ENERGY FOR A CHANGING WORLD For personal use only‘Energy for a changing world’ is the theme of this year’s annual report. This reflects the Company’s international position

LANDFILL GAS COAL MINE METHANE REMOTE AREA SOLUTIONS LIQUEFIED NATURAL GAS/COMPRESSED NATURAL GAS

ENERGY FOR A CHANGING WORLD


ANNUAL REPORT 2008ANNUAL REPORT 2008

leaders in clean energy


www.energydevelopments.com

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LANDFILL GAS COAL MINE METHANE REMOTE AREA SOLUTIONS LIQUEFIED NATURAL GAS/COMPRESSED NATURAL GASPRINTED ON 100% RECYCLED, CHLORINE FREE PAPER.

EDL 1061 AR 2008 Outside Covers DM-FA.indd 1 15/9/08 10:41:03 AM

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ENERGY DEVELOPMENTS LIMITED ANNUAL REPORT 2008

ENERGY DEVELOPMENTS LIMITEDABN 84 053 410 263

‘Energy for a changing world’ is the theme of this year’s annual report. This reflects the Company’s international position as a leader in the renewable and clean energy sector, delivering clean, reliable power and addressing climate change.

Contents

2008 achievements and outlook 1financial and non-financial highlights and forecasts

Chairman’s review 2strategic overview by Chairman, Michael Brown

Managing Director’s review 4operational review by Managing Director, Greg Pritchard

Energy Developments’ business 6overview of the Company’s operations, customers and markets

Energy for a changing world 8operational performance and outlook

Sustainable performance 12environmental initiatives and outlook

Connected communities 14community engagement activities and outlook

Empowered people 16human resources activities

Company leadership 18Directors’ and corporate management team’s profiles

Corporate governance 20Company management policies and systems

Financial statements 27

Definition of key terms Inside Back Cover

Contact information Inside Back Cover

Energy Developments is committed to operating in a manner that enhances outcomes for employees, shareholders, business partners, the environment and the many communities where the Company operates.

The Company is at the forefront of the renewable and clean energy industry in Australia and internationally. With the right balance of assets, technologies, geographic locations and people, Energy Developments is uniquely placed as a supplier of energy for a changing world.

Energy Developments is an international provider of renewable energy and low greenhouse gas (GHG) emission energy. The Company operates in Australia, the United Kingdom, Europe and the United States, providing services in four main areas of power generation and associated energy solutions: landfill gas (LFG) power, coal mine methane (CMM) power, remote area power, and liquefied natural gas (LNG) and compressed natural gas (CNG) power.

PURPose oF tHe AnnUAL RePoRt

The annual report 2008 presents Energy Developments’ main activities and performance highlights for the year ended 30 June 2008 (shown as 2008 in the annual report).

This includes financial and non-financial information about Energy Developments Limited, its subsidiary companies and other controlled entities (referred to as Energy Developments or Company).

Energy Developments has prepared this report for individuals and groups who share an interest in the Company’s achievements and future direction. If you have any comments or suggestions about the design or content of the annual report, please email the corporate administration team at [email protected] or the Company Secretary at [email protected] or telephone + 61 7 3275 5555.


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Broome LNG fuelled power station, WA, Australia

ANNUAL REPORT 2008 ENERGY DEVELOPMENTS LIMITED 1

2008 ACHIEvEmENTs AND OuTLOOk

FinAnCiAL Position

Achieved net after tax profit of •$21.3 million which included non- recurring gain of $3.3 million after tax.

Increased sales revenue by 11% to •$195.8 million.

Generated net operating cash flows •of $52.1 million

Declared an increased final dividend of •6.0 cents per share (cps) taking the total dividend paid for the year to 10.0 cps (2007: 7.5 cps).

Retained healthy cash reserves of •$90.2 million at 30 June 2008 and in a strong financial position after refinancing $300 million with its existing lenders.

oUtLook

In the 2009 financial year (hereafter shown as 2009), Energy Developments expects to benefit from the full commercial operations of WKPP in Australia. The Company also expects to see its 45 MW Moranbah North CMM Power Project start generating cash in the second half following completion and commissioning during the December quarter of calendar 2008.

By December 2008, the Company expects to have increased installed capacity by more than 8% to approximately 600 MW with the completion of the Moranbah North CMM Power Project.

On 4 July 2008, the Board initiated a comprehensive Strategic Review to consider a variety of options with the objective of maximising value for all the Company’s shareholders.

The outcome of this process, which was still underway at the time this annual report’s publication, will have a defining impact on the Company’s future and outlook for the balance of 2009.

* Results exclude specific items

key ACHievements

Maintained lost time injury frequency rate at historic lows.•

Completed and commissioned 61 MW West Kimberley •Power Project (WKPP) in Western Australia.

Completed $300 million refinancing and extension of the •Company’s Australian debt facility.

Progressed turnkey $60 million, 45 MW Moranbah North •CMM Power Project on time and budget.

Achieved strong performance from the UK/European business.•

Initiated Strategic Review to unlock shareholder value and lift •returns on investment.

EARNINGS PER SHARE (cents) year ended 30 June

2004

2005

2006

2007

2008

PROFIT AFTER TAX ($ million) year ended 30 June

2004

2005

2006

2007

2008

REVENUE ($ million) year ended 30 June

2004

2005

2006

2007

2008

14.4*

14.7

18.2*

18.5*

12.1*

18.6*

20.2

26.5*

27.1*

18.0*

204.2

128.1*

145.9

158.8*

183.0

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2 ENERGY DEVELOPMENTS LIMITED ANNUAL REPORT 2008


CHAIRmAN’s REvIEW

EDL, under the leadership of our new chief executive, Greg Pritchard, is examining a range of new opportunities to exploit the diverse asset and skill base of the Company. Michael Brown, Chairman

Nevertheless, feedback from the Company’s major shareholders indicated that the market wanted to see what steps the Company could take to have EDL’s inherent value more immediately reflected in the share price.

After thorough deliberation, on 4 July, the Company announced it would undertake a Strategic Review, and engaged various financial advisors and legal counsel to assist in the process. The Review is considering a variety of options which include the potential sale of the Company as a whole, or the sale of some of the businesses, with the aim of maximising value for all of the Company’s shareholders.

Good progress has been made, with strong interest expressed in all of the Company’s businesses from a range of financial sponsors and trade partners. The process has now entered the confidential phase with information memoranda distributed to qualifying parties in early September.

While the review process is being expedited to the extent practical, timing is not totally within the control of the Company. Our aim is to complete the review by the end of the calendar year – hopefully earlier. The Company will keep shareholders apprised of major developments along the way.

Returning to the past year, our headline result actually showed improvement, with net profit after tax and specific items being $21.3 million, compared to last year’s net loss of $16.6 million (which was impacted by net provisions against West Kimberley and other assets of $43.7 million after tax). Excluding the specific items, 2008 net profit was $18.0 million, down $9.1million on the prior year.

EDL’s financial position remains sound. The continued strong support by the Company’s bankers, demonstrated in their refinancing of our Australian debt facilities in June in uncertain global credit markets, highlights the underlying quality and value of the Company’s asset portfolio.

This position was reflected in the decision to increase the final dividend to be paid in October 2008 to 6 cents per share, taking the full year dividend paid and declared up 33 per cent from 7.5 cents to 10 cents per share.

While the Strategic Review is absorbing significant time for the senior management

A number of teething issues on the start-up of the West Kimberley Power Project, following the earlier construction cost overruns, falls in green credit prices, and temporary gas supply shortages at the German Creek project resulted in 2007/08 being a frustrating year for EDL. As the year progressed, these events came to be reflected in the Company’s earnings and share price performance.

The operational issues have largely been addressed. West Kimberley is now in full commercial operation under the twenty year agreement with Horizon Power and German Creek is again generating at full capacity. EDL, under the leadership of our new chief executive, Greg Pritchard, is examining a range of new opportunities to exploit the diverse asset and skill base of the Company.

West Kimberley is now in full commercial operation under the twenty year agreement with Horizon Power and German Creek is

again generating at full capacity.

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Under construction – Moranbah North CMM power station, QLD, Australia


CHAIRMAN’S REVIEW

team, every effort is being made to continue to pursue new growth prospects for the Company, as well as, of course, actively manage the ongoing enterprise.

The 45 MW Moranbah North Coal Mine Methane project is on track for commercial operations to commence in December this year; gas conditioning equipment is now being installed in our US LFG operations with the objective of significantly improving engine operation; extensions and expansions of existing landfill and remote power sites are being pursued; and opportunities to use our hard-won knowledge of LNG and CNG production and distribution, by expansion into stationary power and heavy duty vehicle applications, are being sought.

In the broader business environment, EDL is fully supportive of the initiatives of the Australian Federal Government to reduce carbon emissions, and believes that these efforts will provide long term opportunities for the Company.

However, the proposed approach to carbon emissions reduction taken by the Federal Government is quite different to the existing state based schemes under which EDL has been operating for the past seven years. It is essential for EDL that early movers in the carbon abatement arena, such as power generators from landfill gas and coal mine methane, are treated fairly under the proposed

Carbon Pollution Reduction Scheme and are not unreasonably, or unintentionally, penalised by the new rules. This can be achieved by appropriate grandfathering or transitioning of existing operations.

To date EDL has made supporting representations to both the Federal and State (primarily NSW) governments, and has been given a sympathetic hearing. These efforts will continue.

The one change to the board over the past twelve months was occasioned by Mr Chris Laurie’s retirement as Managing Director in December 2007 to pursue other interests in the United States. Chris joined EDL in 2002 and provided strong, stable leadership in his five years as Managing Director.

The Company was pleased to be able to appoint Mr Greg Pritchard, our former Finance Director, to the position of Managing Director. Greg is bringing renewed vigour to the direction of the Company.

The Company is in compliance with the ASX Corporate Governance Council’s principles of Good Corporate Governance and Best Practice Recommendations and is well placed to comply with the new revised principles which will take effect during the coming financial year.

I would like to thank all employees for all their efforts in the ongoing safe operation of the enterprise and in successfully and safely delivering key projects such as West Kimberley during the course of the year in very difficult circumstances.

Finally, let me thank shareholders for your frank feedback during the course of the year as to the future direction and plans for the Company, and I look forward to presenting you with the outcomes of the Strategic Review in due course. This will be an obvious watershed for the future of the Company as a whole.

Michael BrownChairman

“EDL is fully supportive of the initiatives of the Australian Federal Government to reduce carbon emissions, and believes that these efforts will provide long term opportunities for the Company ...”

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mANAGING DIRECTOR’s REvIEW


and other fossil fuels and the demand for energy in remote areas driven by the ongoing resources boom.

GReen CReDits UPDAteThe Company continues to actively participate in the development of mechanisms and policies to address the critical issue of global climate change and the expansion of renewable energy around the world.

As the Chairman has highlighted in his Review, we are fully supportive of the Federal Government’s national Carbon Pollution Reduction Scheme (CPRS) and the proposed expansion of the current Mandatory Renewable Energy Target (MRET) to 20% by 2020.

We reiterate, however, that policy makers should ensure the appropriate grandfathering and transitioning of existing state-based carbon abatement and renewable energy schemes into the CPRS and the expanded MRET schemes.

The UK's Energy Bill, due for approval in late 2008, is expected to continue with the key principles of the Energy White Paper of 2007. These are: grandfathering, continued support for Renewable Obligation Certificates, transparency; reliability and security of supply for renewable energy.

In the United States, we see continued growth in renewable energy revenues as more US States move to introduce some form of renewable portfolio standard and the prices paid for renewable energy reflect growing demand. Renewable energy is a major theme in the current US presidential campaign and we expect that either party will promote some form of national CO2 abatement scheme to address the global issue of climate change in its first term.

45 MW Moranbah North CMM project has allowed the management team to re-assess the correct structure to take our Australian business forward. We have made a number of structural adjustments delivering reductions in operating costs and overheads on a like for like basis and positioning the business for profitable growth in the future.

Good progress has been made on the construction of the $60 million Moranbah North project which is due to commence commercial operation in December 2008. The project, which is being constructed by Clarke Energy under a turnkey contract, is on schedule and below budget, so far vindicating the Company’s approach of outsourcing key construction risk to third parties on major project developments.

In June 2008, the Company refinanced its $200 million core Australian debt facility with a $300 million five year debt facility providing additional funding for growth and/or capital management opportunities. The refinance was achieved against a backdrop of global debt market turmoil and reiterates the excellent quality of the Company’s Australian asset portfolio.

