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Chairman’s statementOn behalf of the Board, I am pleased to reportanother successful year for Stanwell in 2016/17.The business achieved a strong financial result,returning a net profit after tax of 375.2 million(2015/16: 170.2 million) and paying a total dividendof 260.6 million (2015/16: 311.6 million). Stanwell’sdiverse revenue streams have continued to underpinits profitability.The total dividend payable excludes 100.0 million that has been retainedto investigate the potential togenerate hydro-electric power atthe Burdekin Falls Dam, as part ofthe State Government’s prioritiesto expand renewable generationcapacity in Queensland.Since the restructure of theQueensland Government ownedelectricity generators in July 2011,we have focused on ensuring ourplant achieves world class reliabilitystandards, optimising our hedgebooks, streamlining businessprocesses and right-sizing theworkforce to enable Stanwell toparticipate efficiently and effectivelyin all aspects of the NationalElectricity Market. Our commercialresults are also a reflection of thesuccess of these initiatives.THE MARKETCoal and gas-fired generationretiring as an increasing amount ofintermittent generation comes online;the need for expensive, short-termgeneration to fill supply gaps; andenergy policy uncertainty at anational level are driving highwholesale prices. Additionally,an extended period of very hightemperatures during summer ledto higher electricity demand inQueensland (which set a new peakdemand record) at a time when theavailability of supply from otherstates was limited.These conditions would historicallyprovide a clear signal for investmentin new baseload generation capacity;however potential investors remainreluctant to make long-terminvestments in a market where noclear policy parameters exist.4STANWELL ANNUAL REPORT 2016/17 CHAIRMAN’S STATEMENTBalancing the electricity markettrilemma of security, affordabilityand sustainability is now a centralfocus of Federal and Stategovernments, the market operatorand market participants. Recentpolicy announcements at a Stateand Federal level have sought tobalance the trilemma. However,these policies will take some timeto have a measurable impact onthe current market situation.OUR GOAL IS ZERO HARM TODAYOur firm commitment to the healthand safety of all our employees andcontractors remains a priority, andcontinues to underpin our approachto our business operations. We haveseen a 45 per cent reduction in thenumber of injuries, from 220 in2015/16 to 119 in 2016/17. While thispositive result is encouraging andreflects the commitment of ourpeople to achieving our goal of ZeroHarm Today, we recognise the needto remain vigilant and seek continualimprovement in this area to preventthe occurrence of workplace injuriesand occupational illnesses.ENSURING A LONG-TERMFUTURE FOR THE BUSINESSWith more than 4,000 MW of coal,hydro and gas generation capacitythroughout Queensland, Stanwell’sportfolio is substantial and diverse.Stanwell’s strategy seeks to leveragethese attributes to support theprovision of secure and reliableelectricity supply to allQueenslanders.

REVENUE 2016/17(B) 28.7%(C) 13.5%6.5%(E) 2.9%(F) 0.5%(D) 3.1%(A) 51.3%A. Sale of electricity – wholesaleB. Sale of electricity – retailC. Energy services revenueD. Gas salesE. Coal revenue sharing arrangementsF. OtherREVENUE 2015/16(B) 25.0%(C) 14.0%9.1%(E) 3.1%(F) 0.6%(D) 5.4%(A) 51.9%Our strategy seeks to: ensure our plant can flex to meetthe demand patterns of a marketwith a higher proportion ofrenewable energy; participate in renewable energy,through direct involvement withrenewable projects and via powerpurchase agreements withrenewable project proponents;and work with large customers andrenewable project proponentsto develop innovative energyproducts to meet the rapidlychanging needs of the market.During 2016/17, Stanwell madeimportant advances in all ofthese areas.We began the pre-feasibilitystudy for a hydro power stationon the Burdekin Dam in NorthQueensland. If the results of thispre-feasibility study are positiveStanwell is expecting to completethe business case by mid-2018 andproviding all development approvalsand agreements with landholdersare in place, construction of thehydro generation plant wouldcommence in 2020.We also initiated a program of workto ensure Stanwell is positioned tocontinue to provide baseloadelectricity in a market with a highproportion of intermittent generation.There are a range of areas we areexploring, one of which includesseeking an understanding of thefull capabilities of our generationassets, in terms of their operatingflexibility and their related fuel supplyrequirements. Stanwell is alsocontributing to discussions on theevolution of the National EnergyMarket and associated regulatoryframework across our industry.Stanwell continues to engage closelywith large users of electricity todesign long-term contracts whichprovide price certainty andaffordability. We are also workingclosely with large industrialcustomers to explore their long-termenergy requirements and togetherdevelop options (which in someinstances involve partnerships withrenewable energy proponents) tomeet those needs.ACKNOWLEDGMENTSI would also like to commend theefforts of our Chief Executive Officer,Richard Van Breda, his executiveleadership team and all Stanwell’semployees for their dedication andcommitment in delivering thestrong operational and financialperformance of the business.Technology and the associatedregulatory and market opportunitiesare moving rapidly, and marketparticipants will need to be agile torespond to them. With our proventrack record of successful businesstransformation, diverse portfolio andorganisational capability, Stanwell iswell positioned to respond to andprosper in, the energy market ofthe future.Dr Ralph CravenNon-executive ChairmanI would like to thank our shareholdingMinisters for their continuedsupport of Stanwell’s strategyand business operations.My fellow directors have beentremendous in their focus throughoutthe year, and I thank them fortheir support, advice and theexpertise they have provided inguiding Stanwell.STANWELL ANNUAL REPORT 2016/17 CHAIRMAN’S STATEMENT5

