 year. Only 2,914,089 tonnes of coal was burned during the 2008–09 year in comparison to 3,254,110 tonnes of coal during the 2007–08 year.

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

2008-09 2007-082006-072005-062004-05

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

SOx and NOx emissions

36.0

7* 38.2

5*

35.9

9

37.8

9

34.2

6

35.6

1

31.6

0

35.8

1

30.4

5

32.0

7

NOx (million kg)SOx (million kg)

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

2008-09 2007-082006-072005-062004-05

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

SOx and NOx emissions

36.0

7* 38.2

5*

35.9

9

37.8

9

34.2

6

35.6

1

31.6

0

35.8

1

30.4

5

32.0

7

NOx (million kg)SOx (million kg)

* Figure excludes Gladstone Power Station and Emu Downs Wind Farm.

46 Stanwell Annual Report 2009 ENVIRONMENTAL PERFORMANCE

ECOSYSTEM

In September 2008, Stanwell presented findings at the River Symposium in Brisbane, following a three year study into the river flow and aquatic ecosystem health of the Barron River to determine if our operations at Barron Gorge Hydro impacted on the surrounding environment.

From 2004 to 2007, Stanwell conducted surveys on an array of locations above, within and below the Barron Gorge to identify and gather information on water quality, in-stream habitat, river and riverbank plant life and fish communities.

The aquatic ecology studies indicated that the aquatic ecosystem health of the Barron Gorge is in good condition. Since we commenced monitoring in 2004, no major changes have been detected in the in-stream habitat, riverbank vegetation or fish and other aquatic animal communities of the Barron River.

The results of a three year study into the health of the Barron River ecosystem showed no negative impact on the environment from Barron Gorge Hydro.

Barron River ecosystem in good health

Utility Worker Phill Kenward at Barron Gorge Hydro.

Water used (GL)Water intensity** (ML/GWh)

5

0

10

15

20

0.5

0

ML/GWhGL

Water used and water intensity at Stanwell Power Station

18.4

2.17

2007

–08

2.0817

.8

2004

–05

18.8

2.17

1 200

5–06

17.5

2.13

2006

–07

2008

–09

2.44

19.1

1.0

1.5

2.0

2.5

Water used (GL)Water intensity** (ML/GWh)

5

0

10

15

20

0.5

0

ML/GWhGL

Water used and water intensity at Stanwell Power Station

18.4

2.17

2007

–08

2.0817

.8

2004

–05

18.8

2.17

1 200

5–06

17.5

2.13

2006

–07

2008

–09

2.44

19.1

1.0

1.5

2.0

2.5

Water used and water intensity at Stanwell Power StationThe water intensity is unusually high because of the impacts of the temporarily increased levels of salinity in the Fitzroy River as a result of flooding between September 2008 and January 2009 (Operations page 32).

** Calculations based on water delivered from the raw water dam to the power station site.

1 The 2005–06 data has been restated to reflect a plant reconfiguration which resulted from the addition of the Raw Water Pre-treatment Plant in 2005.



Maintain Environmental Management System in line with ISO14001 and achieve zero major non-conformances.

Achieved Audited system and confirmed ongoing certification.

Achieve nil Level 4 and 5 incidents. Achieved Recorded no Level 4 or 5 environmental incidents.

Develop a water management strategy. On track Developed draft water management strategy, which is expected to be finalised in early 2009–10.

Implement EcoChoices initiatives within non-production areas of the business.

On track Implemented program initiatives, including carbon footprint measurement and tracking database and education and awareness materials and communications about activities for reducing carbon emissions. This is an ongoing program.

Achieve renewable energy production of 587.3 GWh sent out.

Achieved 914.4 GWh of renewable energy sent out.

Achieve carbon intensity of 861 CO2 kg/MWh sent out. This figure includes Emu Downs Wind Farm and excludes Gladstone Power Station.

Achieved 839.90 CO2 kg/MWh sent out (including Emu Downs Wind Farm, excluding Gladstone Power Station).

Improve existing carbon reporting processes to meet requirements under the National Greenhouse and Energy Reporting Act.

On track Implemented new reporting structures for National Greenhouse and Energy Reporting Act. First report to be submitted by 31 October 2009.


Maintain Environmental Management System in line with ISO14001 and achieve zero major non-conformances.

Achieve nil Level 4 and 5 incidents.

Review our Environmental Policy.

Review our Climate Change Strategy.

Implement Recycling and Waste Management Plan at Stanwell Power Station.

48 Stanwell Annual Report 2009 ECONOMIC PERFORMANCE

ECONOMICPERFORMANCE

Access staircase on the de-mineralised water tank at Stanwell Power Station.

49Stanwell Annual Report 2009 ECONOMIC PERFORMANCE

Specifically, the export coal revenue sharing arrangements contributed $131.2 million to Stanwell’s after tax profit (2007–08: $42.4 million), due primarily to strong prices for coal on the export market and an increase in coal tonnes exported.

Despite reduced electricity demand and soft spot and contract markets (Market trading page 37), Stanwell recorded its highest electricity revenue of $439.1 million in 2008–09, increased from $402.8 million in 2007–08.

At 30 June 2009, our total asset value was $1,930.7 million (2007–08: $1,916.4 million), which includes a cash balance of $174.3 million at 30 June 2009 (2007–08: $69.3 million). The cash and debt facilities are committed to the Queensland Government capital repatriation of $380.0 million and dividend payment of $148.9 million payable in December 2009.

The balance sheet strengthened significantly over the year, with total equity increasing to $957.0 million as at 30 June 2009 from $733.0 million as at 30 June 2008. This is due largely to movement in the cash flow hedge reserve from an unfavourable position of $154.9 million as at 30 June 2008 to a favourable position of $23.5 million as at 30 June 2009. This is a result of reduced electricity prices compared to the previous year.

Income statementStanwell’s record electricity revenue included an improved net result for Gladstone Interconnection and Power Pooling Agreement (IPPA) and higher fair values for electricity derivatives. Excluding the net impact of the Gladstone IPPA and derivative fair value movements, sales of electricity in 2008–09 were $690.5 million compared to $738.6 million in 2007–08, a decrease of 6.5%, given a 1.6% increase in gross generation sent out.

While there was an increase in gross generation sent out of 1.6% (16,038.9 GWh in 2007–08 to 16,300.8 GWh in 2008–09) and an 8.0% reduction in electricity prices (from $46.05/MWh in 2007–08 to $42.36/MWh in 2008–09), electricity revenue has improved. This is a result of a lower cost of electricity purchases to meet electricity supply commitments relating to the Gladstone IPPA and more favourable fair value of electricity derivatives, compared to the 2007–08 year.

Stanwell’s total cost per MWh (excluding depreciation, amortisation and borrowing costs) for 2008–09 was $36.49, a decrease of 1.6% from $35.92/MWh for 2007–08. Excluding the impact in 2008–09 of costs associated with impairments and the write off of development costs, the total cost per MWh is $34.52, which represents a decrease of 3.9% against the previous year.

Stanwell will continue to focus on its cost base to realise operating efficiencies and procurement benefits.

The interest expense for the year increased to $15.8 million in 2008–09 from $11.7 million in 2007–08. This is a result of increased borrowings to partially fund the share acquisition in Blue Energy Limited, income tax instalment payments and the 2007–08 dividend.

The directors have recommended and provided for a dividend of $148.9 million for 2008–09 (2007–08: $92.1 million). This is based on a dividend payout ratio of 80% of after tax profit adjusted to exclude net unrealised gains from the revaluation of financial derivatives.

Stanwell has recorded its strongest ever financial results, with an after tax profit of $195.6 million (2007–08: $135.6 million). This solid performance is the result of sharing export coal revenue from the Curragh North coal mine.

ECOnOMIC pERfORMAnCE

50

Balance sheetStanwell’s total asset position increased to $1,930.7 million at 30 June 2009 from $1,916.4 million at 30 June 2008. The net asset position of Stanwell increased from $733.0 million to $957.0 million at 30 June 2009. These movements are the direct result of the change in the fair value of derivative financial instruments, principally electricity forward contracts, due to lower electricity prices compared to the previous year.

Stanwell’s borrowings as at 30 June 2009 were $257.1 million (2007–08: $130.5 million). Borrowings have increased to partially fund the share acquisition in Blue Energy Limited, income tax instalment payments and the 2007–08 dividend. Based on these debt levels and excluding available cash resources, Stanwell’s gearing (measured as net debt to debt plus equity) increased from 15.1% to 21.1%. At 30 June 2009, Stanwell had available undrawn committed and uncommitted debt facilities of $624.1 million.

At 30 June 2009, Stanwell held cash and cash resources of $174.3 million (2007–08: $69.3 million). The strategy of holding cash on deposit rather than repaying debt was continued in the year due to the reduced risk of capital erosion as a result of market yield movements.

In 2007–08, at the direction of the Queensland Government, Stanwell disposed of all of its wind farms and wind farm projects except for the Emu Downs Wind Farm and the Badgingarra Wind Project. As required by Australian Accounting Standards, the remaining wind assets and the related liabilities have been disclosed as ‘held for sale’. The outcome of the litigation commenced in the 2007–08 year against our joint venture partner, in relation to unreasonably withholding their consent to the sale, was unfavourable and is the subject of an appeal.

Stanwell Annual Report 2009 ECONOMIC PERFORMANCE

Interest cover (times)*

2007

–08

167.

8

2004

–05

3.8

2005

–06

10.1

2006

–07

33.0

2008

–09

22.1

Interest cover (times)*The increase to Stanwell’s interest cover for 2007–08 was a result of the cash management strategy.

* Based on net interest received

Debt to debt + equity

2004

–05

17.1

2005

–06

14.4

2006

–07

35.3

2007

–08

15.1

2008

–09

21.1

Debt to debt + equity (%)Our debt to debt + equity (%) increased as a result of additional borrowings to fund the share acquisition in Blue Energy Limited, tax instalment payments and the 2007–08 dividend.

Return on total assets (%)

2004

–05

3.4

2005

–06

6.9

2006

–07

10.7

7.5

2007

–08

2008

–09

14.5

Return on total assets (%)The increased return on total assets was a result of Stanwell’s improved profit result.

Earnings before interest and tax (EBIT) ($m)

2004

–05

53.5

2005

–06

115.

3

2006

–07

229.

9

168.

620

07–0

8

2008

–09

278.

5

Earnings before interest and tax (EBIT) ($m)The increase to Stanwell’s earnings before interest and tax can be attributed to the increase in export coal revenue sharing arrangements.

51

Cash flow Stanwell generated operating cash flows of $191.9 million (2007–08: $140.8 million) after payment of interest and income tax equivalents. This represents an increase of 36.2% or $51.1 million over the cash flow reported last year. This reflects an increase in operating cash receipts net of payments as a result of improved export coal revenue, offset by an increase in income taxes paid and a reduction in interest received.

Return on total assetsOur return on total assets for 2008–09 was 14.5% compared to 7.5% in the previous year. The increase was the direct result of Stanwell’s improved profit performance.

OutlookThe current outlook for the electricity pool and contract markets is that they will continue to reflect the impacts of reduced electricity prices and lower demand. Increased uncertainty in these markets has been driven by the proposed Carbon Pollution Reduction Scheme.

We will continue to benefit from the export coal revenue sharing arrangements, although the outlook for 2009–10 will reflect the softening of coal export prices. Overall, Stanwell anticipates a strong profit result for 2009–10, although it is unlikely to exceed the 2008–09 result.

Under the Queensland Government’s Capital Restructure Review, Stanwell will participate in a capital repatriation of $380.0 million in December 2009. This will have an impact on Stanwell’s cash flow, debt and gearing ratio.

Stanwell Annual Report 2009 ECONOMIC PERFORMANCE


Optimise costs to generate better returns on Stanwell’s assets.

Achieved Increased return on total assets ratio by 93.3% from the previous year.

Optimise revenue through improvement of Stanwell’s spot and contract trading strategy, including the development of portfolio based risk metrics and benchmarking tools to incorporate a trading portfolio.

Achieved Improved portfolio management supported by models.

Implemented a financial risk and valuation system.

Monetise Stanwell’s existing mining development leases and finalise new coal sharing arrangements.

On track Completed analysis and value modelling.

Advanced negotiation of a comprehensive package with Wesfarmers Resources.


Provide an efficiency dividend to Shareholders of $4 million in the form of cost savings.

Develop options to monetise surplus and non-core assets.

52 Stanwell Annual Report 2009 CORPORATE GOVERNANCE

CORPORATEGOVERNANCE

Old spear removed from spear pit at Kareeya Hydro.

53

As part of its ongoing commitment to best practice corporate governance, the Board finalised Stanwell’s corporate governance framework in the form of a Board Handbook.

Stanwell is required to comply with the Corporate Governance Guidelines for Government Owned Corporations developed by the Queensland Government.

These guidelines summarise the expectations of Shareholding Ministers in relation to the corporate governance of all Government Owned Corporations (GOCs) and provide a framework to develop, implement, review and report on corporate governance arrangements. The guidelines are based on the eight principles of good corporate governance (Office of Government Owned Corporations principles and reporting requirements table page 58–60).

Further information relating to corporate governance at Stanwell, including a copy of our Board Handbook, can be found on our website at www.stanwell.com

Shareholding MinistersAs at 30 June 2009, Stanwell’s Shareholding Ministers were The Honourable Stephen Robertson MP, Minister for Natural Resources, Mines and Energy and Minister for Trade and The Honourable Andrew Fraser MP, the Treasurer and Minister for Employment and Economic Development.

Subsidiaries

The directors of Stanwell’s subsidiaries are Kim Wood and Michael O’Rourke.

Board and committeesStanwell’s Board consists of seven non-executive directors, who are appointed in accordance with the Government Owned Corporations Act 1993 (GOC Act).

Role of Board of DirectorsThe GOC Act establishes that the Board is ultimately responsible for all matters related to the operations of Stanwell.

Within this regulatory framework, the Board’s overall role is to govern the organisation rather than manage it.

It is the purpose of the Executive Management Team to manage the organisation in accordance with the direction and delegations of the Board. It is the responsibility of the Board to oversee the activities of management in carrying out these delegated duties. The Board is responsible for and has the authority to determine all matters relating to the policies, practices, management and operations of Stanwell, except where Shareholding Ministers exercise their reserve powers of policy and direction under the GOC Act. The Board is required to do all things necessary to carry out the objectives of Stanwell and, subject to the reserve powers of our Shareholding Ministers, has the final responsibility for the successful operation of the company.

The principal functions and responsibilities of the Board include:

health, safety and wellbeing •of employees;leadership of the organisation;•strategy formulation;•overseeing planning activities;•stakeholder liaison;•monitoring, compliance and risk •management;matters relating to the Chief Executive •Officer; anddelegation of authority.•

Director independenceAll of Stanwell’s directors are considered by the Board to be independent. In determining the independent status of a director, the Board has considered whether the director is a material supplier or customer of Stanwell or its subsidiaries and has a material contractual relationship with Stanwell other than as a director.

Stanwell Annual Report 2009 CORPORATE GOVERNANCE

CORpORATE GOVERnAnCE

Stanwell is committed to achieving the highest standards of corporate governance to enable the organisation to function effectively and efficiently.

STANWELL CORPORATION

LIMITED

WIND PORTFOLIO

PTY LTD

ENERGY PORTFOLIO 1

PTY LTD

EDWF HOLDINGS 1

PTY LTD

GOONDI ENERGY PTY LTD

THE PEOPLE OF QUEENSLAND

SHAREHOLDING MINISTERS

Minister for Natural Resources, Mines and Energy and Minister for Trade

Treasurer and Minister for Employment and Economic Development

BOARD OF DIRECTORS

Denis ByrneBarry KellyMark WilliamsonLaurie GillespiePeter GreggDavid WatsonGraeme Crow

CHIEF ExECUTIvE OFFICER

Kim Wood

MANAGEMENT TEAM

John BampfyldeGarry ButtonWayne CollinsDerek HanniganBrad NevenMichael O’Rourke

Stanwell structure as at 30 June 2009

54 Stanwell Annual Report 2009 CORPORATE GOVERNANCE

Composition of the Board and committees as at 30 June 2009*

Committee membership

Director Date first appointed

Expiry of term of office

Board membership

Audit and Risk Management

Human Resources

and Workplace Health and Safety

Project Advisory

Group

Denis Byrne 1 July 2006 30 September 2009 Independent Non-executive

Chairman

Member Member Chairman

Barry Kelly 1 July 1999 30 September 2009 Independent Non-executive

Director

Member

Mark Williamson 5 July 2001 30 September 2011 Independent Non-executive

Director

Member Member

Laurie Gillespie 1 July 2006 30 September 2009 Independent Non-executive

Director

Chairman

Peter Gregg 1 July 2006 30 September 2009 Independent Non-executive

Director

Chairman Member

David Watson 1 January 2007 30 September 2009 Independent Non-executive

Director

Member Member

Graeme Crow 1 October 2008 30 September 2011 Independent Non-executive

Director

Member

* Bronwyn Morris’ term of office as a director of Stanwell expired on 30 September 2008.

MILESTONES

Endorsement of Stanwell’s strategic direction.

Approval of Stanwell’s investment in Blue Energy Limited and a farm-in agreement with Icon Energy Limited.

Oversight of Stanwell’s record annual after tax profit of $195.6 million (2007–08: $135.6 million).

Implementation of Stanwell’s stakeholder relations program.

Oversight of the Unit 2 outage— Stanwell Power Station’s largest ever planned maintenance project.

Milestones in 2008–09 Old pelton wheel on display at front gate of Kareeya Hydro.

55

Board committeesStanwell has three standing Board committees, including the Audit and Risk Management Committee, Human Resources and Workplace Health and Safety Committee and Project Advisory Group Committee.

In each case, the committee has no executive powers with regard to its findings and recommendations. These executive powers remain with the Board.

Each committee has a charter (available on our website) that sets out the objectives, composition, term of office, duties and responsibilities of each committee. The charters of each committee are reviewed and updated, as appropriate, on a regular basis.

Stanwell also has three executive management committees that report through to the Audit and Risk Management Committee at every committee meeting. These include the Trading Risk Management Committee, Trading Compliance Committee and Financial Risk Management Committee.

Board and committee evaluationThe Board conducts an external and internal review of its performance and the performance of each Board committee on a regular basis. These reviews ensure that our Board is maintaining best practice corporate governance.

External reviewAn independent third-party consultant has been engaged to undertake a Board and Board committee performance evaluation. The outcomes of that review are to be delivered and implemented by the end of 2009.

The review will:focus on continuous improvement,•provide directors with an opportunity •to respond openly in an independent forum,strengthen relationships within •the Board,enhance the effectiveness of the •Board’s operations and corporate governance practices,strengthen the culture of performance •and accountability, andhelp to align Stanwell’s core values •with Board performance.

Internal reviewSince February 2008, the Board has conducted internal Board reviews where the Board’s individual and collective performance and the performance of Board committees has been reviewed and evaluated. These reviews have been conducted on a quarterly basis during the non-executive director sessions and all actions from those reviews have been implemented at future Board and Board committee meetings.


MeetingsThe attendance of Stanwell’s directors at Board and Board committee meetings is shown below.

Board meeting attendance

D. Byrne B. Morris B. Kelly L. Gillespie P. Gregg M. Williamson D. Watson G. Crow

11 of 11 2 of 3 (term expired 30/9/08)

10 of 11 11 of 11 11 of 11 8 of 10* 11 of 11 7 of 8 (Appointed 1/10/08)

Audit and Risk Management Committee meeting attendance

P. Gregg D. Byrne B. Morris G. Crow D. Watson

6 of 6 6 of 6 1 of 1 (term expired 30/9/08)

4 of 4 (appointed 23/10/08)

6 of 6

Human Resources and Workplace Health and Safety Committee meeting attendance

L. Gillespie B. Kelly D. Byrne M. Williamson

5 of 5 5 of 5 5 of 5 3 of 5

Project Advisory Group Committee meeting attendance

D. Byrne M. Williamson P. Gregg D. Watson

3 of 3 1 of 3 2 of 3 3 of 3

* Leave of absence granted.