At 30 June 2008, the Company had cash reserves of $90 million and undrawn lines of $138 million.

There are a number of development opportunities open to the Company. In the UK, Europe and the United States the focus is on staged expansion of existing landfill gas power projects taking advantage of the Company’s expertise in these areas.

In Australia, business development activities include the extension/expansion of existing remote area power stations; the use of LNG and CNG as an energy source to replace diesel

mANAGING DIRECTOR’s REvIEW

With the completion of the WKPP, Energy Developments will benefit from stable operating cash flows and is well positioned to target specific growth opportunities in key sectors.Greg Pritchard, Managing Director

The financial year just completed delivered underlying revenue growth of 12% to $204.2 million while earnings before interest, tax, depreciation and amortisation (EBITDA) increased marginally to $97.7 million.

Net profit after tax and specific items rose to $21.3 million compared to last year’s net loss of $16.6 million which reflected after tax provisions of $43.7 million primarily against the WKPP.

Net profit after tax but before specific items was $18.0 million down $9.1 million on the prior year due largely to the delay in bringing the substantial WKPP into full commercial operation, short term gas supply issues at the 32 MW German Creek CMM project in early calendar 2008 and falling prices for green credits produced by our Australian LFG and CMM businesses.

The 60 day reliable operations test was finally passed at Broome Power Station in June 2008, with gas quality variations at the Broome Power Station causing supply interruptions on three occasions. This was very frustrating for all involved, as other aspects of the project had been operating well since early January 2008.

I am pleased to report the project is now in full commercial operation delivering reliable and clean power to the five West Kimberley towns of Broome, Derby, Fitzroy Crossing, Halls Creek and Looma. We look forward to the delivery of stable operating cashflows over the project’s initial twenty year life.

A number of key milestones have been recently achieved by the Company which augurs well for the future. The completion of the WKPP and the near completion of the

LNG storage tanks, Broome power station, WA, Australia

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MANAGING DIRECTOR’S REVIEW

united statesThe US LFG business achieved EBITDA of $1.1 million compared to $2.1 million in the prior year, with lower earnings due to ongoing Deutz engine reliability and support issues, higher maintenance costs and a predominance of low priced Power Purchase Agreements which expire in 2011.

Management is working hard to improve the performance of the US LFG business. The first installation of gas conditioning equipment at the Company’s Lorain site is scheduled to be commissioned in December 2008 and is expected to improve gas quality and reduce engine downtime and maintenance costs at this site.

The Company intends to roll out the gas conditioning equipment to certain other key US LFG sites assuming successful testing, which, combined with the expected access to higher power pricing in the medium term and the continued emergence of State based green credit schemes, is expected to improve the profitability of the existing business.

The Company has significant contracted LFG reserves which offer considerable current expansion potential in excess of 30 MW. The Company expects to take advantage of this contracted growth potential in coming periods, subject to higher power pricing, improving gas quality at certain sites and planning and permitting.

Greg PritchardManaging Director

The key drivers for an improved 2009 performance include a full-year contribution from the WKPP, the expected commencement of operations at the 45 MW Moranbah North CMM project in December 2008 and reduced overheads.

Cost reduction initiatives taken in the second half of 2008 mitigated the effect of lower NGAC prices achieved over the course of the year and are expected to deliver full year savings of approximately $4 million in the current financial year.

EuropeThe Company’s UK LFG business continued to be a stand out performer, with EBITDA up 8% to $24.0 million for the year, notwithstanding the adverse impact of the higher Australian dollar. The improved result was driven by access to higher market based power pricing at certain sites, good gasfield management and high engine fleet availability.

Earnings growth is set to continue during 2009 with the full year impact of expansions completed late in the financial year to flow through, continued strong power pricing and further optimisation activities.

The Company’s 50% share of EBITDA from joint ventures in France and Greece was up 37% to $8.6 million with the higher contribution from the Greek JV reflecting a 10 MW expansion completed during 2007.

Significantly the French JV commissioned six new 1 MW projects in the fourth quarter of 2008 which will contribute to earnings in the current financial year, with further incremental growth planned.

sAFety AnD enviRonmentEnergy Developments has maintained a focus on the continuous improvement of its workplace health and safety management systems and processes. After achieving significant reductions in previous years the Company’s lost time injury rate (LTIFR) remained relatively steady at 3.65 against 3.5 in 2007 and three lost time injuries incurred (2007 – three).

The Company remains committed to the continual improvement of safety and to maintaining a “culture of safety” within the workplace.

In 2008 Energy Developments produced approximately 2,100 GWh of clean energy worldwide and captured and utilised greenhouse gases estimated at 8.8 million tonnes of carbon dioxide equivalent around the world, akin to removing 2.8 million cars from the road.

The Company strives to minimise the environmental footprint of its existing operations and seeks to develop projects that will further reduce greenhouse gas emissions.

ReGionAL PeRFoRmAnCe oveRvieW

AustraliaOverall the Australian business excluding the WKPP enjoyed stable operating conditions reflecting the low risk, contracted and diversified nature of the Company’s Australian operating base and blue chip customers such as BHP Billiton, Xstrata, Horizon Power, Power and Water Corporation and Anglo Coal.

LookinG AHeAD Clearly the outcomes of the current Strategic Review may have a major impact on the future shape of the Company as we move forward into the current financial year. In the interim, management remains focussed on delivering improved financial performance and pursuing near term growth opportunities to enhance shareholder returns.

The Company looks forward to improved earnings in 2009, before taking account of the potential costs associated with the Strategic Review and any actions which it might trigger. The key drivers for the improved performance include a full-year contribution from the WKPP, the expected operation of the 45 MW Moranbah North CMM project and reduced overheads.

I would like to thank the Board for their confidence and valuable support through what has been another difficult year and to applaud all employees for their sterling efforts around the world.

I look forward to returning the Company to strong profit growth and lifting shareholder returns over the course of the coming year.

552 mW generating capacity

achieved during the

2008 financial year2004

2005

2006

2007

2008

GENERATING CAPACITY ( mW) year ended 30 June

420

426

445

485

552

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CoRe BUsiness ACtivitiesEnergy Developments is a leading independent electricity producer, owning 74 power generation facilities across Australia, the United Kingdom, Europe and the United States. As at 30 June 2008, the Company had a total installed generation capacity of 552 MW following completion and the successful commissioning of the West Kimberley Power Project.

Capacity will increase by a further 45 MW following completion of the Moranbah North CMM Power Project.

Energy Developments has demonstrated balanced growth, primarily due to its focus on developing assets and providing services in four core areas of business:

LFG power generation;•

CMM power generation;•

remote area power generation; and•

LNG and CNG power generation and •associated energy solutions.

The Company has the ability to design, construct and operate infrastructure that produces cost-efficient, reliable, clean energy for its customers.

Energy Developments employs a 342-strong workforce, primarily based in Australia (where the corporate headquarters and majority of power stations are located), the United Kingdom, Europe and the United States.

RevenUe stReAmsThe Company generates revenue from:

providing and selling electricity to direct •customers such as large energy retailers and mining companies;

generating and selling environmental •credits in international, national and state based schemes;

managing LFG fields on behalf •of landfill owners; and

supplying natural gas in the form •of CNG and LNG.

CUstomeRsEnergy Developments’ customers are typically large ‘blue chip’ public companies including AGL Energy, Anglo Coal, BHP Billiton, Rio Tinto and Xstrata, corporatised government bodies and state based energy retailers such as Horizon Power, Npower, Power and Water Corporation and landfill owners.

The Company traditionally reduces the commercial risk from power generation by negotiating long term power purchase and power supply agreements for the supply of electricity/energy from renewable or clean sources.

mARket oPPoRtUnitiesEnergy Developments aims to maximise opportunities in four key areas:

Energy from LFG LFG occurs at landfills (rubbish dumps) due •to the decomposition of organic waste. LFG contains methane and CO2 which are harmful to the environment;

the Company pioneered the reliable •extraction, processing and reuse of LFG in the Australian power generation marketplace; and

Energy Developments receives an •annuity-style cash flow from long term LFG power purchase agreements with electricity retailers;

Energy from Cmm CMM gases are released by underground •coal mining operations. CMM has more than 20 times the global warming potential of CO2 in the atmosphere and is therefore considered much more harmful; and

Energy Developments pioneered the •collection and use of CMM for power generation through the adaptation of its LFG extraction and handling technologies. The Company has operated one of the world’s largest CMM power generation projects at Appin and Tower in New South Wales, Australia since 1996, operates the 32 MW German Creek CMM Project in central Queensland, Australia and is building the 45 MW Moranbah North CMM Project in same region of central Queensland;

ENERGY DEvELOpmENTs’ busINEss

Energy Developments’ vision is to create shareholder value by applying experience and competencies to designing, integrating and operating competitive, innovative energy and environmental solutions.

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Appin CMM power station, NSW, Australia Clayton LFG power station, VIC, Australia



participation in green credit schemes authorities around the world are urgently •seeking new and better ways to reduce GHG emissions, leading to significant growth in GHG reduction and green credit schemes. These schemes are designed to encourage ‘cleaner, greener power generation’. Governments generally set targets for the amount of renewable or clean energy to be generated as a proportion of the overall energy mix and are likely in the future to place limits on the allowable volumes of GHG emissions via cap and trade regimes;

Energy Developments’ projects participate •in GHG reduction/green credit schemes throughout the world, with credits derived from its LFG and CMM projects. The Company is now an Australian leader in this area and has been recognised by several environmentally-focused investment groups for its contribution to GHG reduction;

Energy Developments’ 45 MW Moranbah •North CMM Power Project will similarly earn credits when it comes on line in December 2008;

the Australian Federal Government expects •to release a white paper and an exposure draft of legislation for Australia’s Carbon Pollution Reduction Scheme (CPRS) by the end of 2008;

Energy Developments supports the •introduction of the CPRS and the expansion of the current MRET to 20% by 2020. The Company is taking an active role in development of related regulatory processes and remains well placed in Australia and internationally to take advantage of new or enhanced GHG reduction/green credit schemes, whatever form they may take; and

Energy Developments believes it is important •that policy makers ensure the appropriate grandfathering and transitioning of existing state based carbon abatement and renewable energy schemes into the CPRS and the expanded MRET schemes;

Replacement of diesel fuels with natural gas

the Company will continue to pursue •opportunities to assist customers to switch from diesel fuels to LNG and CNG as viable, alternative long term energy sources for power generation and transport. This market opportunity has been created by the widening gap between the global price of diesel/oil fuels and natural gas in certain markets. This strategy is particularly relevant in remote areas where there is limited or no existing energy infrastructure such as gas pipelines or electricity grids;

at Karratha, Energy Developments has •established an onshore LNG production facility with surplus capacity as part of the fully completed and commissioned WKPP to support promotion and sales of LNG as a diesel replacement fuel. This 61 MW project has enabled Energy Developments to provide the booming Kimberley region of Western Australia with electricity under a long term power supply contract with Horizon Power;

the Company has developed an innovative •haulage system for delivering CNG to remote power stations that service mining operations and remote communities. Trucks used for haulage also run on CNG; and

Energy Developments is also actively •supporting the use of technologies to displace diesel with LNG and CNG as fuels for heavy vehicles.

* Energy Developments’ share of generating capacity.CURRent oPeRAtions – As At 30 JUne 2008

Country Number

of plantsType of plants

Total generating capacity*

Proportion of owned generating capacity

Australia 21 Landfill gas power generation 83 MW 15%

10 Remote area and LNG/CNG power generation 176 MW 32%

3 Coal mine methane power generation 129 MW 23%

United States 10 Landfill gas power generation 74 MW 13%

United Kingdom 11 Landfill gas power generation 64 MW 12%

France 18 Landfill gas power generation 14 MW 3%

Greece 1 Landfill gas power generation 12 MW 2%

Total 74 552 MW 100%

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AUstRALiAEnergy Developments’ Australian operations produced a solid performance with all power stations continuing to perform well and growth in installed capacity to 388 MW.

Important milestones were achieved at major projects (discussed in the following project profiles) and the Company’s engine rebuild facility at Appin in New South Wales overhauled 18 engines.

West kimberley power project The West Kimberley Power Project is Energy Developments’ most ambitious project to date and was officially opened by the Premier of Western Australia, Mr Alan Carpenter, at a special function held in Broome on 14 April 2008 to mark the occasion.

