AnnuAl RepoRt · resources located in the Surat Basin near chinchilla. established in July 1997 and owned by the Queensland Government,

Investing in the futureAnnuAl RepoRt

0910

purposeTo be a competitive and safe provider of reliable and efficient energy solutions for the people of Queensland.

ValuesSAFeTy AND eNvirONmeNT We live safely and respect our environment

PerFOrmANce We make a lasting difference

AccOuNTABiLiTy We assume responsibility

cOOPerATiON We engage with others

eThicS We do the right thing, always

Contents

Corporate profile 2

Summary of performance Against 3 Stated objectives

Five-Year Financial Comparison 5

Chair’s Report 6

Chief executive officer’s Report 8

Board of Directors 10

executive Management team 12

Safety 14

Generating Assets 18

Mining Assets 22

Marketing and trading 26

environment 30

people 38

Stakeholders 42

Corporate Governance 46

Chief Financial officer’s Report 56

Financial Statements 59

For more information or to download a PDF version of this report, visit www.tarongenergy.com.au

This Annual report celebrates the major achievements and initiatives of Tarong energy corporation Limited (‘Tarong energy’ or ‘the corporation’) in the 2009/10 financial year. it provides our stakeholders with an insight into our business activities, our performance and our strategies to meet future challenges. it also discusses our capability to manage the business and our finances on behalf of our Shareholders and, ultimately, the people of Queensland.

This Annual report is printed on mega recycled Silk, an environmentally considered sheet consisting of 50 per cent post-consumer recycled waste and 50 per cent FSc certified fibre. mega recycled Silk is made elemental chlorine free and is manufactured at the Gohrsmuhle mill in Germany, which has its own waste water treatment plant and is iSO 14001 emS approved.

The financial statements are printed on a PeFc certified paper. With iSO 14001 emS accreditation, this wood free sheet is also made elemental chlorine free.

01

02 03

1 As at 30 June 2010. Figure includes part-time employees.

Corporate profile

This reliability is a valuable asset, and Tarong energy has developed a flexible and responsive marketing approach to make the most of this advantage in the National electricity market (Nem). The corporation sells electricity into the Nem pool and provides ancillary services to the Australian energy market Operator through the Tarong, Tarong North and Wivenhoe power stations.

Tarong energy employs 5181 people in electrical and mechanical trades, engineering, and a wide variety of professional and support roles at its generating sites and in its Brisbane corporate office.

The corporation owns a mix of generating and mining assets:

Tarong Power Station, located near Nanango in the South Burnett region, is a coal-fired power station comprising four units with a gross generating capacity of 1,400 megawatts (mW). it also has a liquid fuel-fired emergency plant with a gross generating capacity of 15 mW.

The neighbouring Tarong North Power Station is a supercritical coal-fired power station with a gross generating capacity of 443 mW. its single unit began operating in 2003 and this year, the power station became wholly-owned by Tarong energy.

Wivenhoe Power Station, located at Wivenhoe Dam about one hour west of Brisbane, is a pumped-storage, hydro-electric facility. The power station has

two units that can generate a gross capacity of 500 mW.

Meandu Mine was acquired by Tarong energy in early 2008 and is operated by contract miner Thiess Pty Ltd. The mine provides coal to the Tarong power stations via a 1.5km conveyor.

The Kunioon coal resource was acquired along with meandu mine to further secure a long-term fuel supply for the Tarong power stations. The resource is located about 15km north of the power stations.

Tarong energy also owns the Glen Wilga and Haystack Road coal resources located in the Surat Basin near chinchilla.

established in July 1997 and owned by the Queensland Government, Tarong energy is a significant power generator with a reputation for reliably supplying electricity to help underpin Queensland’s growth.

02 03

Summary of performance Against Stated objectives

Objective Key OutcOmes

SAFeTyTo achieve and maintain a safe workplace

Successfully implemented the 2009/10 health and Safety Strategic •improvement Plan

recorded an organisation-wide decrease in the Lost Time injury Frequency •rate, medical Treatment injury Frequency rate and recordable injury Frequency rate from the previous year

exceeded the corporate target relating to health, safety, environment and •quality improvement and non-injury incident reporting

GeNerATiNG ASSeTSTo improve commercial reliability of generation plant performance

To maintain continuity of economic coal supply

Successfully completed major overhauls that included control system refits •and installation of low nitrogen oxide burners on Tarong Power Station’s units 2 and 4 to enhance the power station’s performance and reliability and decrease emissions

Achieved practical completion of the trial project to redirect ash from the •current wet ash storage dam to a void at meandu mine

invested significant capital to replace the aging mobile fleet at meandu mine, •resulting in surety of coal deliveries to the power stations and decreased operating costs relating to maintenance

confirmed the existence of additional economic coal at meandu mine that is •capable of securing a fuel supply for the Tarong power stations until at least 2025. The corporation subsequently chose to defer the proposed transition to the Kunioon coal resource

mArKeT POSiTiONTo secure market channels to optimise margin

Successfully implemented the 2009/10 retail channel to market strategy •

Achieved 2009/10 gross margin targets•

Developed systems, policies and procedures to ensure that Tarong energy •is prepared for the possible introduction of an emissions trading scheme in the future

BuSiNeSS reNeWALTo commercially invest in new Queensland-based, bulk, low emission generation options

To optimise the value of Tarong Energy’s coal assets

commenced investigations to evaluate gas generation options at Tarong •Power Station and an associated gas pipeline

commenced investigations to demonstrate the value proposition of a coal •seam gas water treatment plant at the Tarong Power Station site and an associated water pipeline

Acquired The Tokyo electric Power company, incorporated and mitsui & co., •Ltd 50 per cent interest in Tarong North Power Station

04 05

Objective Key OutcOmes

eNvirONmeNTTo reduce Tarong Energy’s environmental impacts and secure reliability of water supply

Progressed planning to undertake a 1ha, 12-month bio carbon capture and •storage trial at Tarong Power Station using algae

in conjunction with cSirO, completed construction of a post-combustion •capture pilot plant at Tarong Power Station

Offset emissions generated by business-related travel•

PeOPLe mANAGemeNTTo achieve and maintain our ‘employer-of-choice’ status

Achieved certification of the 2009 enterprise Bargaining Agreement•

Developed a new employment brand that will differentiate Tarong energy in •the job market and boost recruitment

Built leadership capability across the corporation through initiatives such as •the Supervisor induction Program, change management Toolkit, and the implementation of a Leadership Development Framework

STAKehOLDer reLATiONSTo achieve and maintain stakeholder recognition as a socially responsible and sustainable organisation

continued to deliver mutual benefits, including directly funding people and •projects that benefit the South Burnett Aboriginal community, through the indigenous Land use Agreement between Tarong energy and the Wakka Wakka people

invested $285,000 in projects to benefit the South Burnett region through •the community Partnership Fund

Provided an additional $160,000 worth of sponsorship funding to •organisations in the South Burnett, Brisbane valley and Surat Basin regions

engaged with key stakeholders and communities about major projects •including investigations into gas and water pipelines from the Surat Basin to Tarong Power Station

Summary of performance Against Stated objectives (continued)

04 05

Five-Year Financial Comparison

cOnsOlidated change

2005/06 2006/07 2007/08 2008/09 2009/10 %

revenue - electricity - continuing Operations1 418.1 366.3 313.7 439.4 490.8 11.7

revenue - electricity - Discontinued Operations 2.9 6.2 3.8 - - -

revenue - electricity - Total 421.0 372.5 317.5 439.4 490.8 11.7

earnings Before interest and Tax (eBiT)2 110.7 (84.1) 219.4 149.0 156.9 5.3

Profit/(Loss) After income Tax - continuing Operations

62.0 (71.3) 56.7 85.1 91.6 7.6

Profit/(Loss) After income Tax - Discontinued Operations2 7.3 2.7 121.6 - - -

Profit/(Loss) After income Tax2 69.3 (68.6) 178.4 85.1 91.6 7.6

Dividend Paid or Proposed3 55.5 - 50.8 45.5 17.4 (61.8)

Total Assets 1,568.0 2,115.5 1,848.2 2,087.5 2,567.5 23.0

Total Liabilities 746.6 1,546.5 1,117.1 1,174.1 1,254.0 6.8

Total equity 821.4 569.0 731.1 913.4 1,313.5 43.8

Dividend Payout ratio4,* 80.0% 80.0% 80.0% 80.0% 80.0% 0.0

return on Average Productive Assets4,* 8.0% (0.3%) 2.5% 7.0% 3.2% (53.5)

return on Average equity4,5,6* 8.6% (8.8%) 8.7% 10.8% 8.0% (25.9)

Gearing* 25.2% 39.4% 35.0% 32.8% 25.5% (22.2)

1 including ancillary services, retail and energy services revenue.2 2007/08 result includes profit on sale of wind farms of $114.9 million.3 Dividend in relation to financial year shown is payable within six months after the end of the financial year.4 2007/08 calculations exclude the profit on sale of the wind farms.5 2007/08 equity was reduced by $134.9 million in June 2008 relating to the repatriation of wind farm sales proceeds to Government via a share buy-back.6 2009/10 equity was increased by $275.0 million in October 2009 relating to the equity injection received from Government to facilitate the purchase of the

additional 50 per cent interest in Tarong North Power Station.* Definitions of these are shown in the calculations on the inside back cover.

06 07

Chair’s Report

As a Board, this means that we can

plan for the future and make major

investment decisions knowing that

our people have the skills, drive and

commitment to ‘make things happen’.

On behalf of the Board, i would like

to thank each and every employee

for their contribution in 2009/10 and

assure them that providing a safe and

rewarding workplace remains at the

core of the corporation’s decision-

making.

Our profit after tax of $91.6 million is

commendable, and while we foresee

challenges in 2010/11 and beyond in

maintaining this profit, we are confident

that Tarong energy will continue to

represent value for our Shareholders

and the people of Queensland.

The theme of this year’s report is

Investing in the future, and of the

many investments made during

2009/10, the most significant from a

whole-of-corporation perspective was

the outright purchase of Tarong North

Power Station in November 2009.

The power station was owned as a

joint venture between Tarong energy

(50 per cent) and The Tokyo electric

Power company, incorporated and

mitsui & co., Ltd (50 per cent), and

the opportunity for full ownership

presented itself after our co-venturers

decided to pursue other strategic

interests. i would like to acknowledge

our former partners and thank them for

the genuine care they demonstrated

over more than six years.

Full ownership of the supercritical,

emissions-efficient station has provided

us with increased generating flexibility.

it has also decreased the corporation’s

overall carbon intensity, enabling us to

play an even greater role in meeting

Queensland’s growing energy needs.

Another major investment for 2009/10

was the extensive capital replacement

program at meandu mine involving the

purchase of five new dump trucks and

associated plant worth more than $50

million. This investment directly reflects

our confidence in the resource’s ability

to deliver coal to the Tarong power

stations well into the next decade.

Despite the Australian Government’s

announcement in April 2010 that the

carbon Pollution reduction Scheme

This is my fourth chair’s report for Tarong energy, and each year, as i reflect on the challenges and opportunities that the corporation has faced, i am impressed by how our people have responded to the challenges and embraced the opportunities.

06 0707

would be placed on hold until at least 2013, Tarong energy continues to pursue opportunities to reduce and offset our carbon emissions and we made considerable progress in this area during the year. i look forward to reporting on the preliminary results of our flagship projects in next year’s report.

Our comprehensive unit overhaul program continued successfully in 2009/10, and the communities in which we operate benefited considerably from our presence during the year. helen Gluer will expand on these investments, as well as operational matters, in her chief executive Officer’s report.

in helen, Tarong energy has an exemplary leader who is well respected by our people and our stakeholders. her sharp mind and engaging personal style are wonderful assets and it has been a pleasure to work closely with her and the broader management team again this year. They have done a wonderful job of ensuring that our people are well supported, and of championing our considerable investment in the communities in which we operate, particularly in the South

Burnett where many of our senior leaders are now well known.

With no changes at the Board level for the second consecutive year, i would like to thank my fellow directors for providing stable and strategic leadership.

Finally i would like to thank our shareholding ministers for their support: The honourable Andrew Fraser mP, Treasurer and minister for employment and economic Development; and The honourable Stephen robertson mP, minister for Natural resources, mines and energy and minister for Trade.

Graham Carpenter chair

07

08 0908

Chief executive officer’s Report

Despite a softening in the electricity market and increased competition, we delivered a sound commercial return to Shareholders. i am pleased to report that our effective contracting strategy and cost-efficiency focus contributed to an above-budget profit after tax of $91.6 million.

The current oversupply of capacity in the electricity market is expected to continue impacting on future wholesale prices. We recognise the effects this will have on our revenue-based business and have acted decisively this year to sustain our competiveness now and into the future.

Our strategy is robust and effective: we are consolidating our strengths, embedding efficiencies across the business, investigating new opportunities to diversify, and continuing to invest in our greatest asset, our people.

Investing in the future

As mentioned by the chair in his report, we acquired the remaining 50 per cent interest in Tarong North Power Station in November 2009. Full ownership of the emissions-efficient power station is a key realisation of our strategy to defend our competitive position. Since the purchase, i am pleased to report that Tarong North employees are making

a smooth transition into the Tarong energy workforce.

With a firm focus on our future, we have continued to look at new ways to diversify and grow our business. in late 2009, we began investigating the potential to bring coal seam gas (cSG) from the Surat Basin to the Tarong Power Station site to burn as a second fuel and reduce our emissions under a future carbon Pollution reduction Scheme. As part of the investigations we identified a further opportunity to manage and treat large volumes of cSG water, which may present one possible solution for cSG producers. it is very early days and much work is still to be done on the environmental and technical feasibility of these projects. however, i am excited about the potential to expand our business while contributing to the beneficial reuse of coal seam gas water.

A safe workplace

ensuring the health and safety of our employees and contractors is a core value on which we will not compromise. Our safety performance continued to improve this year, reflecting the increasing effectiveness of our safety systems, processes and plans.

importantly, we continued to foster an active reporting culture where

employees have the confidence to report potential safety incidents and improvement opportunities. The Board and executive management Team believe this culture of reporting is so essential to reaching our goal of a zero harm workplace that we set it as a corporate incentive target in 2009/10. i commend all employees on exceeding the annual target of reporting 1,200 potential incidents and improvement opportunities in health, safety, quality and environment.

Building on our strengths

Throughout 2009/10 we invested in enhancing the longevity and performance of our generating assets while maximising the advantages of owning our own fuel source.

The most significant overhaul program in the 26-year history of Tarong Power Station continued with the overhaul and control system refit of unit 4 completed safely and to schedule. The last unit overhaul in the $168 million maintenance program will be completed in late 2010, and the first scheduled overhaul of Tarong North Power Station under our full ownership will start in 2011. These investments in our generating assets will help us to continue generating competitively and safely for the people of Queensland.

Tarong energy has performed strongly in a challenging environment this year.

08 09

Our priority at meandu mine is to continue accessing the most economic coal reserves. This year we progressed drilling programs at the mine and upgraded the mine’s heavy equipment fleet to improve surety of fuel supplies and lower production costs in the long term. Further work is continuing in the year ahead on how we can further maximise the value of our operations from the mine to the market.

trialing innovations

The Australian Government’s announcement of a delay in the introduction of an emissions trading scheme has provided greater opportunity for Tarong energy to transition successfully to lower emissions, without threatening the economic and social advantages of affordable generation.

Despite the scheme’s delay, we have pushed on with two innovative trials looking at commercially sustainable ways to lower emissions from coal-fired generation. in may 2010, construction started on a post-combustion capture pilot plant at Tarong Power Station in partnership with the cSirO. We have also agreed to work with mBD energy to investigate the feasibility of an algae-based technology that can use emissions from Tarong Power Station to produce biodiesel and stockfeed, with the 12-month trial expected to start in early 2011.

A committed team

i agree with the chair that our people have an excellent track record of rising to meet new challenges. This year was no exception. Faced with a lower profit forecast at the start of the financial year, we actively sought to manage our costs and operate more efficiently. i am proud to report that we achieved the targeted cost savings through innovation and teamwork and, most importantly, by making sound business decisions.

Because we believe in fostering a rewarding and inclusive workplace, we listen to our people. in September 2009, more than three quarters of our workforce shared their views on what it is like to work at Tarong energy. employees highlighted the corporation’s genuine and strong commitment to safety in the workplace, which is very encouraging. We have also acted quickly to address a number of areas identified for improvement.

As one of the largest employers in the South Burnett region, it is important for our people to see that we contribute to the long-term sustainability of the community they call home. This year we further strengthened our community links through sustained engagement, supporting local suppliers and businesses, and providing regional job opportunities. Our people have especially taken pride in seeing community Partnership Fund projects – some of which will continue to provide benefits for a generation – come to fruition this year.

As i look back on our achievements of the past year, i would like to acknowledge all those who contributed. i thank the Board, the executive management Team and all employees for their hard work, dedication and overall commitment to ensuring Tarong energy remains a competitive, safe and efficient generator.

The year ahead holds further challenges, but i have every confidence that we will once again rise to meet them while capitalising on new opportunities.

Helen Gluer chief executive Officer

09

safety in the workplace, which is very encouraging. We have also acted quickly to address a number of areas

As one of the largest employers in the South Burnett region, it is important for our people to see that we contribute to the long-term sustainability of the community they call home. This year we further strengthened our community links through sustained engagement, supporting local suppliers and businesses, and providing regional job opportunities. Our people have

ommunity Partnership Fund projects – some of which will continue to provide benefits for a generation

chief executive Officer

09

10 11

Graham CarpenterMBA, FAICD, FCA

Chair (1 July 2007)

Independent non-executive director

Term of appointment 1 July 2005 – 30 September 2010

Member, Business Development Committee, People and Performance Committee

Ex-officio member, Audit and Risk Management Committee

mr Graham carpenter is a chartered accountant who has held a number of senior executive positions including partner in chartered accounting firms, Auditor-General in the Northern Territory and senior positions with victorian and Queensland Treasuries.

mr carpenter brings expertise in the areas of corporate governance, financial management consulting, accounting, audit, risk management and performance management. he has a depth of experience in infrastructure management.

mr carpenter is chair of the Audit committees of South Bank corporation, Queensland Police Service, urban Land Development Authority and Scenic rim regional council. he serves on committees for the Local Government Association of Queensland, Office of State revenue, Department of Premier and cabinet, Griffith university and construction Skills Queensland. he provides consulting services to BDO where he was previously a partner.

Richard (Ric) BartonBE(Civil), MS(Civil Eng), FIE Aust, FAIM



Member, Audit and Risk Management Committee, Business Development Committee

mr ric Barton is a civil engineer and currently a partner and director of Flagstaff consulting Group Pty Ltd. he has extensive experience at corporate level in commercial business; at project development and delivery stages in the heavy, resource and civil engineering industries; and at project delivery stage in the health and industrial building industries, predominantly from the constructor’s perspective but over recent years from the project owner’s point of view.

mr Barton held various project and senior management positions with John holland Pty Ltd concluding with General manager (Queensland) and executive Director.

more recently, he has held or currently holds independent director, steering committee member, project director, and executive advisor roles with various government-related enterprises.

Leeanne BondMBA, BE(Chem), FIEAust, GAICD


Term of appointment 16 September 2004 – 30 June 2008

Reappointed 1 July 2008 – 30 September 2011

Member, Audit and Risk Management Committee, People and Performance Committee

ms Leeanne Bond is a chemical engineer with extensive experience in business management, projects, design and proposals for international engineering and project management organisations. She has worked on projects across the hydrocarbons, mineral processing, infrastructure and power industry sectors.

ms Bond is currently a director of the Queensland Bulk Water Supply Authority, Seqwater corporation and Liquefied Natural Gas Limited and consults to industry through her company Breakthrough energy Pty Ltd. ms Bond is a former engineers Australia “Professional engineer of the year” and Queensland President of engineers Australia.

Board of Directors

10 11

Elizabeth JamesonBA, LLB(Hons), LSDA, FAICD


Term of appointment 12 April 2007 – 30 September 2010

Chair, People and Performance Committee

Member, Business Development Committee

ms elizabeth Jameson is a corporate/commercial lawyer with comprehensive experience providing legal and related advice and assistance to a large range of corporate and not-for-profit organisations, including statutory bodies and Government Owned corporations. ms Jameson teaches and facilitates a range of corporate governance classes and sessions for the Australian institute of company Directors.

ms Jameson is Principal of Board matters Pty Ltd and a director of rAcQ Limited. She is chair and director of Fibrecycle Pty Ltd, BDO Group holdings (Qld) Pty Ltd and the Board of Trustees Brisbane Girls’ Grammar School. She is also a member of the Board of Taxation.

John PeglerBE(Mining), MAusIMM



Reappointed 1 October 2009 – 30 September 2012

Chair, Business Development Committee

mr John Pegler has extensive national and international experience in open-cut and underground coal resource development, mining and processing operations, project development processes and international procurement. he has a background in coal utilisation and marketing coal to power generators and steel mills in Australia, Japan, Korea, india and other Asian and european countries.

mr Pegler is currently chairman and director of Australian coal Association Ltd (AcA) and chairman and director of AcA Low emissions Technologies Ltd (AcALeT). he is also chairman of the National Low emissions coal council Strategy Working Group and chairman of the underground coal Gasification consultative committee.

mr Pegler is a Board member of the Fitzroy Basin Association and a director of energy resources of Australia Ltd, a foundation member of the Queensland clean coal council, and life member of the Queensland resources council.

Karen Smith-PomeroyMNIA, PNA, FAIBF, MAICD


Term of appointment 12 April 2007 – 30 September 2010

Chair, Audit and Risk Management Committee

ms Karen Smith-Pomeroy is a financial services professional with extensive experience in senior roles within the Australian banking and finance industries. She is currently chief risk Officer Banking with Suncorp Bank.

ms Smith-Pomeroy is a member of the National institute of Accountants and the Australian institute of company Directors, and a fellow of the Australian institute of Banking and Finance. She is also a committee member of the risk management Association inc. Australian chapter.

Kym CollinsMBA, B Eng(Elec), GAICD



Reappointed 1 October 2008 – 30 September 2011

Member, Business Development Committee, People and Performance Committee

ms Kym collins is an electrical engineer, experienced in project management, control and energy engineering in the commercial construction industry. She currently provides project management and engineering design services on several major projects in South east Queensland through her own consultancy business, and was previously the State manager for Building Automation at Siemens Ltd.

ms collins is currently a committee member of the St Aidan’s Old Girls Association.

12 13

Helen Gluer MBA, BCom, CPA, FAICD

Chief Executive Officer

helen commenced as the chief executive Officer of Tarong energy in January 2007. Before this, she was the chief Financial Officer of Brisbane city council.

With a diverse career, helen has 25 years experience in banking, finance and infrastructure. helen is currently a council member for the Queensland university of Technology and Local Government remuneration Tribunal and has directorships with the Queensland resources council, National Generators Forum and TransLink Transit Authority. helen was previously the chair of the central Queensland Ports Authority. her other previous directorships have included city Super Pty Ltd, the South east Queensland Water Board and Brisbane Airport corporation.

Jackie Barber BSc(Chemistry)

General Manager

Marketing and Trading

Jackie has more than 19 years trading experience in deregulated electricity markets: first in the uK where she worked for Powergen Plc Ltd and in Australia for eTSA Power corporation where she helped to establish an electricity retailing business in New South Wales.

upon joining Tarong energy in may 1999, Jackie led the energy contracting team responsible for optimising the corporation’s gross margin and providing stable cash flows for the generation portfolio. Jackie was appointed General manager marketing and Trading in July 2008.

Jenny Gregg MBA, BA, Grad Cert(BAdmin), GAICD

General Manager

People and Communications

Jenny commenced with Tarong energy in the role of General manager People and communications in September 2008. Before this, Jenny worked for more than six years at SunWater holding the positions of manager, human resources and Acting General manager, corporate. in a diverse career, Jenny has gained experience in the utilities, human services and health sectors both in line management and within the human resources field. Previous roles include State manager (Queensland) and National manager, human resources for a national provider of professional human services.

executive Management team

12 13

Bob RuttenBCom, Cert(HR Mgt)

Acting General Manager

Mining Operations

As the Acting General manager mining Operations, Bob is responsible for the supply and quality of coal provided to the Tarong power stations.

With more than 27 years experience in the mining industry, his background includes commercial and operations management in projects in New South Wales, Western Australia, Tasmania and Queensland.

Bob joined Tarong energy in 2001 as the commercial manager Operations and due to his background, has supervised and managed many projects for Tarong energy including the fuel options study, the Glen Wilga mine plan optimisation study, various environmental impact studies, the due diligence report of meandu mine and the recent exploration program that identified additional coal reserves at the meandu mine.

Richard Van Breda BCompt (Hons), CA(Z), CA(Aus), Dip. Fin. Serv. (FM)

Chief Financial Officer

richard joined Tarong energy in the role of chief Financial Officer (cFO) in April 2008.

richard formerly worked for Stanwell corporation where he was appointed cFO in 2007 after acting in the role since July 2005. As cFO richard oversaw Stanwell’s information and communication technology, procurement, finance and finance risk management services.

richard was a partner with Deloitte, Zimbabwe from 1995 to 1997 and subsequently spent three years with a major mining and manufacturing company. During this time he was responsible for the treasury, financial management and reporting of a number of public companies.

John Williamson BA, LLB, FCIS, FAusIMM, MAICD

General Manager Corporate Governance (and Company Secretary)

As General manager corporate Governance, John is responsible for the secretariat, legal, risk management/compliance, and internal audit functions of the corporation.

Directly prior to joining Tarong energy in may 2007, John consulted on corporate governance and commercial matters for a range of clients. Other previous roles include Group General manager corporate Services and company Secretary for Grainco Australia, and various senior management positions at mim including six years as a director of the mim Superannuation Plan. he is currently serving on the Queensland State council of chartered Secretaries Australia.

Andrew KrotewiczBEng (Electrical), Dip Mgt

General Manager

Generation Operations

Andrew commenced as General manager Generation Operations of Tarong energy in September 2008. his role includes responsibility for the corporation’s safety and environmental functions.

Andrew has 29 years experience in the power industry in both Queensland and, more recently, in Western Australia.

in Western Australia, he worked on large-scale, gas-fired cogeneration plants for Alcoa’s alumina smelters. The joint venture was one of the first privately owned generators operating in the then recently deregulated state electricity market.

Andrew is an electrical engineer who has held engineering and management roles with the Queensland electricity commission and cS energy. he has a suite of skills and knowledge in best practice operations, maintenance, engineering, project delivery and asset management.

14 15

Power Worker Scott Vogler with Manager Operations Philips David at Splityard Creek, Wivenhoe Power Station.

14 15

Safety

We invest time and resources into continuously improving our processes and culture and were encouraged this year by the high rate of incident and improvement reporting, and the implementation of new programs that will help us achieve our ultimate goal of a zero harm workplace.

2009/10 Highlights

SAFeTy PerFOrmANce

Tarong energy achieved more than 1.5 million work-hours without a Lost Time injury (LTi) being recorded during the year. The corporation met its 2009/10 All injury Frequency rate target with decreases in the Lost Time injury Frequency rate (LTiFr), the medical Treatment injury Frequency rate (mTiFr) and the recordable injury Frequency rate (riFr) from 2008/09 (see graph).

Any injury to people is unacceptable and focus was maintained on preventing injuries and learning from those that occurred. With this in mind, a 44 per cent decrease in LTis from the previous year was an encouraging sign that process and cultural improvements are impacting positively.

Three of the four LTis recorded during the year were manual strain injuries: two involved contractors on a Principal contractor construction site, and the other involved a Tarong energy employee at Tarong Power Station. The fourth LTi was caused by an electric shock a contractor received while removing a damaged power pack adapter from a power point, resulting in an altered heart rhythm.

Tarong energy employees demonstrated their commitment to improving safety in their workplace by exceeding the 2009/10 corporate target of 1,200 non-injury incident and health, safety, environment and quality improvement reports by 58 per cent.

SAFe SySTemS

Tarong energy has a comprehensive health and safety regime in place that involves policies, procedures, audits and certification, employee education and a focus on continuous improvement.

Focus was maintained on continuous improvement of the corporation’s Occupational health and Safety management System, with eight existing procedures reviewed and seven new procedures developed.

Security was also a focus, with a Security Threat and vulnerability Study conducted during the year to ensure that security preparedness continues to meet the corporation’s security challenges.

Tarong Power Station was audited by the hazardous industries and chemicals Branch of Workplace health and Safety Queensland against the Dangerous Goods Safety Management Act 2001 as a large dangerous goods location. No non-compliance directives were issued.

imPLemeNTiNG PrOGrAmS

The Fitness to Work Program, involving alcohol and other drugs awareness and testing and fatigue management, was fully implemented across all sites during the year. The program was also tested during a high activity period for the first time during the overhaul of unit 4 in may 2010.

The safety of our people, contractors and visitors is a core value and our highest priority.

FreQueNcy rATeS yeAr-ON-yeAr

LTiFr mTiFr riFr

20

18

16

14

12

10

8

6

4

2

0

2008/09

2009/10

16 17

Production Supervisor Mechanical Simon Rogerson with Mechanical Fitter Brian Birch.

16 17

While the program is working effectively, the corporation will consider opportunities to refine and improve processes when it meets with other Queensland Government-owned generators in 2010/11.

in addition:

The 5S housekeeping program was •piloted with three teams within the Generation Operations unit during the year. Pilot groups completed the full 5S suite (Sort, Set, Shine, Standardise and Sustain) and will continue to embed programs to improve the physical conditions of workplaces and realise efficiencies and improvements.