Chief Executive Officer’s reviewThe unprecedented change within the energymarket continues. There is a need for clear andconsistent policy settings to facilitate this changeand this will require strong, forward-thinkingleadership – both politically and from withinthe industry.As a Government OwnedCorporation with a high performingand diverse portfolio of thermaland renewable generation assets,Stanwell is well-positioned tocontribute to a secure, affordableand sustainable energy sector forthe benefit of Queenslanders.Throughout the year, we havecontinued to focus on the reliabilityof our assets with the primaryobjective of providing security ofelectricity supply. As a result ofprudent investment in assetmanagement, and the expertiseand dedication of our operationsand trading teams, our plant wasable to operate efficiently and reliablyin response to the market. Duringthe 2016/17 summer, we achieveda world-class reliability factor ofmore than 99 per cent.Despite the significant change facingour business, our number one priorityremains the health, safety andwellbeing of our people.SAFETY PERFORMANCEOur unrelenting focus on safetyhas led to an improving trend inour safety performance across thebusiness. In 2016/17, we achieveda record low in the number andfrequency of serious injuries. Thiswas achieved during a period ofunprecedented activity at our sitesand was the result of the consistentand passionate focus on safety byall of our people.6One of our many measures of safetyperformance is Total RecordableInjury Frequency Rate (TRIFR). At theend of 2016/17 we recorded a TRIFRof 5.32. This is our lowest TRIFR onrecord and a significant reduction onthe previous year’s result of 10.11.While this result is pleasing andconfirms that we are focusing onthe right things, we can not affordto be complacent as we strive toachieve our goal of Zero Harm Today.The achievement of Zero Harm istransient, requiring a reset and newperspective every day in our questfor an injury free workplace.In the past 12 months, our emphasison safety has been expanded toinclude improving the physical andmental wellbeing of our people. Inthis regard, we offered a voluntarywellness program to all our people,which included access to healthchecks and body composition scans;and we have taken steps to tacklethe issue of domestic and familyviolence by partnering with WhiteRibbon. We were awarded aseven-star rating from the ServicesUnion for our efforts to providesupport to our people dealing withdomestic and family violence.FINANCIAL PERFORMANCEOn the back of our strong electricitymarket contract position, andeffective cost management and plantreliability initiatives, the businessdelivered a net profit after taxof 375.2 million in 2016/17. Thisenables the business to return a totaldividend to shareholders of 260.6million. The total dividend excludesthe retention of 100.0 million as anSTANWELL ANNUAL REPORT 2016/17 CHIEF EXECUTIVE OFFICER’S REVIEWinvestment towards the costof developing the BurdekinHydro-electric power plant,in keeping with the directionreceived from our shareholderson 13 June 2017.The National Electricity Market isa very competitive, highly regulatedmarket and wholesale prices in2016/17 reflect the outcomes ofchanging supply and demandbut also the uncertainty of energyand climate change policy.High wholesale electricity priceswere the result of a range of factors:the closure of large, baseload powerstations; increased electricitydemand in Queensland as a resultof extreme weather events andindustrial demand from the liquefiednatural gas projects; and gas supplyconstraints. In the first quarter of2017, the east coast of Australiaexperienced record hightemperatures increasing demandsignificantly. During February,Queensland experienced its highestmaximum electricity demand onrecord of 9,369 MW,well exceeding the record set in2016 of 9,097 MW.Importantly, we continued to havea strong focus on cost leadershipthroughout the year, and deliveredsignificant savings by reducingour operating costs and optimisingour capital expenditure. Thesettlement of the Wesfarmers’dispute ( 34.0 million) an

F. KAREEYA HYDRO, Far North Queensland – 88 MW (hydro) G. BARRON GORGE HYDRO, Far North Queensland – 66 MW (hydro) H. KOOMBOOLOOMBA HYDRO , Far North Queensland – 7.3 MW (hydro) I. WIVENHOE SMALL HYDRO, South East Queensland – 4.3 MW (hydro) COAL ASSETS J. MEANDU MINE, Southern Queensland