56

Ethical and responsible decision making

Code of ConductStanwell is committed to the highest standards of integrity, honesty and accountability.

We value ethical behaviour and actions that are consistent with our six key strategic objectives. Stanwell’s commitment to this is reflected in the codes of conduct that apply to our directors and employees.

The Directors’ Code of Conduct is contained in Stanwell’s Board Handbook, which is available on our website. Stanwell’s Code of Conduct for employees is also available on our website.

Avoidance of conflicts of interestStanwell’s Constitution and Board Handbook require directors to disclose to the Board potential, perceived or actual conflicts of interest that may exist between the director and any other parties in carrying out the activities of Stanwell. On appointment, directors must disclose to the Board any potential, perceived or actual conflicts of interest in accordance with the Conflict of Interest Probity Protocol (which forms part of the Board Handbook) and must keep these disclosures up to date.

Any director with a material personal interest in a matter being considered by the Board must declare their interest and, unless the Board resolves otherwise, cannot participate in boardroom discussion or vote on matters in respect of which they have a conflict.

The Conflict of Interest Probity Protocol provides for the appointment of an external probity auditor to carry out an audit function regarding the management of conflicts of interest as they occur from time to time. During the 2008–09 financial year, there were no outstanding material issues raised by our external probity auditor.

Access to information and independent professional adviceAll directors have a right of access to company books and receive regular detailed financial and operational reports from executive management.

Directors may request, via the Chairman, independent professional advice at Stanwell’s expense. A copy of advice received by a director will be provided to all other Board members.

financial reporting

CEO and CFO certificateThe Audit and Risk Management Committee (ARMC) reviews and makes recommendations to the Board on all significant accounting policy changes and the annual financial statements, including the auditor’s report. The ARMC considers the annual financial accounts and endorses the accounts to be submitted for approval by the Board.

Stanwell’s Chief Executive Officer and Chief Financial Officer also provide a certificate stating that, to the best of their knowledge and belief, and having regard to materiality, Stanwell’s annual financial statements and notes give a true and fair view of the financial position and performance of Stanwell as the parent entity and the group consisting of Stanwell and its subsidiaries and that the accounting policies of the parent entity and the group are in accordance with the relevant standards and legislation.

This certification is based on implementation of the policies adopted by the Board and the company’s risk management system and internal compliance and control measures, which operate efficiently and effectively in all material respects in relation to financial reporting risks.

Risk managementStanwell has a comprehensive risk management system to identify, analyse, evaluate, treat and monitor material business risks.

Stanwell’s Risk Management Policy aligns with AS 4360:2004 and assigns responsibility to each General Manager for the management of business risks pertaining to their divisions. To fulfil this responsibility, they are supported by the Corporate Risk Manager, business wide common risk language and a risk register database. The Board has approved a Risk Evaluation Framework to guide the business in the measurement of risk and setting management approaches according to risk tolerance.

In addition, significant domains of business risk are supported by specialist staff, processes and systems designed to address specific regulatory and professional requirements while simultaneously integrating with the corporate risk framework.

These domains include health and safety, environment, energy trading, financial risk, legal compliance and production.


57Stanwell Annual Report 2009 CORPORATE GOVERNANCE

Disclosure and communications with shareholdersShareholding Ministers have a general right to obtain information from Stanwell about its operations by virtue of the accountability of Stanwell to the government, Parliament and the public.

Stanwell respects the rights of Shareholding Ministers and their representatives, having regard to the requirements of responsible government, and facilitates the effective exercise of those rights. We actively consult with Shareholding Ministers and give them ready access to balanced and understandable information about the company and corporate proposals.

This is achieved via the following mechanisms:

Annual Report (containing those •matters outlined in section 120 of the GOC Act);Corporate Plan;•Statement of Corporate Intent;•Quarterly Reporting (pursuant to •section 119 of the GOC Act);Ministerial Briefing Notes, as required;•fortnightly updates from the Chief •Executive Officer; andregular meetings between Stanwell’s •Chairman/Chief Executive Officer and the portfolio minister.

In accordance with Section 122 of the GOC Act, Stanwell:

keeps Shareholding Ministers •reasonably informed of the operations, financial performance and financial position of Stanwell and its subsidiaries, including the assets and liabilities, profits and losses, and prospects of Stanwell and its subsidiaries; gives to Shareholding Ministers reports •and information that they require to enable them to make informed assessments of matters relating to operations, financial performance and the financial position of Stanwell and its subsidiaries; and if matters arise that in the Board’s •opinion may prevent, or significantly affect, achievement of our objectives outlined in the Statement of Corporate Intent or targets under our Corporate Plan, will immediately inform Shareholding Ministers of the matters and its opinion in relation to them.

Risk reports and risk maps are tabled at each meeting of the Audit and Risk Management Committee (ARMC). These advise the ARMC of risks with a current rating of high, emerging issues in the business environment, internal control issues and internal control improvements.

Each General Manager reports to the Board on a quarterly basis regarding material compliance exceptions. The Board is continuously advised of the effectiveness of the risk management system and the internal control system through these processes.

Monitoring our riskCirculating water pipes at Stanwell Power Station.

58

Office of Government Owned Corporations (OGOC) principles and reporting requirementsStanwell reports against the Corporate Governance Guidelines for Government Owned Corporations. The table below outlines our compliance against the eight principles of good corporate governance.

Recommendation Annual Report requirement Reference material

Principle 1 Foundations of management and oversight

The Board should have a formal statement or Board Charter which clearly defines the roles and responsibilities of the Board and individual directors and the matters which are delegated to management. This also applies to any committee established by the Board.

A Board Handbook should be available to facilitate Board operations and induction and self-evaluation processes.

Appropriate induction processes should be developed for new members in relation to their Board and committee functions and for senior executives to allow them to participate fully and actively in management decision making at the earliest opportunity.

A register of committees and their functions should be maintained.

The process for performance evaluation of the Chief Executive Officer and senior executives should be disclosed.

Disclose whether a performance evaluation for the Chief Executive Officer and senior executives has taken place in the reporting period and how it was conducted.

Performance evaluations for Stanwell’s Chief Executive Officer and senior executives for the 2007–08 financial year were carried out in August 2008 and will be carried out in August 2009 for the 2008–09 financial year.

The performance evaluation for the Chief Executive Officer was conducted by the Board.

The performance evaluation for senior executives was conducted by the Board and the Chief Executive Officer.

Both the performance evaluation for the Chief Executive Officer and the senior executives were undertaken in accordance with Stanwell’s Executive Management—Recruitment, Appointment and Remuneration Policy against agreed key performance indicators. Please refer to our website for a copy of this policy.

Principle 2 Structure the Board to add value

A majority of the Board should be independent directors.

The Board should develop and implement a plan for identifying, assessing and enhancing director competencies.

Disclose the process for performance evaluation of the Board, committees and individual directors.

The Board and committees regularly review their information needs (quality, quantity and timeliness) to ensure the information they receive is appropriate for the effective discharge of their duties.

Develop and implement appropriate, formal self-evaluation processes for the Board and committees.

Skills, experience and expertise relevant to the position of director held by each director in office at the date of the report.

Names of the directors considered to be independent and Stanwell’s materiality thresholds.

A statement as to whether there is a procedure agreed by the Board to take independent professional advice at the expense of Stanwell.

The term of office held by each director in office at the date of the report, including the date the director was first appointed.

Whether a performance evaluation for the Board and its members has taken place in the reporting period and how it was conducted.

See Board member biographies on page 18–19.

See Director independence on page 53.

See Access to information and independent professional advice on page 56.

See Composition of Board and committees as at 30 June 2009 on page 54.

See Board and committee evaluation on page 55.


59


Principle 3 Promote ethical and responsible decision making

Establish and maintain a code of conduct outlining the practices necessary to maintain confidence in the company’s integrity and to guide compliance with legal and other obligations to stakeholders.

Establish and disclose the policy for trading in securities by directors, officers and employees.

Establish the code of conduct in line with best practice.

For a copy of Stanwell’s codes of conduct for directors and employees, please refer to our website.

Principle 4 Safeguard integrity in financial reporting

The Board should establish an audit committee.

The Chief Executive Officer and Chief Financial Officer (or equivalent) state in writing that the financial reports present a true and fair view and are in accordance with accounting standards.

Details of the names and qualifications of those appointed to the Audit and Risk Management Committee (ARMC), or those who perform the function of an ARMC member.

The number of meetings held by the ARMC and the names of the attendees.

See Composition of the Board and committees as at 30 June 2009 on page 54 and Board member biographies on page 18–19.

See Meetings on page 55.

Principle 5 Make timely and balanced disclosures

Establish written policies and procedures to ensure compliance with disclosure requirements (including those in the GOC Act) and generally ensure the accountability of senior management for that compliance.

For a copy of Stanwell’s Board Handbook, please refer to our website.

Principle 6 Respect the rights of shareholders

Design and disclose a communication strategy to promote effective communication with Shareholding Ministers.

See Disclosure and communications with shareholders on page 57.

Principle 7 Recognise and manage risk

The Board or an appropriate committee should establish policies in risk management and oversight.

Ensure the integration and alignment of the risk management system with corporate and operational objectives.

Ensure clear communication throughout Stanwell of the Board and senior management’s position on risk.

Ensure a common risk management terminology across Stanwell.

Ensure risk management is undertaken as part of normal business practice and not as a separate task at set times.

Ensure information systems for reporting on risk are integrated to enable aggregation and reporting at a corporate level.

Undertake a risk assessment to identify any high-risk fraud areas and develop strategies to mitigate any significant fraud risks.

Disclose that Stanwell’s management has reported to the Board as to the effectiveness of Stanwell’s management of its material business risks.

See Financial reporting on page 56 and Monitoring our risk on page 57.


60


Principle 7 Recognise and manage risk (continued)

Implement policies and procedures which include:

staff responsibilities in relation to fraud, •prevention and identification;responsibility for fraud investigation once •a fraud has been identified;processes for reporting on fraud related •matters to management;reporting and recording processes to be •followed to record allegations of fraud;requirements for staff training to be •conducted on fraud prevention and identification; anda reference to Stanwell’s code for ethical •behaviour.

Implement a fraud control plan for ongoing monitoring and compliance of fraud control activities which identifies fraud risk, incorporates control strategies, action plans and a timetable for implementation and sets out responsibilities and accountabilities for fraud control at all levels of Stanwell.

The Chief Executive Officer and the Chief Financial Officer (or equivalent) state to the Board that the statement given under the recommendations applying to Principle 4 is founded on a sound system of risk management and internal compliance and control which implements Board policies; and the risk management and control system is operating efficiently and effectively in all material respects.

Principle 8 Remunerate fairly and responsibly

Stanwell should disclose its remuneration policies to show the broad structure and objectives of the policies and the link between remuneration of the Chief Executive Officer and senior executives and corporate performance.

The Board should establish a remuneration committee.

Disclosure of Stanwell’s remuneration policies.

The names of the members of the remuneration committee and their attendance at meetings of the committee.

Stanwell has an Executive Management—Recruitment, Appointment and Remuneration Policy which was approved by Stanwell’s Shareholding Ministers in June 2007. The policy applies to the Chief Executive Officer and senior executives of Stanwell, who report directly to the Chief Executive Officer and whose position is commensurate with an office held by a senior executive under the Public Service Act 1996.

Please refer to our website for a copy of the policy.

See Meetings on page 55.


61

IntroductionSection 102 of the Government Owned Corporations Act 1993 (GOC Act) requires Stanwell to have a Statement of Corporate Intent (SCI) for each financial year.

The SCI represents a formal performance agreement between Stanwell’s Board of Directors and its Shareholding Ministers with respect to the financial and non-financial targets specified for the financial year. The SCI also represents an acknowledgment and agreement on major activities, objectives, undertakings, policies, investments and borrowings of Stanwell for the financial year.

StrategyStanwell’s corporate objectives, performance drivers, strengths and business deliverables are summarised in the Our direction section on page 5.

performance monitoringThe SCI specifies Stanwell’s financial and non-financial performance targets for its activities during the 2008–09 financial year. Please refer to page 6 for performance against financial indicators and page 8 for performance against non-financial indicators.

Other mattersNo community service obligations were identified for Stanwell for the year ending 30 June 2009.

AmendmentsThe 2008–09 SCI was amended two times to provide further clarification on Stanwell’s entertainment and corporate hospitality budget for the year.

Dividend policyStanwell’s Dividend Policy takes into account the return its shareholders expect from their investments. Stanwell’s Board will recommend a dividend amount equal to 80% of Stanwell’s net profit after tax for the year ending 30 June 2009.

The Board will adopt such a recommendation on the basis that Stanwell’s shareholders agree to provide the necessary funding for projects which have received Board and shareholder approval, for the maintenance of Stanwell’s approved capital structure or for ensuring Stanwell’s operational viability.

Directions and notificationsSection 120(e) of the GOC Act requires Stanwell to provide, in its annual report, particulars of any directions and notifications given to Stanwell by Shareholding Ministers that relate to the relevant financial year. Please refer to the Directors’ Report for details of the directions received by Stanwell relating to the 2008–09 financial year.

Corporate entertainment and hospitalityThe following table identifies all corporate entertainment and hospitality over $5,000 which was undertaken in 2008–09.

Stanwell Annual Report 2009 GOC ACT REQUIREMENTS

Summary of Statement of Corporate Intent (SCI) (for the year ended 30 June 2009)

GOVERnMEnT OWnED CORpORATIOnS ACT REQUIREMEnTS

Event Date Cost ($)

Staff end of year functions held across Stanwell sites December 2008 21,399

62 Stanwell Annual Report 2009 FINANCIAL REPORT

Directors’ report 63Auditor’s independence declaration 68Annual financial report 69Income statements 70Balance sheets 71Statements of changes in equity 72Cash flow statements 73Notes to the financial statements 741 Summary of significant accounting policies 742 Financial risk management 833 Critical accounting estimates and judgements 904 Segment information 915 Revenue 916 Other income 927 Expenses 928 Income tax equivalent expense 939 Current assets – Cash and cash equivalents 9410 Current assets – Trade and other receivables 9411 Current assets – Inventories 9512 Derivative financial instruments 9613 Disposal groups classified as held for sale 9714 Non-current assets – Available-for-sale financial assets 9815 Non-current assets – Other financial assets 9916 Non-current assets – Property, plant and equipment 9917 Non-current assets – Intangible assets 10318 Non-current assets – Biological assets 104

19 Non-current assets – Exploration and evaluation expenditure 10420 Non-current assets – Deferred tax equivalent assets 10521 Non-current assets – Retirement benefit obligations 10622 Non-current assets – Other non-current assets 10823 Current liabilities – Trade and other payables 10824 Current liabilities – Provisions 10825 Other current liabilities 10926 Non-current liabilities – Borrowings 10927 Non-current liabilities – Deferred tax equivalent liabilities 11028 Non-current liabilities – Provisions 11029 Other non-current liabilities 11130 Contributed equity 11131 Reserves, other owner contributions and retained profits 11232 Dividends 11333 Key management personnel disclosures 11434 Remuneration of auditors 11735 Contingencies 11736 Commitments 11837 Related party transactions 11938 Subsidiaries 12139 Interests in joint ventures 12140 Economic dependency 12141 Reconciliation of profit after income tax equivalent

expense to net cash inflow from operating activities 12242 Earnings per share 12243 Cross border leases 12344 Events occurring after the balance sheet date 123

Directors’ declaration 124Independent audit report 125

FINANCIALREPORT 2009


Stanwell Annual Report 2009 FINANCIAL REPORT 63

DIRECTORS’ REPORT 30 June 2009

DirectorsThe Board comprises non-executive directors who have a diversity of business experience as well as community responsibilities. The names, qualifications and experience of directors in office during the financial year and until the date of this report are shown under the heading ‘Board of Directors’ of this annual report.

Directors’ meetingsThe number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of the Group during the financial year are set out in this annual report (Corporate governance page 55).

Company secretaryThe company secretary is Mr M. O’Rourke (BCom, LLB, G Dip App Fin and G Dip App Coy Sec Prac). Mr O’Rourke was appointed to the position of company secretary in 2002.

Principal activityThe principal activity of the Group during the financial year was to generate electricity for sale to customers within Australia.

Group structureDuring the year the Group entered into a joint venture with Icon Energy Limited covering four of the 30 blocks in ATP 626P in the Surat Basin.

To implement the required joint venture ownership structure, Stanwell Corporation Limited incorporated two subsidiaries as follows:

Energy Portfolio 1 Pty Limited, and•Goondi Energy Pty Limited.•

Both companies are wholly owned subsidiaries of Stanwell Corporation Limited and were incorporated on 29 May 2009.

Review and results of operationsA full review of the operations of the Group during the financial year, and the results of these operations, are set out in this annual report (Operations page 32–36 and Economic performance page 48–51).

Derivatives and other financial instrumentsThe Group has potential exposures as a result of changes in electricity commodity prices, foreign exchange rates and interest rates. Credit, liquidity and cash flow risks also can arise from its operations. The Board has confirmed policies in each of these areas to manage the exposures and risks. The Board requires regular confirmation of adherence to these policies.

It is the policy of the Group to use derivative financial instruments to hedge cash flows subject to electricity commodity prices or foreign currency risks. Derivative financial instruments are not held for speculative purposes. Exposures, including related derivative hedges, are reported to the Board on a monthly basis.

The Group has a strict credit policy for all customers trading on credit terms. It has a range of measures for determining counterparty credit worthiness relying on a risk adjusted assessment principally based on the counterparty’s credit rating determined by a recognised rating agency. Where appropriate, acceptable credit support is also obtained.

Financing facilities and operating cash flows are managed to ensure that the Group is not exposed to any adverse liquidity risks. Adequate standby facilities are maintained to provide strategic liquidity to meet unexpected and material cash outflows in the ordinary course of business.

The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Stanwell Corporation Limited and the entities it controlled at the end of, or during, the year ended 30 June 2009.

Consolidated Parent entity 2009 2008 2009 2008

Profit attributable to ordinary equity holders of the company – $’000 195,605 135,590 192,431 127,461

Basic earnings per share – cents 21.16 13.86

Stanwell Annual Report 2009 FINANCIAL REPORT64


Dividends – Stanwell Corporation LimitedDividends paid or declared by the company in accordance with the Government Owned Corporations Act 1993, since the end of the previous financial year were:

Significant changes in the state of affairsWind farmAs reported at 30 June 2008, a direction was issued for the sale of the Group’s share in Emu Downs Wind Farm. The other joint venture participant withheld consent to the change in control. Legal proceedings commenced with an unsuccessful application for an order that withholding consent was unreasonable. In December 2008 the Queensland Government determined through a direction that EDWF Holdings 1 Pty Ltd was to appeal the original judgement.

To give effect to the direction, the EDWF Holdings 1 Pty Ltd Board convened and authorised the commencement of an appeal against the original decision. The appeal is expected to take place in December 2009 in the Court of Appeal of Western Australia.

The divestment of Wind Portfolio Pty Ltd and its share in the Emu Downs Wind Farm will be completed in the 2009–10 year and the assets continue to be disclosed as ‘assets held for sale’ in the statement of financial position.

Blue Energy LimitedOn 6 August 2008, the Group purchased 87.28 million shares (19.6%) in Blue Energy Limited as part of a strategic move to diversify its asset portfolio to include gas projects.

Blue Energy Limited is a diversified publicly listed Australian energy company that undertakes the appraisal and development of coal bed methane (CBM), natural gas and conventional oil resources within eastern Australia.

Since acquisition, Blue Energy Limited has raised an additional $22.3 million of new ordinary shares (approximately 118 million shares) through a Share Purchase Plan.

On 29 June 2009, Blue Energy Limited executed a Share Placement Agreement with Korea Gas Corporation (KOGAS) which has been approved by the Boards of both Blue Energy Limited and KOGAS. KOGAS will pay $12.57 million to acquire a 10% of Blue Energy Limited’s share capital subject to Foreign Investment Review Board approval.