As part of a holistic wellness •approach, occupational therapists were engaged to proactively manage employees’ pre-existing conditions identified through annual medicals, back clinics held last year and injury reports. results have proved encouraging and the corporation will continue to investigate preventative care and management techniques.

mANAGiNG SiGNiFicANT riSKS

The corporation’s Fatal risk control Protocols are aimed at evaluating systems for managing activities that present the highest risks to Tarong energy people if not managed appropriately against best practice in heavy industry. Progress was made in this area during the year with the instigation of a process for the progressive upgrade of machine guarding, and the evaluation of

isolation practices during a wider Permit to Work System review conducted in February 2010.

iNveSTiNG iN SAFeTy

One of the ways that Tarong energy encourages employees to be proactive about improving their workplace is by providing $10,000 discretionary budgets to a number of teams within each business unit for safety, health or environmental initiatives separate to those addressed in normal operating or capital budgets. Proposed expenditure is reviewed by the relevant health and Safety committee prior to implementation to ensure the program’s objectives are met and that ideas can be shared across the corporation. Purchases this year included:

a heartStart defibrillator for use •in transit by Tarong Power Station crews that work along the Wivenhoe Pipeline;

‘press to talk’ mobile phones for •fire wardens in the Brisbane office to provide improved and direct communication to coordinate an evacuation; and

aluminium toolboxes for the fuel •team’s utility vehicles to protect equipment and improve safety through housekeeping.

imPrOviNG SAFeTy AcrOSS SiTeS

Tarong energy began a process of upgrading its Australian Standard compliant clothing at the beginning of 2010. The main benefit of the new

clothing is that it can be worn across all the corporation’s operational sites including the contractor-operated meandu mine and development projects. The orange and navy blue shirts feature the STAr logo reminding people to Stop, Think, Assess and respond when carrying out their work.

The transition will be staged to allow efficient use of current clothing and will be replaced on a ‘fair wear and tear’ basis by 30 June 2011.

2010/11 objectives

continue to improve systems, work environment and culture with the aim of achieving a zero harm workplace.

integrate Tarong North Power Station’s procedures into the corporation’s safety systems.

Facilitate targeted leadership, observation and feedback programs.

implement the 5S housekeeping program more widely across the corporation where the benefits can be realised.

18 19

A bladder provides the ash dam at Tarong Power Station with additional capacity during extreme rainfall events.

18 19

Generating Assets

investments in major overhauls at Tarong Power Station this year, as well as the integration of Tarong North Power Station into our portfolio, ensure that Tarong energy is well placed to play its role in securing Queensland’s energy future.

2009/10 Highlights

ASSeT PerFOrmANce

Tarong Power Station produced 7,124 gigawatt hours (GWh) of electricity this financial year.

Asset renewal activities were a focus in 2009/10 as part of a mid-life plant refit and upgrades.

During the year, unit 2 underwent an upgrade and commissioning of a new control system and unit 4 was offline from 6 march 2010 for 69 days

for its planned major overhaul. The shutdowns reduced plant availability for Tarong Power Station by 8.4 per cent for the year.

Tarong North Power Station produced 2,215 GWh of electricity this year. in addition to normal overhaul maintenance, significant refurbishment and repairs were required to the power station’s bag house filters, the generator circuit breaker and the turbine, resulting in lower than expected plant availability.

Wivenhoe Power Station maintained a high state-of-readiness level and remained a key part of Tarong energy’s peaking capability. When called into service the twin 250 mW hydromachines lived up to their impeccable reputation for delivering at or above world-class performance standards, achieving an annual availability of 92.4 per cent, start reliability of 99.5 per cent and

operational reliability of more than 99.7 per cent. The station’s unit 1 went offline for 42 days in June 2010 for a planned overhaul.

uNiT OverhAuLS

The largest and most significant operational overhaul of Tarong Power Station commenced in August 2008. All four generating units are being overhauled over a three-year period to improve performance and reliability and reduce emissions.

The first overhaul – a $35 million upgrade of unit 1 – was successfully completed in January 2009. The larger unit 2 overhaul was completed at the beginning of this financial year in July 2009, and unit 4 was completed in may 2010. The overhaul of unit 3 began in July 2010.

The Generation Operations unit is responsible for ensuring that our generating assets maintain their well-earned reputation for reliability and availability.

lOcatiOn 2009/10 Plant availability % 2009/10 PrOductiOn (gWh sent Out)

BuDGeT AcTuAL BuDGeT AcTuAL

Tarong Power Station 86.7 87.3 7,228 7,124

Wivenhoe Power Station 76.7 92.4 22 40

Tarong North Power Station 93.2 63.6 3,541 2,215

20 21

The overhauls of units 1, 2 and 4 involved two major upgrades:

refitting each unit’s control system •– essentially replacing the ‘brain’ of the power station; and

retrofitting the units with low •nitrogen oxide (NOx) burners and preparing for a precipitator trial.

units 2 and 4 also had their generator circuit breakers replaced to update the original maintenance-intensive parts that were approaching the end of their useful asset life.

The unit 4 generator rotor was the final rotor to receive a mid-life condition assessment as well as replacement of retaining rings. This work was in line with good operating and engineering practice and insurer recommendations.

The overhaul of Wivenhoe Power Station’s unit 1 commenced on 7 June 2010 as a routine part of the asset’s life cycle plan. The unit has been in operation for 26 years and was last overhauled in April 2005.

Overhauls were also undertaken on Tarong North Power Station during the year to repair turbine damage resulting from a lightning incident that occurred in September 2008.

Control system refit

Although plant operations have been excellent since the original control system was installed more than 25 years ago, refitting the system was considered essential to ensure plant reliability and flexibility into the future.

Starting in August 2008 and coinciding with scheduled overhauls, the project involves upgrading each unit’s control system infrastructure including

the boiler, turbine, generator and condensing/feedheating controls, boiler and turbine protection systems, turbine bypass systems, turbine governor and supervisory systems. The project also includes the upgrade of some common plant control systems and integrates several existing local control systems.

The result is a highly automated system capable of integrating advanced control concepts and new technologies such as low NOx burners. A purpose-built control room was constructed as part of the $50 million project, which was officially opened in February 2010 by Parliamentary Secretary for Natural resources, mines and energy and Trade, michael choi.

Low NOx burners

Following a successful trial in 2007, low NOx burners were installed and commissioned on units 1, 2 and 4, as scheduled, from February 2009.

The burners are a voluntary measure taken to reduce NOx emissions, which are recognised as a contributor to regional air pollution. The burners also offer the potential to expand the operating range of each generating unit.

The next set of burners will be installed on unit 3 in August 2010.

ASh AND ASh WATer STrATeGy

An ash and ash water strategy prepared during the year will help ensure ash continues to be effectively managed for another 25 years.

The ash and ash water strategy includes:

the requirement to achieve greater •than 89 per cent availability from the Ash Thickening Plant. This will maintain water storage space for the longest remaining life scenario of the coal-fired units while ensuring ash transfer to the new mine void disposal area;

the management of the ash dam •water level to ensure compliance with environmental licence requirements through efficient de-watering processes and the installation of an additional water treatment plant; and

the installation of the Black creek •diversion trench to significantly reduce the catchment area of the ash dam and therefore reduce the risk of the ash dam overflowing cenospheres and ash water during a significant rain event.

POST-cOmBuSTiON cAPTure PrOJecT

Tarong energy has entered into an agreement with the cSirO to design, build and operate a post-combustion capture (Pcc) pilot plant at Tarong Power Station. The pilot plant will experiment with process improvements in the operation of an amine-based plant for capturing carbon dioxide emissions during coal-fired generation.

20 21

After construction off site, assembly and commissioning of the plant occurred on site during may and June 2010. research will be conducted over 12 months from July 2010 to investigate the effectiveness of various operating regimes on carbon capture effectiveness and efficiency.

Whilst the pilot project will not immediately reduce carbon emissions from Tarong Power Station, the information gathered from the research will not only add to the collective body of information on Pcc operations, it will help to select the appropriate technology for use in any commercial-scale application.

TArONG NOrTh POWer STATiON

Tarong energy took full ownership of Tarong North Power Station in late 2009 by purchasing the remaining 50 per cent share from joint venture partners The Tokyo electric Power company, incorporated and mitsui & co., Ltd.

The power station and its employees are being integrated into the Generation Operations business unit.

2010/11 objectives

complete the control system refit program of works at Tarong Power Station.

Successfully complete the Wivenhoe Power Station overhaul.

Finalise the integration of Tarong North Power Station.

commence the unit control system upgrade at Wivenhoe Power Station.

implement the ash and ash water strategy.

Wivenhoe Power Station.

22 23

Acting General Manager Mining Bob Rutten with Mining Operations team members Tahlee Rouillon and Lynette Chagnon.

22 23

major capital investments made this year in new trucks and associated mobile fleet will ensure the surety of coal deliveries to power Tarong energy into the future.

2009/10 Highlights

Key PArTNerShiP STreNGTheNeD

meandu mine is operated by experienced contract miner Thiess Pty Ltd under a mining Services Agreement. The critical nature of supplying fuel to the Tarong power stations means that the relationship between the parties is of particular focus for the corporation, and it was pleasing that Thiess again met all established safety, environmental, cost and production targets in 2009/10.

The parties negotiated a 12-month extension to their agreement during the year. This affirms Tarong energy’s partnering approach to operations at meandu mine and recognises Thiess’ performance and commitment to the project.

iNveSTiNG iN NeW eQuiPmeNT

As part of mining Operations’ asset management strategy, significant capital was invested in replacing much of the primary mobile fleet acquired as part of the meandu mine purchase. A new excavator, dump trucks and support equipment were assembled on site over a six month period beginning in early 2010. No safety incidents or injuries were recorded during the on-site and off-site build and assembly of the mobile fleet. The investment also resulted in approximately $3 million worth of local investment and created a boost to regional employment.

The strategic replacement of aging mobile fleet has a two-fold benefit: increasing the surety of coal deliveries to the power stations through the use of reliable equipment, and decreasing operating costs.

ADDreSSiNG AN iNhereNT riSK

Tarong energy and Thiess recognised that the interaction of light and heavy vehicles was one of the most significant risks to people and machinery on site. With a view to reducing this risk, Thiess commenced implementation of an innovative mine design during the year that is specifically aimed at avoiding those interactions.

SOuTh BurNeTT cOAL reSOurceS

The strategic coal asset review and the update of the meandu life-of-mine plan, which were both completed this year, indicated a significant extension in the economic life of meandu mine. The results of an exploration drilling program undertaken during the year and the outcomes of the strategic review indicated a prospective exploration target east of the current active mining area that may identify further economic coal.

During the year it was confirmed that meandu mine would be able to supply the Tarong power stations until at least 2025. While the transition to the Kunioon coal resource has been officially deferred, it remains an important part of the corporation’s fuel supply strategy.

SurAT BASiN miNiNG ASSeTS

Tarong energy has owned mining tenements in the Surat Basin since 1999. These include mineral Development Licences and exploration Permits for coal over and around:

the Glen Wilga coal resource •located about 12km south east of chinchilla; and

the haystack road coal resource •located about 25km east of chinchilla.

Mining Assets

Our mining Operations unit manages meandu mine and associated projects, the Kunioon coal resource and other mining interests.

24 25

24 25

Tarong energy also has interests in a 150km transport corridor from the Surat Basin to the Tarong power stations.

in relation to Glen Wilga and associated land holdings, the corporation is exploring opportunities to determine their market value.

in February 2010, the Queensland Government released a discussion paper on the topic of strategic cropping land which may impact the mining prospects of haystack road. Accordingly, Tarong energy will continue to monitor strategic cropping land policy developments to determine options for this resource.

iNveSTiNG iN NeW eNerGy

Tarong energy reported last year that it was investigating less carbon-intensive fuel options as part of its commitment to reducing greenhouse gas emissions.

A study into the potential for a biodiesel fuel industry in the South Burnett region, particularly focused on establishing and managing a productive Pongamia (legume tree) plantation and harvesting the trees’ oil for biodiesel production, commenced during the year.

Ongoing research into the environmental and economic viability of Pongamia continues with plans to undertake trial plantations at meandu mine and on other Tarong energy-owned land.

The corporation is also investigating a partnership with the university of Queensland’s centre for integrative Legume research under an Australian research council Linkage Grant.

TrAiNiNG ceNTre uPDATe

The Operations Training centre commenced a trainee program in July 2009 to provide a pathway to full-time employment within the mining industry for South Burnett residents. reflecting local community demographics, the training centre is tailored to ensure opportunities are available to women and Aboriginal people. The program was recognised with an award in the ‘Best company initiative’ category of the 2010 Queensland resources council resources Awards for Women.

While there is no guarantee of employment upon completing the program, all eight successful graduates to date have been able to transition into full-time positions at meandu mine.

2010/11 objectives

Develop a long-term disposal strategy for ash from the power stations into mine voids.

complete the detailed scope and award the contract for the upgrade of the meandu mine coal handling Preparation Plant.

complete the initial phase of the exploration program to the east of the current active mining area at meandu mine.

commence a refurbishment of the meandu mine dragline to ensure long-term operational efficiency and reliability.

26 27

Energy traders Oliver Jessup (left) and David Warman.

26 27

This year’s investment in training and preparation for the possible introduction of a carbon price will ensure we are well placed to manage future challenges effectively.

2009/10 Highlights

QueeNSLAND mArKeT OvervieW

The Queensland electricity market continued to experience reduced volatility throughout the year. maximum demand in Queensland was 8,890.7 mW representing growth of only 2.46 per cent on the previous year. electricity demand was well below the forecast levels reflecting, in part, the slow down in economic growth and average summer temperatures.

The average spot price in Queensland for the year was $33.30 per megawatt hour (mWh). This annual average spot price was supported by stable underlying prices in the $20 to $50/mWh price range.

PrePAriNG FOr chANGe

Tarong energy continued to develop and enhance systems, policies and procedures to prepare for the carbon Pollution reduction Scheme (cPrS),

undertaking detailed analyses of options such as removal units and off-take agreements from low emissions generation to mitigate the corporation’s carbon liability.

The Australian Government announced delays to the cPrS in April 2010, however, Tarong energy continues to prepare for the possible introduction of an emissions trading scheme in the future. A key part of this preparation is ensuring that employees receive the necessary training and have the appropriate systems available to them to effectively manage any potential carbon liability on behalf of the corporation.

DiverSiFyiNG The cuSTOmer BASe

The Queensland energy market continues to evolve since privatisation and the introduction of full retail contestability. Tarong energy has adapted to this changing environment by developing innovative products aligned to the requirements of the corporation’s changing customer base.

Tarong energy also successfully implemented its retail channel to market strategy in 2009/10 to diversify its revenue streams and secure stable cash flows.

Marketing and trading

The marketing and Trading unit manages the dispatch of electricity generated by our assets in the National electricity market.

QueeNSLAND - mONThLy AverAGe SPOT PriceS

QueeNSLAND - ANNuAL AverAGe SPOT PriceS

0

$10

$20

$30

$40

$50

$60

$70

$80

$90

JuL 0

9

AuG 0

9

SeP 0

9

OcT 0

9

NOv 09

Dec 0

9

JAN 10

FeB

10

mAr 10

APr

10

mAy 10

JuN 10

Less than $20

Between $50 and $300

Between $20 and $50

Greater than $300

$/m

Wh

0

$10

$20

$30

$40

$50

$60

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

Less than $20

Between $50 and $300

Between $20 and $50

Greater than $300

$/m

Wh

28 29

OPTimiSiNG FiNANciAL PerFOrmANce

Tarong energy successfully achieved 2009/10 gross margin targets by adopting a diversified contracting strategy and providing innovative solutions to its expanding customer base. marketing and Trading continued to develop and enhance the integrated spot and contracts trading strategy to optimise the portfolio return, while proactively managing the risks associated with planned and unplanned outages during the year.

The seamless integration of the Tarong North Power Station into the corporation’s asset portfolio during 2009/10 provided additional flexibility when bidding and dispatching the output of the corporation’s assets and supported marketing and Trading’s overall strategy.

iNDuSTry eNGAGemeNT

As one of Queensland’s most significant generators, Tarong energy continued to actively participate in the National Generators Forum which directly represents the 23 major power generators in the Australian electricity supply system.

members of the marketing and Trading team also focused on developing relationships with the Australian energy regulator and the Australian energy market Operator.

2010/11 objectives

continue to develop innovative trading strategies to ensure that Tarong energy’s revenue is optimised, and commercially sustainable returns are delivered on the corporation’s portfolio of assets.

continue to prepare for an emissions trading scheme and assess options to cost-effectively manage any potential carbon liability.

invest in the future by equipping employees with the necessary skills and systems to adjust to changing market dynamics.

28 29

30 31

Nanango State High School students with tingids, bred for use as a biological control agent on Tarong Energy-owned land.

30 31

This year we made progress in several key areas including reducing emissions to air, rehabilitation of the ash dam and preserving wildlife habitat.

2009/10 Highlights

iNciDeNTS

For the fifth consecutive year, Tarong energy recorded no catastrophic or major environmental incidents at any of its sites. There was one regulatory breach in July 2009 at Tarong Power Station, further detailed under the Air section of this report.

The corporation received and responded to seven environmental complaints during the year (see graph).

eNvirONmeNTAL mANAGemeNT

Tarong energy’s environmental performance is managed through a certified environmental management System (emS), which provides a structured and robust approach focused on continuous improvement. in 2009/10, certification of the emS to AS/NZS iSO 14001 was maintained at the Tarong and Wivenhoe power stations and the Brisbane office.

The process for managing environmental risks was a particular area under review during the year and improvements will be implemented in 2010/11.

Air

Tarong energy maintained its focus on improving regional air quality by reducing the level of airborne emissions.

The particulate licence limit was exceeded at Tarong Power Station in July 2009 due to transitional issues with the new control system. The maximum particulate concentration during the 54 minute exceedence from unit 1 was 488 mg/Nm3 (licence limit is 458 mg/Nm3).

The Department of environment and resource management (Derm) was notified immediately. measures taken to prevent a recurrence included a review of operator training programs and emission control procedures. in addition, as part of the control system refit project (see page 20), investigations began into the feasibility of automatic unloading and tripping of a unit in the event of high emission levels.

Reducing emissions

Low nitrogen oxide (NOx) burners have been installed in three of Tarong Power

Station’s four generating units, and burners will be installed in the final unit during its overhaul.

A regional air quality modelling study was conducted during the year which determined that the burners have had a positive impact and significantly decreased NOx concentrations. The study also modelled the impact of Tarong energy’s particulate emissions on the surrounding environment. The findings indicated that the levels of particulates – based on a typical emissions profile – were predicted to be below all relevant state and federal ambient air quality guidelines.

environment

Tarong energy understands that our activities have an impact on the environment and we are committed to minimising these impacts and using natural resources sustainably.

NumBer OF iNciDeNTS AND cOmPLAiNTS

2007/082006/07 2008/09 2009/10

8

5

6

7

4

2

1

3

0

catastrophic

major

moderate

complaints

32 33

Offsetting emissions

Tarong energy continued to offset emissions generated by business-related travel through Greenfleet’s nationwide reforestation program. in line with Queensland Government policies, Tarong energy has offset all business-related travel including cars, buses and air travel since December 2007.

To directly reduce emissions, Tarong energy continued to replace six-cylinder petrol powered vehicles in its leased vehicle fleet with four-cylinder diesel powered vehicles. This change has resulted in a reduction in fuel consumption and carbon emissions. To date, 95 per cent of Tarong energy’s leased vehicle fleet has been replaced with more efficient vehicles.

Investigating gas

Tarong energy continued to investigate ways to grow a low emissions generation portfolio. One option is to bring coal seam gas (cSG) to the Tarong Power Station site to burn as a secondary fuel. This project involves:

discussions with potential cSG •suppliers;

identifying a route for a high •pressure pipeline to transport gas to Tarong Power Station; and

investigating a range of options to •use gas to generate electricity at Tarong Power Station.

As part of the investigations into gas supply, Tarong energy identified a potential opportunity to manage and treat the large volumes of brackish water released in the cSG production process. The technical and environmental

feasibility of transporting this water for treatment at Tarong Power Station and is beneficial reuse on site or within South east Queensland is being studied. investigations also include options for reuse or storage of salts extracted from the water.

Trialing new technologies

Tarong energy and mBD energy have agreed to conduct a 1ha bio carbon capture and storage trial at Tarong Power Station using algae. mBD energy is a melbourne-based, public unlisted technology company which operates a joint research and development facility in Townsville with James cook university.

called algal synthesis, the process involves the injection of captured flue gases into a waste water growth medium contained in large, elongated, plastic membranes to produce rapid expansion approximating up to a doubling of oil-rich algal biomass every 24 hours.

This algal biomass, grown from locally selected strains of microalgae to protect local biodiversity, may be harvested daily to produce algal meal suitable for nutritious, lower-methane animal feed, human nutritional supplements and oils suited to the production of plastics and transport fuels including large quantities of biodiesel. The trial plant will be operational in the second part of the 2010/11 financial year and will run for 12 months.

Tarong energy has also entered into an agreement with the cSirO to design, build and operate a post-combustion carbon capture pilot plant at Tarong Power Station (see page 20).

Reporting

compliance with air quality requirements is reported to Derm. Tarong energy also reports emissions information to the National Pollutant inventory (www.npi.gov.au); and for the first time in October 2009, reported its greenhouse gas emissions under the new National Greenhouse and energy reporting System.

cArBON

Tarong energy assumed full ownership of Australia’s most emissions-efficient coal-fired power station in late 2009.

Tarong North Power Station affirmed its reputation this year with a carbon intensity of 822 kilograms of carbon dioxide (cO2) equivalent per mWh of electricity generated (see graph).

Tarong Power Station’s carbon intensity, as illustrated in the graph, increased slightly from the previous year. This is attributed to lower average unit loads resulting generally from market trading conditions.

KG OF cO2e/mWh GeNerATeD

2006/072005/06 2008/092007/08 2009/10

900

860

880

840

800

780

820

760

Tarong North Power Station Tarong Power Station

32 33

Revegetation trials at the ash dam, Tarong Power Station.

34 35

built water storage facility located near Proston. Boondooma Dam received significant inflows early in 2010 to reach its highest level in more than five years, which further improved reliability of water supply to the power station.

Responsible management

Tarong energy remains strongly committed to water conservation and reuses water where possible.

The corporation saved approximately 790 mL of water during the year by reusing blowdown water at Tarong Power Station and meandu mine. Over 1,200 mL of water from the ash dam was also reused during the reporting period, representing a significant saving in raw water use.

Leveraging opportunities

A review of meandu mine’s site water management plan commenced during the year. it will consider integration opportunities afforded by Tarong energy’s common ownership of the power station and mine sites in order to optimise water usage and improve quality and conservation strategies.

LAND

Tarong energy owns considerable land holdings in addition to its operating sites. These include properties related to the Kunioon coal resource in the South Burnett region and properties related to the Glen Wilga coal resource in the Surat Basin.

The corporation is committed to managing issues related to habitat preservation, rehabilitation and property maintenance on all its land holdings.

Protecting fauna habitat

As part of a surface rights extension

to meandu mine, Tarong energy

committed to creating a voluntary

vegetation offset to mitigate the

potential impact of its activities on

the Black Breasted Button Quail, a

vulnerable bird species.

The offset property purchased was

chosen due to the presence of regrowth

habitat for the Black Breasted Button

Quail. The area will also become an

important wildlife corridor, providing

connectivity to surrounding native forest

once fully revegetated.

A long-term strategy was developed

and a weed control program was

implemented during the year to

manage issues associated with the

property’s cattle grazing history.

Sections of the property have been

fenced to exclude cattle and aid in the

natural regeneration of the site.

Tarong energy recognises the

importance of environmental education

and partnered with Nanango State high

School during the year to purchase

seedlings for students to propagate

and help revegetate the offset property.

Senior students are also undertaking a

long-term monitoring study of the site.

Controlling weeds and pests

Tarong energy is committed to working

cooperatively with local communities

on land issues. This includes working

with key stakeholders to determine the

best solution for immediate and long-

term weed and pest problems and

utilising local contractors to complete

identified work.

WATer

Water is essential for operating Tarong energy’s power stations.

in 2009/10, Tarong energy used water from the South east Queensland Water Grid to supply Tarong North Power Station.

Tarong Power Station continues to use water that is predominately sourced from Boondooma Dam, a purpose-

WATer recycLeD AT TArONG POWer STATiON

12,000

8,000

10,000

6,000

2,000

4,000

0

Wat

er (

mL)

includes 4,913 mL of Purified recycled Water


WATer cONSumPTiON AT TArONG POWer STATiON

2006/072005/06 2008/092007/08 2009/10

30,000

20,000

25,000

15,000

5,000

10,000

0

Wat

er (

mL)



2006/072005/06 2008/092007/08 2009/10

34 35

A Black Swan nests on Black Creek Dam.

36 37

The corporation partnered again with Nanango State high School in an environmental education project focused on weed control. One educational stream has year 10 agriculture students breeding small moths called tingids, which are a biological control agent for cat’s claw creeper. A large number of tingids were successfully released on Tarong energy-owned land during the year to help control this prevalent weed.

Tarong energy carries out a successful program at the Tarong and Wivenhoe power station and meandu mine sites as part of a coordinated regional effort to control feral dogs.

WASTe

Tarong power stations generate ash as a direct result of burning coal to produce electricity. The corporation sells more than 20 per cent of this ash for use in various manufacturing processes (see graph page 37) and continues to seek potential new markets to limit the volumes being managed as waste.

New ash disposal

Tarong energy obtained approval to redirect ash into the King 2 West void at meandu mine early in 2008. During the reporting period, the ash pipeline to the King 2 West void was commissioned and ash placement began via a 4.5km above-ground pipeline. This void has a storage capacity of up to five years. After this time, and subject to further approval, ash will be redirected to other voids with sufficient capacity for the life of the power stations.

A 4.5km above-ground pipeline transports ash from the Tarong power stations to a mine void at Meandu Mine.

36 37

to machinery. The corporation is also investigating the possibility of utilising spoil from meandu mine for ash dam capping.

Improving spill response

A bioremediation facility for oil-contaminated soil was designed and constructed at meandu mine during the year. Operating procedures detail how oil-contaminated soil from on-site spills are monitored and controlled to achieve low hydrocarbon residuals, reducing potential contamination.

mOve TO GreeNer OFFice

The Brisbane corporate office relocated to a more environmentally sustainable building in September 2009. Located in Albert Street in Brisbane, Am-60 has been awarded a 5 Star rating by the Green Building council of Australia. As a tenant of Am-60, Tarong energy is obligated to comply with Green Star building initiatives and invested in employee education on waste and energy management during the year.

SuSTAiNABLe PrOcuremeNT

During the year, sustainability considerations were introduced as a requirement in the Tarong energy Procurement Policy. more specifically, the corporation now gives consideration to strategies that manage demand and avoid unnecessary consumption, and minimise whole-of-life environmental impacts. it also considers suppliers’ socially responsible practices including compliance with legislative obligations in relation to employees.

2010/11 objectives

implement a NOX monitoring program once the burner installation project at Tarong Power Station is finalised.

commission the stormwater upgrade project at Tarong Power Station to improve stormwater management on site.

commence research and trials on the post-combustion capture pilot plant at Tarong Power Station and conduct a bio carbon capture and storage trial using algae.

Deliver a revised environmental training program to improve understanding of environmental obligations.

Rehabilitating the ash dam

Tarong energy continued to utilise the ash dam for the disposal of ash and related effluents during 2009/10 while maintaining compliance with relevant conditions of Tarong Power Station’s environmental Authority.

An audit of the groundwater and surface water monitoring programs associated with the ash dam was conducted by Derm in January 2010. No non-compliances were identified.

The Ash Dam management Plan, required as a condition of Tarong energy’s environmental Authority, was also reviewed in September 2009 to include revised mandatory reporting levels for water.

The revegetation trials established in 2007 on the capped ash dam surface were monitored during the year. The trials continue to demonstrate the successful establishment of native trees and shrubs over a capping of sandstone spoil without the use of topsoil or fertilisers. Progressive capping of the ash dam to prevent dust migration will continue in 2010/11 over areas of the ash dam that are full and accessible

SALe OF cOAL cOmBuSTiON PrODucTS

2005/062004/05 2008/092007/082006/07 2009/10

450,000

300,000

350,000

400,000

200,000

250,000

50,000

100,000

150,000

0

Tonn

es

38 39

Technical Employee - Mechanical Ed Hodgson and Manager Operations Philips David.

38 39

By providing a safe, rewarding and supportive workplace, we continue to attract, engage and retain motivated and skilled employees.

Our focus in 2009/10 was on fostering a strong leadership culture, planning for our future workforce needs and addressing employee feedback.

2009/10 Highlights

2009 eNTerPriSe BArGAiNiNG AGreemeNT

Following negotiations between employee representatives, unions and Tarong energy, the 2009 enterprise Bargaining Agreement was certified on 22 September 2009. variations from the 2006 Agreement focused on optimising operational work practices to benefit both employees and the corporation.

A manager’s Guide to the enterprise Bargaining Agreement was released in February 2010 to assist managers in the practical application and implementation of the Agreement and to respond to employees’ commonly asked questions.

LiSTeNiNG TO Our PeOPLe

Tarong energy values the input of employees in helping to shape their workplace. in September 2009, approximately 77 per cent of employees completed the biennial employee Opinion Survey to share feedback about what it is like to work at Tarong energy. The survey results indicated that employees believe Tarong energy displays a genuine and strong commitment to safety and the environment. Key areas for further improvement included enhancing leadership capability, and managing and improving employee performance.

Tarong energy has acted on the survey findings and feedback, using the information to support ongoing initiatives and introduce new programs that matter to employees. These include a new Leadership Development Framework and a review of the annual performance review program.

people

Our people are vital to the ongoing success and future security of our business.