The project comprises: a 200-tonne-a-day LNG plant at Karratha, in the Pilbara region of Western Australia; the haulage of LNG to four remote West Kimberley communities in LNG-fuelled trucks; and four LNG-fired power stations to service those communities. The power stations are at Broome (40 MW), Derby (12 MW), Fitzroy Crossing (4 MW) and Halls Creek (4 MW). A fifth 1 MW power station at Looma, uses distillate fuel. The current generating capacity of 61 MW is expected to increase to 92 MW over the 20-year life of the project to accommodate future demand growth.

All elements of the project were commissioned during the year and brought into commercial operation after overcoming well-documented resourcing challenges and logistical difficulties.

The electricity being produced is sold to Horizon Power under a long term power purchase agreement.

On 3 June, an explosion at Apache Energy’s Varanus Island gas processing plant interrupted supply to the Karratha LNG plant. However, Energy Developments quickly secured an alternative supply of gas to enable LNG production to resume. There was no disruption to power supplies as the power stations have LNG storage capacity to cater for such an event. Gas supply from Apache Energy was partially restored in August 2008 and is expected to be fully restored by December 2008.

The Karratha LNG plant is the first domestic LNG facility to be built in Australia for some 30 years and is poised to play a major part in Australia’s emerging domestic LNG business. Australian demand for LNG is expected to grow rapidly as an alternative fuel source for remote power stations and the transport industry in coming years and the experience gained from the development of WKPP places the Company in an excellent position to capitalise on that growth.

The project will deliver considerable benefits to West Kimberley communities for many years through the provision of more reliable and cleaner power, cutting GHG emissions by at least 25%. LNG availability in the communities may also provide a new fuel source for a range of industrial and domestic applications. This project has created a virtual pipeline connecting these communities with Western Australia’s vast offshore natural gas resources.

As a sign of Energy Developments long term presence in the West Kimberley region and

communities, the Company committed to a $1 million community benefit fund, to be jointly administered by Energy Developments and the West Australian Office of Energy.

German Creek Cmm power projectThe 32 MW German Creek CMM power station in central Queensland commenced operations in late calendar 2006, following progressive commissioning of the generation units. The power plant consists of 16 gas engines, each with a nominal electrical output of 2 MW. The plant is located adjacent to Anglo Coal’s Grasstree coal mine at German Creek. The power plant has capacity to provide up to 240 GWh to the Queensland power grid each year. This capacity is sold to an electricity retailer under a power purchase agreement.

The plant’s gas engines utilise mine methane drained from nearby coal mining operations. By using methane to generate electricity, the plant reduced the amount of GHG emitted during the 2008 financial year by approximately 750,000 tonnes of carbon dioxide equivalent (CO2e). This abatement is accredited by the NSW Greenhouse Abatement Scheme allowing the Company to create credits which can be sold to third parties.

moranbah North Cmm power projectConstruction of the 45 MW Moranbah North CMM Power Project, to be fuelled through a long term gas supply agreement with Anglo Coal, is well advanced and due to be commissioned and in commercial operation by the end of calendar 2008.


Energy Developments completed a major project delivery phase in 2008 with the completion of the WKPP. By December 2008, following completion of the Moranbah North CMM Project, the Company’s installed capacity is expected to increase by a further 8% to approximately 600 MW.

German Creek CMM power station, QLD, Australia

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Derby LNG fuelled power station, WA, Australia


The $60 million project, which largely follows the commercial framework of the successful 32 MW German Creek CMM Project, is being built under a separate turnkey construction contract with Clarke Energy.

The power station near Moranbah in Queensland’s coal-rich Bowen Basin will have the capacity to export up to 350 GWh of electricity into the Queensland power grid. This will have the effect of reducing GHG emissions by up to 1.3 million tonnes of CO2e per annum, the equivalent of taking 390,000 cars off the road. The project received pre-accreditation for the NSW Greenhouse Abatement Scheme.

This power project has provided Energy Developments with the opportunity to extend the skills and expertise deployed during the German Creek CMM Project. It also reinforces the Company as Australia’s foremost owner and operator of CMM power projects with a total of 174 MW. Energy Developments is well placed to be the leading player in developing further CMM projects in Australia and elsewhere in the world.

Yulara CNG Transport projectThe Alice Springs CNG plant and associated trucking and unloading station at Yulara, near Uluru, started commercial operations in 2007. The CNG plant can produce up to 250 tetrajoules of CNG which is then trucked 440 kilometres to fuel the Yulara CNG power station.

The project delivers significant environmental and financial benefits by reducing diesel fuel needs for transport and power generation.

The project has developed considerable innovation in the way CNG is stored for transport. This storage innovation creates efficiencies through reducing overall transport costs.

The Company is continuing to work with technology providers to commercialise technologies, allowing diesel engines to use natural gas fuel.

Web-based telemetryThe Company’s introduction of new web-based telemetry around the world has further improved the reliability and efficiency of the Company’s generating engines and turbines.

This Power Station Management System provides information on electricity generation, gas flow, outage and asset downtime at 15 minute intervals. Operations personnel and management use this information to monitor ongoing power station performance.

Engine rebuild facilityEnergy Developments’ purpose-built engine rebuild facility at Appin, New South Wales, overhauled 13 gas engines and five diesel engines as well as engine heads, blowers and attenuators during 2008. This brings the total number of engines overhauled since the facility opened in 2002 to 157.

The engines overhauled at the plant are used to drive generators in the Company’s Australian power stations.

The Company will continue to focus on extending engine operating hours before major overhauls are required.

2008 ACHievements Successfully commissioned and •commenced operation of the 61 MW WKPP’s Karratha LNG plant and five associated power stations.

Progressed construction of the •45 MW CMM power station at Anglo Coal’s Moranbah North coal mine with commercial operation expected late calendar year 2008.

Delivered increased returns •from the United Kingdom LFG business through asset optimisation, expansions and stronger green credit pricing.

Completed expansions and •site optimisation programs within the Company’s French joint venture.

Energy Developments’ Australian operations produced a solid performance with all power stations continuing to perform well and growth in installed capacity to 388 MW.F

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Pitsea LFG power station, Essex, UK

Rubbish being transported to Pitsea landfill



UniteD kinGDomEnergy Developments’ UK LFG business continued to deliver a solid performance from the existing portfolio with small increases to capacity coming online at year end. Levels of engine availability above 90%, in what is widely acknowledged as a mature, stable and attractive renewable energy regime, continue to provide improved financial performance.

An increasing portion of eligibility for Renewable Obligation Certificates (ROCs), as well as the grandfathering of the rights of the existing project portfolio, will continue to support performance through the Obligation period.

Project expansions of 3 MW prior to 30 June 2008 were delivered on time and to budget. Further UK project expansions, capacity and gasfield optimisation will continue in 2009 with pending and successful over-tipping applications received at three existing sites.

At the launch of the 2008 UK Renewable Energy Consultation, the UK Government called for over 30% of total electricity supplies to be sourced from renewable sources by 2020.

The UK’s Energy Bill, due for approval in calendar year 2008, is expected to continue with the key principles of the Energy White Paper of 2007. These are: grandfathering; continued support for ROCs; transparency; reliability; and security of supply. The Bill also confirmed the Renewable Obligation’s

longer term life to 2027 which should grow and facilitate the delivery of renewables and clean energy schemes in the UK.

It is now evident that the Renewable Obligation Scheme will not become a mechanism to support non-economic projects, but will increasingly support developing and advanced technologies. Energy Developments will continue to monitor the regulatory framework in the UK and grow and develop projects consistent with the evolving regulatory regime.

The Company will also continue to forge effective alliances with a wide range of key stakeholders in clean and renewable energy in the UK and across Europe.

During the year, a £10 million expansion to the existing finance facility for wholly owned UK assets was executed. The Company locked in Renewable Obligation capacity off-takes for another two-year period at attractive prices.

energy for a changing world

“This is a green revolution in the making ... It will be a tenfold increase on our current deployment of renewables, and a 300% increase on our existing plans: the most dramatic change in our energy policy since the advent of nuclear power.” uk prime minister Gordon brown’s comments at the launch of the uk Renewable Energy Consultation, 26 June 2008.

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Expansion, Ano Liossia LFG power station, Athens, Greece Zion LFG power station, Illinois, USA

We will continue to forge effective alliances with key stakeholders in clean and renewable energy in the UK and across Europe.



FRAnCeAs noted in last year’s annual report, additional resources were deployed within the French joint venture to facilitate the expansion of six new projects and the reallocation of five existing modules within the portfolio. The current year’s results therefore reflect a period of change with the benefits of reallocation and the delivery of new capacity expected to have a more significant impact in 2009.

There are continuing opportunities for the growth of the joint venture portfolio on active undeveloped sites and these have been added to the portfolio, mainly through turnkey project delivery and back-to-back operations and maintenance contracts.

GReeCeThe 10 MW expansion at Ano Liossia was officially opened on 19 July 2007 with local and national dignitaries in attendance for a key note speech delivered by the Greek Industry Minister. The 24 MW LFG project near Athens is owned by a joint venture (50% share to the Company).

The delivery of access to additional areas of the gasfield during 2008 led to another year of improved financial performance and further improvements are expected in the coming year.

UniteD stAtesLFG business returns in the United States during 2008 continue to be constrained by high engine maintenance costs and low power tariffs on key sites.

Gas conditioning is being implemented at one of the Company’s key Ohio sites to reduce engine maintenance costs and increase engine availability. This project is intended to be the first phase of a gas conditioning program at key sites, with the aim of significantly lowering operating and maintenance costs and enabling generation growth from long dated LFG reserves.

The Company is optimistic about higher power prices being achieved in the US market once a number of current PPAs roll off. At Zion, tariffs have improved significantly due to recent increases in PJM market pricing.

Renewable portfolio standards were approved in Ohio and Illinois, where two-thirds of the Company’s US generating capacity is located. Demand for Renewable Energy Certificates (RECs) in these markets is expected to be strong and Energy Developments’ RECs are increasingly being sold into the higher priced PJM market.

Renewable energy incentives are a major theme in the current US presidential campaign with positive signals for some form of a CO2 abatement scheme.

Energy Developments firmly believes in the strong underlying value of the substantial long dated LFG reserves at its current US sites and plans to move, over the next two to three years, to fully exploit them.

Opportunities for expansion are being developed given good availability of landfill gas at many sites and an improved outlook for power tariffs. One additional engine was installed at the Illinois site during the period and three other LFG expansions are under consideration.

2009 oUtLookOptimise WKPP during first full •year of operation.

Complete and commission the •Moranbah North CMM power station.

Capitalise on opportunities •to expand on existing sites in response to rising demand for remote power and LNG/CNG as diesel replacement fuels, driven by the resource boom.

Continue incremental UK project •expansions, capacity and gasfield optimisation.

Progressive implementation of •gas conditioning at key US LFG sites set to reduce maintenance costs and lift returns.

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AUstRALiAn LeADeR in GReen AnD CLeAn eneRGyEnergy Developments continues to lead the way as one of Australia’s pioneers in renewable and clean energy, having delivered approximately 1,100 GWh of clean energy to the national power grid in 2008.

Almost 65% of electricity generated by Energy Developments’ Australian operations now comes from LFG and CMM sources. These gases contain substantial amounts of methane which has more than 20 times the global warming potential of CO2, if released into the atmosphere. Completion of the Moranbah North CMM Power Project in late 2008 will add another 45 MW of generating capacity to further abate the impact of CMM.

Most of the remaining 35% of the electricity generated by the Company in Australia comes from natural gas which produces a third of the GHG emissions of conventional power generation fuels, such as coal and diesel.

Energy Developments produced enough electricity to power more than 110,000 homes and in GHG net reduction terms avoided 3.8 million tonnes of CO2e emissions. Energy Developments believes the energy sector has a responsibility to strive to reduce GHG emissions.

The Company is actively pursuing ways to further reduce emissions and to ensure the sustainability of its operations.

Australian demand for LNG is expected to grow rapidly as an alternative fuel source for remote power stations and the transport industry in coming years and the experience gained from the development of WKPP places the Company in an excellent position to capitalise on that growth.

invoLvement in GHG ReDUCtion sCHemesEnergy Developments continues to participate in the increasing number of GHG reduction/ green credit schemes around the world.

These schemes generally set targets for the amount of renewable and clean energy to be generated as a percentage of the overall energy mix and/or to establish limits for GHG emission volumes from power generation.