As a result of the Share Purchase Plan and the Share Placement Agreement the Group’s interest will be diluted to 13.89%.

A Gas Development Alliance agreement was signed between the two parties on the date of the share acquisition. Under the Alliance agreement, the Group has an option to fund field and infrastructure development if preliminary exploration is successful. Blue Energy Limited’s investment will be limited to continuing with its current activities of proving of reserves. Blue Energy Limited will receive a leveraged return through the utilisation of its expertise in gasfield planning and operation and will receive a fee where performance betters production cost benchmarks. The Alliance agreement includes a gas supply arrangement with the Group up to 8.5 PJ per annum of coal seam gas for a potential gas fired power station project over a 25 year period.

Icon Energy LimitedOn 24 December 2008 the Group signed a Farm-in Agreement and Joint Operating and Gas Supply Agreements with Icon Energy Limited to commit $6 million to an initial pilot program covering four of the 30 blocks in Icon Energy Limited’s ATP 626P in the Surat Basin.

Icon Energy Limited is a publicly-listed Australian energy company that is engaged in the exploration, appraisal and development of oil and gas properties and the acquisition of additional oil and gas prospects. ATP 626P is the company’s prime asset located in the Surat Basin in Queensland.

Subject to results, the Group may elect to commit to a further $30 million to secure a minimum 2P reserve of 340 PJ. At the completion of this second stage, the Group will earn a 50% interest in the four blocks as a participant in the Joint Venture Gas Project.

In addition, key commercial terms have been agreed for the Group to purchase 225 PJ from ATP 626P under a Gas Sale Agreement over a 15 year period, subject to completion of the second stage of the Farm-in Agreement.

Cents Total amount per share $’000

As proposed and provided for in last year’s report:

Final ordinary dividend paid by 31 December 2008 9.96 92,105

In respect of the current financial year:

Approved final ordinary dividend to be paid by 31 December 2009 16.11 148,944


Business performanceThe continued strong profit after tax result of the Group for the financial year ended 30 June 2009 reflects the consistent profitability of the underlying electricity generation business and the ongoing significant benefits of the revenue sharing arrangements of coal exports from the Curragh coal mine. It is anticipated that the coal revenue sharing benefits will continue in future financial years but are dependent on continuing high export coal prices.

The Group profit after tax for the year was $195.6 million against the previous year’s result of $135.6 million. The Group’s total revenue from operating activities increased by 25% over the previous year to $668.3 million (2007–08: $536.5 million).

Environmental regulationThe Group’s operations are subject to significant environmental regulations under both Commonwealth and State legislation (Environmental performance page 44).

Events subsequent to the end of the financial yearAs detailed in the Queensland State Budget 2009–10 and as part of its capital structure review, the Queensland Government has approved the return of $380 million equity from the Group on or before 31 December 2009.

The Government has advised that they will continue to review the Group’s capital structure each year in the Budget context, and may elect to make further equity adjustments reflecting changing circumstances as a result of approval of major investment projects or changes in demand or financial outlook.

This amount has been recognised as a commitment (refer note 36(d)).

On 27 July 2009, the Australian Energy Regulator instituted proceedings against the parent entity in the Federal Court, alleging that the company did not make several of its offers to generate electricity in ‘good faith’ contrary to the National Electricity Rules. Stanwell is defending the claim. The costs or penalties associated with these actions are not determinable as they are contingent upon the outcome of the application.

This has been disclosed as a contingent liability (refer note 35(a)).

No other significant events have occurred between 30 June 2009 and the date of this report that have significantly affected, or may significantly affect:

the Group’s operations in future •financial years,the results of those operations in •future financial years, orthe Group’s state of affairs in future •financial years.

Likely developments and expected results of operationsAn outline of future developments in the Group’s operations is submitted in the ‘Chairman’s statement’ and the ‘Chief Executive Officer’s review’ of this annual report. Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group.

Directors’ and senior executives’ compensationThe Human Resources and Workplace Health and Safety Committee of the Board is responsible for making recommendations to the Board on the compensation policies and packages applicable to the senior executives of the Group. The compensation policies and packages are subject to Queensland Government guidelines that may be issued from time to time.

Senior executives may receive an ‘at risk’ payment based on the achievement of specific goals related to the performance of the Group (including operational results). Directors do not receive any performance related compensation.

Details of the remuneration of the directors and other key management personnel (as defined in AASB 124 Related Party Disclosures ) of Stanwell Corporation Limited and the Group are set out in the following table.

Details of compensation policies are disclosed in note 33 of the financial statements.



Directors’ interestsThe directors have no interest in any shares of the Group as all shares are held for the benefit of the State of Queensland by Ministers of the Crown.

Risk managementThe Group, in carrying out its business, maintains a risk management philosophy that appropriately:

protects the wellbeing of the Group’s •workforce, the wider community in which it operates and its physical environment; andmanages threats that could adversely •affect the Group’s ability to meet its corporate objectives, its growth in shareholder value and its stewardship of company assets.

Business environment risksBoard approved policies have been implemented for risks associated with operating in the electricity market. The Board determines the upper limit of electricity generation that will be hedged by way of approved financial instruments. Contracts are established with counterparties in accordance with the Board approved counterparty credit risk policy.

The established legal compliance program is a control framework which ensures that employees remain aware of their responsibilities with respect to state and Commonwealth legislation applying to the Group.

Directors’ and senior executives’ compensation (continued)

Key management personnel Post employment Short-term employee benefits benefits

Name Salary and fees Non-monetary Superannuation Total $’000 $’000 $’000 $’000

Directors

D Byrne (Chairman) 72 - 6 78

L Gillespie (Chairman Human Resources and Workplace Health and Safety Committee) 32 - 3 35

P Gregg (Chairman Audit and Risk Management Committee) 32 - 3 35

B Kelly 30 - 3 33

B Morris (until 30 September 2008) 8 - 1 9

D Watson 30 - 3 33

M Williamson 30 - 3 33

G Crow (from 1 October 2008) 22 - 2 24

Other key management personnel

Chief Executive Officer 437 - 41 478

Chief Financial Officer 253 - 22 275

Chief Operating Officer 265 - 26 291

General Manager Business Services 254 - 22 276

General Manager Business Development 215 - 21 236

General Manager Trading 263 - 25 288

General Manager Corporate Services 222 - 21 243

This table provides disclosure in respect of employees who formed the group of key management personnel during the reporting period. This table excludes performance based ‘at risk’ incentive bonuses.



Operational risksOperational risks embrace all of the risks arising in day-to-day operations, some of which may be site specific. Business managers and asset management teams actively participate in the identification, analysis and management processes for all operating risks. The objective is to ensure that operational risks are managed on a priority basis through operational controls and where appropriate, to mitigate or eliminate exposures through capital investment and minimise residual risks through insurance or other means.

Decision making risksStrategic risks include project, transaction, planning and organisation risks relating to the building of the Group’s future business capability. The Group’s Capital Investment System is designed to ensure that discrete projects or acquisitions will be assessed on the basis of an extensive analysis of project specific risk and, where appropriate, the utilisation of third party assurance of the processes, systems, models and risk allocation. The Group’s Program Management Office facilitates the identification and prioritisation of the various activities to help complete selected projects and acquisitions.

Indemnification and insurance of officersIndemnificationSection 8 of Stanwell Corporation Limited’s Constitution (as approved by Shareholding Ministers on 29 September 2008) provides that every person who is or has been an officer of the company is indemnified by the company against a liability for costs and expenses incurred by that person as an officer in defending any proceedings in which a judgement has been given in favour of that person or where the Court has granted relief. This indemnity excludes actions arising from conduct involving a lack of good faith or improper use of position.

The directors, company secretary and executive officers (current and former) receive the benefit of this indemnity.

Insurance premiumsDuring the financial year, the Group has paid an insurance premium for an insurance policy for the benefit of the directors and officers. The insurance premium relates to:

costs and expenses incurred by •the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; andother liabilities that may arise from •their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

Rounding of amountsThe company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and in accordance with that class order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Auditor’s independence declarationA copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 68.

Dated at Brisbane this 26th day of August 2009.

Signed in accordance with a resolution of the directors:

D. Byrne Chairman

P. Gregg Director and Audit and Risk Management Committee Chairman



To the Directors of Stanwell Corporation Limited

This audit independence declaration has been provided pursuant to s307C of the Corporations Act 2001.

Independence DeclarationAs lead auditor for the audit of Stanwell Corporation Limited for the year ended 30 June 2009, 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.

Stephen G. Stavrou Brisbane (as Delegate of the Auditor-General of Queensland) 26 August 2009

AuDITOR’S InDEPEnDEnCE DECLARATIOn 30 June 2009


AnnuAL FInAnCIAL REPORT 30 June 2009

This financial report covers both the separate financial statements of Stanwell Corporation Limited as an individual entity and the consolidated financial statements for the consolidated entity consisting of Stanwell Corporation Limited and its subsidiaries. The financial report is presented in the Australian currency.

Stanwell Corporation Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Stanwell Corporation Limited ABN 37 078 848 674 Level 12, Waterfront Place 1 Eagle Street Brisbane QLD 4000

Stanwell Corporation Limited is an integrated wholesale energy provider operating predominately within the state of Queensland.

The financial report was authorised for issue by the directors on 26 August 2009.

Income statements 70Balance sheets 71Statements of changes in equity 72Cash flow statements 73Notes to the financial statements 74Directors’ declaration 124Independent audit report 125


Consolidated Parent entity 2009 2008 2009 2008 Notes $’000 $’000 $’000 $’000

Revenue 5 670,367 540,949 660,196 525,337

Other income 6 17,782 40,142 17,782 40,217

Cost of sales (190,798) (226,901) (188,849) (226,003)

Depreciation and amortisation 7 (73,181) (70,858) (73,181) (70,858)

Employee benefits expense (46,399) (41,066) (46,354) (41,003)

Business support costs (37,260) (34,443) (37,003) (33,998)

Net loss on disposal of property, plant and equipment (6,988) (8) (6,978) (8)

Impairment loss 7 (11,400) - (11,400) -

Research and development (595) (870) (595) (870)

Development costs written off 16 (6,603) - (6,603) -

Finance costs 7 (15,777) (11,771) (15,743) (9,269)

Other expenses (33,245) (27,553) (33,291) (27,569)

Profit before income tax equivalent expense 265,903 167,621 257,981 155,976

Income tax equivalent expense 8 (70,298) (32,031) (65,550) (28,515)

Profit for the year 195,605 135,590 192,431 127,461

Cents CentsBasic earnings per share 42 21.16 13.86

Diluted earnings per share 42 21.16 13.86

The income statements should be read in conjunction with the accompanying notes.

InCOME STATEMEnTS for the year ended 30 June 2009


BALAnCE ShEETS as at 30 June 2009


ASSETSCurrent assetsCash and cash equivalents 9 162,670 62,500 162,665 62,495Trade and other receivables 10 102,959 94,080 102,959 94,083Inventories 11 47,539 26,372 47,539 26,372Derivative financial instruments 12 97,140 140,074 97,140 140,074

410,308 323,026 410,303 323,024

Assets of disposal group classified as held for sale 13 96,115 90,049 - -

Total current assets 506,423 413,075 410,303 323,024

Non-current assetsDerivative financial instruments 12 38,819 77,306 38,819 77,306Available-for-sale financial assets 14 26,187 - 26,187 -Other financial assets 15 - - 76,726 76,726Property, plant and equipment 16 1,318,296 1,325,502 1,318,296 1,325,479Intangible assets 17 5,967 7,304 5,967 7,304Biological assets 18 342 175 342 175Exploration and evaluation expenditure 19 10,916 4,373 10,916 4,373Deferred tax assets 20 18,018 86,300 17,994 86,286Retirement benefit surplus 21 3,266 2,352 3,266 2,352Other non-current assets 22 2,500 - 2,500 -

Total non-current assets 1,424,311 1,503,312 1,501,013 1,580,001

Total assets 1,930,734 1,916,387 1,911,316 1,903,025

LIABILITIESCurrent liabilitiesTrade and other payables 23 75,611 65,412 75,611 65,389Provisions 24 155,552 128,178 155,552 128,178Derivative financial instruments 12 78,034 293,663 78,034 293,663Current tax liabilities 23,736 21,193 20,738 19,180Other current liabilities 25 22,597 22,241 22,597 22,241

355,530 530,687 352,532 528,651

Liabilities directly associated with assets of disposal group classified as held for sale 13 936 810 - 500

Total current liabilities 356,466 531,497 352,532 529,151

Non-current liabilitiesBorrowings 26 257,146 130,517 257,146 130,517Deferred tax liabilities 27 340,587 343,672 337,388 341,767Provisions 28 4,931 3,722 4,931 3,722Derivative financial instruments 12 12,149 174,007 12,149 174,007Other non-current liabilities 29 2,500 - 2,500 -

Total non-current liabilities 617,313 651,918 614,114 650,013

Total liabilities 973,779 1,183,415 966,646 1,179,164

Net assets 956,955 732,972 944,670 723,861

EQUITYContributed equity 30 924,569 924,569 924,569 924,569Reserves 31(a) 23,533 (154,910) 23,533 (154,910)Other owner contributions 31(b) (148,309) (148,309) (148,309) (148,309)Retained profits 31(c) 157,162 111,622 144,877 102,511

Total equity 956,955 732,972 944,670 723,861

The balance sheets should be read in conjunction with the accompanying notes.


STATEMEnTS OF ChAnGES In EQuITy for the year ended 30 June 2009


Total equity at the beginning of the financial year 732,972 335,356 723,861 332,301

Changes in the fair value of cash flow hedges 31(a) 254,919 804,058 254,919 807,019

Tax on changes in the fair value of cash flow hedges 31(a) (76,476) (241,218) (76,476) (242,106)

Actuarial losses on defined benefit plans 31(c) (1,601) (8,458) (1,601) (8,458)

Tax on actuarial losses on defined benefit plans 31(c) 480 2,537 480 2,537

Net income recognised directly in equity 177,322 556,919 177,322 558,992


Total recognised income and expense for the year 372,927 692,509 369,753 686,453

Contributions of equity, net of transaction costs 31(b) - (148,309) - (148,309)

Buy-back of ordinary non-voting (B class) shares - (54,479) - (54,479)

Dividends provided for or paid 32 (148,944) (92,105) (148,944) (92,105)

(148,944) (294,893) (148,944) (294,893)

Total equity at the end of the financial year 956,955 732,972 944,670 723,861

The statements of changes in equity should be read in conjunction with the accompanying notes.


CASh FLOw STATEMEnTS for the year ended 30 June 2009


Cash flows from operating activities

Cash receipts in the course of operations (inclusive of goods and services tax) 622,415 441,724 610,741 426,932

Cash payments in the course of operations (inclusive of goods and services tax) (340,051) (270,629) (338,417) (269,285)

Interest received 3,188 10,829 2,750 9,678

Interest paid (15,136) (12,433) (15,136) (9,083)

Income taxes paid (78,554) (28,648) (76,075) (28,648)

Net cash inflow from operating activities 41 191,862 140,843 183,863 129,594

Cash flows from investing activities

Payments for property, plant and equipment (78,625) (33,241) (77,701) (29,651)

Payments for intangible assets (1,251) (6,838) (1,251) (6,838)

Payments for biological assets (269) (175) (269) (175)

Payments for available-for-sale financial assets (34,927) - (34,927) -

Net payments for exploration and evaluation expenditure (6,448) (1,493) (6,448) (1,493)

Proceeds from disposal of net assets held for sale in disposal groups - 54,110 - 54,110

Proceeds from disposal of non-current assets 108 55 80 55

Dividends received 37 - - 2,300 -

Net cash (outflow)/inflow from investing activities (121,412) 12,418 (118,216) 16,008

Cash flows from financing activities

Share buy-back - (54,479) - (54,479)

Proceeds from borrowings 126,629 14,000 126,629 14,000

Repayment of borrowings - (66,419) - (56,216)

Dividends paid 32 (92,105) (122,301) (92,105) (122,301)

Receipts from subsidiary - - - 3,150

Net cash inflow/(outflow) from financing activities 34,524 (229,199) 34,524 (215,846)

Net increase/(decrease) in cash and cash equivalents 104,974 (75,938) 100,171 (70,244)

Cash and cash equivalents at the beginning of the financial year 69,342 145,280 62,494 132,739

Cash and cash equivalents at end of year 9 174,316 69,342 162,665 62,495

The cash flow statements should be read in conjunction with the accompanying notes.

nOTES TO ThE FInAnCIAL STATEMEnTS 30 June 2009


1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Stanwell Corporation Limited as an individual entity and the consolidated entity consisting of Stanwell Corporation Limited and its subsidiaries.

(a) Basis of preparationThis general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Interpretations and the Corporations Act 2001.

Compliance with International Financial Reporting StandardsThe consolidated financial statements and notes of Stanwell Corporation Limited comply with Australian Accounting Standards which incorporate Australian equivalents to International Financial Reporting Standards (AIFRS).

Historical cost conventionThese financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value.

Critical accounting estimatesThe preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Estimates and judgements are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

(b) Principles of consolidation(i) SubsidiariesThe consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Stanwell Corporation Limited (‘company’ or ‘parent entity’) as at 30 June 2009 and the results of all subsidiaries for the year then ended. Stanwell Corporation Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date that control is transferred out of the Group. Subsidiary acquisitions are accounted for using the purchase method of accounting.

The financial statements of controlled entities are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Stanwell Corporation Limited.

(ii) Joint venturesThe proportionate interests in the assets, liabilities and expenses of joint venture operations have been incorporated in the financial statements under the appropriate headings. Details of joint ventures are set out in note 39.

(c) Foreign currency translationForeign currency transactions are translated to Australian currency at the exchange rates prevailing at the dates of the transactions. Amounts receivable and payable in foreign currencies at reporting date are translated at the rates of exchange prevailing on that date. Translation differences relating to amounts payable and receivable in foreign currencies are recognised in the income statement in the financial year in which the exchange rates change, except when deferred in equity as qualifying cash flow hedges.

(d) Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of amounts collected on behalf of third parties. Revenue is recognised for the major business activities as follows:

electricity: when the electricity •generated is traded in the pool market, or in the period that the electricity is generated pursuant to a contract, as applicable. The net result of electricity derivatives, relating to electricity traded in the pool market, is recognised in the period to which the contract settlement relates;coal revenue sharing arrangements: •when coal is exported by the coal supplier;interest income: as it accrues; and•other revenue: on an accruals basis.•



1 Summary of significant accounting policies (continued)

(e) Income tax equivalentThe Group is exempt from Commonwealth Government income taxation but subject to the National Tax Equivalent Regime.

The income tax equivalent expense or benefit for the period is the tax equivalent payable or receivable on the current period’s taxable profit or loss based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax equivalent assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax equivalent assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax equivalent asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax equivalent assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax equivalent liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the

reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax equivalent assets and liabilities are offset when there is a legally enforceable right to offset current equivalent tax assets and liabilities and when the deferred tax equivalent balances relate to the same taxation authority. Current tax equivalent assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax equivalent balances attributable to amounts recognised directly in equity are also recognised directly in equity.

The parent entity and its controlled entities have not implemented the tax consolidation legislation.

(f) LeasesLeases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Assets held under finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other liabilities. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is amortised over the term of the relevant lease, or where it is likely the Group will obtain ownership of the asset, the life of the asset.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to

the income statement on a straight-line basis over the period of the lease.

For assets subject to cross border leases, refer note 43.

(g) Impairment of assetsThe carrying value of non-current assets are assessed when an indicator of impairment exists or annually for assets that have an indefinite useful life. Where an impairment indicator has been identified an assessment is undertaken to determine if the carrying value of the asset is in excess of its recoverable amount. An impairment loss is recognised in the income statement if the asset value is in excess of the recoverable amount.