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eNGAGiNG WiTh Our PeOPLe

With employees operating across five sites in three southern Queensland regions, Tarong energy has well-established communication channels to encourage the sharing of information and feedback among all sites and business units. corporation-wide activities include biannual ceO presentations, a weekly newsletter, monthly corporate issues and information discussions, senior management workshops and the intranet, TarongNet.

Focus group research of representative employees was undertaken in August 2009 to provide valued feedback on the corporation’s internal communication, as well as reward and recognition activities, leadership and employment branding. The research results have helped to shape key initiatives, including ongoing improvements to internal communication tools and the new employment brand.

cOmmuNiTy SuPPOrT

As part of Tarong energy’s social investment program, the corporation offers support to employees who contribute to their community through sport, volunteering or charity fundraising.

This year Tarong energy sponsored its first team in the Queensland corporate Games. in may, employees joined together at celebratory ‘biggest morning teas’ to raise more than $3,000 for the cancer council Australia. Tarong energy matched all funds raised by employees dollar for dollar.

iNveSTiNG iN Our LeADerS

effective leadership is vital to motivate, align and engage the workforce. Tarong energy continued to embed a visible culture of strong leadership with the launch of the Leadership Development Framework.

central to the framework was the corporation-wide release of a new

Leadership charter outlining the desired attributes and performance expected of leaders and the qualities to which emerging leaders should aspire. A pilot group of managers also attended a Senior Leaders’ Leadership Development Program, which will be rolled out to the broader management team in 2010/11. Tarong energy will continue to reinforce the principles of its Leadership charter in the upcoming financial year through stronger links with its performance and salary review processes.

FuTure FOcuS

Tarong energy continued to plan for the future of its workforce. The corporation’s succession planning model was redeveloped to more effectively identify business-critical roles and support the career progression of promising employees. A continued focus on succession planning will help to optimise the workforce and ensure the right people with the right skill sets

Apprentices Kynan Blines and Kyle Butler.

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are working in the right areas for the corporation to deliver on its future objectives.

in a boost for regional employment and Tarong energy’s future workforce needs, nine new apprentices and trainees started in various work placements at Tarong Power Station in February 2010. At meandu mine, 16 trainees attended the mining Operations Training centre during the year, all aiming for a future career in the mining industry (see page 25).

mANAGiNG PerFOrmANce

A review of the corporation’s performance management process was undertaken in late 2009 in response to feedback from the employee Opinion Survey. Policy and procedural changes, coupled with intensive training at supervisor level, have led to improvements in the effectiveness of employees’ biannual performance reviews.

Tarong energy line managers and supervisors attended a new Supervisor induction Program from early 2010 where they received practical guidance on how to better manage their team’s performance. These inductions will continue on an ongoing basis for employees who commence work in line management positions.

ADAPTiNG TO chANGe

To ensure Tarong energy remains competitive and profitable in a challenging market it is essential that employees adapt to and manage change effectively. in 2010, Tarong energy developed a change management Toolkit to assist managers to plan for and implement change initiatives, and to lead their teams effectively through the change process.

recruiTiNG SKiLLeD PeOPLe

A new employment brand was developed to differentiate Tarong energy in the job market and boost recruitment. The brand will be publicly released and embedded internally in mid 2010. Tarong energy also launched a new online recruitment system to streamline and enhance the recruiting process for both candidates and recruiting managers.

2010/11 objectives

identify the roles and employees critical to our business to ensure sufficient resourcing for the future.

continue to implement workforce strategies to attract, retain and engage a skilled workforce.

embed the corporation’s change management processes.

Launch the new employment brand.

Environment Graduate Juanita Legrady on Wivenhoe Dam.

42 43

Indigenous Relations Advisor Darren Schmidt and Wakka Wakka Elder Beryl Gambrill interpret a painting depicting the relationship between Tarong Energy and the Wakka Wakka people to corporate office employees.

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Stakeholders

During the year we invested more than $600,000 in community events, projects and initiatives, and focused on improving our engagement activities.

2009/10 Highlights

eNGAGiNG WiTh The cOmmuNiTy

Tarong energy understands that its ability to generate electricity for the people of Queensland is, in large part, dependant on the support of the communities in which it operates. The corporation continued to build on its existing relationships within the South Burnett region during the year and also strengthened ties with Brisbane valley stakeholders.

community engagement activities in 2009/10 centred on evolving Tarong energy’s approach using feedback gained from perception research undertaken in may 2009. The findings highlighted the communities’ desire to be kept better informed about current activities and for the corporation to work more effectively with landowners, particularly in the Surat Basin. The research also identified the opportunity to raise the profile of Tarong energy’s community investment.

Key to the corporation’s response was the production of the Community Report; a yearbook-style publication featuring articles of relevance to the South Burnett, Surat Basin and Brisbane valley communities. The inaugural report was widely distributed in early 2010 and will be repeated on an annual, calendar-year basis. Tarong energy also continued to produce its community newsletter, Power News, distributing 10,000 copies of each issue to businesses and households in the South Burnett region.

Another response to the research findings involved making changes to community information sessions, which have been a feature of Tarong energy’s community engagement for several years. in 2009/10, Tarong energy hosted two sessions that were open to all members of the South Burnett community and held in community locations rather than at Tarong Power Station. The sessions provided attendees with the opportunity to meet senior Tarong energy representatives and learn about major projects, as well as employment and sponsorship opportunities. The number of attendees, the issues raised and the feedback received were all encouraging.

WOrKiNG WiTh TrADiTiONAL OWNerS

The indigenous Land use Agreement (iLuA) between Tarong energy and the Wakka Wakka people, the traditional owners of the land where Tarong energy’s South Burnett assets are located, continued to deliver mutual benefits during the year. The iLuA formalises the relationship between Tarong energy and the Wakka Wakka people and provides a strong foundation for both parties to achieve their respective goals.

Both parties demonstrated their commitment to the spirit as well as the intent of the iLuA during the year. Senior Tarong energy managers were invited to murgon in September 2009 to an event celebrating new premises for the cultural and business arm of the Wakka Wakka people, the Bunya Wakka Wakka cultural and heritage corporation. A month later, Wakka Wakka elders were honoured guests at the opening of the Wakka Wakka meeting room at Tarong energy’s new corporate office where a painting depicting the close relationship between the parties was also unveiled.

We value the relationships we have with councils, schools, traditional owners and community organisations, as well as our Shareholders, government departments and industry partners.

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Supporting employment

During the reporting period, the two committees established under the iLuA – the Agreement implementation Group (AiG) and the Aboriginal community interest consultative committee (Acicc) – remained focused on delivering long-term social and economic outcomes with an emphasis on supporting role models and employment initiatives.

South Burnett Aboriginal people aspire to work locally in stable employment environments. The focus of the AiG and Acicc during the year was to support initiatives that led to the improvement of local employment prospects.

Tarong energy’s indigenous relations team also worked towards this goal by building relationships with local employment agencies in an effort to deliver sustainable employment opportunities that ultimately extend beyond the life of the iLuA.

Tarong energy directly supports Aboriginal employment as part of the operation of the Tarong power stations and meandu mine by engaging the Bunya Wakka Wakka cultural and heritage Aboriginal corporation and iron

Bark ridge Services. These local small businesses provided cultural heritage and natural resource management services during the year.

Tarong energy also engaged the Wakka Wakka people and their technical advisers to complete several cultural heritage surveys in 2009/10.

Supporting sustainable outcomes

The Acicc operates as a committee under the iLuA and comprises traditional owners, senior Tarong energy employees and representatives of the wider South Burnett Aboriginal community.

The Acicc provides funding to support projects that aspire towards long-term sustainability, providing more than $155,000 of targeted financial support to the South Burnett Aboriginal community in 2009/10.

This funding supported more than 40 Aboriginal community groups and individuals to create long-term improvements in the areas of education, health, culture, business and sport.

in December 2009, the Acicc undertook a review of its three core funding programs – the Tertiary education Scholarship Program, Junior

representative Sports Award and the high School Scholarship Program. The Tertiary education Scholarship Program was adjusted to expand its accessibility and ensure it continues to meet the needs of applicants.

Other Acicc highlights for the 2009/10 year included:

providing financial support to •cherbourg radio station 4um for the preparation of a business plan;

fostering links between potential •applicants and other funding bodies;

funding the year 12 graduation •ceremony for South Burnett Aboriginal students; and

supporting the re-establishment of •the Barambah cricket club, which completed the season as South Burnett regional champions.

ShArehOLDer AND iNDuSTry eNGAGemeNT

The support of Tarong energy’s Shareholders is essential to the corporation’s ongoing success. regular reports and briefings were provided to shareholding ministers and their departments throughout the year.

Nanango State School Principal Lyle Giles and students pose on playground equipment funded by the Tarong Energy Community Partnership Fund.

44 45

Tarong energy also continued to focus on effective communication with other state government agencies such as the Queensland manufactured Water Authority (WaterSecure) and the SeQ Water Grid manager, as well as participating in industry groups such as the Queensland resources council and the National Generators Forum.

SOciAL iNveSTmeNT

Tarong energy continued to support the community in 2009/10 through the implementation of its Social investment Policy. The policy has two funding streams – the corporate Sponsorship Program and the Tarong energy community Partnership Fund.

Community Partnership Fund

Since its inception last financial year, the community Partnership Fund has awarded more than $500,000 to organisations and community groups in the South Burnett region.

The fund supports activities that build social capital in the South Burnett through training and capacity building; the provision of services; or through capital works and infrastructure projects.

in 2009/10, Tarong energy supported eight major projects worth more than $285,000 through the community Partnership Fund.

Several of these projects, and many from 2008/09, were completed and celebrated within the region during the year. These included:

The Nanango State School •received funding to build new play equipment with soft-fall surfaces

at the school. Providing a safe, engaging and interactive area for the students, the play forts will benefit students for years to come.

careFlight rescue received funding •for its Lighting the Dark project, contributing to the purchase of night vision goggles. The goggles will enable pilots to land helicopters safely at night when transporting critical patients to larger hospitals for emergency treatment.

Wondai country club purchased •lawn maintenance equipment with the fund’s support, which will help maintain the local golf and bowls club as well as facilitate business development through the pursuit of tendering opportunities.

Corporate Sponsorship Program

The corporate Sponsorship Program provided more than $160,000 to community groups, schools and councils in the Brisbane valley, Surat Basin and South Burnett regions in 2009/10.

Through the corporate Sponsorship Program, Tarong energy continued to support several key activities including:

the Science and engineering •challenge at Nanango State high School – seven Tarong energy engineers volunteered their time to judge this event;

Playgroup Week celebrations – •this event brought families from throughout the South Burnett together; and

the Queensland music Festival – •South Burnett residents continued to benefit from this three-year partnership.

Tarong energy also:

provided $15,000 to the Duke of •edinburgh Program to purchase equipment for South Burnett participants;

sponsored the annual rail Trail Fun •run held in the Brisbane valley region;

supported safety initiatives of the •Blackbutt SeS, murgon State high School and the cooyar Town rural Fire Brigade; and

sponsored the Boondooma Dam •Fish Stocking and management Association’s fish stocking program and fishing events.

2010/11 objectives

continue to evolve the Social investment Policy to ensure maximum benefits for the communities in which Tarong energy operates.

undertake biennial perception research to ensure communication, community relations and indigenous relations activities are meeting community needs and expectations.

continue to work with traditional owners and the broader South Burnett Aboriginal community to ensure sustainable social and economic benefits are provided through the iLuA.

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Chair Graham Carpenter (standing), General Manager Corporate Governance John Williamson, CEO Helen Gluer (sitting) and Manager Corporate Communication Stephanie McMahon in Tarong Energy’s Brisbane Board room.

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Corporate Governance

Approach to corporate governance

Tarong energy is committed to best practice corporate governance and processes that will enhance the corporation’s efficiency and effectiveness and ensure the appropriate degree of accountability and transparency to stakeholders.

Tarong energy defines governance as ‘the system by which the corporation is directed, managed and held to account’. it incorporates the culture, structures and processes for decision-making, accountability, control and behaviour. it provides the framework within which:

the Board is accountable to •shareholding ministers for the successful operation of Tarong energy;

the strategies and goals of Tarong •energy are set and agreed;

key risks are managed; and•

ethical values and behaviours, and •responsible decision-making are promoted and inappropriate actions and behaviours are not sanctioned.

Tarong energy has adopted the principles outlined in the Corporate Governance Guidelines for Government Owned Corporations and believes that through the reporting period its governance arrangements have been consistent with these principles.

The key features of Tarong energy’s governance regime are set out in this section. Further details on corporate governance matters are available on Tarong energy’s website, www.tarongenergy.com.au

Foundations of management and oversight(Corporate Governance Guidelines principle 1)

Role and function of the Board and senior management

The Board has adopted a charter that sets out the functions and responsibilities of the Board within the governance structure of Tarong energy. The conduct of the Board is also governed by the Corporations Act 2001, the Government Owned Corporations Act 1993 and Tarong energy’s constitution.

The primary responsibilities of the Board include:

the appointment, removal, •performance monitoring and succession planning of the chief executive Officer and the senior executives;

the approval of corporate strategies, •the annual budget and five-year financial plan;

monitoring of organisational and •financial performance and the achievement of Tarong energy’s strategic objectives and targets;

overseeing the effectiveness of the •management processes in place and approving major corporate initiatives;

approving policies in relation •to corporate governance, risk management, compliance, safety and environment;

overseeing the processes for •identifying the significant risks facing the organisation, and ensuring that appropriate and adequate control, monitoring and reporting processes are in place; and

reporting to and communicating •with shareholding ministers.

The chief executive Officer’s responsibilities include the overall operational, business management and financial performance of Tarong energy while managing the organisation in accordance with strategy, plans and policies approved by the Board to achieve agreed targets.

Senior executives reporting to the chief executive Officer have their roles and responsibilities defined in specific position descriptions.

Committees of the Board

The Board has established three committees to assist in the execution of its role and to allow detailed consideration of complex issues. committee members are chosen for their skills and experience.

The roles, responsibilities and delegated authorities of each committee are set out in the respective committee charters. each year the charters are reviewed and, where appropriate, updated to take account of changes and other developments in the committees’ areas of responsibility.

each committee meets several times a year, depending on committee workload requirements. The role and membership of each committee are described in more detail in this section.

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People and Performance Committee (Corporate Governance Guidelines Principles 1 and 8)

The People and Performance committee comprises the following directors:

elizabeth Jameson (chair)

Leeanne Bond

Graham carpenter

Kym collins

The committee’s primary responsibilities are:

corporate governance policy and •framework;

stakeholder engagement and •corporate communication;

succession planning for the ceO, •senior executives and directors;

workplace health and safety;•

remuneration, strategy, reviews and •setting incentive targets for the ceO and the senior executives;

employment and industrial relations •strategy and policy; and

Board, committee and director •evaluations.

Audit and Risk Management Committee (Corporate Governance Guidelines Principles 1 and 4)

The Audit and risk management committee comprises the following directors:

Karen Smith-Pomeroy (chair)

Graham carpenter (ex-officio)

Leeanne Bond

ric Barton

The committee’s primary

responsibilities are:

financial management and •

accounting practices;

the integrity of financial statements;•

business critical risk identification, •

risk management and compliance

frameworks and business continuity

strategy and plans;

compliance with regulatory and •

contractual obligations;

the internal and external audit •

effectiveness and independence;

audit plan approvals;•

the energy trading strategy and risk •

profile; and

insurance strategy and renewals. •

Business Development Committee

The Business Development committee

comprises the following directors:

John Pegler (chair)

ric Barton

Kym collins

Graham carpenter

elizabeth Jameson

The committee’s primary

responsibilities are:

corporate strategy;•

business renewal projects; and•

business processes.•

The papers and material provided to

committee members are available to all

directors. The minutes of committee

meetings are provided to the Board.

The committees are authorised, with

prior approval of the chair or the chair

Audit and risk management committee,

or company Secretary if the chair

is conflicted, to obtain independent

external professional advice at the

corporation’s expense and to secure

the attendance of external parties with

relevant experience and expertise if they

consider it necessary.

The Board and Board committee

charters are available on

Tarong energy’s website,

www.tarongenergy.com.au

Executive remuneration and

performance review (Corporate Governance Guidelines Principles 1 and 8)

each year the Board, with the assistance

of the People and Performance

committee, undertakes a formal

process of reviewing the performance

of the chief executive Officer and senior

executives. The rate of remuneration

increase for the chief executive Officer

and senior executives is determined

with regard to market salary movements

and also individual performance. At-risk

performance incentive payments for

the chief executive Officer and senior

executives are capped at 15 per cent

of total fixed remuneration, with the

amount payable tied to achievement

of pre-determined, Board approved,

corporation and individual performance

targets. The chief executive Officer is

not present at the Board meeting or

People and Performance committee

meeting when the chief executive

Officer’s own remuneration and

performance are being considered.

48 49

Further details about the chief executive Officer and senior executive remuneration (including at-risk performance incentive payments) are disclosed in the remuneration report on page 115.

Details of the remuneration paid to directors and senior executives are set out in note 30 from page 111 of this report.

Structure the Board to add value(Corporate Governance Guidelines principle 2)

The Board held 11 meetings during the period 1 July 2009 to 30 June 2010.

The table on page 61 of this report provides details of director attendance at those meetings.

The Board of Tarong energy consists of seven independent, non-executive directors. The names, qualifications and relevant skills, experience and expertise of the directors who held office during the financial year and up to the date of this report, along with their terms of appointment, are set out on pages 10 to 11.

The Board considers that individually and collectively the directors bring a level of skill, knowledge and experience that enables the Board to discharge its responsibilities effectively.

Directors are appointed by the Governor-in-council. Appointments are for a specified period.

Director induction and professional development

Tarong energy has a comprehensive

director induction program in place that includes the provision of key corporate documents, facilitation of site visits and meetings with senior executives.

The induction program is modified as required to ensure that it is appropriate for the new directors’ qualifications and experience.

To facilitate continual improvement, all directors are encouraged to participate in professional and self-development activities. Activities undertaken by directors that are in furtherance of their responsibilities to Tarong energy are paid for by the corporation.

Director independence

The Board has considered the associations of each of the directors and is of the view that all directors are independent. The basis for this decision is that no director is employed by Tarong energy or is a supplier to, or customer of, Tarong energy. in addition, no director has a relationship or contract with Tarong energy or a business or other relationship (including length of service as a director) that, in the opinion of the Board, would affect the director’s ability to act in the best interests of the corporation.

materiality thresholds used in the determination of whether a relationship is ‘material’ are detailed in the independence of Directors Policy, which is available in the corporate Governance section of the Tarong energy website, www.tarongenergy.com.au

Access to independent professional advice

Directors are entitled to seek independent professional advice on any

aspect of Tarong energy’s business at the corporation’s expense. The process for obtaining such advice requires the relevant director to consult with the chair or the chair Audit and risk management committee, or company Secretary where the chair is conflicted, to facilitate the advice.

The Board can conduct or direct any investigation to fulfil its responsibilities, and can retain, at the corporation’s expense, any legal, accounting or other services it considers necessary to perform its duties.

Access to management

each director has access to the chief executive Officer and members of the executive management Team in the event that they require additional information; and each director is encouraged to contact the company Secretary prior to a Board meeting to discuss any matters that require clarification.

Board evaluation

The Board evaluates its performance, the performance of individual directors, the chair and the Board committees at regular periods, not exceeding two years. The People and Performance committee is responsible for assessing the framework and the processes used for conducting the performance evaluations.

The objective of the performance evaluation is to:

identify areas in which the Board is •performing well;

identify areas for Board •performance improvements;

identify significant corporate •governance issues facing the Board;

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The reception area of Tarong Energy’s new office in Albert Street Brisbane.

50 51

provide a forum for directors to •discuss any governance issues;

develop a series of •recommendations to address these issues;

develop an agreed set of •action items to ensure practical improvements to the corporate governance system; and

identify director professional •development requirements.

During 2009/10, an internally facilitated Board evaluation was held. The results of the review were presented to the Board and discussed. An agreed set of action items was developed to address the issues identified. A report to Shareholders was provided on the outcomes of the Board evaluation.

promote ethical and responsible decision-making(Corporate Governance Guidelines principle 3)

Corporate Values and Code of Ethics

The corporate values and code of ethics apply to Tarong energy directors, employees and contractors. The code promotes ethical and responsible decision-making and requires high standards of honesty, integrity, fairness and equity in all aspects of employment with Tarong energy. The behaviour this fosters is integral to supporting Tarong energy’s values and governance practices.

Policies are an important part of the code of ethics and are based on the following five principles:

1. ethical Behaviour (ethical Behaviour Policy)

2. Fair Treatment (Fair Treatment Policy)

3. conflict of interest (conflict of interest and Gifts and Benefits policies)

4. confidential information (confidential information and Securities Trading policies)

5. compliance with the Law (Government Owned corporations corporate responsibility Policy).

ethical and responsible decision-making at Tarong energy is also promoted by the Whistleblower Protection Policy that is designed to support and protect employees who report non-compliant or unethical conduct by other employees. The policy formalises Tarong energy’s commitment to protecting the confidentiality and position of employees who wish to raise serious matters that affect the integrity of Tarong energy.

The corporate values and code of ethics are available on Tarong energy’s website, www.tarongenergy.com.au

Avoidance of conflicts of interest by directors

The Board is conscious of its obligation to ensure that directors avoid conflicts of interest (actual, potential or perceived) between their duties as directors of Tarong energy and their other interests and duties.

All directors are required to provide written disclosure of any actual,

potential or perceived conflicts of interest on appointment and they are required at least annually, or when relevant changes occur, to update these disclosures. The company Secretary ensures that copies of all disclosures, including updated disclosures, are provided to each other director.

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

The conflict of interest Policy is available in the corporate Governance section of the Tarong energy website, www.tarongenergy.com.au

Trading in securities

The Securities Trading Policy deals with the manner in which Tarong energy’s directors and employees can trade in securities. This policy is specifically designed to raise awareness of the prohibitions on insider trading contained within the Corporations Act 2001, to ensure Tarong energy Group personnel understand these requirements and the restrictions on trading whilst in possession of price-sensitive information and to raise awareness of directors and officers that in some circumstances, trading in securities may create an actual or potential conflict of interest.

The Securities Trading Policy is available in the corporate Governance section of the Tarong energy website, www.tarongenergy.com.au

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Safeguard integrity of financial reporting(Corporate Governance Guidelines principle 4)

The Audit and risk management committee assists the Board in overseeing the reliability and integrity of financial reporting practices, accounting policies, auditing and external reporting. The committee provides advice to the Board on financial statements, financial systems integrity and business risks. it also oversees compliance with applicable laws, regulations and corporate policies and ensures that an adequate, current internal control system is operating for areas such as business, operational, asset and financial risk.

The external audit function is performed by or on behalf of the Queensland Auditor General. Additional work is conducted as required by independent professionals.

The Audit and risk management committee consists of four members. Other directors who are not members of the committee, the auditors (internal and external) and other senior executives, attend meetings by invitation. For information on the skills, experience and expertise of the Audit and risk management committee members, please refer to pages 10 to 11 of this report. Details of the number of meetings and attendance by members at the Audit and risk management committee meetings can be found on page 61 of this report.

Make timely and balanced disclosures(Corporate Governance Guidelines principle 5)

in line with the requirements of the Government Owned Corporations Act, shareholding ministers are advised in a timely manner of all issues likely to have a significant financial, operating, employee, community or environmental impact.

Tarong energy also regularly assesses the key information requirements of its stakeholders.

Release of information publication scheme

Tarong energy is committed to routinely publishing, releasing and/or making information available to the public through its website-based publication scheme as a matter of course, unless there are good public interest reasons for not doing so. it is also committed to regularly reviewing the currency of information contained in its publication scheme.

in addition, the Board considers whether there are any matters requiring publication in respect of each and every item of business that it considers at its meetings.

Tarong energy’s publication scheme is available on the Tarong energy website, www.tarongenergy.com.au

Respect the rights of Shareholders(Corporate Governance Guidelines principle 6)

Tarong energy is committed to ensuring that its stakeholders are continually and appropriately informed of Tarong energy’s performance and activities. communication is undertaken through a number of forums. These include the following:

Statement of Corporate Intent, •Corporate Plan and quarterly reports are prepared to provide information to Shareholders and their representatives on Tarong energy’s performance against agreed targets. The Statement of corporate intent (with commercially sensitive information deleted) is published on Tarong energy’s website.

An Annual Report• that is prepared and issued to Shareholders and interested stakeholders is also published on Tarong energy’s website.

An interim report for the six •months ending 31 December providing details of Tarong energy’s performance against key financial and non financial targets is published on its website in march.

A forecast report• detailing Tarong energy’s expectation of its performance for the financial year is published on its website in July.

Briefings to Shareholders and their •representatives are conducted on a regular basis for the purpose of disclosing business activities and performance against agreed targets.

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Biannual community information •sessions, an annual Community Report and a quarterly newsletter inform the local community of activities involving Tarong energy.

Tarong Energy’s website • is a key source of information for Tarong energy’s stakeholders and the wider community.

Recognise and manage risk(Corporate Governance Guidelines principle 7)

in recognition of the linkages between governance, risk and compliance, Tarong energy has adopted an integrated governance, risk management and compliance framework. ethics and culture have been identified as the cornerstone of this integrated approach.

The objectives of this framework are to ensure that:

Tarong energy’s values, ethics and •behavioural expectations are known, clearly communicated and accepted within Tarong energy;

business strategies are understood •and Tarong energy’s people, processes and technology are aligned to support the achievement of the strategies;

risk appetites and tolerances within •the business units and across Tarong energy are appropriate and aligned with the expectations of the Board, management and stakeholders;

all significant risks have been •identified and assessed, and are actively managed;

information reported to •management, the Board and stakeholders is accurate, reliable, timely and complete; and

compliance obligations are identified •and assessed, and any exceptions are identified with corrective actions taken in a timely manner.

Tarong energy views effective risk management as key to maintaining its operational and strategic objectives. The Board has ensured, through its oversight of a system of management controls and the regular reporting to the Board and Audit and risk management committee, that Tarong energy has the ability to understand and subsequently manage its risks. reviews of Tarong energy’s business-critical risks occur periodically. From these reviews, any changes in Tarong energy’s risk profile are considered and addressed.

Tarong energy conducts a periodic business continuity exercise that is designed to provide a sound degree of resilience should Tarong energy need to respond to, and recover from, a crisis whilst continuing to maintain normal business operations.

The corporation’s internal audit function operates under the terms of the internal Audit charter. The charter is reviewed periodically by the Audit and risk management committee and formalises the purpose, role, authority, responsibilities, scope and operational framework of the internal audit function.

The effectiveness of risk management, control, performance and governance processes is subject to review by the internal Auditor. The Audit and risk management committee monitors

management’s response to these reviews. The internal audit function is independent of management, has full and free access to the Audit and risk management committee, and has full and free access to the corporation’s employees and records. The internal Auditor and representatives of the Auditor General are invited to meet with the committee without management being present. The internal Auditor reports, for administrative purposes, to the General manager corporate Governance.

When presenting financial statements for approval, the chief executive Officer and the chief Financial Officer provide a written statement to the Board to the effect that:

Tarong energy’s financial statements •and notes to the accounts comply in all material respects with the Accounting Standards and present a true and fair view, in all material respects, of the company’s financial performance;

Tarong energy’s financial statements •are founded on a sound system of risk management and internal control and the system is operating effectively in relation to financial reporting risks; and

the risk management and internal •control systems are operating effectively in relation to all material business risks for the period and that nothing has occurred since period-end that would materially change the position.

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Remunerate fairly and responsibly(Corporate Governance Guidelines principle 8)

The fees paid to directors for serving on the Board and on the committees of the Board are determined by the shareholding ministers and advised to Tarong energy.

The People and Performance committee oversees, and provides advice to the Board on, employment strategies and frameworks. it makes recommendations to the Board on enterprise Bargaining Agreements (eBA) as well as remuneration settings for non-eBA staff and the packages and other terms of employment for senior executives. When increasing senior executive remuneration or awarding incentive payments, the Board must comply with the Government Owned corporations Governance Arrangements for chief and Senior executives Appointments and remuneration.

The People and Performance committee consists of four members. Other directors who are not members of the committee and other senior executives attend meetings by invitation. For information on the skills, experience and expertise of the People and Performance committee members, please refer to pages 10 to 11 of this report. Details of the number of meetings and attendance by members at the People and Performance committee meetings can be found on page 61 of this report.

Details of the remuneration paid to directors and senior executives are set out in note 30 from page 111 of this report.

Government directions and notifications

SPOrTS AND recreATiON SPONSOrShiP POLicy

On 8 October 2009, a letter was received from The honourable Andrew Fraser mP, Treasurer and minister for employment and economic Development; and The honourable Stephen robertson mP, minister for Natural resources, mines and energy and minister for Trade, notifying Tarong energy that in accordance with section 114 of the Government Owned Corporations Act 1993, the Sports and recreation Sponsorship Policy applies to Tarong energy and, as far as practicable, its subsidiaries.

revOcATiON OF DirecTiON ThAT APPLieD The ‘AuDiT AND rePOrTiNG reQuiremeNTS FOr GOverNmeNT OWNeD cOrPOrATiON cONTrOLLeD eNTiTieS AND iNveSTmeNTS’ TO TArONG eNerGy uNDer The GOVERNMENT OWNED CORPORATIONS ACT 1993

On 4 may 2010, a letter was received from The honourable Andrew Fraser mP, Treasurer and minister for employment and economic Development; and The honourable Stephen robertson mP, minister for Natural resources, mines and energy and minister for Trade advising that they had revoked the direction that applied the Audit Policy to Tarong energy.