Energy Developments is currently involved in three main schemes in Australia and the UK, being:

the Australian Mandatory Renewable •Energy Target scheme;

the New South Wales Greenhouse •Gas Abatement scheme; and

the United Kingdom Renewable •Obligation scheme.

In 2008, Energy Developments created 174,000 Renewable Energy Certificates and 1.8 million NGACs from Australian operations. Green credit revenue for 2008 across the Company’s global operations was $35 million which was some 6% higher than 2007.

The Australian Federal Government expects to release a white paper and an exposure draft of legislation for Australia’s CPRS. Energy Developments supports the introduction of an Emissions Trading Scheme (ETS) in Australia, is taking an active role in development of related regulatory processes and remains well placed in Australia and internationally to take advantage of new or enhanced GHG reduction/green credit schemes, whatever form they may take.

susTAINAbLE pERFORmANCE

GHG capture in 2008 was estimated at 8.8 million tonnes of CO2e from the Company’s LFG and CMM projects around the world, equivalent to removing 2.8 million cars from the road.

2008 ACHievements Produced approximately •2,100 GWh of clean energy worldwide, an increase of 8% from 2007.

Created 174,000 Renewable •Energy Certificates and 1.8 million New South Wales Greenhouse Abatement Certificates (NGACs) from Australian LFG and CMM projects.

Captured 8.8 million tonnes •of CO2e at Company LFG and CMM projects. This is equivalent to removing approximately 2.8 million cars from the road.

Commenced fuelling of road •trains with LNG instead of diesel in Western Australia.

Had no incidents of •environmental harm in Australia.

Further developed online •environmental manuals to improve accessibility and reduce paper use at power stations.

Expanded the existing •Environmental Management System (EMS) to all sites in Western Australia.F

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SUSTAINABLE PERFORMANCE

imPoRtAnCe oF sUstAinABiLitySustainability drives Energy Developments’ business model and the long term viability of its projects.

For Energy Developments, sustainability means operating in a way that improves outcomes for employees, shareholders, business partners, the environment and the communities where we operate.

As well as improving outcomes for our stakeholders and the environment, sustainability is also improving the Company’s efficiency and profitability as it works toward becoming a leader in the international renewable and clean energy marketplace.

Energy Developments manages a diverse portfolio of LFG, CMM, remote, LNG and CNG energy solutions across most states and territories of Australia, the United Kingdom, Europe and the United States.

The Company’s comprehensive EMS provides a structured approach and is focused on minimising risk to the environment.

Energy Developments’ EMS has been progressively upgraded over recent years and the system has benefited from both industry developments and the regulatory environment under which the Company operates. The system has also drawn on the Company’s extensive operational experience and stakeholder involvement.

The EMS includes regular performance assessment against benchmarks as part of a continuous improvement regime. Fundamental aspects of the system include monthly checks, systematic testing, accurate data collection and regular reporting to ensure the Company is achieving its environmental and sustainability goals.

During 2008, Energy Developments implemented this system at all WKPP sites in line with all regulatory and environmental requirements and will be extending them to Moranbah North in 2009.

The Company is committed to the further enhancement of its customised EMS in the coming year.

imPRovements in tHe kimBeRLeysThe benefits of clean energy to the environment are significant. Clean energy forms an integral part of the long term solution to climate change.

However, there are significant challenges related to the production of reliable, base-load power in the quantities required to sustain society’s increasing energy demands.

An innovative and clever combination of technologies is required to bridge this gap. The WKPP is a good illustration of how existing technology has been cleverly applied to replace inefficient, higher cost diesel power stations with more efficient LNG-fuelled facilities.

As a low GHG emission technologies specialist, Energy Developments has taken up the challenge to replace traditional fossil fuels with cleaner energy sources, such as natural gas. Natural gas is the cleanest, most-viable energy source available, given the West Kimberley region’s proximity to the gas-rich North West Shelf and the Dampier-Bunbury gas pipeline.

The displacement of diesel-fuelled power generation in the West Kimberley region will contribute to improved air quality by reducing airborne particulates and nitrogen oxide and sulphur emissions. The new generating plants are also much quieter than those they have replaced, enhancing the quality of life for residents who live nearby.

2009 oUtLookEnergy Developments will •continue to provide expert assistance and customer service throughout Australia and pro-actively seek environmental solutions.

The Company will continuously •review its environmental policy with reference to changing community standards and expectations and reaffirm environmental performance commitments.

Existing compliance systems •will be expanded to include new developments such as the Moranbah North CMM Project.

Existing systems will be •prepared for the introduction of a national ETS.

Energy Developments supports •the introduction of an ETS in Australia, and is taking an active role in development of the related regulatory processes. The Company remains well placed internationally to take advantage of new or enhanced GHG reduction/green credit schemes, whatever form they may take.

FoCUs on APPin AnD toWeR PoWeR stAtionsThe Appin and Tower CMM power stations are internationally recognised as among the largest CMM power generation projects in the world.

In 2008, these stations abated 2.1 million tonnes of CO2e, making them one of the largest single abatement contributors in Australia.

1999

0.9

4.5

3.6

2000

1.0

5.0

4.0

2001

0.9

4.9

4.0

2002

1.0

5.1

4.1

2003

1.0

4.8

3.8

2004

1.1

5.0

3.9

2005

1.1

4.9

3.8

2006

0.9

4.3

3.4

2007

0.8

4.7

3.9

2008

0.8

4.6

3.8

GREENHOUSE GAS IMPACT – AVOIDED EMISSIONS (AUSTRALIA) (million tonnes) year ended 30 June

GHG released Net GHG reduction Gross GHG released

Tower CMM power station, NSW, Australia

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neW PRoJeCts Boost BeneFitsAs Energy Developments expands its project reach, the Company expects to provide significant social, economic and environmental benefits to the communities where it operates.

The Company aims to develop clean energy operations designed to have minimal impact on the environment and local communities.

In local areas, the Company aims to:

match power generation technologies with •the particular needs of the surrounding communities. This often provides more reliable, efficient and cleaner electricity supplies than those previously available;

introduce cleaner power sources to reduce •local GHG emissions;

install low-noise plant to minimise •operational impacts on neighbouring communities;

directly employ local people for •development projects and create additional service and support industry positions; and

purchase local services and materials during •the construction phases of the projects, wherever possible.

On a global scale, Energy Developments improves the sustainability of the world’s communities by transforming substances that are harmful to the environment, such as LFG and CMM, into clean energy.

CommUnity sUPPoRt FoR WkPPDuring 2008, Energy Developments completed and commissioned infrastructure to supply electricity to the towns of Broome, Looma, Derby, Fitzroy Crossing and Halls Creek in the West Kimberley region of Western Australia.

This project involved the construction of five new power stations and an LNG plant in the region, establishing a state of the art suite of infrastructure which will provide electricity to local customers for at least the next 20 years.

Energy Developments appreciates the strong support it has received from regional communities across Australia and internationally.

A contributing factor towards the Company’s positive engagement with these communities is the effort made to ensure stakeholders are fully informed and consulted about Energy Developments’ activities.

CONNECTED COmmuNITIEs

Energy Developments strongly supports sustainable development through the Company’s community, environmental and social programs. The Company contributes advice, resources and services to assist host communities achieve positive social, economic and environmental outcomes.

2008 ACHievements The Company continued •its community engagement activities related to WKPP, culminating in the official project opening in Broome on 14 April by the Premier of Western Australia, Mr Alan Carpenter. Feedback from community members continues to demonstrate strong project support.

Energy Developments again •participated in the North West Expo in Broome (as a silver sponsor) and the Shinju Matsuri Festival under its program of social activities supporting the community.

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Broome, WA, Australia


CONNECTED COMMUNITIES

In the case of WKPP, the Company had been conducting community engagement activities since 2004 to identify and address potential project impacts on residents, businesses and special interest groups. Activities included:

providing project briefings to Shire •Councillors and Council executives;

consulting local indigenous groups to •develop appropriate cultural heritage management processes and to create training and development opportunities for the local indigenous people;

working with representatives of the •Kimberley Development Commission to maximise local development opportunities;

giving presentations to local Chamber •of Commerce meetings and seeking expressions of interest from members regarding their involvement in the project; and

distributing written project information to •local residents throughout the planning and construction phases of the project.

In 2008, Energy Developments continued with these activities culminating in the official opening of the project at Broome on 14 April 2008. Highlights included participation in the North West Expo in Broome (as a silver sponsor) and the Shinju Matsuri Festival.

In particular, the North West Expo again provided an opportunity to engage with industry, the tourism sector and members of the community. Feedback from such events continued to indicate widespread interest and support for the development of the local power stations.

CommUnity DeveLoPment ContRiBUtions Energy Developments has continued to provide financial and in-kind support for disaster relief programs and community development projects in operating regions.

In 2009, the Company will deliver on its $1 million commitment toward a new community benefit fund jointly administered by Energy Developments and the Western Australian Office of Energy. The fund will be used to help finance community development projects in the West Kimberley region.

DeveLoPmentsEnergy Developments is also benefiting from this sustainable development approach through:

improved relationships with local •communities and regulators;

greater resource efficiency;•

improving environmental performance;•

2009 oUtLookThe Company will continue •to engage local communities during the development and operational phases of major projects.

Energy Developments will •continue to provide training and development opportunities for indigenous groups and maximise employment prospects for other members of local communities.

WKPP community benefit fund •recipients will be identified.

stronger employee relationships which in •turn promote the Company as a better workplace in an increasingly competitive employment marketplace; and

enhanced planning and preparation for •likely issues and changes to regulatory requirements by maintaining effective dialogue with stakeholders.

Our approach to sustaining business performance by strengthening the communities in which we operate, improving business efficiency, and developing stakeholder relationships, will ultimately serve to increase shareholder returns.

As Energy Developments expands its project reach, the Company expects to provide significant social, economic and environmental benefits to the communities where it operates.

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Energy Developments has continued to strengthen its employee retention strategies.



emeRGenCy ResPonse PLAnsThe West Kimberley Power Project was not as greatly affected by tropical cyclones as was the case in the previous year. However, the Company took all necessary precautions at Karratha when Cyclone Nicholas formed off the Western Australian coast in February 2008.

The community of Karratha was placed on an alert which subsequently reached “yellow” status, prompting Energy Developments to activate its emergency response plan and safely shut down the Karratha LNG plant. Loading of LNG delivery vehicles was also suspended.

No incidents were experienced, and electricity supplies from the project’s power plants were unaffected. Once the all clear was given, operations were returned to normal.

Gas supply to the LNG plant at Karratha was interrupted on 3 June 2008 by an explosion at Apache Energy’s Varanus Island processing plant. The LNG plant was shut down without incident until an alternative supply of gas and transport was sourced and connected.

There was no interruption to power supplies from this incident. This is due to the project being designed to have adequate LNG storage capacity and back up supply arrangements at the power facilities to ensure that the supply of power to the townships is uninterrupted by such an event.

HeALtH AnD sAFety systems GoALEnergy Developments has maintained a focus on the continuous improvement of its workplace health and safety management systems and processes.

Following an independent audit of the Company’s safety management systems in 2006, a range of documented protocols and procedures were implemented and integrated into the overarching Health and Safety Management System.

These protocols and procedures are also embodied within the Company’s Occupational Health and Safety Manual, National and State Emergency Response Plans and reports to state regulators as prescribed by legislation.

Training packages governing new and improved safety systems have been developed and are being delivered to all operational sites throughout Australia.

EmpOWERED pEOpLE

Energy Developments’ most important asset is its people, and health and safety remain a top priority across all business activities.

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EMPOWERED PEOPLE

Energy Developments is committed to the continual improvement of safety through both a reduction in lost time injuries and a commitment to an education and awareness campaign to ensure the safety of all workers.

LABoUR sHoRtAGeAttracting and retaining quality personnel are vital for Energy Developments. The Company has successfully attracted and engaged qualified employees for its project delivery program, despite a continuing shortage of qualified engineers and technical workers in the Australian marketplace. This shortage is primarily due to unprecedented demand for employees during the current resources boom, particularly in remote regions.

The Company’s continued success in this area is based on researching remuneration trends and through promoting the diversity of opportunities available for prospective employees.