Assets that have previously been impaired are assessed annually to determine if there has been a reversal in impairment. Where this exists the impairment is reversed through the income statement only to the extent that the carrying value does not exceed the original carrying value net of depreciation should the asset not have been impaired.

Reviews are undertaken on an asset by asset basis except where these assets do not generate cash flows independent of other assets. Where assets do not generate cash flows independent of each other the impairment assessment is based on the cash generating unit.

The recoverable amount is calculated based on either the fair value of the asset less costs to sell or value in use. Fair value less costs to sell is determined as the amount that would be obtained from the sale of the asset in an arm’s-length transaction between knowledgeable and willing parties. The value in use calculation is determined on the future cash flows based on the continuing use of the assets, discounted to a present value using an appropriate market based pre-tax discount rate. The discount rate should reflect the current market assessment of the time value of money and asset-specific risks for which the cash flow estimates have not been adjusted.




(h) Cash and cash equivalentsCash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(i) Trade receivablesTrade receivables are recognised initially at fair value. Subsequent measurement is at amortised cost less provision for impairment. Trade receivables are generally due for settlement within no more than 30 days.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

(j) InventoriesConsumable fuel and storesConsumable fuel and stores are carried at the lower of their weighted average cost per individual item of inventory and net realisable value. Costs of inventory are determined after deducting associated rebates and discounts. Net realisable value is estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Green energy productsA number of the Group’s sites are accredited to create green energy products which can be used to either acquit the mandatory renewable energy liability of the Group or alternatively can be realised through the market. The green energy products are created through various Commonwealth and state legislation. Green energy products that are available for sale are recognised in the financial statements at fair market value.

(k) Disposal groups held for saleNon-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, investment property and non-current biological assets that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Fair value is determined on the basis of the price in a binding sale agreement in an arms length transaction. In the absence of a binding sale agreement the fair value is determined based on the best information available to reflect the amount that could be obtained from disposal in an arm’s length transaction between knowledgeable, willing parties. In determining this amount, consideration is given to the outcome of recent transactions for similar assets within the same industry, and where material, independent valuation prepared by external valuation experts may be used.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

(l) Financial instruments

Financial assetsClassification – Financial AssetsFinancial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables or available-for-sale financial assets.

Financial Instruments: Recognition and Measurement(i) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current and non-current assets based on their expected settlement date.




(l) Financial instrumentsFinancial assets (continued)

(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables (note 10) in the balance sheet.

(iii) Available-for-sale financial assetsAvailable-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.

Recognition and derecognition – Financial assetsRegular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Subsequent measurement – Financial assetsLoans and receivables are carried at amortised cost using the effective interest method.

Available-for-sale and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within other income or other expenses in the period in which they arise.

Details on how the fair value of financial instruments is determined are disclosed in note 2(d).

Classification – Financial liabilitiesFinancial liabilities are classified as either: financial liabilities at fair value through profit or loss or other financial liabilities.

(i) Financial liabilities at fair value through profit or lossFinancial liabilities are classified as at fair value through profit or loss where the financial liability is either held for trading or it is designated as at fair value through profit or loss. Derivatives are classified as held for trading unless they are designated as hedges.

Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in note 2(d).

Financial liabilities at fair value through profit or loss are included in the balance sheets as derivative financial instruments, refer note 12.

(ii) Other financial liabilitiesOther financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Other financial liabilities are included in the balance sheets as trade and other payables and borrowings, refer note 26.

(m) DerivativesThe Group is potentially exposed to commodity price, interest rate and foreign currency fluctuations and enters into economic hedges to manage these risks. Derivative financial instruments including forward foreign exchange contracts and currency options, commodity price and interest rate swaps and commodity cap, collar and floor contracts are used to hedge these risks.

AIFRS have a strict definition of what qualifies as an accounting hedge and in some circumstances some economic hedges will not qualify as hedges for accounting purposes. Derivative financial instruments are not held for speculative purposes.

Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value in line with market fluctuations at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).




(m) Derivatives (continued)

The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 12. Movements in the hedging reserve in shareholders’ equity are shown in note 31. Derivative financial instruments spanning both current and non-current periods are split into their current and non-current components prior to valuation. The fair value of these components is then classified as a current asset or liability when the maturity profile is less than 12 months, and classified as a non-current asset or liability when the maturity profile is greater than 12 months.

Cash flow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ‘finance costs’. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales

is recognised in the income statement within ‘revenue’. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, property, plant and equipment) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Derivatives not hedge accountedCertain derivative instruments are not hedge accounted for either because they do not qualify for hedge accounting or through management decision. Changes in the fair value of any derivative instrument not hedge accounted for is recognised immediately in the income statement.

Embedded derivativesThere may be circumstances where derivatives are embedded in the Group’s sale and purchase contracts. This occurs when future transactions under such contracts are to be executed at prices which will depend on the market prices of the specified financial instruments which themselves are not closely related to the commodities which are the subject of the contracts. The Group has embedded derivatives, however, the financial instruments are closely related to the commodities which are the subject of the contracts.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts.

(n) Property, plant and equipmentProperty, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

As part of the electricity industry restructure, which established the parent entity, independent experts valued non-current assets at 30 June 1997 in conjunction with the Electricity Reform Unit (ERU) on the following basis:

power stations at depreciated •optimised replacement value except where otherwise noted. This approach arrived at values based on the optimum set of replacement assets to achieve the same service potential with no inappropriate surplus capacity;land at Valuer-General valuations or •market values;buildings at market values;•vehicles at market values; and•other assets at depreciated historical •cost where it was not material or reasonable to undertake a detailed revaluation exercise, otherwise at depreciated replacement cost.

These non-current asset values were taken up in the financial statements as cost to the parent entity as at 1 July 1997.

Assets acquired with a cost of $500 or lower are immediately expensed at the date of purchase. All other purchases are capitalised and depreciated where appropriate.

Subsequent costsSubsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the financial period in which they are incurred.




(n) Property, plant and equipment (continued)

Where the Group has an obligation to dismantle or remove an asset, or rehabilitate a site, the obligation is recognised as a provision (refer note 1(u)) and is included in the initial cost of the asset. This cost is depreciated over the asset’s useful life.

Business development project costsBusiness development project costs are expensed as incurred until such time as it is determined that the relevant project should proceed to the bankable feasibility stage. Costs associated with the development of a bankable feasibility study are capitalised. Capitalised feasibility costs are expensed if subsequently the related project does not proceed. Acquisition bid costs are capitalised and treated in the same manner as feasibility costs.

Complex assetsThe components of major assets that have materially different useful lives are effectively accounted for as separate assets, and are separately depreciated.

Depreciation and amortisationAll physical non-current assets, with the exception of freehold land, have limited useful lives and are depreciated or amortised using the straight line method over their estimated useful lives, taking into account estimated residual values, except for finance lease assets. Finance lease assets are amortised over the term of the relevant lease, or where it is likely the Group will obtain ownership of the asset, the life of the asset.

Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only.

Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate. Expenditure relating to major power station overhauls is capitalised and then depreciated over the period of the expected benefits of the overhaul.

The effective lives used to calculate depreciation for each class of asset or component thereof are as follows:

Power stations – leased 6 - 47 years

Power stations – owned 4 - 47 years

Other property, plant and equipment – leased 4 - 45 years

Other property, plant and equipment – owned 2 - 45 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount refer (note 1(g)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(o) Intangible assetsCapitalised softwareSoftware which is not integral to the operation of property, plant and equipment is recognised as an intangible asset. Software which is integral to the operation of property, plant and equipment is treated as property, plant and equipment. Capitalised software is amortised using the straight-line method over its useful life, which ranges from 2 to 5 years.

Research and developmentResearch expenditure is recognised as an expense as incurred. Costs incurred on development projects are recognised as intangible assets when it is probable that the project will, (after considering its commercial and technical feasibility) be completed and generate future economic benefits, and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services and direct labour. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised over the period the related benefit is derived.

Rights to gas supplyThe cost of acquiring or securing long term gas arrangements are recorded at the cost of acquisition less accumulated amortisation and any impairment in value. The intangible asset will be amortised from commencement of supply over the life of the supply arrangement. Where the intangible asset is not amortised, it is reviewed annually for indicators of impairment or whenever events or circumstances indicate the carrying amount will not be recoverable.

(p) Biological assetsBiological assets comprise timber plantations that are stated at cost less any accumulated depreciation and any accumulated impairment losses.

Cost has been adopted as the basis of measurement as the fair value is not determinable at present as the plantation is in its early stages of growth and there is no observable active and liquid market for this timber.

Once the fair value of the plantation becomes reliably measurable it will be measured at its fair value less estimated point-of-sale costs with all changes in fair value being recognised in the income statement in the period in which they arise.




(q) Exploration, evaluation and development expenditureExploration, evaluation and development costs are accumulated in respect of each separate area of interest. Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

When an area of interest is abandoned or the Board decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made.

(r) Trade and other payablesThese amounts represent liabilities for goods and services provided to the Group prior to the end of financial year, which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition.

(s) BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Stanwell Corporation Limited operates a debt-offset facility with Queensland Treasury Corporation as part of its debt management approach. This is a legally enforceable right to offset and it is anticipated that the assets and liabilities will be settled on a net basis.

(t) Borrowing costsBorrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which generally take more than 12 months to get ready for their intended use or sale.

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding borrowings.

(u) ProvisionsA provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a reliably estimated future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

If the effect is material, a provision is determined by discounting the expected future cash flows required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the recovery receivable is recognised as an asset when it is virtually certain that the recovery will be received and is measured on a basis consistent with the measurement of the related provision. In the income statement, the expense recognised in respect of a provision is presented net of the recovery. In the balance sheet, the provision is recognised net of the recovery receivable only when the entity:

has a legally recognised right to •set-off the recovery receivable and the provision, andintends to settle on a net basis or •to realise the asset and settle the provision simultaneously.

DividendsA provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the entire undistributed amount, regardless of the extent to which they will be paid in cash.

RestorationProvisions for restoration costs are made for the remediation of soil, groundwater and untreated waste as soon as a legal, equitable and/or constructive obligation as a result of a past event is identified.

Rehabilitation and decommissioningProvisions for rehabilitation and decommissioning costs are recognised for dismantling and removal of assets and site restoration costs where there is a legal, equitable and/or constructive obligation which arises as a result of the original construction of the asset.

Onerous contractsA provision for onerous contracts is recognised when the expected benefits to be derived from a contract are lower than the unavoidable costs of meeting the obligations under the contract.




(v) Employee benefitsWages and salariesLiabilities for employee benefits in relation to wages and salaries resulting from employees’ service provided to reporting date are calculated at undiscounted amounts based on remuneration wage and salary rates that are expected to be paid as at each reporting date, including related on-costs.

Annual leave and long service leaveThe provisions for annual leave and long service leave are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.

The provisions are calculated using expected future increases in wage and salary levels, including related on-costs and experience of employee departures and periods of service. Future payments not expected to be settled within 12 months are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Retirement benefit obligationsEmployees of Stanwell Corporation Limited are entitled to benefits on retirement, disability or death from the Queensland Electricity Supply Industry Employees’ Superannuation Scheme. Stanwell Corporation Limited has a defined benefit section and a defined contribution section within the scheme. The defined benefit fund provides lump sum benefits based on years of service and final average salary. The defined contribution fund receives fixed contributions from the entity and the entity’s legal or constructive obligation is limited to these contributions. New employees are only entitled to join the defined contribution fund.

A liability or asset in respect of defined benefit funds is recognised in the balance sheet, and it is measured as the present value of the defined benefit obligation at the reporting date less the fair value of the fund’s assets at that date. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Gains and losses arising from changes in actuarial estimates are recognised directly in equity.

Past service costs are recognised immediately in the income statement, unless the changes to the fund are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

Future taxes, such as taxes on investment income and employer contributions, are taken into account in the actuarial assumptions used to determine the relevant components of the employer’s defined benefit liability or asset.

Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Further information is set out in note 21.

(w) Earnings per shareBasic earnings per shareBasic earnings per share is calculated by dividing the profit after income tax equivalent by the weighted average number of ordinary shares of the parent entity.

Diluted earnings per shareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(x) Financial guarantee contractsFinancial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value, which is determined as the present value of the amount that would be payable to a third party for assuming the obligation, and subsequently at the higher of the amount of the obligation under the contract, as determined under AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate.




(y) Goods and Services TaxRevenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), unless the GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to the ATO, are presented as operating cash flow.

(z) New accounting standards and interpretationsCertain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

(i) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12] The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs related to qualifying assets and – when adopted – will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of the Group, as the Group does already capitalise borrowing costs relating to qualifying assets.

(ii) Revised AASB 101 Presentation of Financial Statements, AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 and AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The Group intends to apply the revised standard from 1 July 2009.

(iii) Improvements to Australian Accounting Standards: AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB5, 7, 101, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 & 1038] and AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1 & AASB 5]In July 2008, the AASB issued a number of improvements to existing Australian Accounting Standards. The amendments will generally apply to financial reporting periods commencing on or after 1 January 2009, except for some changes to AASB 5 Non-current Assets Held for Sale and Discontinued Operations regarding the sale of the controlling interest in a subsidiary which will apply from 1 July 2009.

This will have no impact on the financial report of the Group, as the Group already separately discloses the assets and liabilities of its subsidiary as held-for-sale and does not intend to retain a non-controlling interest in the subsidiary.

The amendments to some standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.

The Group intends to apply the revised standards when required.

(iv) AASB 2008-8 Amendments to Australian Accounting Standards – Eligible Hedged Items [AASB 139]AASB 2008-8 was issued in August 2008 and applies to reporting periods beginning on or after 1 July 2009. The standard amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. There will be no impact on the financial report of the Group, as the Group does not designate inflation as a hedgeable risk, nor does it include time value when designating options as hedges.




(z) New accounting standards and interpretations (continued)

(v) AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4 & AASB 7]AASB 2009-2 was issued in April 2009 and applies to reporting periods beginning on or after 1 January 2009. The standard requires additional quantitative disclosures on:(a) the fair value measurements of

financial instruments measured at fair value in the statement of financial position, and

(b) the maturity analysis included in the liquidity risk disclosures of financial liabilities that are settled by delivering cash or another financial asset.

The standard will require the additional disclosure of financial instruments fair values categorised into three levels based on the level of observable inputs in active markets used in the valuation.

The Group intends to apply the revised standard from 1 July 2009.

(aa) Rounding of amountsThe company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the rounding of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

(ab) Segment reportingA business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and

returns that are different from those of segments operating in other economic environments.

2 Financial risk managementThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and commodity price risk), credit risk and liquidity risk. Financial risk management is implemented pursuant to Government and Group policy covering specific areas such as foreign exchange risk, the use of derivative financial instruments and the management of electricity market risk and associated credit risk. The policies focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the financial performance of the Group. Derivatives are exclusively used for hedging purposes i.e. not as trading or other speculative instruments.

The Group measures risk exposure using a variety of methods as follows:

interest rate risk: duration measured by •modified duration;electricity price risk: sensitivity •analysis;foreign exchange risk: sensitivity •analysis;liquidity risk: maturity analysis; and•credit risk: credit value at risk.•

The Group uses derivative financial instruments to hedge certain exposures as follows:

electricity price risk: over the counter •swaps, caps and options, exchange traded futures; andforeign exchange risk: forward •currency contracts and currency options.

(a) Market riskForeign exchange riskForeign exchange risk arises when future transactions are denominated in non-Australian currency.

The Group and parent entity’s risk management policy is to hedge a proportion of anticipated transactions that are denominated in a foreign currency. All projected purchases qualify as ‘highly probable’ forecast transactions for hedge accounting purposes. Currency derivatives such as forward currency contracts and currency options are used to manage foreign exchange risk. The Group and the parent entity designate currency derivatives as cash flow hedges where they qualify for hedge accounting and measures them at fair value.

The carrying amounts of the Group and parent entity’s financial assets and liabilities denominated in foreign currencies are set out below:

2009 2008 AUD AUD $’000 $’000

Forward exchange contracts

- buy foreign currency (USD cash flow hedges) (399) -

- buy foreign currency (USD held for trading) 1 -

- buy foreign currency (GBP cash flow hedges) (61) -

- buy foreign currency (Euro cash flow hedges) (96) -

- buy foreign currency (JPY cash flow hedges) 4,983 (3,316)

- sell foreign currency (USD held for trading) 6 778

- sell foreign currency (JPY cash flow hedges) (25) -

4,409 (2,538)

Currency options

- sell foreign currency (USD held for trading) 4,819 -



2 Financial risk management (continued)

(a) Market risk (continued)

Commodity price riskThe Group and the parent entity are exposed to commodity price risk in the National Electricity Market. The risk arises from fluctuations in the wholesale price of electricity. Electricity derivatives such as swaps, futures and option contracts are used to manage this commodity price risk.

The Group’s and the parent entity’s risk management policy is to hedge a proportion of the production that is highly likely to occur. The Board policy prescribes a target range of allowable hedging levels for discrete time periods based on a number of operational, technical and market parameters. The derivative contracts are negotiated at arms length on commercial terms. The majority of commodity price risk is in the Queensland market and the Group and the parent entity are not exposed to basis risk as a result of hedging underlying electricity generation.

The Group and the parent entity designate electricity derivatives as cash flow hedges where they qualify for hedge accounting and measures them at fair value. Price information is acquired from external sources and where appropriate, industry valuation techniques are used. Electricity derivative contracts are settled on a weekly basis with reference to the half hourly spot prices for electricity provided by the National Electricity Market Management Company.

Sensitivity analysisThe following table summarises the sensitivity of the Group and parent entity’s financial assets and financial liabilities to foreign exchange risk and commodity price risk. The analysis is based on similar information to that which would be provided to management and depicts the impact on the Group and parent entity’s financial position should there be a 20% movement in the underlying foreign exchange risk variable and a 10% movement in the underlying commodity price risk variable. The analysis assumes that the movement occurs at the beginning of a year and that the rate would remain unchanged over the next financial year.

-20% / -10% +20% / +10% Carrying amount Profit Other equity Profit Other equity $’000 $’000 $’000 $’000 $’000

Foreign exchange risk (-/+20%)

USD

2009 4,427 (4,649) 435 9,397 (290)

2008 778 - (1,805) - 1,203

GBP

2009 (61) - 100 - (67)

2008 - - - - -

Euro

2009 (96) - 347 - (231)

2008 - - - - -

JPY

2009 4,958 - 10,050 - (6,650)

2008 (3,316) - 10,010 - (6,673)

Commodity price risk (-/+10%)

2009 36,548 3,500 49,942 (3,644) (49,783)

2008 (247,751) (229) 106,012 221 (106,012)





Cash flow interest rate riskThe Group and parent entity are exposed to interest rate risk through its entities’ loan facilities and deposits in interest bearing and debt offset accounts.

As at the reporting date, the Group and the parent entity had the following mix of financial assets and liabilities exposed to variable interest rates:

30 June 2009 30 June 2008 Weighted Weighted average average interest rate Balance interest rate Balance % $’000 % $’000

Group

Financial assets

Cash at bank and in hand 2.00% 735 6.25% 1,905

Deposits at call – Queensland Treasury Corporation 3.47% 161,935 8.23% 60,595

Held for sale – cash and cash equivalents 2.90% 11,646 7.15% 6,843

174,316 69,343

Financial liabilities

Borrowings 6.97% 257,146 6.73% 130,517

Net exposure to cash flow interest rate risk (82,830) (61,174)

Parent

Financial assets

Cash at bank and in hand 2.00% 735 6.25% 1,900

Deposits at call – Queensland Treasury Corporation 3.47% 161,935 8.23% 60,595

162,670 62,495

Financial liabilities

Borrowings 6.97% 257,146 6.73% 130,517

Net exposure to cash flow interest rate risk (94,476) (68,022)





The Group is exposed to changes in interest rates via its cash and cash equivalents and its borrowings. Group financial policies set the parameters for the management of interest rate risk, and detailed risk management plans are approved at least annually by the Board.