Modification of 2009/10 Statement of Corporate Intent

Nil

Dividend policy

Tarong energy’s Dividend Policy takes into account the return that Shareholders expect from their investment and the cash requirements of the business. On 28 April 2010, the Board of Tarong energy recommended to Shareholders a dividend amount equivalent to 80 per cent of Tarong energy’s consolidated profit after tax for the 2009/10 year.

overseas travel

Tarong energy’s chief executive Officer travelled to the united States to attend a change and organisational renewal course at harvard university. At the conclusion of the course she also met with representatives of electric Power research institute (ePri) to discuss technical issues in achieving reductions in cO2 from uS electricity emissions by 2030 and with representatives from the uS Departments of State and energy to gain a greater understanding of the industrial and community issues involved in achieving a low energy mix by 2030.

Tarong energy’s chief Scientist travelled to the united States to attend the Flow-accelerated corrosion (FAc) in Fossil and combined cycle/hrSG Plants international conference.

54 55

1 cost did not exceed $100/head at this event.

event date PurPOse / benefits tO tarOng energy cOst

christmas functions

December 2009 Approximately 500 employees participated in corporation-wide christmas functions

$33,2281

Corporate entertainment and hospitality (individual events over $5,000)

Meandu Mine’s dragline.

56

Results for the financial year ended 30 June 2010

in what has been a very challenging year for the electricity generation sector in Queensland, Tarong energy has reported a solid financial result with a profit after tax of $91.6 million (2009: $85.1 million).

Surplus generation capacity in Queensland (available installed capacity of approximately12,100 mW against peak demand of 8,891 mW2), continued market uncertainty arising from the delayed emissions trading scheme, and a relatively mild summer and winter, have all contributed to lower wholesale and contract electricity prices. The Queensland weighted average spot price was $33.30/mWh for the year ended 30 June 2010, which makes the profit result for the year even more notable.

Total sent-out generation for the financial year was 9,150 GWh (2009: 8,601 GWh). This increase is largely attributable to the acquisition of the 50 per cent of Tarong North Power Station not already owned on 30 November 2009. Further details of the acquisition are outlined below. The increase in generation volumes offset lower electricity prices resulting in an overall increase in revenue from continuing operations of $490.8 million (2009: $439.4 million), an increase of $51.4 million over the prior year.

The change in the fair value of derivative financial instruments of $99.7

million (2009: $40.3 million) was also a significant contributor to the strong profit result for the year. This unrealised gain is the result of a fall in forward electricity prices and reflects Tarong energy’s strong and active positioning in the energy contract market.

Tarong energy continued to focus on business improvements and efficiencies, which resulted in significant operating cost savings. The importance of owning meandu mine, and the flexibility and value this provides, will be important in adapting to an electricity market that requires increased responsiveness.

Tarong energy will pay a dividend of $17.4 million (2009: $45.5 million) to Shareholders, representing 80 per cent of net profit after tax, excluding mark-to-market unrealised gains.

Financial position

At 30 June 2010 Tarong energy had total debt of $449.6 million (2009: $445.0 million) and a gearing ratio, representing total debt as a percentage of total capital, of 25.5 per cent (2009: 32.8 per cent). The improvement in the gearing ratio is primarily the result of increased profitability and an equity contribution of $275.0 million from the State Government of Queensland to fund the acquisition of the remaining 50 per cent interest in Tarong North Power Station.

Net operating cash flows were $82.6 million (2009: $171.2 million). Total cash flows on investing activities were $385.3 million (2009: $163.1

million), which reflects the significant capital maintenance program and the acquisition of Tarong North Power Station.

Tarong energy has appropriate debt facilities in place through Queensland Treasury corporation to fund future capital expenditure.

Significant transactions and projects

Whilst the electricity market has proved challenging, Tarong energy has also completed a range of significant transactions and projects during the year.

The acquisition of the 50 per cent interest in Tarong North Power Station that Tarong energy did not already own will provide significant portfolio management benefits. The purchase was made from Tarong energy’s joint venture partners, The Tokyo electric Power company, incorporated and mitsui & co., Ltd.

in addition, Tarong energy finalised its long-term fuel strategy for the Tarong energy power stations with the confirmation of economically mineable coal from meandu mine until at least 2025. This supports the decision to defer the development of the Kunioon coal resource for the medium term and provides considerable fuel certainty into the future.

Tarong energy undertook an extensive plant overhaul program during the year with the completion of Tarong Power

2 Source: Australian energy market Operator.

Chief Financial officer’s Report

56

Station’s unit 2 and unit 4 overhauls, a Tarong North Power Station overhaul, and the planning and initiation of the overhauls of Wivenhoe Power Station’s unit 1 and Tarong Power Station’s unit 3. The Tarong Power Station overhauls also involved the upgrade of unit control systems, the installation of low NOx burners and the development and commissioning of the ash to mine void pipeline to support long-term ash management.

Tarong energy invested in upgrades to its mine fleet to improve efficiencies at the mine and ultimately lower production costs. During the year, the mine fleet replacement program commenced with the delivery of a new 350 tonne excavator and five 220 tonne dump trucks.

the future

Tarong energy operates in a challenging environment where there is a significant oversupply of generating capacity in the Queensland electricity market and Federal Government policy in relation to an emissions trading scheme remains uncertain. We will continue to invest in the safety and development of our people and optimise our assets to capitalise on market opportunities that maximise value to our Shareholders.

Tarong energy remains committed to being a competitive and safe provider of reliable and efficient energy solutions for the people of Queensland. We are investigating a number of projects to adapt to a future carbon-constrained world, whilst

ensuring that we maintain security of supply and a commercial focus.

Tarong energy has a long-term economic fuel source, a portfolio of reliable and well maintained generation assets and a dedicated, skilled workforce to deliver our future business objectives. We are well placed to face the challenges that lie ahead.

Richard Van Breda chief Financial Officer

57

58

Wivenhoe Dam.

Financial Statements

for the year ended 30 June 2010

Directors’ report 60

Auditor’s Independence Declaration 63

Statements of comprehensive income 64

Balance sheets 65

Statements of changes in equity 66

Cash flow statements 68

Notes to the financial statements 69

1 Summary of significant accounting policies 69

2 financial risk management 79

3 Critical accounting estimates and judgements 86

4 revenue 86

5 other income 87

6 expenses 87

7 Income tax expense 88

8 Current assets ‑ Cash and cash equivalents 89

9 Current assets ‑ trade and other receivables 89

10 Current assets ‑ Inventories 90

11 Current assets ‑ other current assets 90

12 derivative financial instruments 91

13 non‑current assets ‑ trade and other receivables 92

14 non‑current assets ‑ Property, plant and equipment 93

15 non‑current assets ‑ exploration and evaluation 97

16 non‑current assets ‑ deferred tax assets 97

17 non‑current assets ‑ Intangible assets 98

18 non‑current assets ‑ other non‑current assets 99

19 Current liabilities ‑ trade and other payables 100

20 Current liabilities ‑ Borrowings 100

21 Current liabilities ‑ Provisions 100

22 Current liabilities ‑ other current liabilities 101

23 non‑current liabilities ‑ Borrowings 101

24 non‑current liabilities ‑ deferred tax liabilities 103

25 non‑current liabilities ‑ Provisions 104

26 non‑current liabilities ‑ retirement benefit obligations 105

27 Contributed equity 108

28 reserves and retained earnings 110

29 dividends 111

30 Key management personnel disclosures 111

31 employee benefits 117

32 remuneration of auditors 119

33 Contingencies 119

34 Commitments 120

35 related party transactions 121

36 Business combination 122

37 Subsidiaries and associates 124

38 deed of cross guarantee 124

39 Interests in joint ventures 125

40 economic dependency 126

41 events occurring after the reporting period 126

42 reconciliation of profit after income tax to net cash inflow from operating activities 127

Directors’ declaration 128Independent Auditor’s Report 129

59

Directors’ report

the directors present their report together with the financial report of tarong energy Corporation Limited (“Corporation” or “Parent entity”)

and of the economic entity, being the Corporation and its subsidiaries, and the Corporation’s interest in joint ventures for the financial year

ended 30 June 2010 and the auditor’s report thereon.

Directors

details of the directors’ period of appointment, their qualifications, experience and special responsibilities are detailed in the annual

report.

the following persons were directors of tarong energy Corporation Limited during the whole of the financial year and up to the date of

this report:

Mr G J Carpenter

Mr r a Barton

Ms L K Bond

Ms K L Collins

Ms e M Jameson

Mr J h Pegler

Ms K e Smith‑Pomeroy

Principal activities

the principal activity of the economic entity during the year was the generation and sale of electricity and the operation and development

of coal mining assets in support of its principal activity.

Trading results

Consolidated Parent Entity

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Profit before income tax 128,570 118,509 136,377 93,939

Profit after income tax 91,552 85,103 97,198 67,495

Profit attributable to members of the economic entity 91,552 85,103 97,198 67,495

Dividends ‑ Tarong Energy Corporation Limited

In accordance with the Government Owned Corporations Act 1993, the following dividends of the economic entity have been paid or

declared since the end of the preceding financial year:

$’000

final dividend for 2008/09 declared in previous year, paid 31 december 2009 45,541

final dividend for 2009/10 provided for in this report 17,401

Review of operations

Information on the operations of the economic entity and the results of such operations are detailed in the annual report.

60 61

Directors’ report30 June 2010

Significant changes in the state of affairs

Acquisition of additional 50% interest in Tarong North Power Station

on 30 november 2009 tn Power Pty Ltd (tn Power), a subsidiary of the Corporation, obtained control of tarong north Power Station, a

single unit 443 megawatt supercritical coal‑fired power station, located adjacent to tarong Power Station in the Wide Bay Burnett region.

Prior to the acquisition the tarong north Power Station was operated as an unincorporated joint venture whose participants were tn

Power (50% interest) and tM energy (australia) Pty Ltd. the unit utilises advanced supercritical boiler technology making it one of the

most emissions‑efficient coal‑fired power stations in australia. the acquisition will enable the Corporation to better manage market risks

and provide increased flexibility in dispatch of its generation portfolio.

Matters subsequent to the end of the financial year

no matter or circumstance has arisen since 30 June 2010 that has significantly affected, or may significantly affect:

(a) the economic entity’s operations in future financial years;

(b) the results of those operations in future financial years; or

(c) the economic entity’s state of affairs in future financial years.

Likely developments

an outline of the likely developments in the economic entity’s operations is included throughout the annual report.

Environmental regulation

the economic entity’s operations are subject to significant environmental regulation under both Commonwealth and State legislation.

the primary environmental legislation governing the economic entity’s activities in Queensland is the Environmental Protection Act 1994.

the economic entity undertakes a number of systematic processes to manage its environmental activities. these systems include

line management environmental responsibilities for day‑to‑day activities, specialist environmental personnel providing environmental

advice and monitoring compliance, and a reporting regime which involves the Chief executive officer providing monthly environmental

performance reports to the Board. the directors are not aware of any significant breaches of environmental regulation occurring during

the period covered by this report. further information relating to environmental matters is contained within the annual report.

Meetings of directors

the number of directors’ meetings held, and the number attended by each of the directors of tarong energy Corporation Limited during

the period 1 July 2009 to 30 June 2010 are detailed in the table below:

Full meetings of directors

Meetings of committees

People and Performance

Audit and Risk Management

Business DevelopmentD

a B a B a B a B

Mr G J CarpenterC 11 11 5 5 5 5 5 5

Mr r a Barton 11 10 ‑ ‑ 5 5 3 3

Ms L K Bond 11 11 3 3 3 2 2 2

Ms K L Collins 11 11 5 5 2 2 3 3

Ms e M Jameson 11 9 5 5 ‑ ‑ 5 3

Mr J h Pegler 11 11 ‑ ‑ ‑ ‑ 5 5

Ms K e Smith‑Pomeroy 11 10 ‑ ‑ 5 5 ‑ ‑

a = number of meetings held during the time the director held office or was a member of the committee.B = number of meetings attended.C = Mr G J Carpenter is an ex‑officio member of the audit and risk Management Committee.d = the Strategy and Business development Committee was renamed Business development Committee on 3 february 2010.

60 61

Directors’ report (continued)

Directors’ report (continued)

62 63

Indemnification and insurance of officers

In accordance with the Constitution of the economic entity, the economic entity has entered into a standard form deed of access,

insurance and indemnity with the current directors of the economic entity to indemnify them to the maximum extent permitted by law

against all liabilities which they may incur in the performance of their duties as directors of the economic entity, except a liability for a

pecuniary penalty order or compensation order under the Corporations Act 2001.

the indemnity is made available to current and former directors of the economic entity for a period of seven years from the date of their

resignation. to the extent permitted by law the indemnity covers liability for legal costs.

In accordance with the standard form deed of access, insurance and indemnity referred to above, the economic entity has, during the

financial year ended 30 June 2010, paid an insurance premium in respect of the directors and executive officers of the economic entity.

In accordance with normal commercial practice, the insurance contract prohibits disclosure of the nature or the liability covered by, or the

amount payable under, the contract of insurance.

no claims have been made by any director or officer of the economic entity pursuant to these indemnities.

Auditor’s independence declaration

a copy of the auditor’s independence declaration, as required under section 307C of the Corporations Act 2001, is set out on page 63.

Rounding of amounts

the Corporation is of a kind referred to in Class order 98/100, issued by the australian Securities and Investments Commission, relating

to the ‘’rounding off’’ of amounts in the directors’ report. amounts in the directors’ report have been rounded off in accordance with that

Class order to the nearest thousand dollars, unless otherwise stated.

Auditor

the Queensland audit office continues in office in accordance with section 327 of the Corporations Act 2001.

this report is made in accordance with a resolution of directors.

Mr G J Carpenter Ms K e Smith‑Pomeroy

director director

Brisbane

17 august 2010

62 63

Auditor’s Independence Declaration30 June 2010

Auditor’s Independence Declaration

to the directors of tarong energy Corporation Limited

this audit independence declaration has been provided pursuant to section 307C of the Corporations Act 2001.

Independence Declaration

as lead auditor for the audit of tarong energy Corporation Limited for the year ended 30 June 2010, 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.

this declaration is in respect of tarong energy Corporation Limited and the entities it controlled during the period.

J f adams

delegate of the auditor‑General of Queensland

17 august 2010

Queensland audit office

Brisbane

64 65


2010 2009 2010 2009

notes $’000 $’000 $’000 $’000

Revenue 4 497,202 448,244 439,126 396,260

other income 5 21,787 33,521 6,652 4,254

Change in fair value of derivative instruments that do not qualify

for hedge accounting99,715 40,252 98,758 40,209

Changes in inventory/deferred stripping 1,290 13,123 ‑ ‑

reversal of impairment loss 14 6,711 ‑ ‑ ‑

fuel costs (143,412) (123,427) (120,194) (95,583)

depreciation and amortisation expense 6 (92,203) (88,527) (70,022) (70,593)

employee benefits expense (68,213) (70,999) (66,115) (69,127)

raw materials and consumables used (39,752) (33,882) (26,281) (25,314)

Services (26,957) (23,422) (18,656) (20,581)

Purchases of electricity (22,414) ‑ (22,414) ‑

Cost to terminate contractual obligations 36 (18,875) ‑ (18,875) ‑

transmission systems costs (15,422) (2,920) (14,809) (2,543)

other expenses (40,291) (38,495) (23,682) (36,679)

finance costs 6 (30,596) (34,959) (27,111) (26,364)

Profit before income tax 128,570 118,509 136,377 93,939

Income tax expense 7 (37,018) (33,406) (39,179) (26,444)

Profit for the year 91,552 85,103 97,198 67,495

Other comprehensive income

effective portion of changes in fair value of cash flow hedges 177,933 126,708 177,933 126,708

net change in fair value of cash flow hedges transferred to profit

and loss(107,755) 85,416 (107,755) 85,416

defined benefit plan actuarial gains/(losses) 2,586 (8,278) 2,586 (8,278)

Income tax relating to components of other comprehensive

income(21,828) (61,014) (21,828) (61,014)

Other comprehensive income for the year, net of tax 50,936 142,832 50,936 142,832

Total comprehensive income for the year 142,488 227,935 148,134 210,327

Profit for the year is attributable to:

owners of tarong energy Corporation Limited 91,552 85,103 97,198 67,495

total comprehensive income for the year is attributable to:

owners of tarong energy Corporation Limited 142,488 227,935 148,134 210,327

The above statements of comprehensive income should be read in conjunction with the accompanying notes.

Statements of comprehensive incomeFor the year ended 30 June 2010

64 65

Balance sheetsAs at 30 June 2010


2010 2009 2010 2009

notes $’000 $’000 $’000 $’000

ASSETS

Current assets

Cash and cash equivalents 8 9,983 78,661 9,927 78,185

trade and other receivables 9 97,226 88,588 75,374 72,287

Inventories 10 81,314 75,011 69,121 57,450

Current tax receivables 6,505 ‑ 6,505 ‑

other current assets 11 56,351 29,695 217 ‑

derivative financial instruments 12 194,996 106,104 194,996 106,104

total current assets 446,375 378,059 356,140 314,026

Non‑current assets

trade and other receivables 13 ‑ 5,059 566,793 312,013


Property, plant and equipment 14 1,705,880 1,422,044 1,219,992 1,172,157

exploration and evaluation 15 49,476 49,476 49,476 49,476

Intangible assets 17 111,491 66,822 ‑ ‑

other non‑current assets 18 12,728 28,875 1,756 ‑

total non‑current assets 2,121,161 1,709,445 2,079,603 1,670,815

Total assets 2,567,536 2,087,504 2,435,743 1,984,841

LIABILITIES

Current liabilities

trade and other payables 19 78,359 78,615 44,012 69,507

Borrowings 20 28,656 ‑ 28,656 ‑


Current tax liabilities ‑ 2,448 ‑ 2,448

Provisions 21 51,265 67,268 41,749 66,162

other current liabilities 22 4,953 1,178 1,331 295

total current liabilities 242,634 219,658 195,149 208,561

Non‑current liabilities

Borrowings 23 420,911 445,009 420,911 445,009

deferred tax liabilities 24 359,723 301,233 336,290 292,989

Provisions 25 162,923 155,055 95,169 70,500

retirement benefit obligations 26 19 3,091 19 3,091


other non‑current liabilities 2,092 ‑ 2,092 ‑

total non‑current liabilities 1,011,366 954,397 920,179 861,598

Total liabilities 1,254,000 1,174,055 1,115,328 1,070,159

Net assets 1,313,536 913,449 1,320,415 914,682

EQUITY

Contributed equity 27 986,965 711,965 986,965 711,965

reserves 28(a) 142,976 93,850 142,976 93,850

retained earnings 28(b) 183,595 107,634 190,474 108,867

Total equity 1,313,536 913,449 1,320,415 914,682

The above balance sheets should be read in conjunction with the accompanying notes.

66 67

ConsolidatedContributed

equityReserves

Retained earnings

Total equity

notes $’000 $’000 $’000 $’000

Balance as at 1 July 2008 711,965 (54,637) 73,727 731,055

Total comprehensive income for the year

Profit for year 28(b) ‑ ‑ 85,103 85,103

effective portion of changes in fair value of cash flow

hedges, net of tax28(a) ‑ 88,696 ‑ 88,696

net change in fair value of cash flow hedges transferred to

profit and loss, net of tax28(a) ‑ 59,791 ‑ 59,791

defined benefit plan actuarial (losses) net of tax 28(b) ‑ ‑ (5,655) (5,655)

Total comprehensive income for the year ‑ 148,487 79,448 227,935

Transactions with equity holders in their capacity as

equity holders:

Contributions of equity net of transaction costs 27 ‑ ‑ ‑ ‑

dividends provided for or paid 29 ‑ ‑ (45,541) (45,541)

Balance as at 30 June 2009 711,965 93,850 107,634 913,449

Balance as at 1 July 2009 711,965 93,850 107,634 913,449


Profit for year 28(b) ‑ ‑ 91,552 91,552

effective portion of changes in fair value of cash flow

hedges, net of tax28(a) ‑ 124,554 ‑ 124,554


profit and loss, net of tax28(a) ‑ (75,428) ‑ (75,428)

defined benefit plan actuarial gains, net of tax 28(b) ‑ ‑ 1,810 1,810


Transactions with equity holders in their capacity

as equity holders:

Contributions of equity, net of transaction costs and tax 27 275,000 ‑ ‑ 275,000


Balance as at 30 June 2010 986,965 142,976 183,595 1,313,536

The above statements of changes in equity should be read in conjunction with the accompanying notes.

Statements of changes in equityFor the year ended 30 June 2010

66 67

Parent Ordinary shares Reserves Retained

earnings Total equity

notes $’000 $’000 $’000 $’000

Balance as at 1 July 2008 711,965 (54,637) 92,568 749,896


Profit for year 28(b) ‑ ‑ 67,495 67,495

effective portion of changes in fair value of cash flow hedges,

net of tax28(a) ‑ 88,696 ‑ 88,696


profit and loss, net of tax28(a) ‑ 59,791 ‑ 59,791

defined benefit plan actuarial (losses) net of tax 28(b) ‑ ‑ (5,655) (5,655)



equity holders:

Contributions of equity, net of transaction costs 27 ‑ ‑ ‑ ‑


Balance as at 30 June 2009 711,965 93,850 108,867 914,682

Balance as at 1 July 2009 711,965 93,850 108,867 914,682


Profit for year 28(b) ‑ ‑ 97,198 97,198

effective portion of changes in fair value of cash flow hedges,

net of tax28(a) ‑ 124,554 ‑ 124,554


profit and loss, net of tax28(a) ‑ (75,428) ‑ (75,428)

defined benefit plan actuarial gains, net of tax 28(b) ‑ ‑ 1,810 1,810



equity holders:

Contributions of equity, net of transaction costs and tax 27 275,000 ‑ ‑ 275,000


Balance as at 30 June 2010 986,965 142,976 190,474 1,320,415

The above statements of changes in equity should be read in conjunction with the accompanying notes.

Statements of changes in equity (continued)For the year ended 30 June 2010

68 69


2010 2009 2010 2009

notes $’000 $’000 $’000 $’000

Cash flows from operating activities

receipts from customers (inclusive of goods and services tax) 539,623 514,065 478,417 432,503

Payments to suppliers and employees (inclusive of goods and

services tax)(407,637) (329,349) (355,644) (275,953)

Cash generated from operations 131,986 184,716 122,773 156,550

Payment to terminate contractual obligations (18,875) ‑ (18,875) ‑

Interest received 2,296 4,505 2,431 4,489

Interest paid (24,632) (22,372) (24,633) (19,965)

Income taxes (paid)/received (8,175) 4,395 (8,175) 4,395

Net cash inflow from operating activities 42 82,600 171,244 73,521 145,469

Cash flows from investing activities

Payment for the acquisition of a subsidiary, net of cash acquired 36 (253,462) ‑ ‑ ‑

Payments for property, plant and equipment (131,869) (147,000) (100,738) (127,586)

Interest payments capitalised (5,032) (8,299) (2,688) (3,910)

Payments for exploration and evaluation expenditure ‑ (1,832) ‑ (1,832)

Loans repaid by/(provided to) associated entities 5,059 (6,231) (272,379) (4,225)

Proceeds from sale of property, plant and equipment 9 289 9 18

Net cash outflow from investing activities (385,295) (163,073) (375,796) (137,535)

Cash flows from financing activities

equity contribution 275,000 ‑ 275,000 ‑

Proceeds from borrowings 4,558 51,898 4,558 51,898

dividends paid to the Corporation’s shareholders (45,541) (50,750) (45,541) (50,750)

Net cash inflow from financing activities 234,017 1,148 234,017 1,148

Net (decrease)/increase in cash and cash equivalents (68,678) 9,319 (68,258) 9,082

Cash and cash equivalents at the beginning of the financial year 78,661 69,342 78,185 69,103

Cash and cash equivalents at end of year 8 9,983 78,661 9,927 78,185

The above cash flow statements should be read in conjunction with the accompanying notes.

Cash flow statementsFor the year ended 30 June 2010

68 69

Notes to the financial statementsFor the year ended 30 June 2010

1 Summary of significant accounting policies

the principal accounting policies adopted in the preparation

of these financial statements are set out below. these

policies have been consistently applied to all the years

presented, unless otherwise stated. the financial statements

include separate financial statements for tarong energy

Corporation Limited as an individual entity and the

consolidated entity consisting of tarong energy Corporation

Limited and its subsidiaries (together referred to as the

“economic entity”).

(a) Basis of preparation

the financial report is a general purpose financial report

which has been prepared in accordance with australian

accounting Standards (aaSBs) (including australian

Interpretations) adopted by the australian accounting

Standards Board (aaSB) and the Corporations Act 2001.

the consolidated financial report of the economic entity

and the financial report of the Corporation comply with

International financial reporting Standards (IfrSs) and

interpretations adopted by the International accounting

Standards Board (IaSB).

Date of issue

the consolidated financial statements were authorised for

issue by the Board of directors on 17 august 2010.

Historical cost convention

these 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 estimates

the preparation of financial statements in conformity with

australian accounting Standards (aaSBs) requires the use

of certain critical accounting estimates. It also requires

management to exercise its judgement in the process of

applying the economic entity’s accounting policies. the

areas involving a higher degree of judgement or complexity,

or areas where assumptions and estimates are significant to

the financial statements are disclosed in note 3.

Rounding of amounts

the Corporation is of a kind referred to in Class order

98/100, issued by the australian Securities and Investments

Commission, relating to the ‘’rounding off’’ 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, to the

nearest dollar.

(b) Principles of consolidation

Subsidiaries

the consolidated financial statements incorporate the

assets and liabilities of all subsidiaries of tarong energy

Corporation Limited as at 30 June 2010 and the results

of all subsidiaries for the year then ended. tarong energy

Corporation Limited and its subsidiaries together are referred

to in this financial report as the economic entity.

Subsidiaries are all those entities (including special purpose

entities) over which the economic entity 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 economic entity

controls another entity.

Subsidiaries are consolidated from the date on which

control is transferred to the economic entity. they are

de‑consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains

on transactions between economic entity companies are

eliminated. unrealised losses are also eliminated unless the

transaction provides evidence of the impairment of the asset

transferred. accounting policies of subsidiaries have been

changed where necessary to ensure consistency with the

policies adopted by the economic entity.

Investments in subsidiaries are accounted for at cost in

the individual financial statements of tarong energy

Corporation Limited.

Joint ventures

the 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 translation

Functional and presentation currency

Items included in the financial statements of each of the

economic entity’s entities are measured using the currency

of the primary economic environment in which the entity

operates (‘the functional currency’). the consolidated

financial statements are presented in australian dollars,

which is tarong energy Corporation Limited’s functional and

presentation currency.

70 71

1 Summary of significant accounting policies (continued)

(c) Foreign currency translation (continued)

Transactions and balances

foreign currency transactions are translated into the

functional currency using the exchange rates prevailing at

the dates of the transactions. foreign exchange gains and

losses resulting from the settlement of such transactions and

from the translation at year end exchange rates of monetary

assets and liabilities denominated in foreign currencies are

recognised in the profit and loss, except when they are

deferred in equity as qualifying cash flow hedges.

(d) Revenue recognition

revenue is measured at the fair value of the consideration

received or receivable. amounts disclosed as revenue are

net of returns, trade allowances and duties and taxes paid.

revenue is recognised for the major business activities

as follows:

Sales revenue

revenue from the sale of electricity traded in the national

electricity Market (neM) is recognised when the electricity

generated has been dispatched. the revenue is based

on spot prices for the products and is calculated by the

australian energy Market operator (aeMo), the body

responsible for administering and operating the wholesale

spot electricity market and managing the security of the

power system. electricity revenue also includes the effective

portion of the fair value of electricity derivative contracts

designated as cash flow hedges.

the economic entity further diversified its portfolio by

implementing a retail channel to market strategy during the

period ended 30 June 2010. revenue from retail contracts

is calculated based on the terms of the individual contracts

and is recognised when the electricity is consumed by the

counterparty.

energy services revenue is received in relation to the

recharge of transmission and other operating costs directly

attributable to retail operations and is recognised when the

electricity is consumed by the counterparty.

the economic entity is involved in various environmental

certificate schemes. It holds renewable energy Certificates

(reCs) and Gas electricity Certificates (GeCs) to meet

its environmental obligations and for trading purposes.

for reCs and GeCs held for trading purposes, revenue is

recognised when the sale of certificates occurs.

the economic entity also holds new South Wales (nSW)

Greenhouse abatement Certificates (nGaCs) which have

been acquired or created immediately upon registration

with the Independent Pricing and regulatory tribunal of

nSW. one nGaC represents the abatement of one tonne of

carbon dioxide equivalent associated with the consumption

of electricity in nSW. nGaCs are held for trading purposes

with revenue being recognised when the sale of certificates

actually occurs.

Interest revenue

Interest revenue is recognised as it accrues using the

effective interest rate method.

Sale of by‑product

revenue from by‑product sales is recognised when the

goods are provided to the customer, the customer has

accepted the goods and collection of the related receivable

is probable.

Other revenue

other revenue is recognised when the goods are provided

or when the fee in respect of services provided is receivable.

(e) Income tax

Income tax expense comprises current and deferred tax.

Income tax expense is recognised in the profit and loss

except to the extent that it relates to items recognised

directly in equity, in which case it is recognised in other

comprehensive income.

Current tax is the expected tax payable on the taxable

income for the year, using tax rates enacted or substantially

enacted at the reporting date, and any adjustment to tax

payable in respect of previous years.

deferred tax is recognised using the balance sheet method.

deferred tax 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 the tax rate which is enacted or substantively

enacted. 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

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.