HeALtH AnD sAFety ReCoRDA focus on the continuous improvement of its workplace health and safety systems and processes has helped the Company to maintain the improvement its lost time injury frequency rate (LTIFR). The LTIFR increased marginally from 3.5 in 2007 to 3.65 in 2008. There were three lost time incidents in 2008, the same number as in 2007.

This was a pleasing result for Energy Developments and demonstrates the dedication of the Company and its people to reducing safety risks and incidents. The Company remains committed to seeking further improvements.

emPLoyee Retention stRAteGiesEnergy Developments has continued to strengthen its employee retention strategies.

Non-financial incentives for employees include opportunities to participate in training and development programs such as Developing Managers and Leaders of Tomorrow. These programs aim to support and develop the skills of talented individuals at all levels of the organisation.

neW tRAininG initiAtivesAn independent human resources group was appointed in 2006 to deliver tailored leadership programs.

The training has been designed to help senior employees develop a strategic management focus and identify ways of adding value to Company operations in addition to individual personal development.

The Developing Managers training program was developed to provide management skills to supervisory and technical staff. There are presently 12 people involved in this training program.

The Leaders of Tomorrow program accepted its third intake during 2008. Energy Developments is looking to develop today’s managers into tomorrow’s business leaders. Nine employees graduated from this program in 2008 and there are a further nine engaged in the program currently.

For new recruits at proposed or recently opened Company power stations, intensive training was conducted in 2008 to enable these employees to learn preferred operating procedures and preventative maintenance techniques.

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11

7.3

3.5

3.65

HISTORIC LTIFR year ended 30 June

2004

2005

2006

2007

2008

The lost time injury frequency rate (LTIFR) is the number of injuries incurred per one million hours worked that resulted in a lost day or shift.

6

7

5

3

3

LOST TIME INCIDENTS year ended 30 June

2004

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GREG PRITCHARD Managing Director

MAppFin, BCom, FCA

Greg Pritchard is an experienced corporate executive whose previous positions include Chief Financial Officer of QCT Resources Limited and QNI Limited. He has held various senior posts at KPMG and Wardley James Capel in Australia, the United Kingdom and continental Europe.

Greg was promoted to the position of Managing Director in December 2007, having previously been the Company’s Finance Director.

DR PETER CASSIDY Non-Executive Director

PhD, CEng, BSc (Eng), FAusIMM

Dr Peter Cassidy is a metallurgical engineer with more than 35 years experience in the resources industry in Australia, South East Asia and North America, including over 15 years serving on the boards of major Australian public companies.

Peter is currently Chairman of Allegiance Mining NL, and is a non-executive director of Sino Gold Mining Limited, Lihir Gold Limited and OZ Minerals Limited.

MICHAEL BROWN Chairman

MBA, BEc

Michael Brown has more than 20 years experience in the energy industry, including senior management positions at Exxon Corporation’s operations in Australia, the United States, Japan and Malaysia.

Michael is also a non-executive director of Innamincka Petroleum Limited and Wattyl Limited.

He is a former director of Brambles Industries Limited and several other Australian public companies.

DR BRUCE HARKER Deputy Chairman

PhD (Elec Eng), BE (Hons)

Dr Bruce Harker is an executive director of investment bank and fund manager HRL Morrison & Co Limited and heads its energy sector advisory group. In this role, Bruce is responsible for managing the electricity sector investments of New Zealand-listed company Infratil Limited.

Throughout his career, Bruce has been engaged in major energy sector transactions and projects in Australia, the United Kingdom and New Zealand.

Bruce is also Chairman of New Zealand-listed company TrustPower Limited, and Chairman of Melbourne based electricity retailer Victoria Electricity Pty Ltd. He is former Chairman of Victorian generator, Southern Hydro.

DR RICHARD GREGSON Non-Executive Director

PhD, MBA, BSc (Hons)

Dr Richard Gregson is the co-founder and a partner of private equity funds management group Equity Partners. In this capacity, Richard has assisted with the development and expansion of many small to medium enterprises since 1989.

Richard is also a non-executive director of Traffic Technologies Limited and Portland Orthopaedic Limited, and has extensive experience as a non-executive director of a number of private companies in diverse industries including healthcare, logistics, resources and financial services.

GREG MARTIN Non-Executive Director

BEc, LLB, FAIM, MAICD

Greg Martin is Chief Executive of Challenger Infrastructure, part of the Challenger Financial Services Group. Previously, he spent more than 25 years working with The Australian Gas Light Company (AGL) and held senior roles in Australia and overseas including as the company’s Managing Director and Chief Executive Officer over a five year period.

Greg is also an executive director of Challenger Management Services Limited and Chairman of the New South Wales Royal Botanic Gardens and Domain Trust.

He is former Chairman of NGC Holdings Limited (a former New Zealand-listed company) and former Chairman of Energy Supply Association of Australia Limited.

Energy Developments’ directors offer significant experience and expertise and they will continue to provide strong leadership and direction to the Company as it strives to achieve its strategic objectives.

BoARD oF DiReCtoRs

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GREG PRITCHARD Managing Director (refer to Directors’ profiles)

BRENDAN GILLChief Financial Officer

B Bus (Acc), CPA

Brendan Gill is a highly experienced senior finance executive who was most recently CFO of Brisbane based resources company Intrepid Mines Limited following its 2008 merger with Emperor Mines Limited.

Brendan’s previous experience includes senior finance positions in the BHP Billiton group, including Vice President Finance, Carbon Steel Materials division and Chief Financial Officer, Stainless Steel Materials division.

He has previously held a number of other senior positions with the BHP Billiton group, including the role of Chief Financial Officer of the Nickel division (2001–2002) and Global Lead Risk Management and Audit.

DAVID KENTManaging Director – Europe

BA (Ec) (Hons), ACA, DipGenMgt

David Kent has worked with Energy Developments since 1998. In June 2004, he was made General Manager – Europe.

He manages the UK asset portfolio, maintains relationships with key European suppliers and is responsible for other development opportunities in Europe as well as representing Energy Developments in its joint venture asset portfolios in France and Greece. Since 2004, he has doubled the installed capacity in each region.

With 20 years of financial management experience in different sectors, he is a Chartered Accountant who qualified with Baker Tilly, a major UK chartered accountancy firm.

CHRIS MURRAYExecutive General Manager – Australia

BE (Mech) (Hons), CPEng, GAICD

Chris Murray is the Executive General Manager – Australia. He joined Energy Developments in February 2002 as the Group General Manager – Technical Services, where he had an overall global management responsibility for manufacturing, engineering and technology development.

Prior to this, Chris was Managing Director of a former subsidiary company of Energy Developments – Biomass Energy Service & Technology Pty Limited. During his career spanning more than 20 years, Chris has held various engineering and consulting positions at managerial and principal levels and has worked in the power, mining, manufacturing and chemical industries. He was a founder, and for five years, principal of an engineering consultancy.

JON THOMASPresident – Energy Developments, Inc (United States)

MA (Arts, Sciences), BA (Int Relations)

Jon Thomas’ career includes more than 20 years of experience working with energy related and technology companies. He was appointed to his current position with Energy Developments in July 2005. Jon has held several CEO and senior executive positions, including CEO of CIC Global LLC, a partnership between United States’ Exelon Energy Corporation and Orion New Zealand Limited. He has served as a United States diplomat and an Assistant Secretary of State under President Reagan. He has also been an Adjunct Professor of International Business at Belmont University.

CoRPoRAte mAnAGement teAm

The corporate management team implements worldwide programs that are aligned with the Board’s vision for Energy Developments.

COMPANY LEADERSHIP

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PRinCiPLe 2: stRUCtURe tHe BoARD to ADD vALUe

Recommendation 2.1: A majority of the board should be independent directorsThe Company complies with this Recommendation, and the Board presently comprises five non-executive directors and one executive director. The personal and professional details of the directors for the financial year ended 30 June 2008 are located in the section entitled Company Leadership in the annual report (page 18).

The details of office of each director is as follows:

Director name

Date of appointment

Annual General Meeting

(AGM) at which

retirement by rotation is required

Retiring at 2008

AGM Independent

R P Gregson 25 Oct 1991 2009 No Yes

M R Brown 1 Mar 2001 2010 No Yes

G J Pritchard 24 Jul 2001 NA NA No

B J Harker 27 Jul 2002 2008 Yes No

P W Cassidy 3 Apr 2003 2009 No Yes

G J W Martin 16 May 2006 2009 No Yes

NA = Not Applicable.

The Board & Governance Charter contains a section entitled Board Procedures that requires all directors to bring an independent judgement to bear in decision-making. Where conflicts may arise, affected directors excuse themselves from Board deliberations and decisions.

CORpORATE GOvERNANCE

ASX Listing Rule 4.10.3 requires Energy Developments to disclose the extent to which it complies with the Principles of Good Corporate Governance and Best Practice Recommendations (Guidelines) issued by the ASX Corporate Governance Council in March 2003. There are 10 Principles and 28 Recommendations contained in the Guidelines, which are reported on in this section. Throughout the year ended 30 June 2008, the Company complied with the Guidelines in all respects.

PRinCiPLe 1: LAy soLiD FoUnDAtions FoR mAnAGement AnD oveRsiGHt

Recommendation 1.1: Formalise and disclose the functions reserved to the board and those delegated to managementThe Company complies with this Recommendation. The Board has formally adopted a Board & Governance Charter (available on the Company website) which outlines the key responsibilities of the Board and those responsibilities delegated to management. The key responsibilities of the Board are to:

review, advance and approve the Company’s:•

objectives and strategies; –

plans, budgets and investments; and –

capital management; –

monitor the Company’s businesses, financial performance •and corporate governance;

oversee the financial position of the Company;•

report to shareholders;•

ensure effective control, accountability and compliance systems •are in place;

appoint, and appraise the performance of, the Managing Director;•

review risk management procedures and policies;•

oversee the senior management team in terms of:•

review of performance evaluation; –

succession planning; and –

remuneration; –

establish a culture of high ethical, environmental, •health and safety standards; and

ensure the Board is effective.•

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CORPORATE GOVERNANCE

Recommendation 2.2: The chairperson should be an independent directorThe Company complies with this Recommendation.

Recommendation 2.3: The role of chairperson and chief executive officer should not be exercised by the same individualThe Company complies with this Recommendation.

Recommendation 2.4: The board should establish a nomination committeeAs noted in the Guidelines, smaller boards may not find it efficient to have a separate nomination committee. Accordingly, the Board as a whole acts as a nomination committee. The processes for nominations are contained within the Company’s Board & Governance Charter.

Recommendation 2.5: provide the information indicated in the Guide to Reporting on principle 2The following table contains the recommended information:

Information in accordance with the Guidelines Annual report or website reference

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

Refer to the directors’ profiles at page 18 of the annual report.

The names of the directors considered by the board to constitute independent directors and the company’s materiality thresholds.

Refer to the Company response to Recommendation 2.1 on page 20.

A statement as to whether there is a procedure agreed by the board for directors to take independent professional advice at the expense of the company.

In accordance with the Board & Governance Charter, where reasonably necessary the directors may obtain independent advice after notifying the Chairman.

The term of office held by each director in office at the date of the annual report.

Refer to the Company response to Recommendation 2.1 on page 20.

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

This function is carried out by the Board under the Board & Governance Charter.

An explanation of any departures from Recommendation 2.1, 2.2, 2.3, 2.4 or 2.5.

The Company complies with Recommendations 2.1, 2.2, 2.3 and 2.5. The status with respect to Recommendation 2.4 is explained in the Company’s response to Recommendation 2.4 on page 21.

A description of the procedure for the selection and appointment of new directors to the board.

The Board & Governance Charter, available on the Company website under Corporate Governance, contains details of the principles applied in the appointment of directors to the Board.

The charter of the nomination committee or a summary of the role, rights, responsibilities and membership requirements for that committee.

This function is described in the Board & Governance Charter.

The nomination committee’s policy for the appointment of directors. This function is described in the Board & Governance Charter.

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PRinCiPLe 4: sAFeGUARD inteGRity in FinAnCiAL RePoRtinG

Recommendation 4.1: Require the chief executive officer (or equivalent) and the chief financial officer (or equivalent) to state in writing to the board that the company’s financial reports present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standardsThe Company complies with this Recommendation.

Adoption of the Company’s financial statements for the year ended 30 June 2008 followed written representations from the Managing Director and Chief Financial Officer, in accordance with section 295A of the Corporations Act 2001.

Recommendation 4.2: The board should establish an audit committee The Company complies with this Recommendation.