The Group’s financier, Queensland Treasury Corporation (QTC), provides loan facility arrangements to assist in managing this risk. The Group specifies to QTC the overall target term structure of its debt portfolio and the weighting of various component maturities of debt. The term structure of the debt is set so as to reduce exposure to adverse interest rate movements, match underlying business cash flows and reduce the overall cost of funding. The Group’s pricing for the debt is set based on QTC’s financing cost to issue its own debt instruments of equivalent terms, and QTC’s active management of their debt portfolio.

The following summarises the sensitivity of the Group and parent entity to cash flow interest rate risk.

At 30 June 2009 if interest rates applicable to these financial assets changed by 100 basis points from the reporting date with all other variables held constant, profit in the subsequent year would be:

Group $1,743,000 (2008: $693,000) •higher or lower; andParent $1,627,000 (2008: $625,000) •higher or lower.

At 30 June 2009 if interest rates applicable to these financial liabilities changed by 100 basis points from the reporting date with all other variables held constant, profit in the subsequent year would be:

Group $329,884 (2008: $167,436) •higher or lower; andParent $329,884 (2008: $167,436) •higher or lower.

Secured bank overdraftThe overdraft facility is with the Australia and New Zealand Banking Group Ltd and has an approved limit of $1,000,000. This facility remained fully undrawn at 30 June 2009 and is available for use in the next reporting period.

(b) Credit riskCredit risk exposure refers to the situation where the Group may incur financial loss as a result of another party to a financial instrument failing to discharge their obligation.

The Group utilises industry practice credit review processes and security instruments to manage its credit risks. The Group’s credit risk exposure is managed by trading with electricity industry counterparties under International Swaps and Derivatives Association (ISDA) agreements. The Group has a strict credit policy for all customers trading on credit terms. It has a range of measures for determining counterparty credit worthiness relying on a risk adjusted assessment principally based on the counterparty’s credit rating determined by a recognised rating agency. Where appropriate, the Group also obtains acceptable credit support. Receivable balances are monitored on an ongoing basis with the result that the entity’s exposure to bad debts is not significant.

Concentrations of credit risk exist for groups of counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. A concentration of credit risk for derivative instruments exists predominantly in the Queensland electricity market.

The credit exposure of derivative contracts is calculated utilising the value-at-risk methodology which takes into account the current market value, duration of exposure, diversification of the counterparty’s market operations, likelihood of default of the counterparty, the expected loss given default and the volatility of market prices.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates, as outlined in the table below. The carrying amount of financial assets recorded in the financial statements, net of allowances for losses, represents the Group’s maximum exposure to credit risk.




(b) Credit risk (continued) Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Trade receivables

Counterparties with external credit rating (Moody’s)

AA+ to AA- 6,607 4,645 6,607 4,645

BBB+ to BBB- 56,842 13,080 56,842 13,080

63,449 17,725 63,449 17,725

Counterparties without external credit rating*

Group 1 22,223 61,523 22,223 61,523

Group 2 1,633 554 1,633 554

23,856 62,077 23,856 62,077

Total trade receivables 87,305 79,802 87,305 79,802

Cash at bank and short-term bank deposits

AAA - 62,418 - 62,413

AA+ 161,935 - 161,935 -

AA 735 81 732 81

162,670 62,499 162,667 62,494

Derivative financial assets

AAA - 54,451 - 54,451

AA+ to AA- 61,142 71,178 61,142 71,178

BBB+ to BBB 55,419 59,791 55,419 59,791

Counterparties without external credit ratings 19,398 31,960 19,398 31,960

135,959 217,380 135,959 217,380

* Group 1 – existing customers (more than 6 months) with no defaults in the past. This balance is primarily composed of open trades with NEMMCO. Group 2 – existing customers (more than 6 months) with some defaults in the past.

Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

- Expiring within one year (bank overdraft and bill facility) 11,000 11,000 11,000 11,000

- Expiring beyond one year (bank loans) 613,105 739,733 613,105 739,733

624,105 750,733 624,105 750,733

(c) Liquidity riskLiquidity risk refers to the situation where the Group may encounter difficulty in meeting obligations associated with financial liabilities.

The Group manages its exposure to liquidity risk by maintaining sufficient undrawn facilities, both short and long term, to cater for unexpected volatility in cash flows.

The Group and the parent entity had access to the following undrawn borrowing facilities at the reporting date:



Between Total 1 and 5 Over contractual 0 to 1 year years 5 years cash flowsGroup – At 30 June 2009 $’000 $’000 $’000 $’000

Non-derivatives

Trade and other payables 74,319 1,292 - 75,611

Security deposits and retentions 18 - - 18

Held for sale – trade and other payables 618 - - 618

Fixed rate borrowings 17,908 71,594 260,390 349,892

Total non-derivatives 92,863 72,886 260,390 426,139

Derivatives

Electricity contracts 78,068 12,738 - 90,806

Foreign currency contracts 494 86 - 580

Total derivatives 78,562 12,824 - 91,386

Group – At 30 June 2008

Non-derivatives






Derivatives

Electricity contracts 291,482 180,824 - 472,306

Foreign currency contracts 2,181 1,174 - 3,355



(c) Liquidity risk (continued)

Funding approval is sought in advance for expenditure commitments that extend beyond the current financial year, pursuant to the Queensland Government’s State Borrowing Program.

The Group is wholly owned by the State of Queensland and has been subject to review by an international credit rating agency. The public long term rating of the Group is AA-.

The tables below analyse the Group’s and the parent entity’s financial liabilities, net and gross settled financial instruments,

into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and include both interest and principal cash flows.




(c) Liquidity risk (continued) Between Total 1 and 5 Over contractual 0 to 1 year years 5 years cash flowsParent – At 30 June 2009 $’000 $’000 $’000 $’000

Non-derivatives



Held for sale – trade and other payables - - - -



Derivatives

Electricity hedging contracts 78,068 12,738 - 90,806

Forward foreign exchange contracts 494 86 - 580


Parent – At 30 June 2008

Non-derivatives






Derivatives

Electricity hedging contracts 291,482 180,824 - 472,306

Forward foreign exchange contracts 2,181 1,174 - 3,355


(d) Fair value estimationThe fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets and liabilities held by the Group is the current mid price.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods

and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long term debt instruments held.

The fair value of the remaining financial instruments are determined using other techniques including estimated discounted cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. The fair value of currency options is determined by valuation techniques which use forward exchange market rates, currency market volatility, currency spot rates, option strike rates and the remaining term of the option.

The fair value of cash and cash equivalents and non interest bearing monetary financial assets and financial liabilities approximate their carrying amounts and are not disclosed separately. The fair value of other monetary financial assets and financial liabilities is based on market prices where a market exists, or is determined by discounting expected future cash flows by the current interest rate for financial assets and liabilities with similar risk profiles. The carrying value of trade receivables less impairment provision and payables are assumed to approximate their fair values due to their short term nature.



3 Critical accounting estimates and judgements

In applying the Group’s accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(a) Critical judgements in applying the entity’s accounting policiesImpairment of non-financial assetsImpairment testing is based on management’s judgement and the availability of appropriate information to support certain assumptions. These assumptions may contain information

that is uncertain or subject to fluctuation over time that may have a material impact on the assessment of the asset. Any change in the assumptions selected by management or change in the useful life of the asset may have a significant impact on the cash flow projections and materially affect the impairment assessment.

Key assumptions or information used in the impairment assessment include:

electricity pricing and projections,•impacts of the proposed Carbon •Pollution Reduction Scheme (‘CPRS’) including appropriate pass through rates,changes in proposed legislation •regarding CPRS,carbon intensity factors and other •operational impacts,timing and quantum of sustaining •capital expenditure,appropriate long term growth rates and •indexation, andassessment of discount rates and the •impacts of risks thereon.

The CPRS legislation is not yet enacted. Should it be enacted in a form different to that assumed in the cash flow projections, the impairment assessment will be impacted accordingly.

When preparing a value in use assessment management uses internally approved five year business plans which are held on a stable or declining rate from year six. When assessing generating assets it is considered relevant to determine the present value of the estimated future cash flows arising from the continued use and eventual disposal of the asset.

The financial impact of any changes in the above assumptions is reflected as follows:

Recovery of deferred tax assetsDeferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences.

(b) Critical accounting estimates and assumptionsElectricity hedging contractsThe Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement in determining the value of electricity hedging contracts. The value of contracted electricity swap transactions to occur at future dates is

required to be marked-to-market at fair value. The lack of liquidity in the market coupled with problems in obtaining quoted market prices has resulted in the decision to apply a valuation technique to estimate fair value. The aim of the valuation technique is to incorporate the maximum number of market inputs, and rely as little as possible on entity-specific inputs. A forward curve is constructed on a daily basis with appropriate external and internal information sources and is used to value the electricity contracts.

Note 2 contains a sensitivity analysis for electricity price risk.

Rehabilitation and decommissioning provisionThe Group recognises decommissioning and rehabilitation provisions for its operating sites. The methodology adopted to determine the value of these provisions utilises a number of estimates and assumptions.

The estimates of the cost of decommissioning power stations and rehabilitating the sites utilises an accepted market methodology. These estimates are prepared internally and are periodically validated by an external independent expert. Various scenarios are considered in relation to timing and method of decommissioning.

SensitivityAssumption $’000 $’000 +5% -5%

Electricity pool price 280,000 (280,000)

Carbon price (111,000) 111,000

Carbon pass through rate 95,900 (95,900)

+1% -1%

WACC pre tax (98,900) 98,900



3 Critical accounting estimates and judgements (continued)

(b) Critical accounting estimates and assumptions (continued)

Defined benefit plansVarious actuarial assumptions underpin the determination of the Group’s pension obligations. These assumptions and the related carrying amounts are discussed in note 21.

Long service leave provisionAs discussed in note 1(v), the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value

of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.

Estimation of useful lives of assetsThe estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ design life. Depreciation and amortisation rates are reviewed annually for appropriateness. Adjustments to useful life are made when considered necessary. Effective lives are included in note 1(n).

Onerous contract provisionThe Group recognises an onerous contract provision relating to the Gladstone Interconnection and Power

Pooling Agreement. The methodology adopted to value this provision includes a number of key assumptions including estimates of future wholesale pool prices, generation output and the appropriate discount rate for net present value purposes.

4 Segment informationBusiness segmentsThe Group operates principally in the electricity generation industry.

Geographical segmentsThe Group operates solely in Australia. The Group’s customers are located entirely in Australia.

5 Revenue Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

From operating activities

Sales of electricity 439,059 402,762 433,177 396,677

Coal revenue sharing arrangements 187,384 60,593 187,384 60,593

Other revenue 38,708 62,337 32,867 56,436

Interest 3,187 10,766 2,748 10,226

Dividends - - 2,300 -

668,338 536,458 658,476 523,932

From outside operating activities

Other revenue 2,029 4,491 1,720 1,405

670,367 540,949 660,196 525,337

6 Other income Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Renewable Energy Certificate income 15,782 - 15,782 -

Distribution from trustees – defined benefit plan (note 21(e)) 2,000 - 2,000 -

Remeasurement of liabilities acquired on transfer of Gladstone Business Unit

- onerous contract - 11,622 - 11,622

- derivative financial instruments and other liabilities - 10,120 - 10,120

Net gain on disposal of net assets held for sale in disposal groups (note 6(a)) - 18,400 - 18,475

17,782 40,142 17,782 40,217



6 Other income (continued)

(a) Net gain on disposal of net assets held for sale in disposal groups/investment in subsidiariesToora Wind Farm Pty Ltd, Windy Hill Wind Farm Pty Ltd and Wind Project Developments Pty Ltd were incorporated on 31 August 2007 and were sold on 20 December 2007. The sale of the subsidiaries resulted in a consolidated after tax gain on disposal of $18.4 million.

7 Expenses Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Profit before income tax includes the following specific expenses:

Depreciation

Power stations 21,783 19,938 21,783 19,938

Other property, plant and equipment 3,022 3,364 3,022 3,364

Total depreciation 24,805 23,302 24,805 23,302

Amortisation

Power stations 45,036 43,625 45,036 43,625

Other property, plant and equipment 761 831 761 831

Intangible assets 2,579 3,100 2,579 3,100

Total amortisation 48,376 47,556 48,376 47,556

Finance costs

Interest and finance charges paid/payable 15,777 11,771 15,743 9,269

Rental expense relating to operating leases 2,389 2,391 2,184 2,181

Net bad and doubtful receivables expense including movements in provision for doubtful receivables 887 23,016 887 23,016

Net expense/(benefit) from movement in employee entitlements provision 1,717 380 1,717 376

Defined contribution superannuation expense 2,937 2,395 2,937 2,395

Defined benefit plan expense 1,129 625 1,129 625

Impairment losses

Available-for-sale assets (note 14) 8,740 - 8,740 -

Property, plant and equipment (note 16) 2,660 - 2,660 -

11,400 - 11,400 -



8 Income tax equivalent expense Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

(a) Income tax equivalent expenseCurrent tax equivalent 81,559 39,500 78,097 37,381

Deferred tax equivalent (11,279) (7,486) (12,563) (8,883)

Adjustments for current tax equivalent of prior periods 18 17 16 17

70,298 32,031 65,550 28,515

Deferred income tax equivalent (benefit) expense included in income tax equivalent expense comprises:

Decrease (increase) in deferred tax equivalent assets (note 20) (1,109) (10,308) (1,099) (10,300)

(Decrease) increase in deferred tax equivalent liabilities (note 27) (10,170) 2,444 (11,464) 1,039

(Under) over provision in prior year - 378 - 378

(11,279) (7,486) (12,563) (8,883)

(b) Numerical reconciliation of income tax equivalent expense to prima facie tax payableProfit before income tax equivalent expense 265,903 167,621 257,981 155,976

Tax at the Australian tax rate of 30% (2008 – 30%) 79,771 50,287 77,395 46,793

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

Non-deductible expenses 49 594 49 594

Sundry items 1,245 1,480 1,245 1,458

Leave provision transfer - 1 - 1

Non-assessable income (13,155) (20,348) (13,155) (20,348)

Dividends paid 2,370 - - -

70,280 32,014 65,534 28,498

Adjustments for current tax equivalent of prior periods 18 17 16 17

Income tax equivalent expense 70,298 32,031 65,550 28,515

(c) Amounts recognised directly in equityDeferred tax equivalent arising in the reporting period and not recognised in net profit or loss but directly (debited) or credited to equity was as follows:

Deferred tax equivalent assets (note 20) (69,391) (242,106) (69,391) (242,106)

Deferred tax equivalent liabilities (note 27) (7,085) 3,425 (7,085) 2,537

(76,476) (238,681) (76,476) (239,569)



9 Current assets – Cash and cash equivalents Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Cash at bank and in hand 735 1,905 730 1,900

Deposits at call – Queensland Treasury Corporation 161,935 60,595 161,935 60,595

162,670 62,500 162,665 62,495

Reconciliation to cash and cash equivalents at the end of the yearThe above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the cash flow statements as follows:

Balances as above 162,670 62,500 162,665 62,495

Cash and cash equivalents classified as held for sale (note 13) 11,646 6,843 - -

Balances per statement of cash flows 174,316 69,343 162,665 62,495

Interest rate risk exposureThe Group’s and the parent entity’s exposure to interest rate risk is discussed in note 2.

10 Current assets – Trade and other receivablesTrade receivables 97,226 105,168 97,226 105,168

Provision for impairment of receivables (9,202) (23,170) (9,202) (23,170)

88,024 81,998 88,024 81,998

Receivable from subsidiaries - - - 3

Other receivables 13,581 11,050 13,581 11,050

Prepayments 1,354 1,032 1,354 1,032

102,959 94,080 102,959 94,083

(a) Impaired trade receivablesAs at 30 June 2009 current trade receivables of the Group and parent with a nominal value of $9,920,765 (2008: $25,366,401) were impaired. The amount of the provision was $9,202,262 (2008: $23,169,983). The impaired receivable primarily relates to a contract which is currently in dispute.

The ageing of these receivables is as follows:

0 to 3 months 34 999 34 999

3 to 6 months 1 2,127 1 2,127

Over 6 months 9,886 22,240 9,886 22,240

9,921 25,366 9,921 25,366



10 Current assets – Trade and other receivables (continued)

(a) Impaired trade receivables (continued)

Movements in the provision for impairment of receivables are as follows:


At 1 July (23,170) (154) (23,170) (154)

Provision for impairment recognised during the year (887) (23,121) (887) (23,121)

Provision released during the year1 14,855 105 14,855 105

(9,202) (23,170) (9,202) (23,170)

1 During the year, a disputed contract was partially resolved with a majority of the contracted parties which resulted in the reversal of the provision of $14,832,486 (2008: $nil).

The creation and release of the provision for impaired receivables has been included in ‘other expenses’ in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

(b) Past due but not impairedAs at 30 June 2009, there were no trade receivables past due but not impaired (2008: $nil).

(c) Other receivablesThese amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at 9.5% per annum (2008: 9.5% per annum) where payment is after the due date.

(d) Foreign exchange and interest rate riskInformation about the Group’s and the parent entity’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 2.

(e) Fair value and credit riskDue to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to note 2 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.

11 Current assets – Inventories Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Fuel at weighted average cost 15,366 8,045 15,366 8,045

Stores at weighted average cost 15,438 12,759 15,438 12,759

Green energy products at fair market value 16,735 5,568 16,735 5,568

47,539 26,372 47,539 26,372



12 Derivative financial instruments Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Current assets

Electricity contracts – cash flow hedges 26,266 135,967 26,266 135,967

Electricity contracts – held for trading 64,337 3,329 64,337 3,329

Foreign currency forward contracts – cash flow hedges 1,710 778 1,710 778

Foreign currency forward contracts – held for trading 8 - 8 -

Foreign currency option contracts – held for trading 4,819 - 4,819 -

Total current derivative financial instrument assets 97,140 140,074 97,140 140,074

Non-current assets



Foreign currency forward contracts – cash flow hedges 3,271 39 3,271 39

Total non-current derivative financial instrument assets 38,819 77,306 38,819 77,306

Current liabilities


Electricity contracts – held for trading 64,360 - 64,360 -

Foreign currency forward contracts – cash flow hedges 494 2,181 494 2,181

Total current derivative financial instrument liabilities 78,034 293,663 78,034 293,663

Non-current liabilities



Foreign currency forward contracts – cash flow hedges 86 1,174 86 1,174

Total non-current derivative financial instrument liabilities 12,149 174,007 12,149 174,007

Net derivative financial instrument assets/(liabilities) 45,776 (250,290) 45,776 (250,290)

(a) Instruments used by the GroupThe Group has a range of policies and procedures in place to control financial risks associated with its operating activities. Derivative financial instruments are used to hedge exposure to fluctuations in electricity prices and foreign exchange rates. Throughout the period under review, no speculative trading in financial instruments was undertaken.

Foreign exchange contracts – cash flow hedgesTransaction exposures relating to foreign currencies are managed by entering into forward exchange contracts to purchase and sell foreign currencies. These transactions relate to the contracted purchase of capital equipment and operating expenditure denominated in Japanese Yen, Pounds Sterling, US Dollars and Euros and the receipt of revenue from coal export sharing arrangements with prices referenced to US Dollars. The Group classifies its forward exchange contracts which hedge forecast transactions as cash flow hedges and states them at fair value.

The forward contracts in place cover a proportion of highly probable transactions over the next five years and are timed to expire as each cash flow is due. The contracts require settlement of net cash flows receivable or payable on maturity and are settled on a net basis.



12 Derivative financial instruments (continued)

(a) Instruments used by the Group (continued)

The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective. When the cash flows occur for hedges of capital equipment purchases the Group adjusts the initial measurement of the capital equipment recognised in the balance sheet by the related amount deferred in equity. Gains and losses deferred in equity for hedges of revenue and expense transactions are reclassified into profit and loss when the hedged transaction is recognised.

All foreign exchange contracts were entered into by the parent entity.