Notes to the financial statements (continued)For the year ended 30 June 2010

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(e) Income tax (continued)

deferred tax 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 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 assets and liabilities are offset when there is

a legally enforceable right to offset current tax assets and

liabilities and when the deferred tax balances relate to the

same taxation authority. Current tax 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 balances attributable to amounts

recognised directly in equity are also recognised directly

in equity.

Tax consolidation

tarong energy Corporation Limited and its wholly‑owned

australian controlled entities are part of a tax consolidated

group under the tax consolidation legislation as of

1 July 2003.

the head entity, tarong energy Corporation Limited, and the

controlled entities in the tax consolidated group continue

to account for their own current and deferred tax amounts.

these tax amounts are measured as if each entity in the tax

consolidated group continues to be a stand alone taxpayer

in its own right.

In addition to its own current and deferred tax amounts,

tarong energy Corporation Limited also recognises the

current tax liabilities (or assets) and the deferred tax assets

arising from unused tax losses assumed from controlled

entities in the tax consolidated group as disclosed in note 7.

assets or liabilities arising under tax funding agreements

with the tax consolidated entities are recognised as amounts

receivable from or payable to other entities in the group.

details about the tax funding agreement are disclosed in

note 7.

(f) Leases

Leases of property, plant and equipment where the

economic entity, as lessee, has substantially all the risks

and rewards of ownership are classified as finance leases.

finance leases are capitalised at the lease’s inception at

the fair value of the leased property or, if lower, the present

value of the minimum lease payments. the corresponding

rental obligations, net of finance charges, are included

in other short‑term and long‑term payables. each lease

payment is allocated between the liability and finance cost.

the finance cost is charged to the profit and loss 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 are depreciated over the shorter of the

asset’s useful life and the lease term. the economic entity

does not currently have any finance leases.

Leases in which a significant portion of the risks and

rewards of ownership are not transferred to the economic

entity as lessee are classified as operating leases (note

34). Payments made under operating leases (net of any

incentives received from the lessor) are charged to the profit

and loss on a straight‑line basis over the period of the lease.

(g) Business combinations

the economic entity has adopted revised aaSB 3

Business Combinations (2008) and amended aaSB 127

Consolidated and Separate Financial Statements (2008)

for business combinations occurring in the financial year

starting 1 July 2009. all business combinations occurring

on or after 1 July 2009 are accounted for by applying the

acquisition method. the change in accounting policy is

applied prospectively and had no impact on comparative

information presented in this financial report.

the economic entity has applied the acquisition method for

the business combination disclosed in note 36.

for every business combination, the economic entity

identifies the acquirer, which is the combining entity

that obtains control of the other combining entities or

businesses. Control is the power to govern the financial

and operating policies of an entity so as to obtain benefits

from its activities. In assessing control, the economic entity

takes into consideration potential voting rights that currently

are exercisable. the acquisition date is the date on which

control is transferred to the acquirer. Judgement is applied in

determining the acquisition date and determining whether

control is transferred from one party to another.


72 73


(g) Business combinations (continued)

Measuring goodwill

the economic entity measures goodwill as the fair value

of the consideration transferred including the recognised

amount of any non‑controlling interest in the acquiree,

less the net recognised amount (generally fair value) of

the identifiable assets acquired and liabilities assumed, all

measured as of the acquisition date.

Consideration transferred includes the fair values of the

assets transferred, liabilities incurred by the economic entity

to the previous owners of the acquiree, and equity interests

issued by the economic entity. Consideration transferred

also includes the fair value of any contingent consideration

and share‑based payment awards of the acquiree that

are replaced mandatorily in the business combination.

If a business combination results in the termination of

pre‑existing relationships between the economic entity and

the acquiree, then the lower of the termination amount, as

contained in the agreement, and the value of the off‑market

element is deducted from the consideration transferred and

recognised in other expenses.

Contingent liabilities

a contingent liability of the acquiree is assumed in a

business combination only if such a liability represents a

present obligation and arises from a past event, and its fair

value can be measured reliably.

Non‑controlling interest

the economic entity measures any non‑controlling interest

at its proportionate interest in the identifiable net assets of

the acquiree.

Transaction costs

transaction costs that the economic entity incurs in

connection with a business combination, such as finder’s

fees, legal fees, due diligence fees, and other professional

and consulting fees, are expensed as incurred.

(h) Impairment of assets

Financial assets ‑ including receivables

an impairment loss in respect of a financial asset measured

at amortised cost is calculated as the difference between

its carrying amount and the present value of the estimated

future cash flows discounted at the asset’s original effective

interest rate. Losses are recognised in the statement of

comprehensive income and reflected in an allowance

account against receivables.

Non‑financial assets

the carrying amounts of the economic entity’s non‑financial

assets, other than inventories and deferred tax assets, are

reviewed at each reporting date to determine whether

there is any indication of impairment. If any such indication

exists, then the asset’s recoverable amount is estimated. for

goodwill, and intangible assets that have indefinite useful

lives or that are not yet available for use, the recoverable

amount is estimated each year at the same time.

the recoverable amount of an asset or cash‑generating unit

is the greater of its value in use and its fair value less costs

to sell. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre‑tax

discount rate that reflects current market assessments of

the time value of money and the risks specific to the asset.

for the purpose of impairment testing, assets that cannot

be tested individually are grouped together into the smallest

group of assets that generates cash inflows from continuing

use that are largely independent of the cash inflows of

other assets or groups of assets (the “cash‑generating

unit”). Subject to an operating segment ceiling test, for the

purposes of goodwill impairment testing, cash‑generating

units to which goodwill has been allocated are aggregated

so that the level at which impairment is tested reflects the

lowest level at which goodwill is monitored for internal

reporting purposes. Goodwill acquired in a business

combination is allocated to groups of cash‑generating units

that are expected to benefit from the synergies of the

combination.

the economic entity’s corporate assets do not generate

separate cash inflows. If there is an indication that a

corporate asset may be impaired, then the recoverable

amount is determined for the cash‑generating unit to which

the corporate asset belongs.

an impairment loss is recognised if the carrying amount of

an asset or its cash‑generating unit exceeds its estimated

recoverable amount. Impairment losses are recognised in

the profit and loss. Impairment losses recognised in respect

of cash‑generating units are allocated first to reduce the

carrying amount of any goodwill allocated to the units, and

then to reduce the carrying amounts of the other assets in

the unit (group of units) on a pro rata basis.


72 73



(h) Impairment of assets (continued)

an impairment loss in respect of goodwill is not reversed.

In respect of other assets, impairment losses recognised

in prior periods are assessed at each reporting date for

any indications that the loss has decreased or no longer

exists. an impairment loss is reversed if there has been a

change in the estimates used to determine the recoverable

amount. an impairment loss is reversed only to the extent

that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net of

depreciation or amortisation, if no impairment loss had

been recognised.

(i) Cash and cash equivalents

for the purpose of presentation in the cash flow statements,

cash 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 in the

balance sheets.

(j) Trade receivables

trade receivables are recognised initially at fair value

and subsequently measured at amortised cost using the

effective interest method, less provision for impairment.

trade receivables are generally due for settlement within

30 days.

(k) Inventories

Raw materials and fuel

fuel and stores are stated at the lower of cost and net

realisable value. Cost for raw materials, stores and fuel is

their purchase price and for partly processed and saleable

products is generally the cost of production. for this

purpose, the cost of production includes direct materials,

direct labour and an appropriate proportion of variable and

fixed overhead expenditure, the latter being allocated on

the basis of normal operating capacity. Costs are assigned

to individual items of inventory on the basis of weighted

average costs.

net realisable value is the estimated selling price in the

ordinary course of business less the estimated costs of

completion and the estimated costs necessary to make

the sale.

Work in progress inventory relates to stocks of raw and

crushed coal not in a form ready for consumption.

Quantities are assessed through monthly surveys.

Environmental certificates

the Corporation is subject to various regulatory

environmental schemes and as such accrues environmental

liabilities as part of its general business operations. to meet

these liabilities, the Corporation acquires environmental

certificates on the wholesale market and surrenders these

to the scheme administrators annually. the Corporation

currently holds reCs, GeCs and nGaCs and these are

recognised at fair value through the profit and loss. fair value

is determined by reference to observable market prices for

such certificates at balance date.

(l) Derivatives and hedging activities

derivatives are initially recognised at fair value on the date

a derivative contract is entered into and are subsequently

remeasured to their fair value at each reporting date. the

method of recognising the resulting gain or loss depends

on whether the derivative is designated as a hedging

instrument, and if so, the nature of the item being hedged.

the economic entity designates certain derivatives as either;

(1) hedges of the fair value of recognised assets or liabilities

or a firm commitment (fair value hedge); or (2) hedges of

highly probable forecast transactions (cash flow hedges).

at the inception of the transaction, the economic entity

documents the relationship between hedging instruments

and hedged items, as well as its risk management objective

and strategy for undertaking various hedge transactions. the

economic entity 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 28.

the full fair value of a hedging derivative is classified as a

non‑current asset or liability when the remaining maturity

of the hedged item is more than 12 months; it is classified

as a current asset or liability when the remaining maturity of

the hedged item is less than 12 months.

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(l) Derivatives and hedging activities (continued)

Cash flow hedge

the effective portion of changes in the fair value of

derivatives that are designated and qualify as cash flow

hedges is recognised in profit and loss and accumulated in

reserves in equity. the gain or loss relating to the ineffective

portion is recognised immediately in profit and loss within

other income or other expense.

amounts accumulated in equity are reclassified to profit

and loss in the periods when the hedged item affects profit

and loss (for instance when the forecast sale that is hedged

takes place). the gain or loss is recognised in profit and

loss within sales. however, when the forecast transaction

that is hedged results in the recognition of a non‑financial

asset (for example, inventory) 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. the deferred

amounts are ultimately recognised in profit and loss as cost

of goods sold in the case of inventory, or as depreciation in

the case of fixed assets.

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 profit

or loss. 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 that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge

accounting. Changes in the fair value of any derivative

instrument that do not qualify for hedge accounting are

recognised immediately in the profit and loss as “Changes in

the fair value of derivative instruments that do not qualify for

hedge accounting”.

(m) Deferred stripping costs

Stripping costs comprise the removal of overburden

and other waste products from a mine. Stripping costs

incurred in the development of a mine before production

commences are capitalised as part of the cost of

constructing the mine and are subsequently amortised over

the life of the operation.

Stripping costs incurred during the production stage of

a mine are deferred when this is considered the most

appropriate basis for matching the costs against the related

economic benefits. the amount of stripping costs deferred

is based on the ratio obtained by dividing the amount of

waste mined by the amount of coal mined. Stripping costs

incurred in the period are deferred to the extent that the

stripping ratio for the current period exceeds the expected

stripping ratio for the area or block subject to mining activity

during the period. Such deferred costs are then charged

to the profit and loss in subsequent periods to the extent

that the current period stripping ratio falls below the block

stripping ratio. the block stripping ratio is calculated based

on proven and probable reserves. any changes to the block

stripping ratio are accounted for prospectively.

deferred stripping costs are included in “other current

assets” and “other non‑current assets”. these form part of

the total investment in the relevant cash generating unit,

which is reviewed for impairment if events or changes in

circumstances indicate that the carrying value may not be

recoverable.

(n) Property, plant and equipment

Property, plant and equipment are stated at historical cost

less accumulated depreciation and accumulated impairment

charges. historical cost includes expenditure that is directly

attributable to the acquisition of the items. Cost may also

include the costs of dismantling and removing the items

and restoring the site on which they are located, capitalised

borrowing costs and transfers from other comprehensive

income of any gains or losses on qualifying cash flow

hedges of foreign currency purchases of property, plant

and equipment.

Subsequent costs of replacing part of an item of property,

plant and equipment 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 economic entity

and the cost of the item can be measured reliably. the

carrying amount of the replaced asset is derecognised.

the costs of day‑to‑day servicing of property, plant and

equipment are recognised in the profit and loss as incurred.

the economic entity has established a program of major

overhauls providing cyclical maintenance works on the

operating assets. Capitalised overhaul expenditure is

depreciated over the period in which the economic entity

expects to derive the benefits of the overhaul.


74 75



(n) Property, plant and equipment (continued)

Depreciation

depreciation is recorded over the useful life of the asset,

or over the remaining life of the mine if shorter. assets

are depreciated from the date they become available

for use. Land is not depreciated. the major categories of

property, plant and equipment are depreciated on a units of

production or straight line basis as follows:

Units of production basis

operational mining assets and mining development assets

are depreciated on a ‘units of production’ basis. In applying

the units of production method, depreciation is normally

calculated using the quantity of material extracted from the

mine in the period as a percentage of the total quantity of

material to be extracted in current and future periods based

on proven and probable reserves.

development costs that relate to a discrete section of an ore

body and which only provide benefit over the life of those

reserves, are depreciated over the estimated life of that

discrete section. development costs incurred which benefit

the entire ore body are depreciated over the estimated life

of the ore body.

Straight line basis

• Buildings 23‑32years

• Generationassets 2‑32years

• Non‑generationassets 2‑10years

• Capitalisedoverhauls 2‑4years

estimates of residual values and useful lives are reassessed

annually, and any change in estimate is taken into account

in the determination of future depreciation charges.

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 (note 1(h)).

Gains and losses on disposals are determined by comparing

proceeds with the carrying amount. these are included in

the profit and loss.

(o) Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition

over the fair value of the economic entity’s share of the

net identifiable assets of the acquired business/subsidiary

at the date of acquisition. Goodwill is not amortised.

Instead, goodwill is tested for impairment annually or

more frequently if events or changes in circumstances

indicate that it might be impaired, and is carried at cost less

accumulated impairment losses. Gains and losses on the

disposal of an entity include the carrying amount of goodwill

relating to the entity sold.

Research and development

expenditure on research and development activities,

undertaken with the prospect of obtaining and developing

new scientific or technical knowledge and understanding,

is recognised in the profit and loss as an expense when it

is incurred.

Mining information and mining leases

Mining information and mining leases acquired are carried

at the net fair value at date of acquisition less amortisation

and impairment losses. Mining information and mining

leases are amortised over the life of the mine for which the

information relates using the units of production method

and reflecting the pattern of economic benefit to the

economic entity.

(p) Trade and other payables

trade and other payables represent liabilities for goods and

services provided to the economic entity prior to the end

of the financial year which are unpaid. trade payables are

stated at their original invoice amount, are unsecured and

are normally settled on 30 day terms.

(q) Borrowings

Borrowings are initially recognised at fair value, net of

transaction costs incurred. Borrowings are subsequently

measured at amortised cost. any difference between the

proceeds (net of transaction costs) and the redemption

amount is recognised in the profit and loss over the period

of the borrowings using the effective interest method. fees

paid on the establishment of loan facilities are recognised as

transaction costs of the loan to the extent that it is probable

that some or all of the facility will be drawn down. In this

case, the fee is deferred until the draw down occurs. to the

extent there is no evidence that it is probable that some or

all of the facility will be drawn down, the fee is capitalised as

a prepayment for liquidity services and amortised over the

period of the facility to which it relates.

Borrowings are derecognised from the balance sheet

when the obligation specified in the contract is discharged,

cancelled or expired. the difference between the carrying

amount of a financial liability that has been extinguished

or transferred to another party and the consideration paid,

including any non‑cash assets transferred or liabilities

assumed, is recognised in other income or other expenses.

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(r) Borrowing costs

Borrowing costs relate to interest incurred on the

Corporation’s loan with Queensland treasury Corporation

(QtC), net of interest earned on the QtC debt offset

facility. these costs are expensed as incurred unless they

relate to qualifying assets, in which case they are capitalised

during the period of time that is required to complete and

prepare the asset for its intended use or sale.

exploration, evaluation and development expenditure

carried forward relating to areas of interest on the basis

that they are expected to be recouped through successful

development and exploitation, or alternatively by sale are

deemed to be qualifying assets. exploration, evaluation

and development expenditure carried forward relating to

areas of interest which have not reached a stage permitting

reliable assessment of economic benefits are not regarded

as qualifying assets and therefore, related borrowing costs

are expensed.

Where funds are borrowed specifically for the acquisition,

construction or production of a qualifying asset, the amount

of borrowing costs capitalised are those incurred in relation

to that borrowing net of any interest earned on those

borrowings. Where funds are borrowed generally, borrowing

costs are capitalised using a weighted average interest rate.

(s) Provisions

Provisions are recognised when the economic entity has a

present legal or constructive obligation as a result of past

events, it is more likely than not that an outflow of resources

will be required to settle the obligation, and the amount has

been reliably estimated. Provisions are not recognised for

future operating losses.

Where there are a number of similar obligations, the

likelihood that an outflow will be required in settlement

is determined by considering the class of obligations as a

whole. a provision is recognised even if the likelihood of an

outflow with respect to any one item included in the same

class of obligations may be small.

Provisions are measured at the present value of

management’s best estimate of the expenditure required

to settle the present obligation at the balance sheet date.

the discount rate used to determine the present value

reflects the current market assessment of the time value of

money and the risks specific to the liability. the increase in

the provision due to the passage of time is recognised as

interest expense.

(t) Employee benefits

Short‑term obligations

Liabilities for wages and salaries, including non‑monetary

benefits, annual leave and accumulating sick leave expected

to be settled within 12 months of the reporting date are

recognised as provisions in respect of employees’ services

up to the reporting date and are measured at the amounts

expected to be paid when the liabilities are settled. Liabilities

for non‑accumulating sick leave are recognised when the

leave is taken and measured at the rates paid or payable.

Other long‑term employee benefit obligations

the liability for long service leave is recognised in the

provision for employee benefits and measured as the

present value of expected future payments to be made

in respect of services provided by employees up to the

reporting date 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 that match, as closely as

possible, the estimated future cash outflows.

Retirement benefit obligations

all employees of the economic entity are eligible for

benefits on retirement, disability or death. the economic

entity’s default superannuation plan (eSI Super) has a

defined benefit section and a defined contribution section

within its plan. the defined benefit section provides defined

lump sum benefits based on years of service and final

average salary. the defined contribution section receives

fixed contributions from economic entity companies and the

economic entity’s legal or constructive obligation is limited to

these contributions.

a liability or asset in respect of defined benefit

superannuation plans is recognised in the balance sheet,

and is measured as the present value of the defined benefit

obligation at the reporting date plus unrecognised actuarial

gains (less unrecognised actuarial losses) less the fair value

of the superannuation fund’s assets at that date and any

unrecognised past service cost. 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.


76 77



(t) Employee benefits (continued)

expected future payments are discounted using market

yields at the reporting date on Government bonds with

terms to maturity that match, as closely as possible, the

estimated future cash outflows.

actuarial gains and losses arising from experience

adjustments and changes in actuarial assumptions are

recognised in other comprehensive income.

Past service costs are recognised immediately in income,

unless the changes to the superannuation 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 that are funded by the Corporation and are

part of the provision of the existing benefit obligation

(for example, taxes on investment income and employer

contributions) are taken into account in measuring the net

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.

Profit‑sharing and bonus plans

the economic entity recognises a liability and an expense

for bonuses on a formula that takes into consideration,

amongst other factors, the profit attributable to the

Corporation’s shareholders. the economic entity recognises

a provision where contractually obliged or where there is a

past practice that has created a constructive obligation.

Termination benefits

termination benefits are payable when employment is

terminated before the normal retirement date, or when

an employee accepts voluntary redundancy in exchange

for these benefits. the economic entity recognises

termination benefits when it is demonstrably committed to

either terminating the employment of current employees

according to a detailed formal plan without possibility of

withdrawal or to providing termination benefits as a result of

an offer made to encourage voluntary redundancy. Benefits

falling due more than 12 months after the end of the

reporting period are discounted to present value.

(u) Dividends

Provision is made for the amount of any dividend declared,

being appropriately authorised and no longer at the

discretion of the economic entity, on or before the end of

the financial year but not distributed at balance date.

(v) Exploration and evaluation expenditure

exploration, evaluation and development costs are

accumulated in respect of each separate area of interest.

exploration and evaluation costs are carried forward where

material and where:

• rightoftenureoftheareaofinterestiscurrentandthey

are expected to be recouped through sale or successful

development and exploitation of the area of interest; or

• activitiesintheareaofinteresthavenotyetreached

a stage that permits reasonable assessment of the

existence of economically recoverable reserves.

development expenditure incurred by or on behalf of the

economic entity is accumulated separately for each area of

interest in which economically recoverable resources have

been identified. Such expenditure comprises costs directly

attributable to the construction of a mine and the related

infrastructure.

once a development decision has been taken, the carrying

amount of the exploration and evaluation expenditure

in respect of the area of interest is aggregated with the

development expenditure and classified under non‑current

assets as development properties.

a development property is reclassified as a mining

property at the end of the commissioning phase, when the

mine is capable of operating in the manner intended by

management.

development properties are tested for impairment in

accordance with the policy in note 1(h).

When an area of interest is abandoned or the directors

decide that it is not commercial, all accumulated costs in

respect of that area are written off in the financial period in

which the decision is made.

amortisation is not charged on costs carried forward in

respect of areas of interest in the development phase until

production commences. When production commences,

carried forward exploration, evaluation and development

costs are amortised on a units of production basis over the

life of the economically recoverable reserves.

78 79


(w) Restoration, rehabilitation and environmental expenditure

future costs associated with the rehabilitation of power

station sites, and close down and restoration of coal

mines are estimated and provided for in accordance with

note 1(s). In relation to mining activities, restoration and

rehabilitation costs are provided for in the accounting period

when the obligation arising from the related disturbance

occurs, whether this occurs during the site development or

during the production phase, based on the net present value

of estimated future costs. Provisions for restoration and

rehabilitation costs do not include any additional obligations

which are expected to arise from future disturbance. the

costs are estimated on the basis of a closure plan. the

cost estimates are calculated annually during the life of the

operation to reflect known developments and are subject to

formal review at regular intervals.

When provisions for restoration and rehabilitation are

initially recognised, the corresponding cost is capitalised

as an asset, representing part of the cost of acquiring the

future economic benefits of the operation. the capitalised

cost is amortised over the estimated economic life of

the operation. the value of the provision is progressively

increased over time as the effect of the discounting

unwinds, creating an expense which is recognised as a

finance cost. the amortisation or ‘unwinding’ of the discount

applied in establishing the net present value of provisions

is charged to the profit and loss in each accounting period.

the amortisation of the discount is shown as a financing

cost, rather than as an operating cost.

the costs for the restoration of site damage which

arises during production are provided at their net present

values and charged against operating profits as the

extraction progresses.

(x) Goods and services tax

revenues, expenses and assets are recognised net of the

amount of Goods and Services tax (GSt), except where the

amount of GSt incurred is not recoverable from the taxation

authority. 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. the net amount of GSt recoverable from, or payable

to, the taxation authority is included with other receivables

or payables in the balance sheet.

Cash flows are presented on a gross basis. the GSt

components of cash flows arising from investing or financing

activities which are recoverable from, or payable to, the

taxation authority are presented as operating cash flows.

(y) Fair value estimation

the 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 is based on quoted market prices at the balance

date. the quoted market price used for financial assets and

liabilities held by the economic entity is the appropriate

current mid price.

the fair value of financial instruments that are not traded in

an active market is determined using valuation techniques.

the economic entity 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 non‑standard financial

instruments held.

the fair value of financial liabilities for disclosure purposes is

estimated by discounting the future contractual cash flows

at the current market interest rate that is available to the

economic entity for similar financial instruments.

the carrying amount of financial assets and liabilities

approximate their fair value, except for borrowings, the fair

value of which is disclosed in note 23.

(z) Presentation of financial statements

the economic entity applies revised aaSB 101 Presentation

of Financial Statements (2007), which became effective

as of 1 January 2009. as a result, the economic entity

presents in the consolidated statement of changes in equity

all owner changes in equity, whereas all non‑owner changes

in equity are presented in the consolidated statement of


Comparative information has been re‑presented so that it

also is in conformity with the revised standard.

(aa) New accounting standards and interpretations not yet adopted

the following standards, amendments to standards and

interpretations have been identified as those which

may impact the economic entity in the period of initial

application. they are available for early adoption at

30 June 2010, but have not been applied in preparing

this financial report.


78 79



(aa) New accounting standards and interpretations not yet adopted (continued)

(i) aaSB 2009‑5 Further Amendments to Australian

Accounting Standards arising from the Annual

Improvements Project (effective for annual periods

beginning on or after 1 January 2010)

the amendments affect various aaSBs resulting in

minor changes for presentation, disclosure, recognition

and measurement purposes. the amendments, which

will become mandatory for the economic entity’s 30

June 2011 financial statements, are not expected to

have a significant impact on the financial statements.

(ii) revised aaSB 124 Related Party Disclosures and

aaSB 2009‑12 Amendments to Australian Accounting

Standards (effective for annual reporting periods

beginning on or after 1 January 2011)

In december 2009 the aaSB issued a revised

aaSB 124 Related Party Disclosures. It is effective

for accounting periods beginning on or after 1

January 2011 and must be applied retrospectively.

the amendment removes the requirement for

Government‑related entities to disclose details of

all transactions with the Government and other

Government‑related entities and clarifies and simplifies

the definition of a related party. the economic entity

will apply the amended standard for the 30 June 2012

financial statements. this is expected to reduce the

economic entity’s and the Parent entity’s related party

disclosures.

(iii) aaSB 2009‑14 Amendments to Australian

Interpretation ‑ Prepayments of a Minimum Funding

Requirement (effective 1 January 2011)

In december 2009, the aaSB made an amendment

to Interpretation 14 The Limit on a Defined Benefit

Asset, Minimum Funding Requirements and their

Interaction. the amendment removes an unintended

consequence of the interpretation related to voluntary

prepayments when there is a minimum funding

requirement in regard to the economic entity’s defined

benefit scheme. It permits entities to recognise an

asset for a prepayment of contributions made to cover

minimum funding requirements. the economic entity

does not make any such prepayments. the amendment

is therefore not expected to have any impact on the

economic entity’s financial statements. the economic

entity intends to apply the amendment for the 30 June

2012 financial statements.

(iv) aaSB 9 Financial Instruments and aaSB 2009‑11

Amendments to Australian Accounting Standards

arising from AASB 9 (effective for annual reporting

periods beginning on or after 1 January 2013)

aaSB 9 includes requirements for the classification and

measurement of financial assets. the standard is not

applicable until 1 January 2013 and the economic entity

has not yet completed its assessment of the impacts.

(v) aaSB Interpretation 19 Extinguishing financial

liabilities with equity instruments and aaSB 2009‑13

Amendments to Australian Accounting Standards

arising from Interpretation 19 (effective 1 July 2010)

aaSB Interpretation 19 clarifies the accounting when an

entity renegotiates the terms of its debt with the result

that the liability is extinguished by the debtor issuing its

own equity instruments to the creditor (debt for equity

swap). It requires a gain or loss to be recognised in

the profit and loss which is measured as the difference

between the carrying amount of the financial liability

and the fair value of the equity instruments issued.

the economic entity will apply the interpretation from

1 July 2010 and it is not expected to have any impact

on the economic entity’s or the Parent entity’s

financial statements.

2 Financial risk management

the economic entity’s activities expose it to a variety of

financial risks: market risk (including interest rate risk

and electricity commodity price risk), credit risk, liquidity

risk, and foreign exchange risk. the economic entity’s

overall risk management program focuses mainly on the

unpredictability of the electricity and financial markets and

seeks to minimise potential adverse effects on the financial

performance of the economic entity. the economic entity

uses derivative financial instruments to hedge certain risk

exposures. the economic entity uses different methods to

measure different types of risk to which it is exposed. these

methods include sensitivity analysis in the case of interest

rate and electricity commodity price risks, a counterparty

credit ratings analysis for credit risk and a contracts aging

analysis for liquidity risk.

financial risk management is carried out by the energy

risk Management and Settlements department under

policies approved by the Board. the Marketing and trading

department identifies, evaluates and hedges electricity

market risks. the Board provides guidance for overall

risk management and approves policies covering specific

areas, such as mitigating interest rate and credit risk, use

of derivative financial instruments and investment of

excess liquidity.

80 81

2 Financial risk management (continued)

the economic entity holds the following financial instruments:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Financial assets

Cash and cash equivalents 9,983 78,661 9,927 78,185

trade and other receivables 97,226 93,647 642,167 384,300

electricity derivatives ‑ cash flow hedges 180,803 112,590 180,803 112,590

electricity derivatives ‑ held for trading 255,779 130,683 255,779 130,683

543,791 415,581 1,088,676 705,758

Financial liabilities

trade and other payables 78,359 78,615 44,012 69,507

Borrowings 449,567 445,009 449,567 445,009

electricity derivatives ‑ cash flow hedges ‑ 3,285 ‑ 3,285


673,025 643,782 638,678 634,674


(a) Market risk

Electricity commodity price risk

the economic entity is exposed to electricity price

movements in the national electricity Market. to manage

its electricity commodity price risk the economic entity has

entered into a number of electricity derivatives (including

over the counter swaps, futures, cap and option contracts)

in accordance with the Board approved risk management

policy. for the majority of these contracts the economic

entity receives from counterparties a fixed price per

megawatt hour and in return pays the actual observed pool

price. these contracts assist the economic entity to provide

certainty in relation to revenue received.

electricity price risk is measured weekly through the review

of the economic entity’s mark to market exposure of the net

derivative asset and liability position.

Environmental commodity price risk

the economic entity is exposed to environmental certificate

price movements through its requirement to comply with

various regulatory environmental schemes as part of its

normal business operations. to manage its environmental

certificate price risk the economic entity buys these

certificates in both the spot and forward markets. the

economic entity has no material exposure to environmental

commodity price risk on financial instruments held as at

30 June 2010.

Foreign exchange risk

the economic entity incurs foreign exchange exposure

primarily as a result of imported components and

equipment. Contracts to supply these items at times include

a currency rise and fall clause in which the economic entity

is exposed to foreign exchange risk. the economic entity has

no material exposure to foreign exchange risk on financial

instruments held as at 30 June 2010.