Recommendation 4.3: structure the audit committee so that it consists of:

only non-executive directors;• a majority of independent directors;• an independent chairperson, who is not chairperson •of the board; and at least three members.•

The Company complies with this Recommendation.

The present members of the Audit Committee are Peter Cassidy (Chairman), Michael Brown and Bruce Harker.

PRinCiPLe 3: PRomote etHiCAL AnD ResPonsiBLe DeCision-mAkinG

Recommendation 3.1: Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: 3.1.1 the practices necessary to maintain confidence in the company’s integrity; and

3.1.2 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.


The Company has adopted a Code of Conduct (available on the Company website) which is applicable to all employees and directors. Further details of the Company’s Code of Conduct are contained in the response to Recommendation 10.1 (page 26).

Recommendation 3.2: Disclose the policy concerning trading in company securities by directors, officers and employeesThe Company complies with this Recommendation.

The Company has adopted a Securities Trading Policy (available on the Company website) which applies to all employees and directors. The policy provides guidance to employees and directors on the purchase and sale of Company securities with the objective of seeking to prevent relevant breaches of the Corporations Act 2001, and to ensure that dealings by employees and directors in Company securities are fair and are seen to be fair.


Information in accordance with the Guidelines Annual report or website reference

An explanation of any departures from Recommendation 3.1, 3.2 or 3.3. The Company complies with Recommendations 3.1, 3.2 and 3.3.

Any applicable code of conduct or a summary of its main provisions. The Company’s Code of Conduct is available on the Company website under Corporate Governance.

The trading policy or a summary of its main provisions. The Company’s Securities Trading Policy is available on the Company website under Corporate Governance.

Corporate GovernanCe

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PRinCiPLe 5: mAke timeLy AnD BALAnCeD DisCLosURe

Recommendation 5.1: Establish written policies and procedures designed to ensure compliance with AsX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that complianceThe Company complies with this Recommendation.

The Company has adopted a Continuous Disclosure Policy (available on the Company website) to ensure that investors are able to make informed investment decisions.


Information in accordance with the Guidelines

Annual report or website reference

Explanation of any departures from Recommendation 5.1 or 5.2.

The Company complies with Recommendations 5.1 and 5.2.

A summary of the policies and procedures designed to guide compliance with ASX Listing Rule disclosure requirements.

The Company’s Continuous Disclosure Policy is available on the Company website under Corporate Governance.

Recommendation 4.4: The audit committee should have a formal charterThe Company complies with this Recommendation.

The Company has adopted an Audit Committee Charter which is available on the Company website. The Audit Committee provides advice and assistance to the Board in fulfilling its responsibilities.




Details of the names and qualifications of those appointed to the audit committee, or where an audit committee has not been formed, those who fulfil the functions of an audit committee.

Refer to the Company’s response to Recommendation 4.3 above.

The number of meetings of the audit committee and the names of the attendees.

There were five Audit Committee meetings held during the reporting period. Peter Cassidy (as Chairman), Michael Brown and Bruce Harker attended all meetings.


The Company complies with Recommendations 4.1, 4.2, 4.3, 4.4 and 4.5.

The audit committee charter. The Audit Committee Charter is available on the Company website under Corporate Governance.

Information on procedures for the selection and appointment of the external auditor, and for the rotation of external audit engagement partners.

The Audit Committee Charter provides for the committee’s review, at least annually, of the performance of external auditors. The committee may recommend changes in the selection of external auditors as it deems appropriate. The committee also obtains and reviews, at least annually, a report by the external auditor describing the external auditor’s internal quality control and independence procedures.


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The risk matrix is used throughout appropriate levels of the Company to facilitate appropriate application in Company business, and the internal auditor assesses compliance with the risk matrix on a periodic basis, and reports results to the Audit Committee and Board.

Recommendation 7.2: The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the board in writing that: 7.2.1 the statement given in accordance with Best Practice Recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board; and

7.2.2 the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.


The adoption of the Company’s financial statements for the year ended 30 June 2008 followed written representations from the Managing Director and Chief Financial Officer made in accordance with Recommendation 7.2 and in accordance with section 295A of the Corporations Act 2001.




Explanation of any departures from Recommendation 7.1, 7.2 or 7.3.

The Company complies with Recommendations 7.1, 7.2 and 7.3.

A description of the company’s risk management policy and internal compliance and control procedures.

The Company’s Risk Management Policy is available on the Company website under Corporate Governance.

PRinCiPLe 6: ResPeCt tHe RiGHts oF sHAReHoLDeRs

Recommendation 6.1: Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetingsThe Company complies with this Recommendation.

The Board & Governance Charter outlines the Company’s approach to market disclosure and shareholder communications. These are designed to ensure immediate communication of all material events to shareholders in accordance with continuous disclosure requirements.

Recommendation 6.2: Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.The Company complies with this Recommendation. The auditor is also required by section 250RA of the Corporations Act 2001 to attend the annual general meeting.

PRinCiPLe 7: ReCoGnise AnD mAnAGe Risk

Recommendation 7.1: The board or appropriate board committee should establish policies on risk oversight and managementThe Company complies with this Recommendation.

The Company has adopted a Risk Management Policy (available on the Company website) to recognise and manage risk. The objective of the policy is to create and maintain shareholder value and successfully execute the Company’s strategies. Based on reviews of each segment of the Company’s business, an overall risk profile has been established.

Consistent with the Risk Management Policy, the Company undertakes a regular review of key risks relevant to the Company, corresponding mitigants, and further steps to be taken to monitor or mitigate the risks, as appropriate. The risk review is conducted at least annually by senior management, including the Company’s internal auditor and results form part of a risk matrix which is reported to the Audit Committee and Board.


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Recommendation 9.2: The board should establish a remuneration committeeThe Company complies with this Recommendation.

As at 30 June 2008, the members of the Remuneration Committee were Greg Martin (Chairman), Michael Brown and Richard Gregson.

The Company has adopted a Remuneration Committee Charter which is available on the Company website. The Remuneration Committee provides assistance to the Board in relation to remuneration policies and practices and the remuneration of the Managing Director, other senior executives and non-executive directors. It also links remuneration with specific goals and objectives. Salaries are in accordance with prevailing market rates. Bonuses and options granted are subject to the fulfilment of performance conditions.

Recommendation 9.3: Clearly distinguish the structure of non-executive directors’ remuneration from that of executivesThe Company complies with this Recommendation.

The basis and background to the Company’s remuneration policies and the remuneration of non-executive directors are contained in the remuneration report included in the Directors’ Report at pages 28–39 of the annual report.

Recommendation 9.4: Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholdersThe Company complies with this Recommendation.

The Company operates an employee share option plan (Employee Plan) and an employee tax exempt share acquisition plan (Tax Plan). The Employee Plan and Tax Plan were approved by shareholders at the 2005 AGM. The Remuneration Committee is responsible for the oversight of offers under the Employee Plan. Offers in the form of performance rights were made to eligible executives under the Employee Plan during the reporting period. Further details of the offer are set out in Note 25 to the financial statements included in the annual report.

Options/performance rights granted to executive directors are subject to shareholder approval.

PRinCiPLe 8: enCoURAGe enHAnCeD PeRFoRmAnCe

Recommendation 8.1: Disclose the process for performance evaluation of the board, its committees and individual directors, and key executivesThe Company complies with this Recommendation.

The Board & Governance Charter states that key responsibilities of the Board are to:

ensure the Board is effective;•

appoint, and appraise the performance of, the Managing Director; and•

oversee the senior management team by reviewing performance •evaluation and succession planning.

Further, at least every two years the Chairman conducts a performance review of the Board, supported by a formal questionnaire completed by all Board members. The review is focused on:

the overall effectiveness and competencies of the Board;•

the availability and contribution of each individual director;•

effectiveness of directors’ training and orientation; and•

succession planning.•

A performance evaluation for the Board and its members was carried out by the Chairman during the year ended 30 June 2007.

PRinCiPLe 9: RemUneRAte FAiRLy AnD ResPonsiBLy

Recommendation 9.1: provide disclosure in relation to the company’s remuneration policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to directors and key executives and corporate performanceThe Company complies with this Recommendation. The Company is also required by section 300A of the Corporations Act 2001 to provide this information.

The basis and background of the Company’s remuneration policies and the remuneration of the directors and key executives are contained in the remuneration report included in the Directors’ Report at pages 28–39 of the annual report.

Further details are also provided in the Remuneration Committee Charter which is available on the Company website.


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Disclosure of the company’s remuneration policies referred to in Recommendation 9.1 and in Box 9.1 of the Guidelines

Refer to the Company’s response to Recommendation 9.1 on page 25.

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

There were two meetings of the Remuneration Committee during the reporting period. Greg Martin, Michael Brown and Richard Gregson attended both meetings.

The existence and terms of any schemes for retirement benefits, other than statutory superannuation, for non-executive directors.

There are no schemes for retirement benefits, other than statutory superannuation, for non-executive directors.


The Company complies with Recommendations 9.1, 9.2, 9.3, 9.4 and 9.5.

The charter of the remuneration committee or a summary of the role, rights, responsibilities and membership requirements of that committee.

The Company’s Remuneration Committee Charter is available on the Company website under Corporate Governance.

PRinCiPLe 10: ReCoGnise tHe LeGitimAte inteRests oF stAkeHoLDeRs

Recommendation 10.1: Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholdersThe Company complies with this Recommendation.

The Company’s Code of Conduct sets out the standards expected of all employees (including directors). It follows best practice guidelines in that it contains provisions relating to compliance, conflicts, fair dealing, company assets and property, confidential information, employment practices, gifts and entertainment, and reporting. The reporting provision requires employees to report any circumstance which the employee believes in good faith to be a breach of the law or the Code of Conduct.


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FINANCIAL STATEMENTS

for the year ended 30 June 2008

Directors’ Report 28

Auditor’s Independence Declaration 39

Income Statement 40

Balance Sheet 41

Statement of Changes in Equity 42

Cash Flow Statement 44

Notes to the Financial Statements 45Note 1: Summary of Significant Accounting Policies 45Note 2: Profit and Loss Items 50Note 3: Income Tax 51Note 4: Dividends 53Note 5: Earnings per Share 53Note 6: Receivables (current and non-current) 53Note 7: Inventories (current) 54Note 8: Financial Instruments – Derivatives 54Note 9: Property, Plant and Equipment 54Note 10: Other Assets (current and non-current) 56Note 11: Payables (current) 56Note 12: Borrowings (current) 56Note 13: Financial Instruments – Derivatives (current) 56Note 14: Provisions (current) 56Note 15: Borrowings (non-current) 56Note 16: Deferred Tax Liabilities (non-current) 57Note 17: Provisions (non-current) 58Note 18: Financial instruments – derivatives (non-current) 58Note 19: Contributed Equity 59Note 20: Minority Interests 61Note 21: Notes to the Cash Flow Statement 61Note 22: Expenditure Commitments 62Note 23: Segment Information 63Note 24: Share Based Payments 64Note 25: Directors and Executives Disclosures 68Note 26: Remuneration of Auditors 73Note 27: Related Party Disclosures 73Note 28: Investments Accounted for Using the Equity Method 74Note 29: Controlled Entities 75Note 30: Financial Instruments 77Note 31: Contingent Liabilities 81Note 32: Subsequent Events 81

Directors’ Declaration 82

Independent Audit Report 83

Shareholder Information 84

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DIRECTORS’ REPORTfor the year ended 30 June 2008

^ Not a member of the relevant committee.

* C S Laurie resigned on 14 December 2007 and attended all Board meetings while he was a director during the relevant period.

Your directors submit their report for the year ended 30 June 2008.

DirectorsThe names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

M R Brown MBA, BEc

P W Cassidy PhD, CEng, BSc (Eng), FAusIMM

R P Gregson PhD, MBA, BSc (Hons)

B J Harker PhD (Elec Eng), BE (Hons)

C S Laurie BE (Elec), RegEng, FNZIM, FIOD (NZ) (resigned 14 December 2007)

G J W Martin BEc, LLB, FAIM, MAICD

G J Pritchard MAppFin, BCom, FCA (appointed 17 December 2007) (previously Finance Director)

Directors’ interestsAs at the date of this report, the interests of directors in shares, options and performance rights (PR) of the Company were:

Ordinary shares

Number

Options/ ordinary shares

on conversionNumber

PRNumber

M R Brown 28,170 - -

P W Cassidy 28,504 - -

R P Gregson 59,099 - -

B J Harker - - -

G J W Martin 10,000 - -

G J Pritchard 26,334 700,000 150,000

No director is a party entitled to a benefit under a contract giving a right to call for shares in the Company.