Foreign exchange contracts – held for tradingThe parent entity has further entered into forward exchange contracts and currency options which are economic hedges but do not satisfy the requirements for hedge accounting. These contracts are subject to the same risk management policies as all other derivative contracts, refer note 2 for details. However, they must be accounted for as held for trading.

The gain or loss on derivatives entered into for economic hedge purposes and which are not hedge accounted for are recognised in the income statement immediately. In the year ended 30 June 2009 a loss of $1,622,752 (2008: $nil) was included in the income statement.

Electricity contracts – cash flow hedgesThe parent entity bids all electricity generated into the National Electricity Market (NEM). Cash flows received from the NEM can be volatile and accordingly the parent entity has entered into electricity derivatives such as price swaps under which it is obliged to receive cash flows at fixed electricity prices and pay cash flows at variable electricity prices.

Swaps currently in place cover a large proportion of the total load to be generated over the next three years and are timed to expire as each cash flow is received from the NEM. The contracts require settlement of net cash flows receivable or payable each week and are settled on a net basis.

The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and reclassified into profit and loss when the hedged electricity revenue is recognised. The mark-to-market movement in the year was a change from an out-of-the money position to an in-the-money position of $274,697,369 (2008: reduction in the out-of-the money position of $807,280,018).

All electricity contracts were entered into by the parent entity.

Electricity contracts – held for tradingThe parent entity has further entered into electricity contracts which are economic hedges but do not satisfy the requirements for hedge accounting. These contracts are subject to the same risk management policies as all other derivative contracts, refer note 2 for details. However, they must be accounted for as held for trading.

The gain or loss on derivatives entered into for economic hedge purposes and which are not hedge accounted for are recognised in the income statement immediately. In the year ended 30 June 2009 a loss of $16,264,380 (2008: $6,523,711 gain) was included in the income statement.

(b) Risk exposuresFor an analysis of the sensitivity of derivatives to interest rate, foreign exchange and commodity price risk refer to note 2.

13 Disposal groups classified as held for sale

On 3 June 2007, the Queensland Government announced that it would dispose of all wind farms and related assets held by Government Owned Corporations. On 20 December 2007, the Group disposed of assets relating to Toora wind farm, Windy Hill wind farm and the wind farm development portfolio through the sale of Toora Wind Farm Pty Ltd, Windy Hill Wind Farm Pty Ltd and Wind Project Developments Pty Ltd.

At balance date, Stanwell Corporation Limited owns 50% of the Emu Downs Wind Farm Joint Venture in Western Australia through the wholly owned subsidiaries Wind Portfolio Pty Ltd and EDWF Holdings 1 Pty Ltd. On 28 November 2007 the parent entity entered into a Sale and Purchase Agreement with the State of Queensland and a third party to sell its share of the Emu Downs Wind Farm Joint Venture through the sale of its shares in Wind Portfolio Pty Ltd and EDWF Holdings 1 Pty Ltd. The sale did not proceed due to an unfavourable legal outcome and the court judgement is subject to an appeal.

As at reporting date, the Group is negotiating with third parties for the sale of the Emu Downs Wind Farm and Badgingarra Wind Farm Project.



13 Disposal groups classified as held for sale (continued)

Carrying amounts of assets and liabilitiesThe carrying amounts of the Group’s wind assets and liabilities as at 30 June are:


Property, plant and equipment 80,988 80,078 - -

Cash and cash equivalents 11,646 6,843 - -

Trade and other receivables 3,015 2,634 - -

Interest rate swap contract - - - -

Other receivables 466 494 - -

Total assets 96,115 90,049 - -

Trade and other payables (618) (526) - (500)

Electricity hedging contracts - - - -

Borrowings - - - -

Provision for rehabilitation and decommissioning (318) (284) - -

Total liabilities (936) (810) - (500)

Net assets 95,179 89,239 - (500)

14 non-current assets – Available-for-sale financial assetsAt beginning of year - - - -

Additions 34,927 - 34,927 -

Losses from impairment (8,740) - (8,740) -

At end of year 26,187 - 26,187 -

Available-for-sale financial assets include the following classes of financial assets:

Listed securities (note 13(a))

Equity securities 26,187 - 26,187 -

(a) Listed securitiesThe listed investment relates to a 15.44% holding in Blue Energy Limited (ASX:BUL) acquired during the financial year. The acquisition included the shares in Blue Energy Limited, a premium to the market price and an option to a gas supply arrangement. At the date of acquisition the share price was 29 cents falling to 20 cents at 30 June 2009. At the reporting date the investment is required to be marked to market resulting in a

reduction of the investment value. As this is considered to be a sustained or prolonged change in the value of the investment an impairment has been recognised in the income statement of $8,740,000. Future fluctuations in the share price that are not considered sustained or prolonged changes in the fair value will be recorded through equity.

(b) Investments in related partiesRefer to note 37.

(c) Impairment and risk exposureWhere there has been a reduction in the share price of an investment that appears to be sustained or prolonged, management has made an assessment as to whether an impairment is required. The amount of the impairment has been determined after consideration of the fair value of the investment, based on recent share price for listed companies.



15 non-current assets – Other financial assets Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Investments in subsidiaries (note 38) - - 76,726 76,726

These financial assets are carried at cost.

16 non-current assets – Property, plant and equipment Other Power Other property, Power stations property, plant and stations under plant and equipment Works in owned finance equipment under progress at cost lease at cost finance lease at cost Total

Consolidated $’000 $’000 $’000 $’000 $’000 $’000

At 1 July 2007

Cost 301,596 1,513,100 52,579 18,608 23,958 1,909,841

Accumulated depreciation (116,607) (411,691) (16,149) (6,004) - (550,451)

Net book amount 184,989 1,101,409 36,430 12,604 23,958 1,359,390

Year ended 30 June 2008

Opening net book amount at 1 July 184,989 1,101,409 36,430 12,604 23,958 1,359,390

Additions - - 605 - 38,404 39,009

Transfers between asset classes 30,931 - 5,209 - (36,140) -

Transfers to inventory (1,616) (1,675) - - - (3,291)

Transfers to disposal groups held for sale (362) - (915) - - (1,277)

Re-estimation of rehabilitation and decommissioning asset (6) - - - - (6)

Disposals (313) (32) (95) - (125) (565)

Depreciation (19,938) - (3,364) - - (23,302)

Amortisation - (43,625) (96) (735) - (44,456)

Closing net book amount at 30 June 193,685 1,056,077 37,774 11,869 26,097 1,325,502

At 30 June 2008

Cost 329,655 1,511,180 55,627 18,608 26,097 1,941,167


Net book amount 193,685 1,056,077 37,774 11,869 26,097 1,325,502



16 non-current assets – Property, plant and equipment (continued) Other Power Power Other property, Power stations stations property, plant and stations owned at under plant and equipment Works in owned recoverable finance equipment under progress at cost amount lease at cost finance lease at cost Total

Consolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000


Opening net book amount at 1 July 193,685 - 1,056,077 37,774 11,869 26,097 1,325,502

Additions - - - - - 80,010 80,010

Transfers between asset classes 40,818 5,190 - 5,008 - (51,016) -

Transfers to disposal groups held for sale - - - (24) - - (24)

Re-estimation of rehabilitation and decommissioning asset 245 - - - - - 245

Impairment loss - (2,660) - - - - (2,660)

Disposals (329) (9) (7,016) (218) - - (7,572)

Development costs written off - - - - - (6,603) (6,603)

Depreciation (21,389) (394) - (3,022) - - (24,805)

Amortisation - - (45,036) (95) (666) - (45,797)

Closing net book amount at 30 June 213,030 2,127 1,004,025 39,423 11,203 48,488 1,318,296

At 30 June 2009

Cost or recoverable amount 367,076 7,187 1,486,602 59,552 18,608 48,488 1,987,513

Accumulated depreciation (154,046) (5,060) (482,577) (20,129) (7,405) - (669,217)

Net book amount 213,030 2,127 1,004,025 39,423 11,203 48,488 1,318,296



16 non-current assets – Property, plant and equipment (continued) Other Power Other property, Power stations property, plant and stations under plant and equipment Works in owned finance equipment under progress at cost lease at cost finance lease at cost Total

Parent entity $’000 $’000 $’000 $’000 $’000 $’000

At 1 July 2007

Cost 301,259 1,513,100 52,579 18,608 23,958 1,909,504


Net book amount 184,989 1,101,409 36,430 12,604 23,958 1,359,390


Opening net book amount at 1 July 184,989 1,101,409 36,430 12,604 23,958 1,359,390

Additions - - 582 - 38,405 38,987

Transfers between asset classes 30,931 - 5,209 - (36,140) -

Transfers to inventory (1,616) (1,675) - - - (3,291)

Transfers to disposal groups held for sale (362) - (915) - - (1,277)

Re-estimation of rehabilitation and decommissioning asset (6) - - - - (6)

Disposals (313) (32) (95) - (126) (566)

Depreciation (19,938) - (3,364) - - (23,302)

Amortisation - (43,625) (96) (735) - (44,456)

Closing net book amount at 30 June 193,685 1,056,077 37,751 11,869 26,097 1,325,479

At 30 June 2008

Cost 329,655 1,511,180 55,604 18,608 26,097 1,941,144


Net book amount 193,685 1,056,077 37,751 11,869 26,097 1,325,479



16 non-current assets – Property, plant and equipment (continued) Other Power Power Other property, Power stations stations property, plant and stations owned at under plant and equipment Works in owned recoverable finance equipment under progress at cost amount lease at cost finance lease at cost Total

Parent entity $’000 $’000 $’000 $’000 $’000 $’000 $’000


Opening net book amount at 1 July 193,685 - 1,056,077 37,751 11,869 26,097 1,325,479

Additions - - - - - 80,010 80,010

Transfers between asset classes 40,818 5,190 - 5,008 - (51,016) -

Re-estimation of rehabilitation and decommissioning asset 245 - - - - - 245

Impairment loss - (2,660) - - - - (2,660)

Disposals (329) (9) (7,016) (219) - - (7,573)

Development costs written off - - - - - (6,603) (6,603)

Depreciation (21,389) (394) - (3,022) - - (24,805)

Amortisation - - (45,036) (95) (666) - (45,797)

Closing net book amount at 30 June 213,030 2,127 1,004,025 39,423 11,203 48,488 1,318,296

At 30 June 2009

Cost or recoverable amount 367,076 7,187 1,486,602 59,552 18,608 48,488 1,987,513

Accumulated depreciation (154,046) (5,060) (482,577) (20,129) (7,405) - (669,217)

Net book amount 213,030 2,127 1,004,025 39,423 11,203 48,488 1,318,296

Carrying amounts of land and buildingsThe carrying amounts of land and buildings included in the tables above are set out below:


Land and buildings 69,266 69,191 69,266 69,191



17 non-current assets – Intangible assets Capitalised softwareConsolidated and parent entity $’000

At 1 July 2007

Cost 15,008

Accumulated amortisation (11,442)

Net book amount 3,566


Opening net book amount 3,566

Additions 6,838

Amortisation charge (3,100)

Closing net book amount at 30 June 7,304

At 30 June 2008

Cost 21,845




Opening net book amount at 1 July 7,304

Additions 1,251

Disposals (9)

Amortisation charge (2,579)

Closing net book amount at 30 June 5,967

At 30 June 2009

Cost 23,094



Amortisation of $2,578,885 (2008: $3,100,023) is included in the depreciation and amortisation expense in the income statement.




Plantation growing timber

Carrying amount at 1 July 175 - 175 -

Purchases 167 175 167 175

Carrying amount at 30 June 342 175 342 175

(a) Financial risk management strategiesThe entity is exposed to financial risks arising from changes in the price of timber. The entity does not anticipate that timber prices will decline significantly in the foreseeable future and, therefore, has not entered into derivative or other contracts to manage the risk of a decline in timber prices. The entity reviews its outlook for timber prices regularly in considering the need for active financial risk management.

(b) Contractual obligationsRefer to note 36 for disclosure of any commitments to develop or acquire biological assets.

19 non-current assets – Exploration and evaluation expenditureExploration and evaluationCost

Opening balance 4,373 2,860 4,373 2,860

Expenditure incurred 6,543 1,513 6,543 1,513

Closing balance 10,916 4,373 10,916 4,373

18 non-current assets – Biological assets

The Group has an interest in a joint venture that consists of 99 hectares of hardwood plantation in the Rockhampton area (refer note 39).

The Group’s timber plantation resources are comprised of two hardwood species, the Western White Gum and a Spotted Gum hybrid. The trees are expected to be felled and sold in 2032 (25 years after planting).

The Western White Gum was planted on 69.2 hectares with 990 trees per hectare and the Spotted Gum hybrid was planted on 28.2 hectares with 660 trees per hectare. Initial survival of the Western White Gum was good however initial survival of the Spotted Gum hybrid was poorer and consequently trees have been replaced and a recent stock count indicated that there are now 573 trees per hectare.



20 non-current assets – Deferred tax equivalent assets Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

Provisions and accrued employee entitlements not currently deductible 13,996 14,932 13,972 14,918

Development costs deductible in the future 1,135 1,703 1,135 1,703

Sundry items 265 274 265 274

Derivatives - 69,391 - 69,391

Investment writedown 2,622 - 2,622 -

Total deferred tax equivalent assets 18,018 86,300 17,994 86,286

Movements:

Opening balance at 1 July 86,300 318,173 86,286 318,092

Credited/(charged) to the income statement (note 8) 1,109 10,308 1,099 10,300

(Charged)/credited to equity – derivative financial instruments (note 31) (69,391) (242,106) (69,391) (242,106)

Tax equivalent losses utilised - (75) - -

Closing balance at 30 June 18,018 86,300 17,994 86,286

Deferred tax equivalent assets to be recovered within 12 months 11,882 53,362 11,882 53,348

Deferred tax equivalent assets to be recovered after more than 12 months 6,136 32,938 6,112 32,938

18,018 86,300 17,994 86,286

Consolidated and parent entity 2009 2008 $’000 $’000

Present value of the defined benefit obligation (24,355) (24,706)

Fair value of defined benefit plan assets 27,131 26,705

Net asset before adjustment for contributions tax 2,776 1,999

Adjustment for contributions tax 490 353

Net asset in the balance sheet 3,266 2,352

The Group intends to contribute to the defined benefit plan at a rate of 12.0% (2008: 10.0%) of salaries having consideration for the actuary’s latest recommendations.

21 non-current assets – Retirement benefit obligations(a) Superannuation plansThe Group contributes on behalf of its employees to a number of defined contribution funds as well as to the industry multiple employer superannuation scheme, the Queensland Electricity Supply Industry Employees’

Superannuation Scheme, which consists of a defined benefit plan and a defined contribution plan. The defined benefit section provides lump sum benefits based on years of service and average salary. The defined contribution section receives fixed contributions from the Group and the Group’s legal or constructive obligation is limited to these contributions.

The following sets out details in respect of the defined benefit section only.

(b) Balance sheet amountsThe amounts recognised in the balance sheet are determined as follows:



21 non-current assets – Retirement benefit obligations (continued)

(c) Categories of plan assetsThe major categories of plan assets are as follows:


Cash 1,899 1,843

Fixed interest securities 4,341 5,287

Domestic equities 5,698 6,062

Private equity 5,426 2,377

International equities 5,698 7,851

Unlisted property 4,069 3,285

27,131 26,705

(d) ReconciliationsReconciliation of the present value of the defined benefit obligation, which is partly funded:

Opening balance at 1 July 24,706 22,866

Current service cost 1,562 1,515

Interest cost 1,306 1,182

Actuarial (gains) and losses (1,430) 1,092

Contributions by members 465 416

Benefits paid (2,391) (1,123)

Contributions tax 137 (1,242)

Balance at the end of the year 24,355 24,706

Reconciliation of the fair value of plan assets:

Opening balance at 1 July 26,705 31,902

Expected return on plan assets 1,739 2,072

Actuarial (decrease) increase in assets (3,031) (7,366)

Contributions by Group companies 1,644 804

Contributions by members 465 416

Benefits paid (2,391) (1,123)

Trustee distribution 2,000 -

Balance at the end of the year 27,131 26,705



21 non-current assets – Retirement benefit obligations (continued)

(e) Amounts recognised in income statementThe amounts recognised in the income statement are as follows:


Current service cost 1,562 1,515

Finance cost 1,306 1,182

Expected return on plan assets (1,739) (2,072)

Total included in employee benefits expense (note 7) 1,129 625

Trustee distribution (note 6) (2,000) -

(871) 625

Actual return on plan assets (1,292) (5,294)

(f) Principal actuarial assumptionsThe principal actuarial assumptions used (expressed as weighted averages) were as follows:

Consolidated and parent entity 2009 2008

Discount rate 5.5% 5.4%

Expected return on plan assets 6.0% 6.5%

Future salary increases 4.5% 4.5%

(h) Historic summary 2009 2008 2007 2006 2005 $’000 $’000 $’000 $’000 $’000

Defined benefit plan obligation (24,355) (24,353) (21,271) (21,192) (21,914)

Plan assets 27,131 26,705 31,902 26,376 21,888

Surplus/(deficit) 2,776 2,352 10,631 5,184 (26)

Experience adjustments arising on plan liabilities 1,430 (1,092) 1,278 1,119 (3,689)

Experience adjustments arising on plan assets (3,031) (7,366) 4,211 3,899 1,892

The expected rate of return on plan assets has been calculated based on the current asset allocation to each of the major asset classes and the expected future investment return for each of these asset classes. This resulted in the selection of a 6.0% (2008: 6.5%) expected return (net of investment fees and tax).

(g) Employer contributionsEmployer contributions to the defined benefit section of the plan are based on recommendations by the plan’s actuary. Actuarial assessments are made at no more than three yearly intervals, and the

last such assessment was made as at 1 July 2008 by Sunsuper Financial Services Pty Ltd.

The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the projected unit credit method. This funding method seeks to have the benefits funded by means of a total contribution which is expected to be a consistent percentage of members’ salaries over their working lifetime.

Using the projected unit credit method and particular actuarial assumptions as to the plan’s future experience the actuary recommended, in the actuarial review as at 1 July 2008, the payment of employer contributions to the fund of 12.0% of defined benefit members salaries from 1 July 2009. A contribution rate of 12% has been adopted by the Group.

Total employer contributions expected to be paid by the Group for the year ending 30 June 2010 are $979,000.



22 non-current assets – Other non-current assets Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Other

Deferred receivable refer note 35(b) 2,500 - 2,500 -

23 Current liabilities – Trade and other payablesTrade payables 25,617 16,852 25,617 16,852

Other payables and accruals 49,994 48,560 49,994 48,537

75,611 65,412 75,611 65,389

(a) Amounts not expected to be settled within the next 12 monthsOther payables and accruals include accruals for annual leave. The entire obligation is presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave within the next 12 months. The following amounts reflect leave that is not expected to be taken within the next 12 months:

Annual leave obligation expected to be settled after 12 months 1,292 1,197 1,292 1,197

(b) Risk exposureInformation about the Group’s and the parent entity’s exposure to foreign exchange risk is provided in note 2.

24 Current liabilities – ProvisionsEmployee benefits 5,563 4,764 5,563 4,764

Onerous contracts - 30,602 - 30,602

Restoration 1,045 707 1,045 707

Dividends (refer note 32) 148,944 92,105 148,944 92,105

155,552 128,178 155,552 128,178

(a) Employee benefitsDetails of the calculations used for these benefits are included in note 28.

(b) Onerous contractsThe onerous contracts provision has been calculated by projecting the revenue and expenditure attributable to the contract up to the contract expiry date and discounting back to present values using the Group’s cost of capital.



24 Current liabilities – Provisions (continued)

(c) Movements in provisionsMovements in each class of provision during the financial year, other than employee benefits, are set out below:

Onerous contracts Restoration Dividends Total $’000 $’000 $’000 $’000

Consolidated and parent entity – 2009

Opening balance at 1 July 30,602 707 92,105 123,414

Charged/(credited) to the income statement

- additional provisions recognised - 440 148,944 149,384

- reduction from remeasurement (30,602) - - (30,602)

Dividends paid - - (92,105) (92,105)

Amounts used during the period - (102) - (102)

Closing balance at 30 June - 1,045 148,944 149,989

(d) Amounts not expected to be settled within the next 12 monthsEmployee benefits includes the current provision for long service leave which includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. However, based on past experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.