Diesel commodity price risk

the economic entity incurs exposure to diesel price

movements through operating its vehicle fleet and

equipment at its coal mine and power station. to manage

its diesel price risk the economic entity has entered into

a number of diesel derivatives. two types of transactions

have been entered into, either the economic entity pays a

fixed australian dollar (aud) price to counterparties and

in return receives a floating aud price referenced to actual

observed daily closing oil price in united States dollars

(uSd) and foreign exchange prices, or the economic entity

pays a fixed uSd price to counterparties and a separate

foreign exchange forward contract is used to hedge the

foreign currency exposure. under both transaction types, the

derivative settlement receipts/payments are offset against

actual physical consumption which is settled monthly. these

contracts assist the economic entity to provide certainty in

relation to diesel consumption costs. the economic entity

has no material exposure to diesel commodity price risk on

financial instruments held as at 30 June 2010.

80 81



(a) Market risk (continued)

Cash flow and fair value interest rate risk

the economic entity has interest rate risk on its debt. the

economic entity manages its cash flow interest rate risk by

maintaining a spread of maturities. the debt duration is

selected with reference to the cash flow profile of the assets.

Interest rate risk is measured monthly through the

monitoring of changes in yields over the debt

duration profile.

Summarised sensitivity analysis

the following commentary and tables summarise the

sensitivity of the economic entity’s financial assets and

financial liabilities to commodity price risk and interest rate

risk. the analysis is based on similar information to that

which would be provided to management and reflects

the impact on the economic entity’s financial instruments

should certain price movements occur.

the sensitivity in the mark to market of the electricity

derivative portfolio at balance date was investigated by

observing the price relative impact of annualised volatility

in the forward curve over a selected period under

observable market conditions. the analysis assumes an

upward movement of 16% (2009: 20%) and a downward

movement of 16% (2009: 20%), which reflects the market

sensitivity of positions held by the economic entity at

balance date.

the economic entity has assumed a +/‑100 basis point

(bpt) movement in interest rates applicable to its borrowings

as a reasonable expectation based on historical patterns for

the type of debt facility held.

Consolidated Interest rate risk Commodity price risk

‑100 bpt +100 bpt ‑16% +16%

30 June 2010

Carrying

amountProfit equity Profit equity Profit equity Profit equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash and cash

equivalents9,983 (100) (100) 100 100 ‑ ‑ ‑ ‑

electricity derivatives ‑

cash flow hedges180,803 ‑ ‑ ‑ ‑ ‑ 124,304 ‑ (110,857)


held for trading255,779 ‑ ‑ ‑ ‑ 109,873 109,873 (89,666) (89,666)



cash flow hedges‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ (28,904)


held for trading145,099 ‑ ‑ ‑ ‑ (59,483) (59,483) 29,202 29,202

Borrowings ‑ current 28,656 287 287 (287) (287) ‑ ‑ ‑ ‑

Borrowings non‑current 420,911 403 403 (403) (403) ‑ ‑ ‑ ‑

Total increase/

(decrease)590 590 (590) (590) 50,390 174,694 (60,464) (200,225)

82 83


(a) Market risk (continued)

Consolidated Interest rate risk Commodity price risk

‑100 bpt +100 bpt ‑20% +20%

30 June 2009

Carrying

amountProfit equity Profit equity Profit equity Profit equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash and cash

equivalents78,661 (787) (787) 787 787 ‑ ‑ ‑ ‑


cash flow hedges112,590 ‑ ‑ ‑ ‑ ‑ 113,358 ‑ (68,572)


held for trading130,683 ‑ ‑ ‑ ‑ 128,645 128,645 (30,153) (30,153)

non‑current receivable 5,059 (51) (51) 51 51 ‑ ‑ ‑ ‑


derivatives ‑ cash flow

hedges3,285 ‑ ‑ ‑ ‑ ‑ 2,860 ‑ (47,451)


held for trading116,873 ‑ ‑ ‑ ‑ (117,508) (117,508) 19,203 19,203

Borrowings 445,009 426 426 (426) (426) ‑ ‑ ‑ ‑

Total (decrease)/

increase (412) (412) 412 412 11,137 127,355 (10,950) (126,973)

the sensitivity of the Parent entity’s financial instruments is not materially different to the amounts disclosed above.


(b) Credit risk

Credit risk largely arises from the potential failure of

counterparties to meet their obligations under the respective

contracts upon maturity. In relation to the economic entity,

credit risk arises largely from derivative financial instruments

(note 12) and trade receivables (notes 9 and 13).

the economic entity trades within defined parameters,

sets credit limits and monitors the performance of

counterparties. further, the economic entity has a rigorous

and independent credit assessment, taking into account

ratings of counterparties as provided by rating agencies and

adopts a conservative approach to credit risk.

the Corporation transacts with the australian energy

Market operator (aeMo), which is a company limited by

guarantee. aeMo was incorporated under the Corporations

Act 2001 and is owned by the governments of the six

jurisdictions who are members of the australian energy

Market – Queensland, Victoria, South australia, new South

Wales, australian Capital territory and tasmania. aeMo

is self‑funding and has an ability to recover its costs from

fees that participants are required to pay. as effective

power system operations are of great importance to the

governments involved, implied support from all owners is

assumed. as a result credit risk with aeMo is not

considered significant.

82 83



(b) Credit risk (continued)

the following table provides a summary of the credit quality of financial assets that are neither past due nor impaired as assessed

by reference to external credit ratings where available or by internal management review:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Cash at bank and short‑term bank deposits

aa 5,868 76,602 5,868 76,602

aa‑ 4,634 1,584 4,578 1,283

other ‑ non‑rated (519) 475 (519) 300

9,983 78,661 9,927 78,185

Trade and other receivables

aa 10,758 7,858 10,758 7,858

aa‑ ‑ 248 ‑ 248

BBB+ 938 2,664 938 2,664

BBB 3,380 821 3,380 821

BBB‑ 972 ‑ 972 ‑

BB 20,894 ‑ ‑ ‑

aeMo 17,952 25,771 17,952 25,771

other ‑ non‑rated 42,332 56,285 608,167 346,938

97,226 93,647 642,167 384,300

Derivative financial assets

aa 167,229 75,393 167,229 75,393

aa‑ ‑ 1,762 ‑ 1,762

BBB+ 3,976 7,105 3,976 7,105

BBB 29,420 59,043 29,420 59,043

BBB‑ 6,660 ‑ 6,660 ‑

other ‑ non‑rated 129,712 27,303 129,712 27,303

336,997 170,606 336,997 170,606

84 85


(c) Liquidity risk

the economic entity is subject to cash flow volatility and prefers to minimise the risk by maintaining a highly contracted profile.

to the extent that volatility still arises, the economic entity manages liquidity risk by maintaining sufficient cash and undrawn facilities

to meet any unexpected volatility. the economic entity uses stress testing to measure extreme cash flow risk. the economic entity

has access to QtC funds as required once shareholding Ministers’ approval for the borrowing purpose has been received and

subject to meeting credit criteria set by QtC. the QtC borrowings have no fixed repayment date however the facility is assessed by

QtC annually.

the following table provides a summary of contractual maturities of financial liabilities:

Less than 5 months

Greater than 5 months

Nominal amount

$’000 $’000 $’000

As at 30 June 2010

Non‑derivatives

trade and other payables 78,359 ‑ 78,359

Derivatives

electricity derivatives ‑ cash flow hedges ‑ ‑ ‑

electricity derivatives ‑ held for trading 34,178 91,841 126,019

Total derivatives 34,178 91,841 126,019

As at 30 June 2009

Non‑derivatives

trade and other payables 78,615 ‑ 78,615

Derivatives

electricity derivatives ‑ cash flow hedges 231 3,027 3,258

electricity derivatives ‑ held for trading 30,107 67,118 97,225

Total derivatives 30,338 70,145 100,483

details of the maturity of borrowings are provided in note 23.

the electricity derivatives designated as cash flow hedges are expected to impact the profit and loss in the same period in which

the cash flows occur.

(d) Fair value measurements

the fair value of financial assets and financial liabilities

must be estimated for recognition and measurement or for

disclosure purposes.

as of 1 July 2009, tarong energy Corporation Limited

adopted the amendment to aaSB 7 Financial Instruments:

Disclosures which requires disclosure of fair value

measurements by level of the following fair value

measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for

identical assets or liabilities (Level 1);

(b) inputs other than quoted prices included within Level

1 that are observable for the asset or liability, either

directly (as prices) or indirectly (derived from prices)

(Level 2); and

(c) inputs for the asset or liability that are not based on

observable market data (unobservable inputs)

(Level 3).

the following table presents the economic entity’s and

the Parent entity’s assets and liabilities measured and

recognised at fair value as at 30 June 2010. Comparative

information has not been provided as permitted by the

transitional provisions of the amended standard.


84 85



(d) Fair value measurements (continued)

Economic Entity ‑ as at 30 June 2010 Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000

Assets

derivative financial assets 31,717 337,863 69,898 439,478

Liabilities

derivative financial liabilities (30,918) (91,246) (5,050) (127,214)

Net derivative financial assets 799 246,617 64,848 312,264

although the economic entity believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions

could lead to different measurements of fair value. for fair value measurements in Levels 2 and 3 of the fair value hierarchy, changing

one or more of the derived or unobservable inputs used could lead to a reasonably alternative fair value being reached. for fair value

measurements in Level 3 of the fair value hierarchy, changing one or more of the unobservable inputs used to reasonably possible

alternative assumptions would have the following effects:

Effect on profit or loss Effect on hedging reserve

Favourable (Unfavourable) Favourable (Unfavourable)

$’000 $’000 $’000 $’000

derivative financial assets 11,137 (11,357) 1,042 (1,048)

derivative financial liabilities 113 (109) ‑ ‑

Total 11,250 (11,466) 1,042 (1,048)

the following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements of derivative

financial instruments in Level 3 of the fair value hierarchy:

Economic Entity ‑ as at 30 June 2010 Net derivative financial assets

$’000

opening balance as at 1 July 23,243

total gains recognised in:

Profit and loss1 45,326

other comprehensive income 16,210

transfers out of Level 32 (19,931)

Closing balance as at 30 June 64,848

1 total gains and losses included in profit and loss for the period are included in the statement of comprehensive income in “change in fair value of derivative instruments that do not qualify for hedge accounting”.

2 during the year certain derivative financial assets and liabilities were transferred out of Level 3 of the fair value hierarchy when significant inputs used in their fair value measurement which were previously unobservable become observable.

86 87

3 Critical accounting estimates and judgements

estimates and judgements are continually evaluated and are

based on historical experience and other factors, including

expectations of future events that may have a financial

impact on the economic entity and that are believed to be

reasonable under the circumstances.

the economic entity makes estimates and assumptions

concerning the future. the resulting accounting estimates

will, by definition, seldom equal the related actual results.

the estimates and assumptions that have a significant risk

of causing a material adjustment to the carrying amounts

of assets and liabilities within the next financial year are

discussed below:

Estimated impairment of non‑current assets

the economic entity tests annually whether non‑current

assets (including goodwill) have suffered any impairment in

accordance with the accounting policy stated in note 1(h).

the recoverable amounts of cash‑generating units have

been determined based on either fair value less cost to sell

or value‑in‑use calculations. these calculations require the

use of assumptions which may contain information that is

uncertain or subject to fluctuation over time. 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. refer to note 17 for details of assumptions

used in value‑in‑use calculations and the potential impact of

changes to the assumptions.

Fair value of financial instruments

the fair value of financial instruments that are not traded

in an active market (for example, certain types of electricity

derivatives) is determined by using valuation techniques.

the economic entity uses its judgement to select a variety of

methods and makes assumptions that are mainly based on

market conditions existing at each balance sheet date.

Rehabilitation provisions

the economic entity has to provide for site closure and

restoration in accordance with the accounting policy stated

in note 1(w). this calculation requires the use of key

assumptions including the timing of restoration work, legal

requirements and the use of a discount rate.

Retirement benefits

Various actuarial assumptions underpin the determination of

the economic entity’s retirement benefit obligations. these

assumptions and the related carrying amounts are outlined

in note 26.

4 Revenue


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Sales revenue

Sale of electricity 474,916 439,921 416,814 388,034

energy services revenue 15,902 ‑ 15,902 ‑

Sale of by‑product 4,088 3,818 3,979 3,737

494,906 443,739 436,695 391,771

Other revenue

Interest 2,296 4,505 2,431 4,489

497,202 448,244 439,126 396,260


86 87


5 Other income


2010 2009 2010 2009

$’000 $’000 $’000 $’000

net gain on change in rehabilitation liability1 11,535 14,205 ‑ ‑

other income 6,813 4,785 6,652 4,254

Insurance proceeds received 2,359 ‑ ‑ ‑

net present value gain on contingent consideration in business

combination1,080 14,531 ‑ ‑

21,787 33,521 6,652 4,254

1 during the period ended 30 June 2010 the Meandu Mine rehabilitation provision was reassessed and reduced to reflect a change in estimated outflows to settle the obligation. In accordance with the requirements of australian accounting Standards, the amount of the change in the rehabilitation liability in excess of the carrying value of the related assets was recognised in the profit and loss.

6 Expenses


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Profit before income tax includes the following specific

expenses:

Depreciation and amortisation1

Generation assets 55,383 54,610 45,146 47,655

Capitalised overhauls 19,254 17,262 15,331 14,429

non‑generation assets 8,051 6,674 7,847 6,505

operational mining assets 7,355 7,675 ‑ ‑

Buildings 2,160 2,306 1,698 2,004

92,203 88,527 70,022 70,593

Finance costs

Interest and finance charges paid/payable on borrowings 28,285 33,104 28,284 26,307

amount capitalised (5,032) (8,299) (5,032) (3,910)

Interest associated with increase in provisions due to the passage

of time7,343 10,154 3,859 3,967

30,596 34,959 27,111 26,364

Transaction costs on acquisition of business

(included in other expenses) (note 36)14,925 ‑ ‑ ‑

1 the depreciation and amortisation expense includes a credit adjustment of $7,207,000 to reflect the reassessment of the useful life of tarong Power Station

88 89

7 Income tax expense

(a) Income tax expense


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Current tax (798) 25,250 16,735 21,724

deferred tax 38,597 9,849 23,406 6,241

over provided in prior years (781) (1,693) (962) (1,521)

37,018 33,406 39,179 26,444

Income tax expense is attributable to:

Profit before income tax expense 37,018 33,406 39,179 26,444

deferred income tax expense included in income tax expense

comprises:

(Increase)/decrease in deferred tax assets (note 16) (4,108) 9,174 (8,847) 7,181

Increase/(decrease) in deferred tax liabilities (note 24) 42,705 675 32,253 (940)

38,597 9,849 23,406 6,241

(b) Numerical reconciliation of income tax expense to prima facie tax payable


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Profit before income tax expense 128,570 118,509 136,377 93,939

tax at the australian tax rate of 30% (2009: 30%) 38,571 35,553 40,913 28,182

tax effect of amounts which are not taxable in calculating taxable

income:

Sundry items (772) (454) (772) (218)

37,799 35,099 40,141 27,964

over provision in prior years (781) (1,693) (962) (1,520)

Income tax expense 37,018 33,406 39,179 26,444

(c) Amounts recognised directly in equity


2010 2009 2010 2009

$’000 $’000 $’000 $’000

aggregate current and deferred tax arising in the reporting period and

not recognised in the profit and loss but directly debited or credited to

equity:

Cash flow hedges (note 28) 21,052 63,637 21,052 63,637

defined benefit plan (note 28) 776 (2,623) 776 (2,623)

21,828 61,014 21,828 61,014


88 89


7 Income tax expense (continued)

(d) Tax consolidation

tarong energy Corporation Limited and its wholly‑owned australian controlled entities entered into a tax sharing and funding

agreement from 1 July 2005 in relation to their participation in the tax consolidation regime. under the terms of this agreement,

the wholly‑owned entities reimburse tarong energy Corporation Limited for any current income tax payable by tarong energy

Corporation Limited arising in respect of their activities. the reimbursements are payable at the same time as the associated income

tax liability is due. In the opinion of the directors, the tax sharing agreement is also a valid agreement under the tax consolidation

legislation and limits the joint and several liabilities of the wholly‑owned entities in the case of a default by tarong energy


8 Current assets ‑ Cash and cash equivalents


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Cash at bank and on hand 4,634 1,584 4,578 1,108

deposits at call 5,868 76,602 5,868 76,602

Margin call account ‑ available funds (519) 475 (519) 475

9,983 78,661 9,927 78,185

(a) Cash at bank and on hand

Cash held with banks is bearing an interest rate of 2.6% (2009: 4.1%).

(b) Deposits at call

the deposits yielded floating interest rates between 3.3% and 5.2% during the year ended 30 June 2010 (2009: 3.2% to 8.3%).

(c) Fair value

the carrying amount for cash and cash equivalents equals the fair value.

9 Current assets ‑ Trade and other receivables


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Net trade receivables

trade receivables 54,697 52,472 54,697 53,378

Net other receivables

other receivables 41,349 35,416 19,577 18,304

Prepayments

Insurance 117 108 75 69

other prepayments 1,063 592 1,025 536

1,180 700 1,100 605

97,226 88,588 75,374 72,287

there are no material receivables that are past due.

90 91

9 Current assets ‑ Trade and other receivables (continued)

(a) Bad and doubtful trade receivables

the economic entity did not recognise any material losses in respect of bad and doubtful trade receivables during the year ended

30 June 2010 (2009: $nil).

(b) Other receivables

these amounts generally arise from non‑electricity related transactions of the economic entity. repayment terms are generally 30

days from invoice date. no interest is charged on outstanding balances. Collateral is not normally obtained.

(c) Effective interest rates and credit risk

Information concerning the effective interest rate and credit risk of non‑current receivables is set out in note 12 and note 13.

(d) Fair value

the carrying amounts of trade and other receivables equal their fair values.

10 Current assets ‑ Inventories


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Raw materials

Stores at lower of cost or net realisable value 17,898 15,503 11,292 11,970

Fuel

Coal stocks at cost (work in progress) 5,587 13,370 ‑ ‑

Coal stocks at cost (complete) 40,628 40,090 40,628 40,090

oil at cost 1,452 1,431 1,452 1,435

47,667 54,891 42,080 41,525

Environmental certificates

renewable energy Certificates 13,775 3,738 13,775 3,738

Gas electricity Certificates 994 6 994 6

nSW Greenhouse abatement Certificates 980 873 980 211

15,749 4,617 15,749 3,955

81,314 75,011 69,121 57,450

Write‑downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2010 amounted to

$960,000 (2009: $nil) in the economic entity and $542,000 (2009: $nil) for the Parent entity. the expense has been included in

‘raw materials and consumables used’ in the profit and loss.

11 Current assets ‑ Other current assets


2010 2009 2010 2009

$’000 $’000 $’000 $’000

deferred stripping 56,134 29,695 ‑ ‑

other 217 ‑ 217 ‑

56,351 29,695 217 ‑


90 91


12 Derivative financial instruments


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Current assets



other financial derivatives ‑ held for trading 943 ‑ 943 ‑

total current derivative financial instrument assets 194,996 106,104 194,996 106,104




total non‑current derivative financial instrument assets 241,586 137,169 241,586 137,169

total derivative financial instrument assets 436,582 243,273 436,582 243,273

Current liabilities



total current derivative financial instrument liabilities 79,401 70,149 79,401 70,149

Non‑current liabilities



total non‑current derivative financial instrument liabilities 65,698 50,009 65,698 50,009

total derivative financial instrument liabilities 145,099 120,158 145,099 120,158

net derivative financial instrument assets 291,483 123,115 291,483 123,115

(a) Instruments used by the Economic Entity

the economic entity is party to derivative financial

instruments in the normal course of business primarily

to hedge exposures to fluctuations in the spot price of

electricity. Some trading occurs to profit from short‑term

movements in the electricity derivative forward market

in accordance with the economic entity’s energy risk

Management Policy (refer to note 2).

Electricity derivatives ‑ cash flow hedges

the economic entity enters into derivative contracts

(generally swaps) to fix the price of electricity sales. the

volume of generation hedged by contracts is determined

in accordance with the economic entity’s energy risk

Management Policy. the cash flows are expected to occur

within three years of balance date.

the contracts are recognised at trade date and are settled

on a net basis each week. the settlement dates coincide

with the dates on which revenue is received on the

underlying electricity sales (generally 20 business days from

the end of the settlement week).

these contracts are fair valued by comparing the contracted

rate to the current market rate for an identical contract. 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 recycled into the profit

and loss when the hedged electricity revenue is recognised.

the ineffective portion is recognised in the profit and loss

immediately. In the year ended 30 June 2010 a gain of

$107,755,000 (2009: loss of $85,416,000) was reclassified

from the cash flow hedge reserve to the profit and loss and

included in the measurement of electricity revenue.

92 93

13 Non‑current assets ‑ Trade and other receivables


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Related party receivables

Loans to subsidiaries ‑ ‑ 566,793 306,954

Secured loan to third party ‑ accrued shortfall balance ‑ 5,059 ‑ 5,059

‑ 5,059 566,793 312,013

the Corporation’s non‑current receivables include loans provided to subsidiaries for their net cash requirements. these loans are

non‑interest bearing and are eliminated upon consolidation.

under the terms of the tarong north electricity agreement, the Corporation was required to advance funds to the external joint

venture party tM energy (australia) Pty Ltd. funds advanced were secured and interest was paid at the rate specified in the

agreement. the loan was repaid on termination of the joint venture during the year.

12 Derivative financial instruments (continued)

(a) Instruments used by the Economic Entity (continued)

at balance date for both the economic entity and the Parent

entity these contracts constituted a net asset with a fair

value of $180,803,000 (2009: net asset of $109,305,000).

due to the nature of the electricity derivative contracts,

most ineffectiveness arises at the time when the hedged

electricity is generated. the ineffective portion of the hedge

is recognised in the profit and loss at the time when the

effective portion of the hedge is recycled to the profit

and loss.

Electricity derivatives ‑ held for trading

trading contracts are entered into for the purposes of

profiting from short‑term movements in the electricity

derivative forward market in accordance with the economic

entity’s energy risk Management Policy. Maturities are

unrelated to outstanding hedging contracts. however, the

amount and rate of hedging transactions are considered

in the determination of the positions taken. In addition to

these contracts designated as held for trading, an accounting

reclassification is made to contracts entered into as a hedge

for portfolio purposes that do not meet the requirements of

a cash flow hedge under aaSB 139 Financial Instruments:

Recognition and Measurement.

at balance date for both the economic entity and the Parent

entity these contracts constituted a net asset with a fair

value of $110,680,000 (2009: net asset of $13,810,000).

all contracts expire by 31 december 2015.

these contracts are fair valued by comparing the contracted

rate to the current market rate for an identical contract.

any changes in fair values are taken to the profit and loss

immediately.

(b) Credit risk exposures

Credit risk arises from the potential failure of counterparties

to meet their obligations under the respective contracts

at each settlement date as well as any unrealised

mark‑to‑market losses from derivative contracts.

Management have established limits using external

credit ratings where available or by internal management

assessment to measure credit risk arising from derivative

financial instruments. Controls are also in place to limit

the amount of exposure, by groupings of counterparties.

Measurement of credit risk is monitored on a daily basis and

reported on a weekly basis.

the economic entity has historically undertaken the

majority of its transactions in electricity derivatives contracts

with counterparties owned by the State of Queensland.

With the sale of the Government‑owned contestable

retail businesses, and with full retail Contestability, new

counterparties have emerged or are emerging, presenting a

changing landscape with regard to credit risk. Management

conducts regular credit reviews of all counterparties.


92 93


14

Non

‑cur

rent

ass

ets

‑ Pr

oper

ty, p

lant

and

equ

ipm

ent

Cons

olid

ated

Wor

k in

pr

ogre

ssFr

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ld

land

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ildin

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sets

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onal

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sets

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ing

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ndit

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l

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

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0

Year

end

ed 3

0 Ju

ne 2

009

ope

ning

net

boo

k am

ount

62,7

9610

,854

48,3

621,

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95,7

6150

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12,2

9131

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1,36

7,30

5

addi

tions

thro

ugh

norm

al o

pera

tions

140,

677

‑‑

‑‑

‑‑

‑14

0,67

7

tran

sfer

s fro

m w

ork

in p

rogr

ess

(81,

904)

2,49

967

625

,131

4,25

225

,807

8,77

114

,768

‑

Borro

win

g co

sts

capi

talis

ed8,

299

‑‑

‑‑

‑‑

‑8,

299

Incr

ease

in re

habi

litat

ion

asse

t‑

‑‑

6,39

7‑

‑‑

‑6,

397

dis

posa

ls‑

‑‑

(16)

(444

)‑

(40)

‑(5

00)

Writ

e‑do

wn

of p

revi

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pita

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amou

nts1

(558

)‑

‑‑

‑(9

,217

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‑(9

,775

)

tran

sfer

red

to e

xplo

ratio

n an

d ev

alua

tion

(153

)(1

,679

)‑

‑‑

‑‑

‑(1

,832

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dep

reci

atio

n an

d am

ortis

atio

n ch

arge

‑‑

(2,3

06)

(54,

610)

(7,6

75)

‑(6

,674

)(1

7,26

2)(8

8,52

7)

Clos

ing

net

book

am

ount

129,

157

11,6

7446

,732

1,03

1,55

291

,894

67,3

9114

,348

29,2

961,

422,

044

As

at 3

0 Ju

ne 2

009

Cos

t12

9,15

711

,674

66,4

041,

474,

555

102,

827

67,3

9152

,285

67,8

971,

972,

190

accu

mul

ated

dep

reci

atio

n‑

‑(1

9,67

2)(4

43,0

03)

(10,

933)

‑(3

7,93

7)(3

8,60

1)(5

50,1

46)

Net

boo

k am

ount

129,

157

11,6

7446

,732

1,03

1,55

291

,894

67,3

9114

,348

29,2

961,

422,

044

94 95

14

Non

‑cur

rent

ass

ets

‑ Pr

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ty, p

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and

equ

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(con

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Cons

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$’00

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$’00

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0

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end

ed 3

0 Ju

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ope

ning

net

boo

k am

ount

129,

157

11,6

7446

,732

1,03

1,55

291

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67,3

9114

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29,2

961,

422,

044

addi

tions

thro

ugh

norm

al o

pera

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135,

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‑‑

‑‑

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‑13

5,47

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thro

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busi

ness

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3,28

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9,04

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7‑

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57,

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208,

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(174

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Incr

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litat

ion

‑‑

‑23

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(45)

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‑‑

298

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tion

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join

t ven

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min

e de

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(3,5

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dep

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n an

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n ch

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(2,1

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(55,

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9,25

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3)

Clos

ing

net

book

am

ount

98,2

5611

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53,9

661,

270,

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106,

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79,9

1423

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61,4

491,

705,

880

As

at 3

0 Ju

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t98

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7473

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1,70

5,19

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4,69

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2,25

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4

accu

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ated

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atio

n‑

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9,41

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34,1

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(18,

240)

‑(3

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6,16

0)(5

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24)

Net

boo

k am

ount

98,2

5611

,674

53,9

661,

270,

998

106,

451

79,9

1423

,172

61,4

491,

705,

880


94 95


14

Non

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ets

‑ Pr

oper

ty, p

lant

and

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(con

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Pare

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0 Ju

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ope

ning

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boo

k am

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57,5

8410

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41,7

1191

2,15

450

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11,9

3323

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1,10

8,67

2

addi

tions

thro

ugh

norm

al o

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137,

419

‑‑

‑‑

‑‑

137,

419

tran

sfer

s fro

m w

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in p

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(75,

648)

2,49

965

424

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25,8

078,

645

13,8

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910

‑‑

‑‑

‑‑‑

3,91

0

Incr

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asse

t‑

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4,41

0‑

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4,41

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dis

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(15)

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(2,0

04)

(47,

655)

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Clos

ing

net

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am

ount

122,

554

11,6

7440

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893,

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67,3

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23,0

781,

172,

157

As

at 3

0 Ju

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2,55

411

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57,7

431,

283,

207

67,3

9150

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55,9

891,

648,

757

accu

mul

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dep

reci

atio

n‑

‑(1

7,38

2)(3

90,1

42)

‑(3

6,16

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2,91

1)(4

76,6

00)

Net

boo

k am

ount

122,

554

11,6

7440

,361

893,

065

67,3

9114

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23,0

781,

172,

157

1 dur

ing

the

year

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ed 3

0 Ju

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009,

the

Cor

pora

tion

perfo

rmed

a re

view

of i

ts p

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r the

por

tfolio

of g

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sets

and

ext

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f the

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ndu

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cono

mic

ben

efits

to th

e en

tity

and

was

writ

ten

off a

ccor

ding

ly.

96 97

14

Non

‑cur

rent

ass

ets

‑ Pr

oper

ty, p

lant

and

equ

ipm

ent

(con

tinue

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Pare

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122,

554

11,6

7440

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95,8

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2,68

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22,8

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(45)

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join

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par

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ine

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lopm

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‑‑

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(3,5

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(3,5

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dep

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n ch

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(1,6

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Clos

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net

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am

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76,0

1811

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38,7

1194

5,96

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22,4

6445

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1,21

9,99

2

As

at 3

0 Ju

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t76

,018

11,6

7457

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1,37

2,71

779

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60,5

7478

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1,73

7,34

1

accu

mul

ated

dep

reci

atio

n‑

‑(1

9,08

0)(4

26,7

51)

‑(3

8,11

0)(3

3,40

8)(5

17,3

49)

net

boo

k am

ount

76,0

1811

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38,7

1194

5,96

679

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22,4

6445

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1,21

9,99

2

(a)

Impa

irm

ent

reve

rsal

an a

sset

impa

irmen

t of $

32,5

00,0

00 w

as re

cogn

ised

in th

e ye

ar e

nded

30

June

200

7 in

rela

tion

to th

e C

orpo

ratio

n’s

50%

sha

re o

f tar

ong

nor

th P

ower

Sta

tion

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ts. t

his

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the

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vera

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ass

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refle

cted

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Pow

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of th

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itial

ly re

cogn

ised

impa

irmen

t was

reve

rsed

.