C S Laurie resigned on 14 December 2007. At that date, he held 21,394 ordinary shares and 1,000,000 options which had vested.

Company Secretary The Company Secretary is Glen Marshall B Bus (Acc)/LLB, LLM. Glen has worked for EDL as Legal Counsel since 2003 and was appointed Company Secretary in January 2008. Glen has previously

worked at various legal firms in Australia and overseas, covering a broad range of corporate, commercial and project work in various sectors.

Directors’ meetingsThe number of meetings of directors (including meetings of committees of directors) held and attended by each director during the year is shown in the table at the bottom of this page.

Principal activitiesThe continuing principal activities of the Consolidated Entity during the year were the development and operation of power generation projects.

ResultsThe net profit of the Consolidated Entity for the financial year was $21,341,000 (2007: net loss of $16,600,000).

DividendsIn respect of the financial year ended 30 June 2007, as detailed in the directors’ report for that financial year, a final dividend of 5.0 cents per share was paid to the holders of fully paid ordinary shares on 4 October 2007.

In respect of the financial year ended 30 June 2008, an interim dividend of 4.0 cents per share was paid to holders of fully paid ordinary shares on 3 April 2008.

In respect of the financial year ended 30 June 2008, the directors recommend the payment of a final dividend of 6.0 cents per share to the holders of fully paid ordinary shares on 3 October 2008.

Review of operationsA review of the operations of the Consolidated Entity during the financial year is set out on pages 1 to 17 of the annual report.

Significant changes in the state of affairsOther than matters mentioned in this report, there were no significant changes in the state of affairs of the Consolidated Entity during the financial year.

Likely developments and expected resultsLikely developments in and expected results of the operations of the Consolidated Entity are discussed generally in the annual report. In the opinion of the directors, it would prejudice the interests of

BOARD

Directors’ meetingsRegularly scheduled Other

Audit Committee

Remuneration Committee

Committee of Independent Non-Executive Directors

Number of meetings held 11 4 5 2 1

Number of meetings attended

M R Brown 11 4 5 2 1

P W Cassidy 11 4 5 ^ 1

R P Gregson 11 4 ^ 2 1

B J Harker 11 3 5 ^ ^

C S Laurie* 5 1 ^ ^ ^

G J W Martin 11 4 ^ 2 1

G J Pritchard 11 4 ^ ^ ^

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the Consolidated Entity if any further disclosure of information was included.

Share options/performance rightsDetails of options granted to directors or relevant officers as part of their remuneration are set out in the section of this report headed remuneration report. Details of shares and interests under options and PR are set out in Note 24 and 25 to the financial statements and form part of this report.

REMUNERATION REPORT (AUDITED)This report forms part of the directors' report for the year ended 30 June 2008 and outlines the remuneration arrangements in place for directors and executives of Energy Developments Limited.

This remuneration report outlines the director and executive remuneration arrangements of the Company and the Consolidated Entity in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, key management personnel (KMP) of the Consolidated Entity are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Consolidated Entity, directly or indirectly, including any director (whether executive or otherwise) of the Company, and includes the five executives in the Company and the Consolidated Entity receiving the highest remuneration.

For the purpose of this report, the term ‘executive’ encompasses the Managing Director, senior executives and general managers of the Company and the Consolidated Entity.

Approach to remuneration The performance of the Company is critically dependent upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives.

The objective of the Company’s executive reward framework is to ensure that reward for performance is competitive and appropriate for the results delivered. To this end, the Company has embedded the following principles in its reward framework:

provide competitive rewards to attract high calibre executives;•

link executive reward to shareholder value;•

significant portion of executive remuneration is ‘at risk’ depending •on meeting pre-determined performance benchmarks;

establish appropriate and demanding performance hurdles in relation •to variable remuneration; and

transparency of policies and outcomes.•

Company policy states that employees who have or may receive options, rights (including PR and incremental share appreciation rights (ISAR)) or similar instruments over the Company’s securities may not enter into transactions in associated products (such as warrants) without the prior approval of the Board. This policy covers products which operate, or are intended to operate, to limit the economic risk or are designed or intended to hedge exposure to the Company’s securities. This policy is reinforced by periodically bringing the Company code of conduct (which refers to this policy) to the attention of all employees.

Remuneration CommitteeThe Board has delegated certain authority to a Remuneration Committee. The Remuneration Committee is responsible for assisting the Board by reviewing and making recommendations in relation to the Company’s overall human resource policies and strategies, specifically including overall remuneration policy guidelines, and the structure and level of the remuneration of the Managing Director and of non-executive directors. In doing so, it reviews relevant employment market conditions and receives independent professional advice. The members of the Remuneration Committee at the date of this report are G J W Martin (Chairman), M R Brown and R P Gregson.

Remuneration structureIn accordance with best practice corporate governance, the structure of non-executive director and senior manager remuneration is separate and distinct.

Non-executive director remunerationThe Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Non-executive directors’ fees are determined within the aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The current limit is $850,000 per annum and this was approved by shareholders at the 2005 annual general meeting (AGM).

Non-executive directors’ annual fees are set out as follows (inclusive of compulsory superannuation where relevant):

Chairman $240,000;•

Deputy Chairman $120,000; •

Non-executive director $85,000; and•

Non-executive director (Audit Committee Chairman) $100,000.•

Senior management and executive director (senior executives) remunerationIn consultation with external consultants, the Company has structured a senior executive remuneration framework that is market competitive and complementary to the reward strategies of the Company. The framework is reviewed on an annual basis by the Remuneration Committee.

The senior executive pay and reward framework has four components:

base pay and benefits;•

short term performance incentives;•

long term incentives through the assignment of share options and/or •performance rights; and

other remuneration such as superannuation.•

Base pay and benefits

Base pay and benefits are structured as a total employment cost package which may be delivered as a mix of cash and limited prescribed non-financial benefits at the senior executives’ discretion. External remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market for a comparable role. Base pay for senior executives is reviewed annually to ensure that senior executives’ pay is competitive with the market. Senior executives’ pay is also reviewed on promotion. There are no guaranteed base pay increases in any senior executives’ contracts.

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REMUNERATION REPORT (AUDITED) (cONTINUED)

Senior management and executive director (senior executives) remuneration (continued)

Short term performance incentives (STI)

The objective of the STI program is to link the achievement of the Company’s operational targets with the remuneration received by the senior executives charged with meeting those targets and to retain key company executives. The total potential STI available is set at a level so as to provide sufficient incentive to the senior executive to achieve the prescribed targets while keeping the cost to the Company reasonable.

Each year, the Remuneration Committee considers the STI targets applicable to senior executives on an individual basis. This includes setting the maximum payout for an incentive payment and the minimum performance required to trigger a payment. Each senior executive has different STI targets depending on the accountability of their role and impact on the Company or business unit performance. The STIs are usually paid by way of a cash bonus and may be adjusted up or down in line with under or over achievement against the target performance levels.

Long term incentives (LTI) through the assignment of share options and/or PR

The objective of the Company’s LTI plan is to reward senior executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. Accordingly, LTI grants are only made to executive directors and to senior executives who are able to influence the generation of shareholder wealth and thus have a direct impact on the Company’s performance against the relevant long term performance hurdles set by the Board. The Board reviews the appropriateness of the Company's LTI plan on a regular basis with the assistance of independent advisers. LTI grants are made under the Company’s employee share option plan (Employee Plan) which was originally approved by shareholders in 1999, reapproved in 2002 and amended and approved by shareholders at the 2005 AGM.

Up to 2003, the Company delivered LTI benefits in the form of traditional share options to executive directors and senior executives as follows:

executive directors were eligible to receive traditional share options •over unissued shares in the Company on terms and conditions specified by the Board and specifically approved by shareholders in general meeting. Each option entitles the holder to subscribe for one fully paid ordinary share at various exercise prices. The options vest over a two or three year period based on the achievement of certain key performance criteria and lapse after five years;

the current executive director, G J Pritchard, last received an option •grant in 2003 which was approved by shareholders at the 2003 AGM; and

other senior executives were entitled to the issue of traditional •options under the Company’s Employee Plan. No traditional share options have been issued under the Employee Plan since 2002;

Grants to eligible senior executives and executive directors (subsequent to shareholder approval at the 2005 AGM) now take the form of PR issued under the Employee Plan with each right being equivalent to one share in the Company and not traditional share options. The current executive director, G J Pritchard, received PR entitlements under the Employee Plan in 2005 which were approved by shareholders at the 2005 AGM. See the further comments below about different performance rights proposed to be provided to the Managing Director and Chief Financial Officer.

The terms and conditions of PR grants, including relevant performance hurdles, to eligible senior executives and executive directors are set by the Board and, in the case of executive directors, are subject to shareholder approval under ASX Listing Rule 10.14 at an AGM. The vesting of PR granted under the Employee Plan is subject to the satisfaction of performance hurdles to be determined by the Board from time to time.

Performance rights – for eligible senior executives (other than Chief Financial Officer)

PR were issued to eligible senior executives in January 2008 (2008 PR issue) and November 2006 (2007 PR issue). Further details of the 2008 and 2007 PR issue are included in Note 25 to the financial statements. The PR issues are subject to separate internal (earnings per share – EPS) and external (total shareholder return – TSR) performance benchmarks with the proportion of PR which becomes exercisable dependent on the progressive achievement of these targets within specified performance periods. To date, all PR issues to eligible senior executives have been split 50% with an internal hurdle and 50% with an external hurdle.

The Company uses a relative TSR for the external performance benchmark. The use of a relative TSR based performance benchmark provides alignment between the comparative shareholder return and the reward for senior managers. To measure the TSR performance, the Company receives independent data from Standard & Poor’s which provides both the Company TSR growth from the commencement date of each grant and that of the selected peer group. The peer group chosen for comparative purposes comprises companies listed in the ASX 100–300 Companies Index, excluding mining companies and property trusts.

Each company in the peer group is ranked in order of relative TSR growth from the commencement of the grant over the respective performance period. Fifty percent of the relevant PR tranche becomes exercisable when the Company achieves a TSR ranking of greater than 50% over the respective performance period and increases proportionally as the TSR ranking increases as illustrated in the table below:

TSR ranking in ASX 100–300

<50% 50% 55% 60% 65% 70% 75%

Proportion of PR subject to TSR hurdle that will be awarded 0% 50% 60% 70% 80% 90%100%

The Company uses the compound growth of EPS over the performance period as its internal performance benchmark. Fifty percent of the relevant PR tranche becomes exercisable when the Company achieves compound growth in EPS of greater than 10% per annum over the respective performance period and increases proportionally as the compound growth in EPS increases as illustrated in the table below. The calculation of compound EPS growth is approved by the Board and may be different from data published in the Company's financial statements – eg to remove where appropriate the impact of non-recurring significant items on the Company's published operating results.

Compound EPS growth per annum

<10% 10% 11% 12% 13% 14% 15%

Proportion of PR subject to EPS hurdle that will be awarded 0% 50% 60% 70% 80% 90% 100%

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Senior management and executive director (senior executives) remuneration (continued)

Performance rights – for Managing Director and Chief Financial Officer

The PR issued to executive directors (current and former Managing Director) in August 2007 and October 2006 have a vesting period of two and a half years to three years (December 2005: vesting period of two and a half years) and are subject to the satisfaction of one external performance hurdle: the Company’s relative TSR ranking.

In the year ended 30 June 2008, the Company proposed a different PR regime for the Managing Director and Chief Financial Officer (2008 PR), with the 2008 PR proposed to be split 50% with ISAR (see below) and 50% with EPS based PR (which are intended to operate on the same basis, and with the same benchmarks as the EPS PR for senior executives). ISAR give the holder the right to acquire shares in the Company at no cost to the holder if Company returns outperform returns from a comparator group. ISAR differ from PR in that the ISAR vesting process and measuring of ISAR performance involves calculating a total dollar value return (capped at $3.00 per ISAR), and the ISAR holder is then entitled to acquire such number of Company shares as is equal to that dollar value, subject to appropriate caps (the share number cap is yet to be determined, and any excess over the cap is paid to the holder as cash in lieu of shares).