Long service leave obligation expected to be settled after 12 months 5,198 4,032 5,198 4,032

25 Other current liabilitiesSecurity deposits and retentions 18 17 18 17

Mandatory Renewable Energy Target obligations1 22,579 22,224 22,579 22,224

22,597 22,241 22,597 22,241

1 The Mandatory Renewable Energy Target obligations includes the Group’s obligation to the Office of Renewable Energy Regulator for the calendar years of 2001–2006 and 2009.

26 non-current liabilities – BorrowingsUnsecured borrowings 257,146 130,517 257,146 130,517

(a) Unsecured borrowingsThe unsecured borrowings are provided by Queensland Treasury Corporation. An amount of $463,104,533 (2008: $589,733,117) is held in a debt offset account, and is reported as a set-off against non-current borrowings. The net balance after offset is $257,145,530 (2008: $130,516,945). Interest rates on the unsecured borrowings are at book rate which is reviewed and updated as necessary once per year to reflect the evolving market rate of interest that Queensland Treasury Corporation pays to investors to service the underlying bond funding. The book rate of interest that Stanwell pays to Queensland Treasury Corporation is therefore a weighted average of previous market rates of interest but this weighted average is only updated once per year for accounting purposes.



26 non-current liabilities – Borrowings (continued)

(b) Fair valueThe fair value of unsecured borrowings for the Group and parent entity at 30 June 2009 was $255,469,108 (2008: $127,151,416) compared to a carrying amount of $257,145,530 (2008: $130,516,945).

(c) Risk exposuresFor an analysis of the sensitivity of borrowings to interest rate risk refer to note 2.

27 non-current liabilities – Deferred tax equivalent liabilities Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

Differences in depreciation and amortisation of property, plant and equipment for accounting and income tax equivalent purposes 308,889 321,121 305,814 319,804

Expenditure currently deductible for tax equivalent purposes but deferred and amortised for accounting purposes 14,909 16,177 14,785 15,876

Revenue recognised in accounting revenue but deferred for tax purposes 4,983 1,327 4,983 1,040

Defined benefit plan asset 980 706 980 706

Derivative assets 10,826 - 10,826 -

Revaluation of liabilities - 4,341 - 4,341

Net deferred tax equivalent liabilities 340,587 343,672 337,388 341,767

Movements:


Charged/(credited) to the income statement (note 8) (10,170) 2,444 (11,464) 1,039

Credited to equity – derivative financial instruments (note 31) 7,565 (888) 7,565 -

Charged to equity – retirement benefit obligations (note 31) (480) (2,537) (480) (2,537)


Deferred tax equivalent liabilities to be settled within 12 months 33,639 23,162 30,439 21,257

Deferred tax equivalent liabilities to be settled after more than 12 months 306,948 320,510 306,949 320,510

340,587 343,672 337,388 341,767

28 non-current liabilities – ProvisionsEmployee benefits 2,452 1,959 2,452 1,959

Restoration 864 540 864 540

Rehabilitation and decommissioning 1,615 1,223 1,615 1,223

4,931 3,722 4,931 3,722

(a) Employee benefitsThe present value of employee benefits not expected to be settled within 12 months of balance date have been calculated using the following weighted averages:

2009 2008

Estimate of average labour cost increases 5.5% 5.5%

Discount rate 3.0% 6.9%

Settlement term (years) 19 19



28 non-current liabilities – Provisions (continued)

(b) Movements in provisionsMovements in each class of provision during the financial year, other than employee benefits, are set out below:

Rehabilitation and Restoration decommissioning Total $’000 $’000 $’000

Consolidated and parent entity – 2009

Non-current

Opening balance at 1 July 540 1,223 1,763

Charged to the income statement

- additional provisions recognised 324 - 324

- unwinding of discount - 148 148

Increase from remeasurement - 244 244

Closing balance at 30 June 864 1,615 2,479

(c) Rehabilitation and decommissioningThe rehabilitation and decommissioning provision has been calculated by projecting the estimated costs in current values by the expected long-term inflation rate to the end of the useful life of each site, which may include a mothball period, and discounting back to present value using the Group’s cost of capital.

29 Other non-current liabilities Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Deferred revenue refer note 35(b) 2,500 - 2,500 -

30 Contributed equity Consolidated and parent entity Consolidated and parent entity 2009 2008 2009 2008 Shares Shares $’000 $’000

Authorised and Issued Share capital

Ordinary voting (A class) $1 shares, fully paid 4 4 - -

Ordinary non-voting (B class) $1 shares, fully paid 924,568,658 924,568,658 924,569 924,569

924,568,662 924,568,662 924,569 924,569

Total contributed equity – parent entity 924,569 924,569

Total consolidated contributed equity 924,569 924,569

Holders of ordinary shares are entitled to receive dividends as declared from time to time and holders of A class shares are entitled to one vote per share at shareholders’ meeting.

The shares have no par value.

In the event of winding up of the company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.

There has been no movement in share capital during the year.

Capital risk managementThe Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to maintain the required credit rating for a Government owned generator corporation operating in a deregulated electricity market, to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.




Borrowings 257,146 130,517 257,146 130,517

Net debt (refer note 26(a)) 257,146 130,517 257,146 130,517

Total equity 956,955 732,972 944,670 723,861

Total capital 1,214,101 863,489 1,201,816 854,378

Gearing ratio 21% 15% 21% 15%

31 Reserves, other owner contributions and retained profits(a) Reserves

Hedging reserve – cash flow hedges 23,533 (154,910) 23,533 (154,910)

Movements:

Opening balance at 1 July (154,910) (717,750) (154,910) (719,823)

(Loss)/gain on revaluation – gross: electricity contracts 112,968 121,297 112,968 121,297

(Loss)/gain on revaluation – gross: foreign exchange contracts 6,601 1,465 6,601 1,465

Transfer to net profit – gross: electricity contracts 135,026 685,983 135,026 685,983

Transfer to net profit – gross: foreign exchange contracts 644 (1,726) 644 (1,726)

Transfer to net profit – gross: interest rate contracts - (2,961) - -

Transfer to property, plant and equipment – gross: foreign exchange contracts (320) - (320) -

Deferred tax equivalent assets (note 20) (69,391) (242,106) (69,391) (242,106)

Deferred tax equivalent liabilities (note 27) (7,085) 888 (7,085) -

Balance 30 June 23,533 (154,910) 23,533 (154,910)

(b) Other owner contributions (148,309) (148,309) (148,309) (148,309)

Movements:

Contributions by owners1 - (148,309) - (148,309)

1 On 30 August 2007 the Government Owned Corporations (QPTC restructure – Stage 2) Regulation 2007 transferred the net liabilities of the Gladstone Business Unit of the Queensland Power Trading Corporation to Stanwell Corporation Limited as of 2 September 2007.

30 Contributed equity (continued)

Capital risk management (continued)

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistently with others in the industry, the Group and the parent entity monitor capital on the basis of the gearing ratio. This ratio is calculated as debt divided by total capital. Debt is calculated as total borrowings, including ‘borrowings’ disclosed within disposal groups classified as held for sale. Total capital is calculated as ‘equity’ as shown in the balance sheet plus debt.

During 2009, the Group’s Board continued to support a target debt range of between 30% and 50% of total capital. The gearing ratios at 30 June 2009 and 30 June 2008 were as follows:



31 Reserves, other owner contributions and retained profits (continued)

(c) Retained profits Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Retained profits 157,162 111,622 144,877 102,511

Movements:


Net profit for the year 195,605 135,590 192,431 127,461

Dividends (148,944) (92,105) (148,944) (92,105)

Actuarial (losses)/gains on defined benefit plans (1,601) (8,458) (1,601) (8,458)

Tax on actuarial (losses)/gains on defined benefit plans 480 2,537 480 2,537


(d) Nature and purpose of reservesThe hedging reserve is used to record gains or losses on cash flow hedges that are recognised directly in equity, as described in note 1(m). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

32 DividendsDividends recognised by the parent entity are:

Cents per share Total amount $’000 Date of payment

2009

2009 Final – Ordinary (Declared) 16.11 148,944 by 31 December 2009

2008

2008 Final – Ordinary (Declared) 9.96 92,105 31 December 2008



33 Key management personnel disclosures(a) Compensation of directorsDirectors’ compensation is determined by the Shareholding Ministers based on recommendations provided by the Cabinet Budget Review Committee. Directors do not receive performance related compensation.

Details of the nature and amount of each major element of the compensation of each director of the company, all of whom are non-executive, are:

Short-term employee benefits Post-employment Name Salary and fees Super-annuation Total $’000 $’000 $’000

2009

D Byrne (Chairman) 72 6 78

L Gillespie (Chairman Human Resources and Workplace Health and Safety Committee) 32 3 35

P Gregg (Chairman Audit and Risk Management Committee) 32 3 35

B Kelly 30 3 33

B Morris (until 30 September 2008) 8 1 9

D Watson 30 3 33

M Williamson 30 3 33

G Crow (from 1 October 2008) 22 2 24

2008

D Byrne (Chairman) 69 6 75

L Gillespie (Chairman Human Resources and Workplace Health and Safety Committee from 21 August 2007) 31 3 34

P Gregg (Chairman Audit and Risk Management Committee from 24 October 2007) 30 3 33

B Kelly (Chairman Human Resources and Workplace Health and Safety Committee until 21 August 2007) 29 3 32

B Morris (Chairman Audit and Risk Management Committee until 24 October 2007) 29 3 32

D Watson 29 3 32

M Williamson 29 3 32

Directors’ compensation does not include insurance premiums paid by the company or related parties in respect of directors’ and officers’ liabilities and legal expenses, as the insurance policies do not specify premiums paid in respect of individual directors. Further, the directors do not receive any compensation in the form of non-monetary or other benefits.



33 Key management personnel disclosures (continued)

(b) Compensation of other key management personnel

Primary Post-employment Salary and fees Termination superannuation Total

Name $’000 $’000 $’000 $’000

2009


Chief Financial Officer 253 - 22 275

Chief Operating Officer 265 - 26 291

General Manager Business Services 254 - 22 276

General Manager Business Development 215 - 21 236

General Manager Trading 263 - 25 288

General Manager Corporate Services 222 - 21 243

2008


Chief Financial Officer1 55 15 5 75

Chief Operating Officer1 283 62 25 370

General Manager Business Services1 280 - 23 303

General Manager Business Development1,2 206 - 19 225

General Manager Trading1 208 36 17 261

General Manager Corporate Services1,2 167 - 14 181

1 During part of the year these positions were performed by other employees or external contractors until permanent employees were appointed. The costs of contractors are excluded on the basis that they are not employees.

2 These positions were created during the year due to a restructuring of general manager responsibilities.

Executives may earn performance based ‘at risk’ incentive bonuses which are not shown in this table.

Executives’ compensation does not include insurance premiums paid by the consolidated entity or related parties in respect of directors’ and officers’ liabilities and legal expenses insurance contracts, as the insurance policies do not specify premiums paid in respect of individual officers.

(c) Total key management personnel compensation Consolidated Parent entity 2009 2008 2009 2008 $ $ $ $

Short-term employee benefits 2,373 2,082 2,373 2,082

Termination - 113 - 113

Post-employment benefits 223 165 223 165

2,596 2,360 2,596 2,360

The Human Resources and Workplace Health and Safety Committee is responsible for making recommendations to the Board on the compensation policies and packages applicable to the senior executives of the company. The compensation policies and packages are subject to Queensland State Government guidelines that may be issued from time to time.

Senior executives may receive an ‘at risk’ payment based on the achievement of specific goals related to the performance of the company (including operational results).

Executive officers are those officers involved in the strategic direction, generation management or control of business at a company or operating division level.

Details of the nature and amount of each major element of the compensation of each executive of the company are outlined in the following table:



Position Term (Years) Expiry Date

Chief Executive Officer 3 5 February 2010

Chief Financial Officer 3 13 June 2011

Chief Operating Officer 3 30 June 2010

General Manager Business Development 3 10 April 2011

General Manager Business Services 3 13 January 2012

General Manager Trading 3 31 March 2011

General Manager Corporate Services 3 23 January 2012


(c) Total key management personnel compensation (continued)

Amounts disclosed for remuneration of key management personnel excludes insurance premiums paid by the consolidated entity or related parties in respect of directors’ and officers’ liabilities and legal expenses insurance contracts, as the insurance policies do not specify premiums paid in respect of individual officers.

(d) Compensation policyThe Group seeks to attract and retain high performing individuals to ensure that it exceeds its shareholders’ expectations of operational and value adding performance. One component of attracting and retaining such employees is a competitive compensation strategy that rewards based on a combination of personal, team and company performance.

The company has three broad categories of employees with each category having a specific compensation policy and framework.

Senior executives (inclusive of the Chief Executive Officer)This category of employees is employed on individual employment agreements on salary and conditions outlined by the shareholder’s policy ‘Remuneration Guidelines and Senior Executives in Government Owned Corporations’. The terms of these agreements and expiry dates for each senior executive position are detailed in the following table:

Separation benefits, in the event of termination by the company (in circumstances other than by ill health, misconduct or poor performance) are allowed for in the agreements. Performance payments for senior executives are based on key performance indicators reflective of personal, division and company performance over each financial year. Payment is subject to endorsement by the Board and approval by the Shareholding Ministers. Payments are made in cash, or if appropriate notice has been provided, paid into the employee’s superannuation fund on a salary sacrifice basis.

Salaried employeesIn line with shareholder guidelines, these employees are employed under a collective bargaining agreement framework but have some of their conditions, inclusive of salary, established by an Alternative Employment Agreement (AEA). These employees have an open term of employment and separation benefits are in line with the relevant site bargaining agreements.

Performance payments for these employees are based on key performance indicators reflective of personal, site and corporate performance over each financial year. Payment is subject to endorsement by the Chief Executive Officer and approval by the Board. Payments are made in cash or, if appropriate notice has been given, paid into employees’ superannuation funds on a salary sacrifice basis.

Employees under Queensland Industrial Relations CommissionThe majority of the employees of the company are employed pursuant to site bargaining agreements. There are four agreements, covering the major operating sites and the offices. All agreements are certified by the Queensland Industrial Relations Commission. These employees have an open term of employment with the company and separation benefits are in line with the relevant site bargaining agreements.

Each of the bargaining agreements has a clause allowing for the payment of team based performance bonuses which are paid six monthly. Performance is measured against mutually agreed indicators that are renewed for each payment period. Payments are made in cash, or if appropriate notice has been provided, paid into the employee’s superannuation fund on a salary sacrifice basis.




(e) Performance paymentsThe following information is provided in respect of performance payments to Group employees:

2009 2008 $’000 $’000

Aggregate performance payment expense 3,434 2,840

Total salaries and wages (including employer contributions to superannuation funds) paid to employees receiving bonus 38,616 35,483

The number of employees who received performance bonuses 388 372

The table below details the terms and grant dates of performance payments by category of employee:

Category Grant date Criteria Nature

Senior executives (including Chief Executive Officer) Board approval Performance Cash

Salaried employees 1 July Performance Cash

Employees – Queensland Industrial Relation Commission 1 January/1 July Performance Cash

34 Remuneration of auditorsDuring the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

Consolidated Parent entity 2009 2008 2009 2008 $ $ $ $

(a) Audit servicesQueensland Auditor-General1 235,034 196,700 235,034 196,700

(b) Non-audit servicesQueensland Auditor-General1 97,728 215,000 97,728 215,000

332,762 411,700 332,762 411,700

1 Of the 2007–08 fee $11,700 relating to audit services and $77,000 relating to non-audit services has been expensed in the current year.

35 Contingencies(a) Contingent liabilitiesParent entity guarantees in favour of third parties:

2009 2008 $’000 $’000

Griffin Windfarm Pty Ltd 4,000 4,000

Other 993 993

4,993 4,993

All guarantees are provided in the form of unconditional undertakings provided by Queensland Treasury Corporation and are secured through indemnity agreements.

These guarantees may give rise to liabilities in the parent entity if the subsidiaries do not meet their obligations under the terms of the agreements or other liabilities subject to the guarantees.

In line with the policy set out in note 1(x) the fair value of the above guarantees is $nil (2008: $nil).



36 Commitments(a) Capital expenditure commitments Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Property, plant and equipment

Within one year 46,714 22,984 46,714 22,984

Later than one year but not later than five years 3,795 62,267 3,795 62,267

50,509 85,251 50,509 85,251

Biological assets

Within one year 2 65 2 65

Later than one year but not later than five years 174 128 174 128

Later than five years 129 176 129 176

305 369 305 369

(b) Operating lease commitmentsCommitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year 2,251 1,988 2,251 1,988


Later than five years - 257 - 257

8,002 8,779 8,002 8,779

(c) Operating expenditure commitmentsOperating expenditure, commitments contracted but not provided for are payable as follows:

Within one year 74,115 68,245 74,115 68,245


Later than five years 671,814 684,998 671,814 684,998

Minimum lease payments 984,904 1,002,464 984,904 1,002,464

(d) Equity repatriation commitments

Commitment for equity repatriation – not recognised as a liability refer note 44 380,000 - 380,000 -

35 Contingencies (continued)

(a) Contingent liabilities (continued)

Joint venturesDuring the year, the Group signed a Farm-in Agreement and Joint Operating and Gas Supply Agreements with Icon Energy Limited and invested $6,000,000 for an initial pilot program covering four of the 30 blocks in Icon Energy Limited’s ATP 626P.

Subject to the results, the Group may elect to progressively commit a further $30,000,000 to secure a minimum

2P reserve of 340 PJ of gas. The commitment requires a maximum farm-in period of 2.5 years after the completion of specific performance milestone.The election to farm-in will result in the recognition of a joint venture asset for an equivalent amount less expenses recognised to that date.

Legal proceedingsOn 27 July 2009, the Australian Energy Regulator announced that it has instituted proceedings against the parent entity in the Federal Court, alleging that the company did not make several of its

offers to generate electricity in ‘good faith’ contrary to the National Electricity Rules. Stanwell is defending the claim. The costs or penalties associated with these actions are not determinable as they are contingent upon the outcome of the application.

(b) Contingent assetsDuring the financial year Stanwell Corporation Limited has secured deferred revenue of $2,500,000 and a contingent asset of $2,500,000 to be realised between 30 June 2012 and 30 June 2014.



37 Related party transactions

2009 2008 $’000 $’000

Issue of share capital - 75,726

Loans repaid during the year - (22,269)

Interest receivable on loans provided during the year - 547

Interest paid on loans provided during the year - (1,394)

Transfer out of assets - 35,688

Dividends received 2,300 -

(a) Parent entityThe parent entity is a Queensland Government Owned Corporation, with all shares held by the Shareholding Ministers on behalf of the State of Queensland.

(b) Wholly owned groupThe wholly owned Group consists of Stanwell Corporation Limited and its wholly owned entities. Details of the interests in subsidiaries are set out in note 38.

The following transactions occurred with subsidiaries during the year:

(c) Joint ventureThe consolidated entity holds a 50% participatory interest in the Emu Downs Wind Farm through EDWF Holdings 1 Pty Ltd and is a party to the Woodlands Hardwood Plantation Joint Venture with Forestry Plantations Queensland.

Details of the interest and transactions with the joint ventures are set out in note 39.

(d) Key management personnelDisclosures relating to key management personnel are set out in note 33.

Apart from specific compensation detailed in note 33, no director has entered into a contract with the Group since the end of the previous financial year.

A number of key management personnel of the Group are or were also directors of other organisations which have or had transactions with the consolidated entity. These transactions are based on normal commercial terms and conditions. Material transactions with other state of Queensland controlled entities are disclosed in note 37(e).