96 97


15 Non‑current assets ‑ Exploration and evaluation


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Costs carried forward in respect of areas of interest in the

exploration and evaluation phases:

opening balance 49,476 47,644 49,476 47,644

expenditure incurred ‑ 1,832 ‑ 1,832

Closing balance 49,476 49,476 49,476 49,476

the ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful

development and commercial exploitation or sale of the areas of interest.

16 Non‑current assets ‑ Deferred tax assets


2010 2009 2010 2009

$’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

Amounts recognised in the income statement

tax losses1 798 ‑ 798 ‑

Provisions 60,187 51,517 35,867 25,818

accruals 837 2,507 286 1,785

fixed assets 7,534 10,723 ‑ ‑

deferred income ‑ ‑ ‑ ‑

renewable energy Certificates ‑ 87 ‑ 87

other 811 ‑ 811 ‑

70,167 64,834 37,762 27,690

Amounts recognised directly to equity

defined benefit plan 151 927 151 927

total deferred tax assets 70,318 65,761 37,913 28,617

Set‑off of deferred tax liabilities pursuant to set‑off provisions (note 24) (70,318) (65,761) (37,913) (28,617)

net deferred tax assets ‑ ‑ ‑ ‑

Movements:

opening balance as at 1 July 65,761 129,681 28,617 90,544

Credited/(charged) to the profit or loss 4,108 (9,174) 8,847 (7,181)

(Charged)/credited to equity (776) (29,532) (776) (29,532)

tax losses (used)/created in current year 798 (22,801) 798 (22,801)

under provision in prior year 427 (2,413) 427 (2,413)

Closing balance as at 30 June 70,318 65,761 37,913 28,617

1the deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

98 99

17 Non‑current assets ‑ Intangible assets

Consolidated GoodwillMining lease ‑

Kunioon

Mining information ‑ Kunioon

Total

$’000 $’000 $’000 $’000

Year ended 30 June 2009

opening net book amount 8,111 62,037 4,785 74,933

reduction in goodwill (8,111) ‑ ‑ (8,111)

Closing net book amount ‑ 62,037 4,785 66,822

As at 30 June 2009

Cost ‑ 62,037 4,785 66,822

accumulated amortisation and impairment ‑ ‑ ‑ ‑

net book amount ‑ 62,037 4,785 66,822

Year ended 30 June 2010

opening net book amount ‑ 62,037 4,785 66,822

acquisition of business 44,669 ‑ ‑ 44,669

Closing net book amount 44,669 62,037 4,785 111,491

As at 30 June 2010

Cost 44,669 62,037 4,785 111,491

accumulated amortisation ‑ ‑ ‑ ‑

net book amount 44,669 62,037 4,785 111,491

Goodwill

Goodwill recognised during the period ended 30 June 2010 relates to the acquisition of the tarong north Power Station and is

attributable to the synergies expected to be achieved from integrating the business into the Corporation’s existing business

(note 36).

the prior year’s goodwill represented the value over and above the value of identifiable business assets acquired from rio tinto

Coal australia (rtCa) in february 2008. reductions in the 2009 financial year included an adjustment to employee provision

balances of $4,500,000 as part of the finalisation of the purchase price allocation. the remaining $3,600,000 related to

movements in the estimate in the contingent consideration under the terms of the acquisition. Changes to the net present value of

the contingent consideration were recorded against goodwill up to the point where the value of goodwill was reduced to nil, with

subsequent adjustments recognised in the profit and loss.

Mining Lease ‑ Kunioon

additional economic coal reserves at the Meandu Mine were confirmed during the 2009 financial year which enabled the

Corporation to defer a full scale development and transition to the Kunioon coal resource. activities relating to the transition to

the Kunioon coal resource have been deferred, however the resource continues to be part of the Corporation’s long‑term fuel

supply plan. amortisation of the Kunioon mining lease and mining information will occur over the life of the Kunioon Mine using a

‘units of production’ method and reflecting the pattern of economic benefit to the economic entity in accordance with note 1(o).

amortisation will commence once the mine is operational.


98 99


17 Non‑current assets ‑ Intangible assets (continued)

(a) Impairment tests for goodwill

for the purposes of impairment testing, goodwill is allocated to the economic entity’s cash‑generating units (CGus) as follows:

Consolidated 2010 2009

$’000 $’000

Generation and mining 44,669 ‑

the goodwill balance arose on acquisition of the remaining 50% interest in the tarong north Power Station and has been allocated

in full to the generating and mining CGu. the Generation and mining CGu is tested for impairment annually or more frequently if

required in accordance with the accounting policy outlined in note 1(h).

(b) Key assumptions used for value‑in‑use calculations

Discount rate1

2010 2009

% %

Generation and mining CGu 11.2 11.2

1In performing the value‑in‑use calculations for each CGu, the economic entity has applied post‑tax discount rates to discount the forecast future post‑tax cash flows. the equivalent pre‑tax discount rates are disclosed above.

In carrying out the impairment tests at 30 June 2010, the recoverable amount of the Generation and mining CGu was estimated

using value‑in‑use calculations. the value‑in‑use calculations use cash flow projections based on internally approved mine plans,

price curves and capital expenditure programs. Key assumptions required in these calculations include:

• forecastelectricitypoolandcontractprices;

• forecastfuelprices;

• forecastwatercosts;

• timingandvalueofsustainingcapitalexpenditure;and

• assessmentofdiscountrates.

the impact of any carbon policy changes has not been included in future cash flows at this time given the current policy uncertainty.

18 Non‑current assets ‑ Other non‑current assets


2010 2009 2010 2009

$’000 $’000 $’000 $’000

deferred stripping 10,972 28,875 ‑ ‑

other 1,756 ‑ 1,756 ‑

12,728 28,875 1,756 ‑

100 101

19 Current liabilities ‑ Trade and other payables


2010 2009 2010 2009

$’000 $’000 $’000 $’000

trade payables 23,365 27,979 21,742 26,918

accrued expenses 43,356 42,752 15,139 25,576

other payables 11,638 7,884 7,131 7,515

amounts payable to subsidiaries ‑ ‑ ‑ 9,498

78,359 78,615 44,012 69,507

trade and other payables are generally due within 30 days.

the carrying value of trade payables approximates their fair value.

20 Current liabilities ‑ Borrowings

Unsecured Consolidated Parent Entity

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Loans from Queensland treasury Corporation (QtC) 28,656 ‑ 28,656 ‑

the borrowings are used for short‑term funding and the terms of the facility are reviewed annually. Interest is charged based on an

interest rate that changes daily based on the reserve Bank of australia official cash rate.

further details on loans from QtC are provided in note 23.

21 Current liabilities ‑ Provisions


2010 2009 2010 2009

$’000 $’000 $’000 $’000

employee benefits 23,273 21,727 21,909 20,621

onerous contracts 339 ‑ 339 ‑

dividends 17,401 45,541 17,401 45,541

Site rehabilitation 10,252 ‑ 2,100 ‑

51,265 67,268 41,749 66,162

(a) Dividends

Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance

date. dividends provided for at balance date will be paid by 31 december 2010.


100 101


21 Current liabilities ‑ Provisions (continued)

(b) Movements in provisions

Movements in each class of provision during the financial year, other than employee benefits, are set out below:

Onerous contracts Dividends Site

rehabilitation

$’000 $’000 $’000

Consolidated ‑ 2010

Carrying amount as at 1 July ‑ 45,541 ‑

amounts paid during the year ‑ (45,541) ‑

additional provisions recognised 339 17,401 ‑

reassessment of provision ‑ ‑ 10,252

Carrying amount as at 30 June 339 17,401 10,252

Parent ‑ 2010

Carrying amount at as 1 July ‑ 45,541 ‑

amounts paid during the year ‑ (45,541) ‑

additional provisions recognised 339 17,401 ‑

reassessment of provision ‑ ‑ 2,100

Carrying amount as at 30 June 339 17,401 2,100

22 Current liabilities ‑ Other current liabilities


2010 2009 2010 2009

$’000 $’000 $’000 $’000

other current liabilities 4,364 295 1,114 295

unearned income 589 883 217 ‑

4,953 1,178 1,331 295

23 Non‑current liabilities ‑ Borrowings

Unsecured Consolidated Parent Entity

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Loans from Queensland treasury Corporation (QtC) 420,911 445,009 420,911 445,009

(a) Loans from QTC

the QtC non‑current borrowings have no fixed repayment date and the terms of the facility are reviewed by QtC annually. Interest

is charged based on a fixed rate which is set annually.

the total interest rate payable includes a Competitive neutrality fee payable to Queensland treasury, representing the difference

between the cost at which QtC is able to source debt and the estimated cost of debt for the economic entity were it to be a

stand‑alone entity not owned by the Queensland Government. the Competitive neutrality fee can be adjusted up or down

according to changes in credit quality of the economic entity and market changes to the relative cost of debt compared with a

highly‑rated government issuer.

102 103

23 Non‑current liabilities ‑ Borrowings (continued)

(b) Fair value

the carrying amounts and fair values of interest bearing liabilities at balance date are:

2010 2009

Carrying amount Fair value

Carrying amount

fair value

$’000 $’000 $’000 $’000

Current borrowings 28,656 28,656 ‑ ‑

non‑current borrowings 420,911 435,391 445,009 450,640

449,567 464,047 445,009 450,640

fair value is inclusive of costs which would be incurred on settlement of a liability.

(c) Financing arrangements

the economic entity and the Parent entity had access to the following undrawn borrowing facilities at balance date:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Credit standby arrangements

Bank overdrafts

total facilities 1,000 1,000 1,000 1,000

used at balance date ‑ ‑ ‑ ‑

unused at balance date 1,000 1,000 1,000 1,000

QTC loan facilities

total facilities 470,911 495,009 470,911 495,009

used at balance date 449,567 445,009 449,567 445,009

unused at balance date 21,344 50,000 21,344 50,000

the bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the

continuance of satisfactory credit ratings, the QtC loan facilities may be drawn at any time.

In addition to the unrestricted access to funds as noted above, the Corporation has a $165,000,000 facility with QtC which is able

to be drawn to support the Corporation’s australian financial Services License requirements.

(d) Interest rate risk exposures

the table below sets out the economic entity’s exposure to interest rate risk at balance date.

the QtC borrowings have no fixed repayment date as noted in (a) above. after consideration of future funding requirements and

in accordance with the 5 year Corporate Plan, the economic entity does not expect to repay the QtC loan within 5 years of balance

date. accordingly, the amounts shown in the ‘1 year or less’ column and ‘over 1 to 5 years’ column below consist of interest only

repayments.


102 103


23 Non‑current liabilities ‑ Borrowings (continued)

(d) Interest rate risk exposures (continued)

Fixed interest securities maturing in:

1 year or less Over 1 to 5 years Over 5 years Total

$’000 $’000 $’000 $’000

2010

Loans from QtC 36,495 145,943 396,642 579,080

Weighted average interest rate 8.1% 8.1% 8.1%

2009

Loans from QtC 28,332 113,401 445,009 586,742

Weighted average interest rate 6.4% 6.4% 6.4%

24 Non‑current liabilities ‑ Deferred tax liabilities


2010 2009 2010 2009

$’000 $’000 $’000 $’000

The balance comprises temporary differences

attributable to:

Inventories 36,936 27,791 16,188 14,400

receivables 10,129 6,451 3,417 5,120

research and development ‑ 5,038 ‑ 5,038

fixed assets 240,156 231,512 233,893 228,953

Mining costs 20,047 20,046 ‑ ‑

derivatives held for trading 33,212 10,977 33,212 10,977

other 28,291 24,961 26,223 16,900

368,771 326,776 312,933 281,388

Other

revaluation of property, plant and equipment 7,044 7,044 7,044 7,044

Cash flow hedges 54,226 33,174 54,226 33,174

61,270 40,218 61,270 40,218

total deferred tax liabilities 430,041 366,994 374,203 321,606

Set‑off of deferred tax assets pursuant to set‑off provisions

(note 16)(70,318) (65,761) (37,913) (28,617)

net deferred tax liabilities 359,723 301,233 336,290 292,989

Movements:

opening balance as at 1 July 366,994 338,938 321,606 291,102

Charged/(credited) to the profit or loss (note 7) 42,705 675 32,253 (940)

Charged/(credited) to equity 21,052 31,336 21,052 31,336

(over)/under provision in prior year (710) (3,955) (707) 108

Closing balance as at 30 June 430,041 366,994 374,204 321,606

104 105

25 Non‑current liabilities ‑ Provisions


2010 2009 2010 2009

$’000 $’000 $’000 $’000

employee benefits 1,118 1,396 1,094 1,396

Site rehabilitation 161,805 153,659 94,075 69,104

162,923 155,055 95,169 70,500

(a) Site rehabilitation

Provision is made for site rehabilitation costs expected to be incurred upon the closure of each generation site and the mine

site. the estimated costs include reclamation, plant closure, waste site closure and monitoring activities. the costs have been

determined on the basis of current costs, current legal requirements and current technology. the calculation of the provision is in

accordance with note 1(w).

(b) Movements in provisions

Movements in the site rehabilitation provision during the financial year are set out below:

Site rehabilitation

$’000

Consolidated ‑ 2010

Carrying amount as at 1 July 153,659

Increase in discounted amount arising from passage of time 7,343

effect of change in discount rate1 11,631

reassessment of provision (9,423)

rehabilitation works undertaken in the year (1,405)

Carrying amount as at 30 June 161,805

Parent ‑ 2010

Carrying amount as at 1 July 69,104

Increase in discounted amount arising from passage of time 3,859

effect of change in discount rate1 6,307

reassessment of provision 14,819

rehabilitation works undertaken in the year (14)

Carrying amount as at 30 June 94,075

1this change reflects a reassessment of the discount rate to be used in calculating the present value of future rehabilitation obligations.


104 105


26 Non‑current liabilities ‑ Retirement benefit obligations

(a) Superannuation plan

the Corporation’s superannuation contributions include contributions to its default superannuation fund, the electricity Supply

Industry Superannuation fund (Qld) (eSI Super), an industry multiple employer superannuation fund. the fund has defined

Benefit and defined Contribution accounts. employer contributions to the defined Benefit account are based on the advice of the

fund’s actuary. after serving a qualifying period, members are entitled to lump sum benefits from the defined Benefit account on

retirement, retrenchment, disability or death, based on years of service and final average salary. employees are given the choice of

converting their benefits into the defined Contribution account of this fund. from 10 June 2001 new employees are only entitled

to join the defined Contribution account of the default fund. the defined Contribution account receives fixed contributions from

the economic entity and the economic entity’s legal or constructive obligation is limited to these contributions.

eSI Super has reported that the most recent actuarial assessment of the defined Benefit portion of the fund, as at 30 June 2008,

was carried out by Mr Shane Mather, fellow of the Institute of actuaries of australia, on 22 May 2009. the actuary concluded

that the assets of the plans were sufficient to meet all benefits payable to all defined Benefit members in the event of the plan’s

termination, or voluntary or compulsory termination of employment.

the actuary has certified that the fund is in a satisfactory financial position as at 30 June 2010. the actuary has utilised the

experience rated approach to determine the financial position of tarong energy’s notional interest in the fund. the contribution

rate for each employer under this approach is determined based on the movement in that employer’s notional assets and

benefit liabilities.

(b) Balance sheet amounts

the amounts recognised in the balance sheet are determined as follows:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Present value of the defined benefit obligation 39,740 36,424 39,740 36,424

fair value of defined benefit plan assets (39,724) (33,797) (39,724) (33,797)

16 2,627 16 2,627

net liability before adjustment for contributions tax 16 2,627 16 2,627

adjustment for contributions tax 3 464 3 464

Net liability in the balance sheet 19 3,091 19 3,091

(c) Categories of plan assets

the major categories of plan assets are as follows:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Cash 1,986 2,366 1,986 2,366

equity instruments 27,807 20,954 27,807 20,954

debt instruments 5,959 5,407 5,959 5,407

Property 3,972 5,070 3,972 5,070

39,724 33,797 39,724 33,797

106 107

26 Non‑current liabilities ‑ Retirement benefit obligations (continued)

(d) Reconciliations


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Reconciliation of the present value of the defined benefit

obligation, which is partly funded:

Balance as at 1 July 36,424 30,439 36,424 30,439

Current service cost 1,820 1,591 1,820 1,591

Interest cost 1,682 1,613 1,682 1,613

Contributions by plan participants 641 496 641 496

actuarial (gains)/losses (1,391) 3,919 (1,391) 3,919

Change in tax 461 (1,312) 461 (1,312)

Benefits paid 103 (322) 103 (322)

Balance as at 30 June 39,740 36,424 39,740 36,424

Reconciliation of the fair value of plan assets:


expected return on plan assets 2,048 2,276 2,048 2,276

actuarial gains/(losses) 1,195 (4,360) 1,195 (4,360)

Contributions by the economic entity 1,940 464 1,940 464

Contributions by plan participants 641 496 641 496

Benefits paid, insurance and net transfers 103 (322) 103 (322)


(e) Amounts recognised in profit or loss

the amounts recognised in the profit and loss are as follows:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Current service cost 1,820 1,591 1,820 1,591

Interest cost 1,682 1,613 1,682 1,613

expected return on plan assets (2,048) (2,276) (2,048) (2,276)

total included in employee benefits expense 1,454 928 1,454 928

actual return on plan assets 3,243 (2,084) 3,243 (2,084)


106 107



(f) Amounts recognised in other comprehensive income


2010 2009 2010 2009

$’000 $’000 $’000 $’000

actuarial gain/(loss) recognised in the year 1,810 (5,656) 1,810 (5,656)

Cumulative actuarial (losses)/gains at 1 July (4,618) 1,038 (4,618) 1,038

(2,808) (4,618) (2,808) (4,618)

(g) Actuarial assumptions

the principal actuarial assumptions used (expressed as weighted averages) were as follows:


2010 2009 2010 2009

% % % %

discount rate 5.1 4.7 5.1 4.7

expected return on plan assets 6.0 6.0 6.0 6.0

future salary increases 4.5 4.5 4.5 4.5

the expected rate of return on assets has been based on historical and future expectations of returns for each of the major

categories of asset classes as well as the expected and actual allocation of plan assets to these major categories. this resulted in the

selection of a 6.0% per annum (2009: 6.0% per annum) rate of return net of tax and expenses.

(h) Employer contributions to the defined benefit plan

employer 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 30 June 2008.

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 aggregate

funding method. this funding method seeks to have benefits funded by means of a total contribution which is expected to be a

constant percentage of members’ salaries over their working lifetime.

using the funding method described above and particular actuarial assumptions as to the plan’s future experience (as detailed

below), the actuary recommended in the actuarial review as at 30 June 2008, the payment of employer contributions to the fund

of 18% of salaries for employees who are members of the defined Benefit section. these contribution rates have been adopted

by the economic entity for the period ended 30 June 2010. the contribution rate for defined Benefit members adopted by the

economic entity for the year ended 30 June 2009 was 3%, plus a lump sum additional payment of $150,000 as recommended by

the actuary.

the increase in the employer contribution rate is primarily due to a reduction in the investment return on plan assets at the time of

the last actuarial review.

total employer contributions expected to be paid by the economic entity companies for the year ending 30 June 2011 are

approximately $1,886,000 (Parent entity: $1,886,000).

the economic assumptions used by the actuary to make the funding recommendations were a long‑term investment earning rate

of 6.0% per annum (net of fees and taxes), a salary increase rate of 4.5% per annum together with an age related promotional

scale, and an inflation rate of 3.0% per annum.

108 109


(i) Net financial position of plan

In accordance with aaS 25 Financial Reporting by Superannuation Plans the plan’s net financial position is determined as the

difference between the present value of the accrued benefits and the net market value of plan assets. this has been determined

as at the date of the most recent financial report of the Superannuation fund (30 June 2008), and a surplus of $3,488,000 was

reported.

(j) Historic summary

2010 2009 2008 2007 2006

$’000 $’000 $’000 $’000 $’000

defined Benefit Plan obligations (39,740) (36,424) (30,439) (28,416) (29,911)

Plan assets 39,724 33,797 35,243 41,004 36,508

(deficit)/surplus (16) (2,627) 4,804 12,588 6,597

experience adjustments arising

on plan liabilities

(930)

2,607

(472)

(2,616)

2,495

experience adjustments arising

on plan assets

1,195

(4,360)

(8,146)

3,965

2,486

27 Contributed equity

(a) Share capital

Consolidated and Parent Entity


2010 2009 2010 2009

Number of

Shares

number of

Shares$’000 $’000

ordinary shares

Voting (a class) shares of $1.50 fully paid 4 4 ‑ ‑

non‑voting (B class) shares fully paid 661,965,442 661,965,442 986,965 711,965

661,965,446 661,965,446 986,965 711,965

(b) Movements in ordinary share capital:



2010 2009 2010 2009

Number of

Shares

number of

Shares$’000 $’000

Balance as at 1 July 661,965,446 661,965,446 711,965 711,965

equity contribution ‑ ‑ 275,000 ‑

Balance as at 30 June 661,965,446 661,965,446 986,965 711,965


108 109


27 Contributed equity (continued)

(c) Ordinary shares

ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the

number of and amounts paid on the shares held.

on a show of hands every holder of a class ordinary shares present at a meeting in person or by proxy, is entitled to one vote and

upon a poll each share is entitled to one vote.

the Corporation received an equity contribution of $275,000,000 on 7 october 2009 from its shareholders in order to facilitate

the purchase of the additional 50% interest in the tarong north Power Station. no additional shares were issued in relation to the

equity contribution received.

(d) Capital risk management

the economic entity’s objective when managing capital is to safeguard the ability to continue as a going concern and to provide

returns for shareholders and benefits for other stakeholders. Ideally the aim is to maintain an optimal capital structure in order to

minimise the cost of capital.

Consistent with industry practice, the economic entity monitors capital structure using the gearing ratio. this ratio is calculated as

gross debt divided by total capital. total capital is calculated as ‘equity’ as shown in the balance sheet plus gross debt.

during 2010, the economic entity’s strategy, which was unchanged from 2009, was to maintain a gearing ratio within a 40% upper

limit. the gearing ratios at balance date were as follows:

Consolidated

2010 2009

$’000 $’000

total borrowings from QtC 449,567 445,009

total equity 1,313,536 913,449

total capital 1,763,103 1,358,458

Gearing ratio 26% 33%

the decrease in the gearing ratio for the year ended 30 June 2010 resulted primarily from the equity contribution received during

the year.

110 111

28 Reserves and retained earnings

(a) Reserves


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Property, plant and equipment revaluation reserve 16,434 16,434 16,434 16,434

hedging reserve ‑ cash flow hedges 126,542 77,416 126,542 77,416

142,976 93,850 142,976 93,850

Movements:

Property, plant and equipment revaluation reserve

Balance as at 1 July and 30 June 16,434 16,434 16,434 16,434

Hedging reserve ‑ cash flow hedges

Balance as at 1 July 77,416 (71,071) 77,416 (71,071)

revaluation ‑ gross 177,933 126,708 177,933 126,708

deferred tax on revaluation (53,379) (38,012) (53,379) (38,012)

transfer to net (profit)/loss ‑ gross (107,755) 85,416 (107,755) 85,416

deferred tax on transfers 32,327 (25,625) 32,327 (25,625)


(b) Retained earnings


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Movements are as follows:


net profit for the year 91,552 85,103 97,198 67,495

dividends (17,401) (45,541) (17,401) (45,541)

actuarial gains/(losses) on defined benefit plans recognised

directly in other comprehensive income2,586 (8,278) 2,586 (8,278)

deferred tax relating to actuarial movements on defined

benefit plans(776) 2,623 (776) 2,623


(c) Nature and purpose of reserves

Property, plant and equipment revaluation reserve

the property, plant and equipment revaluation reserve was used to record increments and decrements on the revaluation of

non‑current assets when these were carried at fair value prior to the transition to australian equivalents to International financial

reporting Standards.

Hedging reserve ‑ cash flow hedges

the hedging reserve is used to record gains or losses on cash flow hedges that are recognised directly in equity, as described in

note 1(l). amounts are recognised in the profit and loss when the associated hedged transaction affects income.


110 111


29 Dividends

Parent Entity

2010 2009

$’000 $’000

total dividends provided 17,401 45,541

Pursuant to the national tax equivalents regime the economic entity is not required to maintain a franking account.

30 Key management personnel disclosures

(a) Directors

the following persons were directors of tarong energy Corporation Limited during the financial year:

Chair ‑ non‑executive Mr G J Carpenter

Non‑executive directors Mr r a Barton

Ms L K Bond

Ms K L Collins

Ms e M Jameson

Mr J h Pegler

Ms K e Smith‑Pomeroy

(b) Other key management personnel

the following positions, all of which are employed by tarong energy Corporation Limited, had the authority and responsibility for

planning, directing and controlling the activities of the economic entity during the financial year:

Chief executive officer

General Manager Generation operations

General Manager Mining operations

Chief financial officer

General Manager Marketing and trading

General Manager People and Communications

General Manager Corporate Governance

(c) Remuneration of key management personnel

a summary of the remuneration of the directors of tarong energy Corporation Limited and other key management personnel of the

economic entity is set out in the following table:

Parent Entity

2010 2009

$’000 $’000

Short‑term employee benefits 2,243 2,112

Post‑employment benefits 257 218

termination benefits 70 ‑

2,570 2,330

112 113

30 Key management personnel disclosures (continued)

(c) Remuneration of key management personnel (continued)

Directors

directors’ remuneration is determined by the shareholding Ministers. In addition, the shareholding Ministers have determined

remuneration payable to directors who are members of various Board committees. directors’ remuneration comprises cash salary,

committee fees, superannuation contributions and car parking benefits. no other benefits are payable to directors.

Other key management personnel

tarong energy Corporation’s remuneration policy has three distinct objectives:

• toensureallemployeesarerecognisedandrewardedfortheirperformanceinafairandequitableway;

• toensuretheremunerationpaidtoemployeesiscompetitive,enablingtheEconomicEntitytoattractandretainemployees

capable of meeting the economic entity’s needs; and

• torewardemployeesforachievingpre‑determinedcorporate,businessunitandpersonalperformancetargets.

remuneration packages for the Chief executive officer and other key management personnel comprise the following components:

• basesalary,whichispayableincash.Basesalariesarebasedonthegeneralmarketrate,asassessedbyexternalconsultants,

Mercer hr Consulting;

• otherbenefits,includingmotorvehicleallowances,privatehealthinsuranceandcarparking;

• retirementbenefitsdeliveredunderdefinedcontributionsuperannuationfundsnominatedbythekeymanagementpersonnel

apart from one key management person who is provided defined lump sum benefits based on years of service and final salary;

and

• at‑riskperformanceincentives,thatmaybepayableannuallyincash,dependinguponsatisfactionofkeycriteria.

Link between remuneration paid and the performance of the Corporation

directors’ remuneration is not directly linked to the performance of the Corporation, with any remuneration increases being

determined by the shareholding Ministers. directors do not receive any performance‑related remuneration.

the rate of remuneration increase for the Chief executive officer and other key management personnel is determined with

regard to wage movements and individual performance. remuneration increases are applied after personal performance reviews,

consideration of the Corporation’s performance and review and approval by the Board.

at‑risk performance incentive payments of the Chief executive officer and other key management personnel are capped at 15% of

total fixed remuneration (base salary, motor vehicle allowance, superannuation, and parking benefit where applicable). the amounts

payable are tied to the achievement of pre‑determined Corporation and individual performance targets as approved by the Board.

Service Agreements

Service agreements are not in place for directors.

the Chief executive officer’s appointment is approved by the shareholding Ministers upon recommendation of the Board. the

remuneration and other terms of employment for the Chief executive officer are specified in an employment contract. the contract

provides for the provision of performance‑related cash bonuses and other benefits including motor vehicle allowance, health

insurance and car parking. other major provisions of the contract relating to remuneration are set out below:

• termofcontract–threeyears,commencing29January2007andextendedon29January2010forafurthertwoyears(with

no further option to extend);

• paymentofterminationbenefitonearlyterminationbytheEconomicEntity,exceptforseriousmisconductorpoor

performance, equal to two weeks’ salary (with a minimum of 13 weeks and maximum of 52 weeks salary) for each year of

continuous service, 20% of residual salary value of the contract and any accrued entitlements; and

• paymentof12weeks’salaryuponexpiryoftheagreement,andanyaccruedentitlements.


112 113



(c) Remuneration of key management personnel (continued)

all Senior executive appointments have been approved by the shareholding Ministers upon the recommendation of the Board.

the remuneration and other terms of employment for these roles are specified in employment contracts. the contracts provide

for the provision of performance‑related cash bonuses and other benefits including motor vehicle allowance, health insurance and

car parking.

all senior executives other than the General Manager Marketing and trading are employed on fixed term employment contracts.

the Chief financial officer and General Managers Corporate Governance, Generation operations, Mining, and People and

Communications are subject to these contracts. Contract provisions include:

• three‑yearterms,withtheoptiontoextendthetermforamaximumoftwoyearsbymutualagreement.Commencement

date for the General Manager Corporate Governance was 1 June 2007, for the General Manager Generation operations was

1 September 2008, for the General Manager Mining operations was 11 September 2008 (ceased employment 8 July 2009),

and for the Chief financial officer and the General Manager People and Communications was 2 March 2009;

• apaymentofterminationbenefitonearlyterminationbytheEconomicEntity,exceptforseriousmisconductorpoor

performance, equal to two weeks salary (with a minimum of four weeks and maximum of 52 weeks salary) for each year of

continuous service, 20% of the residual salary value of the contract and any accrued entitlements; and

• aseverancepaymentequalto12weeksofsalary,onlyincircumstanceswhereemploymentterminatesuponexpiryofthe

contract and where the economic entity has not offered further employment beyond the expiry date for reasons other than for

serious misconduct or poor performance, and any accrued entitlements.

the General Manager Marketing and trading, who commenced in the role on 23 July 2008, is employed under another contract

arrangement which is not for a fixed term and therefore does not provide for the payment of a termination benefit on early

termination. Should the position become redundant, the contract provides for payment of a redundancy amount comprising six

months salary, and as for all employees, an additional amount payable for each year of service subject to a cap of 75 weeks salary,

an additional notice payment of 17 weeks salary, and accrued entitlements.

the acting General Manager Mining operations, who commenced in an acting capacity on 8 July 2009, is employed under another

contract arrangement consistent with the substantive position. When the position is filled the contract terms will conform with

contract arrangements applied to Senior executive appointments.

At‑risk performance incentive remuneration

the terms and conditions for each category of at‑risk performance incentive remuneration in this or future reporting periods are set

out in note 31.

114 115


(d) Details of remuneration (continued)

details of the remuneration of each director of tarong energy Corporation Limited and each of the other key management

personnel of the economic entity are set out in the following tables:

Directors of Tarong Energy Corporation Limited

2010 Short‑term employee benefits Post‑ employment

Name Cash salary Committee fees

Non‑monetary benefits

Super‑ annuation Total

$’000 $’000 $’000 $’000 $’000

Mr G J Carpenter 66 8 11 7 92

Mr r a Barton 27 6 ‑ 3 36

Ms L K Bond 27 8 ‑ 4 39

Ms K L Collins 27 8 ‑ 4 39

Ms e M Jameson 27 9 ‑ 4 40

Mr J h Pegler 27 6 ‑ 3 36

Ms K e Smith‑Pomeroy 27 6 ‑ 3 36

2009 Short‑term employee benefits Post‑ employment

Name Cash salary Committee fees

Non‑monetary benefits1

Super‑ annuation Total

$’000 $’000 $’000 $’000 $’000

Mr G J Carpenter 64 8 10 7 89

Mr r a Barton 26 4 ‑ 3 33

Ms L K Bond 26 8 ‑ 3 37

Ms K L Collins 26 8 ‑ 3 37

Ms e M Jameson 26 9 ‑ 4 39

Mr J h Pegler 26 5 ‑ 3 34

Ms K e Smith‑Pomeroy 26 5 ‑ 3 341 Prior year figures have been updated to include car parking benefits


114 115


30

Key

man

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ent

pers

onne

l dis

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(co

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ued)

(d)

Det

ails

of

rem

uner

atio

n (c

ontin

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oth

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t per

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el o

f the

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ntity

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ben

efits

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ploy

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wan

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wan

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‑mon

etar

y be

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ts1

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r‑

annu

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ymen

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tal

2010

$’00

0$’

000

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000

$’00

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359

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211

33‑

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2

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erat

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ager

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933

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282

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)6

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174

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116 117

30

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l dis

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(co

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(d)

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ey m

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t per

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eco

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ntity

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Non

‑mon

etar

y be

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ts1

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r‑

annu

atio

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rmin

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n Pa

ymen

tsTo

tal

2009

$’00

0$’

000

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000

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0

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tive

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325

51‑

1648

‑ 4

40

actin

g C

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fin

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ffice

r (un

til 1

Mar

ch 2

009)

225

0‑

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6811

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until

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8)3

263

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on w

as re

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as a

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e 20

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ion

is o

nly

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to b

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for t

hose

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cutiv

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peci

fied

for t

he c

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d w

ho w

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also

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the

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ay a

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ote

31 (

b).


116 117



(e) Other transactions with directors and other key management personnel

all transactions in the years ended 30 June 2010 or 30 June 2009 between the economic entity and directors or other key

management personnel, including their related parties, were on normal commercial terms and conditions and were immaterial

in nature.

31 Employee benefits


2010 2009 2010 2009

$’000 $’000 $’000 $’000

aggregate employee benefit liability (including on‑costs):

Current 23,273 21,727 21,909 20,621

non‑current 1,118 1,396 1,094 1,396

24,391 23,123 23,003 22,017

average number of employees during the reporting

period (full‑time equivalent)

506

452

500

452

(a) Long service leave

the present values of long service leave not expected to be settled within 12 months of balance date have been calculated using

the following assumptions:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

assumed rate of increase in wage and salary rates 4.5% 4.5% 4.5% 4.5%

discount rate 5.1% 5.6% 5.1% 5.6%

Settlement term 13 years 13 years 13 years 13 years

118 119

31 Employee benefits (continued)

(b) Performance payments for the Economic Entity

the following discloses the aggregate at‑risk performance bonuses and salary and wages paid to all employees who received an

at‑risk performance payment:

Parent Entity

2010 2009

$’000 $’000

Aggregate at‑risk performance incentive remuneration1:

Chief executive officer and Senior executives 270 182

Contract and enterprise Bargaining agreement employees 5,421 4,366

5,691 4,548

aggregate remuneration (including at‑risk performance incentive remuneration) paid or

payable to employees to whom a performance payment is paid or payable2

60,222

51,754

number of employees to whom a performance payment is paid or payable 537 490

1 Performance payments accruing in respect of the relevant year, regardless of the payment date.

2 total remuneration includes base salary, overtime payments, motor vehicle and other work related allowances and performance payments but excludes superannuation and non‑cash benefits.

the terms and conditions for each category of at‑risk performance incentive remuneration in this or future reporting periods are set

out below:

Employee category Grant date1 Nature of remuneration granted

Chief executive officer 17 august 2010at‑risk performance incentive payable in cash (cap of 15% of total fixed

remuneration)

Senior executives 17 august 2010at‑risk performance incentive payable in cash (cap of 15% of total fixed

remuneration)

Contract employees 17 august 2010 at‑risk performance incentive payable in cash (cap of 15% of base salary)

enterprise Bargaining

agreement employees17 august 2010 at‑risk performance incentive payable in cash (cap of 12% of base salary)

1approval of the final component of the 2009/10 incentive payments for all employees will be sought at the Board meeting held on 17 august 2010.

at‑risk performance incentive payments are provided for annually and align with the economic entity’s financial year ending 30

June. all employees are eligible for participation but a minimum service period of three months is required before entitlement

commences. for employees with a service period of less than one year, full year incentive amounts are pro‑rated based on

the proportion of the financial year in employment with the economic entity. the amount of a contract or enterprise Bargaining

agreement (eBa) employee’s incentive payment is determined as a percentage of base salary, capped at the percentages provided

in the preceding table. the amount of the Chief executive officer’s and Senior executives’ incentive payments are determined

as a percentage of total fixed remuneration (base salary, motor vehicle allowance, superannuation and parking benefit where

applicable), capped at the percentages provided in the preceding table. the incentive percentage is calculated by reference to

actual performance compared to predetermined targets, with weightings for corporate results, business unit results, personal/team

results and for non‑eBa employees, a personal assessment as part of the annual performance review process.

there has been no alteration to the terms or conditions of the incentive payments to be paid for the year ended 30 June 2010 year

since the grant date.


118 119


32 Remuneration of auditors

during the year the following fees were paid or payable for services provided by the auditor of the Parent entity:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Audit services

audit of financial reports and other audit work under the

Corporations Act 2001281 241 281 241

Prior year under provision 21 46 21 46

total remuneration for audit services 302 287 302 287

33 Contingencies

Claims

a number of claims by or against the economic entity are pending as at 30 June 2010. It is not practical to estimate the potential

effects of these claims however the economic entity has concluded that any asset or liability that may arise from these claims will

not be significant.

a federal Court action was received by the economic entity on 15 July 2010 regarding the purchase of certain land in relation to

the Kunioon Coal Project which did not proceed. this claim has not yet been quantified by the applicant and it is not yet possible

for the economic entity to form an opinion on the potential outcome of this action.

Contingent consideration

tarong energy acquired the Meandu Mine on 31 January 2008. In the event that the actual electricity pool price differs from the

forecast electricity pool price used in the consideration calculations, additional consideration may be payable or receivable in

february 2011. Initially the additional consideration was brought to account as a component of goodwill arising on the acquisition,

however since goodwill has been utilised in full it is now brought to account through the profit and loss. for the period ended 30

June 2010 a receivable of $20,894,000 has been recognised, of which $1,080,000 (2009: $14,531,000) has been recorded in

the profit and loss. no adjustment has been made against goodwill in the current year.

Guarantees

Cross guarantees given by tarong energy Corporation Limited, tn Power Pty Ltd, tarong north Pty Ltd, tarong fuel Pty Ltd, teC Coal

Pty Ltd and Glen Wilga Coal Pty Ltd are described in note 38.

In addition to the above, in specific transactions with third parties tarong energy Corporation Limited also guarantees subsidiaries

independently.

these guarantees may give rise to liabilities in the Parent entity if the subsidiaries do not meet their obligations under the terms of

the overdrafts, loans, leases or other liabilities subject to the guarantees.

Bank Guarantees

the economic entity has provided a bank guarantee to the State of Queensland in respect of mining tenements issued under the

Mineral Resources Act 1989 (Qld).

the maximum amount payable under the guarantee is $44,931,000 (2009: $44,931,000).

Indemnity Deed

the economic entity has provided an indemnity deed to the State of Queensland in respect of the agreement for Lease dated

20 June 2008 in relation to the lease of floors 12‑14 of 60 albert Street, Brisbane, Queensland. the maximum amount payable

under the indemnity deed is $2,052,000 (2009: $nil).

no material losses are anticipated in respect of any of the above contingent liabilities.

120 121

34 Commitments

Capital commitments

Capital expenditure (GSt exclusive) contracted for at the reporting date but not recognised as liabilities is as follows:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Payable:

Within one year 30,871 41,880 14,147 36,744

Later than one year but not later than five years 2,587 3,428 2,587 3,428

Later than five years ‑ ‑ ‑ ‑

33,458 45,308 16,734 40,172

Operating leases

the economic entity leases property and motor vehicles under operating leases with terms ranging from one to four years.

Leases generally provide the economic entity with a right of renewal, at which time all terms are renegotiated. Property lease

payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on movements in the

Consumer Price Index.


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Payable:

Within one year 3,521 3,177 3,325 2,959


Later than five years 10,381 12,755 10,381 12,755

23,703 26,471 23,429 25,978

Other commitments

other operating expenditure (GSt exclusive) contracted for at the reporting date but not recognised as liabilities is as follows:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Payable:

Within one year 77,227 50,412 44,990 23,783


Later than five years 108,800 93,450 56,100 63,200

291,347 209,538 157,510 133,753


120 121


35 Related party transactions

(a) Parent Entity

ultimate control of the economic entity resides with the

State of Queensland. the ultimate Parent entity within the

economic entity is tarong energy Corporation Limited.

(b) Directors

the names of persons who were directors of the company

at any time during the financial year are as follows: Mr r a

Barton, Ms L K Bond, Mr G J Carpenter, Ms K L Collins, Ms e

M Jameson, Mr J h Pegler and Ms K e Smith‑Pomeroy.

(c) Subsidiaries

Interests in subsidiaries are set out in note 37.

(d) Key management personnel compensation

disclosures relating to key management personnel are set

out in note 30.

(e) Transactions with related parties

tarong energy Corporation Limited is a Queensland

Government owned Corporation, with all shares held

by the shareholding Ministers on behalf of the State of

Queensland. all State of Queensland controlled entities

meet the definition of a related party of tarong energy


the economic entity transacts with other State of

Queensland controlled entities. all transactions are

negotiated on normal terms and conditions offered by the

respective related party or as disclosed in note 40.

the following transactions occurred with related parties:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Sales ‑ State of Queensland controlled entities

Settlements relating to electricity derivatives 49,706 73,847 49,706 73,847

Expenses ‑ State of Queensland controlled entities

raw materials and consumables used 29,622 11,239 28,865 11,239

employee benefits expense 3,405 2,666 3,346 2,666

finance costs 27,840 30,592 25,496 26,202

Income tax 37,018 33,406 39,179 26,444

other expenses 16,263 19,405 15,677 10,782

114,148 97,308 112,563 77,333

Loans to related parties

Loans advanced to subsidiaries ‑ ‑ 282,497 22,573

Loans from related parties

Loans advanced from State of Queensland controlled entities 54,069 101,374 54,069 101,374

Loan repayments to State of Queensland controlled entities 49,511 49,476 49,511 49,476

Superannuation contributions

Contributions to superannuation funds on behalf of employees 8,624 5,722 8,624 5,722

Interest revenue

Subsidiaries ‑ ‑ 12 16

Other transactions

dividends paid to the State of Queensland 45,541 50,750 45,541 50,750

122 123

35 Related party transactions (continued)

(f) Outstanding balances arising from sales/purchases of goods and services

the following balances are outstanding at the end of the reporting period in relation to transactions with related parties:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Current receivables

Subsidiaries ‑ ‑ ‑ 506

State of Queensland controlled entities ‑ current tax asset 6,505 ‑ 6,505 ‑

State of Queensland controlled entities ‑ other 17,798 8,496 17,798 8,496

24,303 8,496 24,303 9,002

Non‑current receivables (loans)

Subsidiaries ‑ ‑ 566,793 306,954

Current payables

State of Queensland controlled entities ‑ loans 28,656 ‑ 28,656 ‑

State of Queensland controlled entities ‑ current tax liabilities ‑ 2,448 ‑ 2,448

State of Queensland controlled entities ‑ other 4,272 1,570 4,272 1,570

State of Queensland controlled entities ‑ dividend provision 17,401 45,541 17,401 45,541

Subsidiaries ‑ ‑ ‑ 9,498

50,329 49,559 50,329 59,057

Non‑current payables (loans)

State of Queensland controlled entities ‑ loans 420,911 445,009 420,911 445,009

no expense has been recognised in respect of bad or doubtful debts due from related parties.

36 Business combination

(a) Summary of acquisition

on 30 november 2009 tn Power Pty Ltd (tn Power), a subsidiary of the Corporation, obtained control of the tarong north Power

Station, a business which principally operates to generate and sell electricity. Prior to the acquisition the tarong north Power Station

was operated as an unincorporated joint venture whose participants were tn Power (50% interest) and tM energy (australia) Pty

Ltd (tM energy). tn Power purchased the additional 50% interest in the tarong north Power Station and the share in the joint

venture manager entity, tarong north Pty Ltd, increasing the Corporation’s equity interest from a 50% joint venture participant to a

100% owned subsidiary.

the tarong north Power Station is a single unit 443 megawatt supercritical coal‑fired power station, located adjacent to the tarong

Power Station. the acquisition is expected to enable the Corporation to better manage market risks and provide increased flexibility

in dispatch of its generation portfolio. the Corporation also expects to reduce costs through economies of scale.

the acquired business contributed external revenues of $26,367,000 and net profit of $680,000 to the economic entity for

the period from 30 november 2009 to 30 June 2010. If the acquisition had occurred on 1 July 2009, management estimates

that consolidated revenue and consolidated net profit for the year ended 30 June 2010 would have been $524,940,000 and

$86,401,000 respectively. In determining these amounts, management has assumed that the fair value adjustments, determined

provisionally, that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 July 2009.


122 123


36 Business combination (continued)

(a) Summary of acquisition (continued)

the following summarises the major classes of consideration transferred, and the recognised amounts of assets acquired and

liabilities assumed at the acquisition date:

$’000

Purchase consideration

Cash paid 254,938

(b) Cash flow information

Outflow of cash to acquire subsidiary, net of cash acquired

Cash consideration 254,938

Less: Cash balances acquired (1,476)

outflow of cash 253,462

(c) Assets and liabilities acquired

the assets and liabilities recognised as a result of the acquisition are as follows:

Cash 1,476

trade and other receivables 1,367

Prepayments 252

Inventories 4,250

Property, plant and equipment 208,840

trade payables (5,633)

Provision for employee benefits (283)

net identifiable assets acquired 210,269

add: Goodwill 44,669

net assets acquired 254,938

the goodwill is attributable mainly to the synergies expected to be achieved from integrating the operations of the tarong north

Power Station into the Corporation’s existing business. none of the goodwill recognised is expected to be deductible for income tax

purposes.

Transactions separate from the acquisition

the Corporation incurred acquisition related costs of $14,925,000 (2009: $785,000) relating to external legal fees, due diligence

costs and stamp duty. these costs have been included in other expenses in the Corporation’s consolidated statement of


the Corporation and the previous joint venture parties were subject to an electricity agreement under which the Corporation

was required to guarantee the supply of water and coal to the tarong north Power Station and were subject to a number of

penalty provisions in the instance that certain requirements were not met. at the acquisition date this pre‑existing relationship was

effectively terminated. the value assigned to the termination of this agreement was $18,875,000 and represents management’s

estimate of the reduction in risks and future cash outflows as a result of extinguishing the electricity agreement. this amount has

been recognised in the profit and loss as a cost to terminate contractual obligations.

124 125

37 Subsidiaries and associates

the consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with

the accounting policy described in note 1(b):

Name of entity Country of incorporation Class of shares

Equity holding

2010 2009

% %

tn Power Pty Ltd1 australia ordinary 100 100

tarong north Pty Ltd1, 2 australia ordinary 100 ‑

tarong fuel Pty Ltd1 australia ordinary 100 100

Glen Wilga Coal Pty Ltd1 australia ordinary 100 100

teC Coal Pty Ltd1 australia ordinary 100 100

1 these subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class order 98/1418 issued by the australian Securities and Investments Commission.

2 during the year ended 30 June 2010 tn Power Pty Ltd acquired the additional 50% of the ordinary shares in tarong north Pty Ltd, the management company associated with the previously unincorporated tarong north joint venture which was deemed to be an associate in 2009. tarong north Pty Ltd is now a 100% owned subsidiary.

the financial results of the subsidiaries are detailed below:

Revenue Expenses Total Assets Total Liabilities Equity

$’000 $’000 $’000 $’000 $’000

2010

tn Power Pty Ltd 61,524 (72,174) 408,678 (430,642) (21,964)

teC Coal Pty Ltd 156,393 (153,732) 133,109 (120,149) 12,960

tarong north Pty Ltd 14,088 (14,088) 21,849 (22,005) (156)

2009

tn Power Pty Ltd 52,306 (48,132) 165,161 (176,475) (11,314)

teC Coal Pty Ltd 169,989 (157,130) 122,398 (112,098) 10,300

tarong fuel Pty Ltd is a holding company and Glen Wilga Coal Pty Ltd is dormant and as such no results are shown.

38 Deed of cross guarantee

the Corporation has entered into a deed of Cross Guarantee with its subsidiaries tn Power Pty Ltd, tarong north Pty Ltd, tarong

fuel Pty Ltd, teC Coal Pty Ltd and Glen Wilga Coal Pty Ltd under which each company guarantees the debts of the others.

By entering into the deed, the wholly‑owned entities have been relieved from the requirement to prepare a financial report and

directors’ report under Class order 98/1418 issued by the australian Securities and Investments Commission.

the above companies represent a ‘Closed Group’ for the purposes of the Class order, and, as there are no other parties to

the deed of Cross Guarantee that are controlled by tarong energy Corporation Limited, they also represent the ‘extended

Closed Group’.


124 125


39 Interests in joint ventures

during the year the economic entity held an interest in the tn Power unincorporated joint venture. the joint venture, whose

participants were tn Power Pty Ltd (50% interest), a subsidiary of the Corporation and tM energy (australia) Pty Ltd, owned the

tarong north Power Station. tarong north Pty Ltd, an associated entity of the Corporation (50% interest), manages the operation

of the tarong north Power Station as agent for the joint venture. on 30 november 2009, tn Power Pty Ltd acquired the additional

50% interest in the tarong north Power Station and additional 50% share in the management company tarong north Pty Ltd. the

entity is now a 100% owned subsidiary.

the Corporation holds a 20.30% (2009: 20.94%) interest in the output of a joint venture named Private forestry Plantation Joint

Venture whose principal activity is the commercial production of timber from plantations.

as at 30 June 2009, the Corporation held a 7.7% interest in the Centre for Low emission technology Joint Venture whose principal

activity was to facilitate research and other activities directed to the generation of electricity from coal with lower greenhouse gas

emissions. the Centre for Low emission technology successfully completed its research program on 31 July 2009 and closed

effective 01 august 2009.

the economic entity’s interest in the assets employed in joint ventures are in the consolidated balance sheet, in accordance with

the accounting policy described in note 1(b), under the following classifications:


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Current assets

Cash and cash equivalents ‑ 770 ‑ 294

receivables ‑ 5,500 ‑ ‑

Inventories ‑ 2,842 ‑ ‑

other ‑ 1,224 ‑ ‑

Total current assets ‑ 10,336 ‑ 294


Property, plant and equipment ‑ carrying value 1,027 152,727 1,027 1,027

Total non‑current assets 1,027 152,727 1,027 1,027

Share of assets employed in joint venture 1,027 163,063 1,027 1,321

126 127

40 Economic dependency

the economic entity relies upon the australian energy Market operator (aeMo) to determine the regional reference Price used in

calculating the economic entity’s electricity sales revenue.

the economic entity’s customers are predominantly Queensland based due to limitations of physical delivery to other australian

energy Market regions.

the economic entity is reliant on Queensland electricity transmission Corporation Limited (Powerlink Queensland) to provide fully

available and functioning transmission lines to enable physical delivery of electricity.

the economic entity’s tarong and tarong north Power Stations are dependent upon the supply of water for the production of

demineralised water as cooling water, for the production of drinking water and for water for general use. Wivenhoe Power Station

is dependent upon a supply of water to operate as a pumped storage hydro‑electric power station, but this water is returned to the

natural waterways.

from 1 July 2008, the economic entity, on a directive from the Queensland Government, has entered into contractual agreements

with the South east Queensland Water Grid Manager for long‑term water supply from the water grid for both the tarong north

and tarong Power Stations. Grid water will include dam water and recycled water. annual maximum contract volumes and contract

charges for the first ten years to 2017/18, have been set by the Queensland Government. the economic entity will be able to

continue sourcing water from Boondooma dam.

41 Events occurring after the reporting period

no matter or circumstance has arisen since 30 June 2010 that has significantly affected, or may significantly affect:

• theEconomicEntity’soperationsinfuturefinancialyears;

• theresultsofthoseoperationsinfuturefinancialyears;or

• theEconomicEntity’sstateofaffairsinfuturefinancialyears.


126 127


42 Reconciliation of profit after income tax to net cash inflow from operating activities


2010 2009 2010 2009

$’000 $’000 $’000 $’000

Profit for the year 91,552 85,103 97,198 67,495

depreciation and amortisation charge 92,203 88,527 70,022 70,593

non‑cash retirement benefits (credit)/expense (486) 465 (486) 465

Write down of Kunioon asset ‑ 9,775 ‑ 9,775

non‑cash onerous contract expense 339 ‑ 339 ‑

non‑cash stock obsolescence expense 1,061 ‑ 642 ‑

reversal of impairment (6,711) ‑ ‑ ‑

net (gain)/loss on sale of non‑current assets 87 211 36 36

Purchase price allocation adjustment to employee provisions ‑ 4,549 ‑ ‑

revenue share agreement adjustment to goodwill ‑ 3,562 ‑ ‑

net gain on contingent consideration (1,079) 14,531 ‑ ‑

net gain on change in rehabilitation liability (11,535) ‑ ‑ ‑

unrealised fair value gain on derivative financial instruments

through the profit and loss(98,190) (18,362) (98,188) (18,362)

Change in operating assets and liabilities, net of effects from

sale of controlled entity‑ ‑ ‑ ‑

Increase in inventories (3,114) (13,424) (12,312) (12,013)

(Increase)/decrease in receivables (5,938) (49,415) 14,511 (27,243)

Increase in other current assets (217) ‑ (217) ‑

(Increase)/decrease in deferred stripping (8,536) 862 ‑ ‑

Increase in other operating assets (1,756) ‑ (1,756) ‑

(decrease)/increase in deferred income (294) (722) 217 (170)

(decrease)/increase in payables (6,984) (2,812) (16,759) 10,938

Increase/(decrease) in other current liabilities 4,405 (343) 1,155 (273)

(Increase)/decrease in current tax asset (6,505) 4,395 (6,505) 4,395

(decrease)/increase in current tax liabilities (2,448) 2,448 (2,448) 2,448

Increase in deferred tax liabilities 36,662 30,966 21,471 31,421

Increase in rehabilitation provisions 7,343 8,922 3,859 3,937

Increase in other provisions 985 2,006 986 2,027

Increase in other current liabilities 1,756 ‑ 1,756 ‑

Net cash inflow from operating activities 82,600 171,244 73,521 145,469

128 129

In the directors’ opinion:

(a) the financial statements and notes set out on pages 59 to 127 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 Corporation’s and economic entity’s financial position as at 30 June 2010 and of its

performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date; and

(b) there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and

payable; and

(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in

note 38 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross

guarantee described in note 38.

this declaration is made in accordance with a resolution of the directors.

Mr G J Carpenter Ms K e Smith‑Pomeroy

director director

Brisbane

august 2010

Directors’ declaration30 June 2010

128 129129

to the Members of tarong energy Corporation Limited

Report on the Financial Report

I have audited the accompanying financial report of tarong energy Corporation Limited, which comprises the balance sheets as at

30 June 2010, and the statements of comprehensive income, statements of changes in equity and statements of cash flows 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 Report

the directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with 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. In note 1, the directors also state, in accordance with accounting Standard aaSB 101

Presentation of Financial Statements, that the financial report of the group and the company, comprising the financial statements and

notes, complies with International financial reporting Standards.

Auditor’s Responsibility

My responsibility is to express an opinion on the financial report based on the audit. 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 auditor 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.

Independence

the Auditor‑General Act 2009 promotes the independence of the auditor‑General and all 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.

129

Independent Auditor’s Report30 June 2010

130 131

Independent Auditor’s Report (continued)30 June 2010

Auditor’s Opinion

In my opinion –

(a) the financial report of tarong energy 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 2010 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; and

(b) the financial report also complies with International financial reporting Standards as disclosed in note 1.

J f adams

delegate of the auditor‑General of Queensland

17 august 2010

Queensland audit office

Brisbane

132

Glossary

aaSB australian accounting Standards BoardaCICC aboriginal Community Interest Consultative

CommitteeaIfr all Injury frequency rateaS/nZS australian/new Zealand StandardCeo Chief executive officerCo2 carbon dioxideCPrS Carbon Pollution reduction SchemeCSG coal seam gasCSIro Commonwealth Scientific and Industrial research

organisationderM department of energy and resource

ManagementeBa enterprise Bargaining agreementeMS environmental Management SystemGeC Gas energy CertificateGW gigawatt (one GW = one thousand megawatts)GWh gigawatt hourIaSB International accounting Standards BoardIfrS International financial reporting Standards

ILua Indigenous Land use agreementISo 14001 International standard for environmental

managementLtI Lost time InjuryLtIfr Lost time Injury frequency rateML megalitre (one ML = one million litres)MtIfr Medical treatment Injury frequency rateMW megawatt (one MW = one million watts)MWh megawatt hournGaC new South Wales Greenhouse abatement

CertificatenGerS national Greenhouse and energy reporting

SystemneM national electricity Marketnox nitrogen oxidePCC post‑combustion captureQao Queensland audit officeQtC Queensland treasury CorporationreC renewable energy CertificaterIfr recordable Injury frequency rate

Calculations

Abbreviations

dIVIdend Payout ratIo return on aVeraGe ProduCtIVe aSSetS

dividends Paid x 100 earnings Before Interest and tax excluding fair value gains of derivative instruments x 100operating Profit after tax excluding tax‑effected

fair value gains of derivative instruments

1 average Productive assets = average total assets ‑ average uncommissioned assets ‑ average total derivative Instrument assets ‑ average Cash and cash equivalents.

average Productive assets1

availability: the total energy available to the system, allowing for planned maintenance and breakdowns, as a percentage of maximum possible energy available

Carbon intensity: emissions of carbon dioxide equivalents per megawatt hour generated (kgCo2e/MWh generated)

output: dispatched generation

Pool price: the average half‑hour trading price of five minute dispatch prices set by marginal generation

GearInG

debt x 100

debt + equity

return on aVeraGe eQuIty

operating Profit after tax x 100

average total equity

Tarong Power Station PO Box 15 Nanango QLD 4615 Telephone 61 7 4160 9444 Facsimile 61 7 4160 9305

Wivenhoe Power Station PO Box 38 Fernvale QLD 4306 Telephone 61 7 5427 1100 Facsimile 61 7 5426 7800

www.tarongenergy.com.au

Tarong Energy Corporation Limited ABN 52 078 848 736 Registered Office Level 13 42 Albert St Brisbane GPO Box 800 Brisbane QLD 4001 Telephone 61 7 3228 4333 Facsimile 61 7 3228 4300

Tarong North Power Station PO Box 708 Nanango QLD 4615 Telephone 61 7 4163 4200 Facsimile 61 7 4163 4226

Meandu Mine PO Box 1165 Kingaroy QLD 4610 Telephone 61 7 4160 9208 Facsimile 61 7 4160 7236

AnnuAl RepoRt · resources located in the Surat Basin near chinchilla. established in July 1997 and owned by the Queensland Government,

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