37 Related party transactions (continued)

(e) Other State of Queensland controlled entities and post employment benefit plansAll State of Queensland controlled entities meet the definition of a related party in AASB 124 Related Parties. The Group transacts with other state of Queensland controlled entities as part of its normal operations on terms equivalent to those that prevail in arms length transactions.

The following transactions occurred with other related parties:


Electricity financial instrument settlements and green energy products 29,640 46,189 29,640 46,189

Purchase of goods and services 32,635 28,480 32,635 28,480

Recharge of costs* 27,603 27,234 27,603 27,234

Net interest (revenue)/expense 12,931 (711) 12,931 (711)

Superannuation contributions 3,886 3,248 3,886 3,248

Dividends paid and proposed 148,944 92,105 148,944 92,105

Income tax paid 85,877 28,648 83,399 28,648

Income tax received 7,345 - 7,345 -

Shares bought back and cancelled - 54,479 - 54,479

The following balances are outstanding at the reporting date in relation to transactions with related parties:

Cash and cash equivalents 161,935 62,411 161,935 62,411

Receivables 16,185 8,246 16,185 8,246

Derivative financial instrument assets 41,496 44,435 41,496 44,435

Deferred tax assets 18,018 86,300 17,994 86,286

Payables 3,901 4,383 3,901 4,383

Current tax liabilities 23,736 21,193 20,738 19,180

Derivative financial instrument liabilities 18,161 115,802 18,161 115,802

Deferred tax liabilities 340,587 343,672 337,388 341,767

Borrowings 257,146 130,517 257,146 130,517

Dividends 148,944 92,105 148,944 92,105

* The recharge of costs includes $27,203,000 (2008: $25,219,000) of costs recharged under a Project Development Agreement to ZeroGen Pty Ltd, a related entity previously owned by the parent entity and sold to the Queensland Government on 16 March 2007. The Chairman of the Board of Directors of the parent entity was a director on the board of ZeroGen Pty Ltd until 4 February 2009. Costs are recharged to ZeroGen on normal terms and conditions.

No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.



38 SubsidiariesThe consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): Equity holdingName of entity Country of incorporation Class of shares 2009 2008 % %

Wind Portfolio Pty Ltd1 Australia Ordinary 100 100

EDWF Holdings 1 Pty Ltd1 Australia Ordinary 100 100

Energy Portfolio 1 Pty Ltd (incorporated 29 May 2009)2 Australia Ordinary 100 -

Goondi Energy Pty Ltd (incorporated 29 May 2009)2 Australia Ordinary 100 -

1 Held for sale (refer note 13).2 Dormant for the period 29 May 2009 to 30 June 2009.

Consolidated 2009 2008 $’000 $’000

Non-current assets

Biological assets – at cost 342 175

For contingent liabilities relating to these joint ventures refer to note 35.

40 Economic dependencyThere is a co-dependent relationship between the company and AGL Hydro Partnership and Origin Energy as a significant portion of the Group’s electricity hedge contracts are with AGL Hydro Partnership and Origin Energy.

39 Interests in joint venturesThe Group has a 50% (2008: 50%) participating interest in the Emu Downs Wind Farm Project, whose principal activity is the operation of a wind farm in Western Australia. The joint venture interest is held by EDWF Holdings 1 Pty Ltd, which is a wholly owned subsidiary of Wind Portfolio Pty Ltd, which in turn is a wholly owned subsidiary of Stanwell Corporation Limited. The joint venture is managed by EDWF Manager Pty Ltd which is 50% owned by EDWF Holdings 1 Pty Ltd. This interest is recognised under disposal groups classified as held for sale in note 13.

In the course of 2008 the Group obtained an 84% interest in an unincorporated joint venture, the Woodlands Hardwood Plantation Joint Venture, with Forestry Plantations Queensland. The principal activity of this venture is the establishment of a viable commercial hardwood plantation of trees.

During 2009 the Group became an investor but not a joint venturer in an unincorporated joint venture, the ATP626P joint venture, with Icon Energy Limited. The principal activity of this venture is the exploration, and if appropriate, the exploitation of coal seam methane from ATP626P in the Surat Basin.

The Group’s share of assets employed in the joint ventures is included in the consolidated balance sheet, in accordance with the accounting policy described in note 1(b), under the following classification:



41 Reconciliation of profit after income tax equivalent expense to net cash inflow from operating activities Consolidated Parent entity 2009 2008 2009 2008 $’000 $’000 $’000 $’000


Add items classified as investing/financing activities:

Net loss/(profit) on sale of non-current assets 6,988 (18,392) 6,978 (18,467)

Dividends received - - (2,300) -

Add non-cash items:

Depreciation and amortisation 73,181 70,762 73,181 70,762

Impairment loss 11,400 - 11,400 -

Development costs written off 6,615 96 6,615 96

Non-cash retirement benefits expense (2,035) (179) (2,035) (179)

Revaluation of assets and liabilities acquired from Enertrade - (21,742) - (21,742)

Change in assets and liabilities:

(Increase)/decrease in trade debtors and other receivables (32,628) 131,443 (32,628) 131,375

(Increase) in inventories (21,167) (1,811) (21,167) (1,811)

(Increase)/decrease in assets classified as held for sale (353) 2,803 - -

Decrease in deferred tax equivalent assets 68,282 231,872 68,292 231,806

Decrease/(increase) decrease in other assets 22,792 (3,139) 22,796 (3,686)

Decrease in derivative financial instrument assets 80,127 206,165 80,127 206,165

Increase/(decrease) in trade and other payables 7,873 (101,586) 7,896 (100,695)

Increase in current tax equivalent liabilities 2,543 11,141 1,558 9,128

Increase/(decrease) in liabilities directly associated with assets classified as held for sale 126 (61) (500) -

(Decrease)/increase in deferred tax equivalent liabilities (3,085) 1,555 (4,379) 1,039

(Decrease) in derivative financial instrument liabilities (377,487) (1,061,386) (377,487) (1,061,386)

(Decrease) in provisions and other liabilities (25,358) (5,129) (25,358) (5,186)

Decrease in hedging reserve 178,443 562,841 178,443 564,914

Net cash inflow from operating activities 191,862 140,843 183,863 129,594

42 Earnings per share Consolidated 2009 2008 Cents Cents

(a) Basic earnings per shareProfit from continuing operations attributable to the ordinary equity holders of the company 21.16 13.86

(b) Diluted earnings per shareProfit from continuing operations attributable to the ordinary equity holders of the company 21.16 13.86



42 Earnings per share (continued)

(c) Reconciliations of earnings used in calculating earnings per share Consolidated 2009 2008 $’000 $’000

Basic earnings per share

Profit from continuing operations 195,605 135,590

Diluted earnings per share

Profit attributable to the ordinary equity holders of the company used in calculating diluted earnings per share 195,605 135,590

(d) Weighted average number of shares used as the denominator Consolidated 2009 2008

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 924,568,662 978,601,166

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 924,568,662 978,601,166

43 Cross border leasesStanwell Power Station is subject to cross border leases which were entered into in 1995. In accordance with accounting standards, the leases are treated as finance leases. The leased assets are being amortised to the income statement over the estimated life of the assets on a straight-line basis consistent with the Group’s policy on depreciation of power stations.

Any major changes to the operational configuration of the power station must be approved by the lessors. There is no lease liability as future lease payments were prepaid at the commencement of the lease.

44 Events occurring after the balance sheet dateAs detailed in the Queensland State Budget 2009–10 and as part of its capital structure review, the Queensland Government has approved the return of $380 million equity from the Group on or before 31 December 2009.

The Government has advised that they will continue to review the Group’s capital structure each year in the Budget context, and may elect to make further equity adjustments reflecting changing circumstances as a result of approval of major investment projects or changes in demand or financial outlook.

This amount has been recognised as a commitment (refer note 36(d)).

On 27 July 2009, the Australian Energy Regulator instituted proceedings against the parent entity in the Federal court, alleging that the company did not make several of its offers to generate electricity in ‘good faith’ contrary to the National Electricity Rules. Stanwell is defending the claim. The costs or penalties associated with these actions are not determinable as they are contingent upon the outcome of the application.

This has been disclosed as a contingent liability (refer note 35(a)).

No other significant events have occurred between 30 June 2009 and the date of this report that have significantly affected, or may significantly affect:

the Group’s operations in future •financial years,the results of those operations in future •financial years, orthe Group’s state of affairs in future •financial years.


DIRECTORS’ DECLARATIOn 30 June 2009

In the opinion of the directors:

(a) the financial statements and notes set out on pages 70 to 123 are in accordance with the Corporations 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 company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the financial 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.

Dated at Brisbane this 26th day of August 2009.

This declaration is made in accordance with a resolution of the directors.

D. Byrne Chairman

P. Gregg Director and Audit and Risk Management Committee Chairman


InDEPEnDEnT AuDIT REPORT 30 June 2009

Independent auditor’s report to the members of Stanwell Corporation Limited

Matters relating to the electronic presentation of the audited financial reportThe auditor’s report relates to the financial report of Stanwell Corporation Limited for the financial year ended 30 June 2009 included on Stanwell Corporation Limited’s website. The directors are responsible for the integrity of Stanwell Corporation Limited’s website. I have not been engaged to report on the integrity of Stanwell Corporation Limited’s website. The auditor’s report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report, available from Stanwell Corporation Limited, to confirm the information included in the audited financial report presented on this website.

These matters also relate to the presentation of the audited financial report in other electronic media including CD Rom.

Report on the Financial ReportI have audited the accompanying financial report of Stanwell Corporation Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the Financial ReportThe directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityMy responsibility to express an opinion on the financial report based on the audit is prescribed in the Auditor-General Act 2009. This Act, including transitional provisions, came into operation on 1 July 2009 and replaces the previous requirements contained in the Financial Administration and Audit Act 1977.

The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the audit considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies 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.

IndependenceThe Auditor-General Act 2009 promotes the independence of the Auditor-General and QAO authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can only be removed by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor General’s opinion are significant.

In conducting the audit, the independence requirements of the Corporations Act 2001 have been complied with.

Auditor’s opinionIn my opinion the financial report of Stanwell Corporation Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

Stephen G. Stavrou Brisbane (as Delegate of the Auditor-General of Queensland) 26 August 2009

126 Stanwell Annual Report 2009 GLOSSARY

Availability The total energy available to the system, allowing for planned and forced maintenance, as a percentage of total energy capacity.

Baseload power plant Low cost power stations that operate with a high capacity factor in order to meet the majority of the electricity demand.

Capacity factor The ratio of a plant’s actual usage to its total capacity.

Carbon intensity Emissions of CO2 (kg) per megawatt hour sent out.

Carbon capture and sequestration The capture and long-term storage of carbon dioxide in soil, plant, ocean or underground geological formations.

Clean coal Coal that has undergone treatment processes to reduce greenhouse gas emissions.

Combined cycle A combined cycle power plant is the most efficient way to generate electricity. The combined cycle unit reuses the waste heat in a heat recovery steam generator.

Derivative market Derivative markets are investment markets for buying and selling securities or financial instruments that get part or all of their value from the value of another security, such as commodities, mortgages, stocks, bonds or currency.

Emissions trading The buying and selling of unused emissions credits.

Farm-in agreement An arrangement in which one operator ‘buys in’ or acquires an interest in a lease or concession owned by another operator, on which oil or gas has been discovered or is being produced. Often, a farm-in is negotiated to assist the original owner with development costs and to secure for the buyer a source of oil or gas.

Forced outage factor The proportion of a plant’s capacity that is unavailable as a result of forced maintenance.

Levels 1–3 environmental incident An event, usually contained to the site, which has minimal environmental effects. This also includes non compliances with business systems.

Levels 4–5 environmental incident An event leading to material or serious environmental harm and may result in prosecution.

Mandatory renewable energy target The quantity of total energy sales sourced from renewable energy sources.

Renewable energy Energy generated from natural resources such as sun, wind, rain and ocean.

Renewable energy certificates A form of ‘currency’ created by the Renewable Energy (Electricity) Act 2000 and used to demonstrate compliance with the requirements of the Government’s mandatory renewable energy target.

Rewind The process of removing and replacing the generator stator and rotor windings to extend the life of the generator and improve safety, reliability and efficiency.

Sent out generation The amount of power exported to the electricity grid after the energy used by the power station itself.

Spear pit The chambers below the turbine floor level that contain pressure pipework and ancillary plant.

Spot market The physical market managed by NEMMCo for the dispatch of generating units and dispatchable loads.

Spot price The half-hour average of the five-minute dispatch prices set by marginal generator.

GLOSSARy

127Stanwell Annual Report 2009 ABBREVIATIONS

AASB Australian Accounting Standards Board

AIFRS Australian equivalents to International Financial Reporting Standards

AOD Alcohol and other drugs

ARMC Audit and Risk Management Committee

ASX Australian Security Exchange

ATO Australian Taxation Office

ATSI Aboriginal and Torres Strait Islander

ATW Authority to Work

CCSD Cooperative Research Centre for Coal in Sustainable Development

CEO Chief Executive Officer

CFO Chief Financial Officer

CIS Capital Investment System

CO2 Carbon dioxide

CO2CRC Cooperative Research Centre for Greenhouse Gas Technologies

CPRS Carbon Pollution Reduction Scheme

DNRW Department of Natural Resources and Water

EEO Equal employment opportunity

EPA Environmental Protection Agency

EPRI Electric Power Research Institute

ERO Equity Referral Officer

GAGAL Gladstone Area Group Apprenticeships Limited

GOC A government owned corporation under the Government Owned Corporations Act 1993

GST Goods and services tax

GWh Gigawatt hour One GWh = one thousand megawatt hours

IPPA Interconnection and Power Pooling Agreement

ISO14001 International standard for environmental management

LP Low pressure

LTIDR Lost Time Injury Duration Rate

LTIFR Lost Time Injury Frequency Rate

m Million

MDL Mineral Development Licence

ML Megalitre(s) One ML = one million litres

MW Megawatt(s) One MW = one million watts

MWh Megawatt hour One MWh = one thousand kilowatt hours

NEM National Electricity Market A competitive wholesale electricity market for eastern and south eastern Australia

NEMMCo National Electricity Market Management Company

NGER National Greenhouse and Energy Reporting

NGF National Generators Forum

NOx Oxides of nitrogen

NPI National Pollutant Inventory

OHS Occupational health and safety

QMEA Queensland Minerals and Energy Academy

QTC Queensland Treasury Corporation

SCI Statement of Corporate Intent

SOx Oxides of sulphur

ZIP Zero Incident Process

ABBREVIATIOnS

128 Stanwell Annual Report 2009 INDEX

Asset Management 5, 12, 14, 32, 44, 49, 50Performance 4, 8, 36

AuditsAudit and Risk Management Committee 19, 54, 55, 56, 57, 59External 23, 44

Barron Gorge Hydro 3, 7, 11, 25, 27, 29, 33, 35, 36, 44, 45, 46

Blue Energy Limited 2, 3, 7, 8 13, 14, 16, 18, 40, 41, 42, 49, 50, 54

BoardActivities 13, 53–60Appointments 53–54Committees 55Composition 54Corporate governance 52–61Directors 18–19Remuneration 60, 65–66Role 53

Carbon Pollution Reduction Scheme 4, 5, 10, 12, 13, 14, 15, 37, 38, 40, 51

Chairman’s statement 12–13

Chief Executive Officer’s review 14–15

CommunityPerformance 28–30Sponsorships 4, 7, 28–29Strategy 4, 9, 28

CompanyProfile 3–4Structure 53

Economic performance 7, 9, 48–51

Emissions trading 5, 7, 9, 10, 12, 13, 32, 39, 40

EmployeesApprenticeships and traineeships 24Career development programs 24, 26Certified agreements 25EcoChoices 7, 44, 45, 47Equal employment opportunity 25Leadership Development Program 25Remuneration policy 81, 116–117

Emu Downs Wind Farm 3, 33, 36, 45, 50

EnvironmentAudits 11, 44, 47Climate Change Strategy 9, 44, 47Performance 2, 4, 6, 7, 9, 11, 12, 15, 34, 43–47, 65, 66

Executive Management Team 13, 15, 16–17, 65–66, 115–117

Gas 2, 3, 4, 5, 8, 9, 11, 12, 13, 14, 36, 40, 41, 42, 45, 64, 79, 98

Gladstone Interconnection and Power Pooling Agreement 7, 8, 42, 49, 91

Health and safetyAlcohol and Other Drugs program 9, 21, 23Authority to Work program 23Fitness For Duty program 9, 21, 23LTIDR 22LTIFR 6, 22Management 13, 14, 23, 34Performance 2, 7, 9, 14, 21–23Policy 21

Icon Energy Limited 2, 7, 8, 13, 14, 40, 41, 42, 54, 63, 64, 118, 121

Kareeya Hydro 3, 7, 13, 25, 27, 29, 32, 36, 37, 45

Koombooloomba Hydro 3, 33, 36

Mackay Gas Turbine 3, 36, 45

Mandatory Renewable Energy Target 37

Market tradingContract market 37–38, 49, 51Emissions trading 5, 6, 7, 9, 10, 12, 13, 32, 39, 40Performance 7, 9, 37–39Spot market 12, 14, 37, 38, 49, 74

OperationsOutage 2, 8, 32, 34, 35Performance 7, 32–36, 44, 46

Project developmentPerformance 2, 7, 8, 11, 13, 40–42, 44Research 7, 15, 40

Risk management 21, 53, 54, 55, 56–57, 59, 66–67, 83–89

Stakeholder engagement 7, 29, 30

Stanwell Energy Park 3, 9, 42, 45

Stanwell Power Station 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 15, 21, 23, 24, 25, 27, 28, 29, 30, 32, 33, 34, 35, 36, 40, 44, 45, 46, 47, 54, 123

Statement of Corporate Intent 8, 57, 61

Surat Morton Basin 7, 8, 12, 13, 42, 63, 64, 121

Wesfarmers Resources 3, 7, 8, 12, 40, 42, 51

Wivenhoe Small Hydro 3, 33, 36

ZeroGen 8, 18, 120

InDEX

TablesAsset performance 36

Career development programs 26

Composition of the Board and committees as at 30 June 2009 54

Corporate entertainment and hospitality 61

EcoChoices strategies 45

EEO numbers 26

Employees by occupation 26

Environmental incidents 44

Environmental incidents by site 2008–09 45

Financial highlights 2

Meetings 55

Office of Government Owned Corporations (OGOC) principles and reporting requirements 58–60

Performance indicators 6

Performance overview 2008–09 8–9

Year ahead 2009–10 10–11

GraphsCarbon intensity 45

Contract forward curve movement over 2008–09 38

Debt to debt + equity 50

Demand growth versus installed capacity and spot price 38

Earnings before interest and tax 50

Employee turnover 25

Interest cover 50

Lost Time Injury Duration Rate 22

Lost Time Injury Frequency Rate 22

Queensland annual average available generation, demand and spot price 38

Return on total assets 50

SOx and NOx emissions 45

Sponsorship expenditure by region 29

Stanwell Power Station historical availability and outage factors 33

Water used and water intensity at Stanwell Power Station 46

Workforce numbers 25

DiagramsElectricity supply chain 4

Site map 3

Stanwell structure 53

Subsidiaries 53

CONTACTwww.stanwell.comemail: [email protected]: 1800 303 116

GPO Box 773Brisbane Qld 4001

Brisbane office (registered office)Level 12, Waterfront Place1 Eagle StreetBrisbane Qld 4000T (07) 3335 7444 F (07) 3335 7477

Rockhampton officeSuite 1 and 3, 74 Victoria ParadeRockhampton Qld 4700T (07) 4931 3000 F (07) 4931 3050

Stanwell Power StationT (07) 4930 3444 F (07) 4930 3272

Barron Gorge HydroT (07) 4036 6955 F (07) 4036 6950

Kareeya HydroT (07) 4036 6822 F (07) 4035 0200

Stanwell Annual Report 2009 Printed using environmentally friendly waterless printing.Printed on Mega recycled – 50% recycled (post consumer waste), 50% FSC certified fibre (sustainable forestry).

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