To measure ISAR performance, the Company compares the return to an investor in Company shares compared with the return to an investor in the ASX 100–300 Companies Index, excluding mining companies and property trusts (Index), over the relevant ISAR tranche performance period. At the end of the relevant performance period, the return to a Company investor must exceed the return to an investor in the Index for the ISAR to have any value and to give any right to the holder to acquire Company shares. Shareholder approval is intended to be sought for the grant of EPS based PR and ISAR to the Managing Director. If necessary shareholder approval is not received, a cash equivalent will be paid. It is also proposed to seek shareholder approval at the 2008 AGM to amend the Employee Plan to allow ISAR to be granted to other senior executives.

Company performance

For the year ended 30 June 2008, the Consolidated Entity recorded net profit before interest, tax, depreciation, amortisation and specific items of $97,678,000 (2007: $96,179,000). EPS (before specific items) decreased from 18.5 cents per share to 12.1 cents per share. Net operating cash flows decreased by 32% to $52,100,000.

Due to the impact of adopting Australian International Financial Reporting Standards in the year ended 30 June 2005, a comparison of current year results to years before that ended 30 June 2005 has not been made.

Over the last three years to 30 June 2008, the Consolidated Entity has increased the dividends paid to shareholders each year. The table below shows the dividends paid per share each financial year for the last three years and also details the share price on 30 June over those years:

Year ended 30 June 2008



Total dividends paid/declared per share (cents) 10.0 7.5 4.0

Share price ($) 2.58 4.50 3.80

Employment agreements

The former Managing Director, Mr C S Laurie, was employed under contract which commenced on 28 January 2003. Either party could terminate the employment contract by the giving of six months’ written notice to the other party. The termination sum payable to Mr Laurie for any reason other than dismissal for cause was equal to one year’s base annual salary inclusive of compulsory superannuation contributions. Mr Laurie was also entitled to other benefits and entitlements owing up to the date of termination. Any LTI options/PR vested to Mr Laurie at the date of termination were released. Any unvested LTI options/PR were forfeited, subject to their terms of issue. Mr Laurie resigned on 14 December 2007.

Mr G J Pritchard was appointed Managing Director on 17 December 2007, and signed a new employment agreement with the Company in relation to that role. Mr Pritchard’s Managing Director employment agreement commenced on 17 December 2007, and states that the Company may terminate the agreement at any time by giving 12 months’ written notice to Mr Pritchard, and that Mr Pritchard may terminate the agreement at any time by giving six months’ written notice to the Company. The termination sum payable to Mr Pritchard for any reason other than dismissal for cause is equal to 12 months’ base salary inclusive of compulsory superannuation contribution. In addition, Mr Pritchard will be entitled to a pro-rata payment of his then current STI, any unvested option or performance right issued as a LTI will vest at the discretion of the Board, and Mr Pritchard is entitled to receive executive outplacement services to the value of $20,000 to be used within three months. Prior to his appointment as Managing Director, Mr Pritchard was the Company Finance Director, employed under an earlier separate contract which commenced on 25 June 2001.

The Chief Financial Officer, Mr B Gill, is employed under contract. The current employment contract commenced on 9 June 2008. Mr B Gill may resign from his position by providing three months’ written notice or the Company may terminate the employment contract by providing nine months’ written notice or payment in lieu of the notice period (based on base salary and benefits). On resignation, Mr B Gill is entitled to any base salary, other benefits and entitlements owing up to the date of resignation. Any LTI options/PR that have vested will be released. LTI options/PR that have not vested will be forfeited, subject to the terms of issue.

All other executives are employed under contracts. Executives may resign under these contract by providing three months’ written notice. On resignation, executives are entitled to any base salary, other benefits and leave entitlements owing up to the date of resignation. If the Company terminates the contract, it is required to pay a termination payment equal to six months’ salary except in the case of termination for poor performance or for cause. Any LTI options/PR that have vested will be released. LTI options/PR that have not vested will be forfeited, subject to the rules of the Employee Plan.

Details of executivesB Gill Chief Financial Officer (appointed 9 June 2008)

D Kent General Manager – Europe

J W McInnes Executive General Manager – Operations (Australia) (resigned 31 August 2007)

C R Murray Executive General Manager – Head of Country Australia

J Thomas President – Energy Developments Inc (United States)

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Directors’ and executives’ remunerationDetails of the nature and amount of each element of the remuneration of each director of the Company and each of the five executive officers of the Company and the Consolidated Entity receiving the highest remuneration for the financial year are as follows:

POST EMPLOY- ShORT TERM BENEfITS MENT EqUITY TOTAL

Options/ Options/PR* Base Pensions/ PR* at as % of Perform- salary Non- super- amortised remun- ance and fees monetary Bonuses Other annuation cost Total eration related $ $ $ $ $ $ $ % %

Year ended 30 June 2008Directors M R Brown 183,486 - - - 56,514 - 240,000 - -P W Cassidy - - - - 100,000 - 100,000 - -R P Gregson - - - - 85,000 - 85,000 - -B J Harker 120,000 - - - - - 120,000 - -C S Laurie^ 327,520 - 250,000 1,241,372 49,872 - 1,868,764 - 13G J W Martin 77,981 - - - 7,019 - 85,000 - -G J Pritchard 494,114 53,624 150,000 - 49,296 154,510 901,544 16 36

1,203,101 53,624 400,000 1,241,372 347,701 154,510 3,400,308

Executives B Gill** - - - - 12,421 - 12,421 - -D Kent 312,640 - 152,311 16,525 31,264 24,156 536,896 4 33J W McInnes^^ 67,964 7,282 - 352,000 6,078 - 433,324 - 24C R Murray 351,250 15,980 65,154 - 33,051 25,378 490,813 5 18J Thomas 267,678 12,715 78,073 - 9,369 4,851 372,686 1 22

999,532 35,977 295,538 368,525 92,183 54,385 1,846,140

Year ended 30 June 2007 Directors M R Brown 134,993 - - - 105,007 - 240,000 - -P W Cassidy 50,000 - - - 50,000 - 100,000 - -R P Gregson - - - - 85,000 - 85,000 - -B J Harker 120,000 - - - - - 120,000 - -C S Laurie 654,512 - 287,500 - 130,694 111,523 1,184,229 10 34G J W Martin 77,982 - - - 7,018 - 85,000 - -G J Pritchard 393,264 54,716 150,000 - 53,818 61,661 713,459 9 30

1,430,751 54,716 437,500 - 431,537 173,184 2,527,688

Executives D Kent 307,213 - 65,129 18,187 31,745 27,212 449,486 6 21J W McInnes 314,731 17,500 75,000 - 71,489 27,212 505,932 5 20C R Murray 249,824 - 75,000 - 61,245 27,212 413,281 7 25J A Snow^^^ 112,435 - 55,000 268,372 39,223 - 475,030 - -J Thomas 250,626 24,946 38,166 - 8,664 25,977 348,379 7 18

1,234,829 42,446 308,295 286,559 212,366 107,613 2,192,108

* PR granted as part of senior manager remuneration have been valued using a Binomial pricing model, which takes into account factors such as the Company’s dividend yield, the current level and volatility of the underlying share price, the time to maturity and the market based performance conditions for vesting of the PR. The PR value amortised represents the pro-rata apportionment of the theoretical option value to the reporting period and takes account of the period to vesting. For more details of the valuation of PR including assumptions used, refer to Note 24 to the financial statements. There have been no alterations to the terms and conditions of PR granted as remuneration since their grant date.

^ C S Laurie resigned on 14 December 2007. Other benefits include amounts paid upon termination of employment.** B Gill was appointed as Chief Financial Officer on 9 June 2008.^^ J W McInnes resigned on 31 August 2007. Other benefits include amounts paid upon termination of employment.^^^ J A Snow resigned on 27 October 2006. Other benefits include amounts paid upon termination of employment.

Further information on options, PR and share holdings of directors and key management personnel is provided in Note 25 to the financial statements.

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Option, PR and share holdings of key management personnel and directors

(a) Options

(i) Options granted and/or vested during the year

No options were granted to directors during the financial year. The following options vested during the year:

VESTED NUMBER

2008 2007

Director G J Pritchard 150,000 150,000Executive C R Murray - 55,000

(ii) Option holdings of key management personnel and directors

VESTED AT 30 JUNE 2008

Balance at the Options expired Balance at the beginning of the during the end of the financial year financial year financial year Number Number Number Total Exercisable

Year ended 30 June 2008DirectorG J Pritchard 700,000 - 700,000 700,000 700,000

ExecutivesD Kent 50,000 - 50,000 50,000 50,000C R Murray 55,000 - 55,000 55,000 55,000

Total 805,000 - 805,000 805,000 805,000

Directors and key management personnel excluded from the above table have no option holdings.No options held by directors or key management personnel were granted or exercised during the current financial year.C S Laurie resigned on 14 December 2007. As at this date, he held 1,000,000 vested options.



Year ended 30 June 2007DirectorsM R Brown 200,000 (200,000) - - -C S Laurie 1,000,000 - 1,000,000 1,000,000 1,000,000G J Pritchard 700,000 - 700,000 550,000 550,000


Total 2,005,000 (200,000) 1,805,000 1,655,000 1,655,000

Directors and key management personnel excluded from the above table have no option holdings.No options held by directors or key management personnel were granted or exercised during the prior financial year.

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Option, PR and share holdings of key management personnel and directors (continued)

(b) PR

(i) PR granted and/or vested during the year

PR were granted to specified directors on 29 and 30 August 2007, and executives on 17 January 2008, under the long term incentive plan as equity compensation benefits, as disclosed below. The PR were issued at a nil exercise price per share and expire on 30 August 2017 and 17 January 2018 respectively. Each PR entitles the holder to one fully paid ordinary share if certain key performance criteria are achieved within a specified performance period (two and a half to three years).

Value Vested of PR at First number Granted grant date exercise granted in % % Number $ date 2005 Vested Forfeited

Year ended June 2008Directors C S Laurie^ 100,000 100,640 30 Jun 2010 - - 100%G J Pritchard 50,000 50,320 30 Jun 2010 50,000 33.3% -

Executives D Kent 60,000 58,690 17 Jan 2011 16,870 11.4% 7.5%J W McInnes^^ - - - - - 100%C R Murray 70,000 56,926 17 Jan 2011 16,870 10.7% 7%J Thomas 50,000 40,661 17 Jan 2011 - - -

^ C S Laurie resigned on 14 December 2007.

^^ J W McInnes resigned on 31 August 2007.

PR were granted to specified directors on 4 and 5 October 2006, and executives on 28 November 2006, under the long term incentive plan as equity compensation benefits, as disclosed below. The PR were issued at a nil exercise price per share and expire on 5 October 2016 and 28 November 2016 respectively. Each PR entitles the holder to one fully paid ordinary share if certain key performance criteria are achieved within a specified performance period (two and a half to three years).

Value of PR at First Granted grant date exercise Vested % % Number $ date Number Vested Forfeited

Year ended June 2007Directors C S Laurie 100,000 230,122 30 Jun 2009 - - -G J Pritchard 50,000 115,061 30 Jun 2009 - - -

Executives D Kent 40,000 91,141 28 Nov 2009 - - -J W McInnes 40,000 91,141 28 Nov 2009 - - -C R Murray 40,000 91,141 28 Nov 2009 - - -J Thomas 40,000 91,141 28 Nov 2009 - - -

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(b) PR (continued)

(ii) PR holdings of key management personnel and directors

Granted as Balance at the remuneration Exercised Lapsed Balance at beginning of the during the during the during the the end of the financial year financial year financial year financial year financial year Number Number Number Number Number

Year ended 30 June 2008DirectorsC S Laurie^ 250,000 100,000 - (350,000) -G J Pritchard 100,000 50,000 - - 150,000

ExecutivesD Kent 88,000 60,000 (6,496) (11,130) 130,374J W McInnes^^ 88,000 - - (88,000) -C R Murray 88,000 70,000 (16,870) (11,130) 130,000J Thomas 40,000 50,000 - - 90,000

Total 654,000 330,000 (23,366) (460,260) 500,374

Year ended 30 June 2007DirectorsC S Laurie 150,000 100,000 - - 250,000G J Pritchard 50,000 50,000 - - 100,000

ExecutivesD Kent 48,000 40,000 - - 88,000J W McInnes 48,000 40,000 - - 88,000C R Murray 48,000 40,000 - - 88,000J Thomas - 40,000 - - 40,000

Total 344,000 310,000 - - 654,000



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(c) Shares

(i) Shareholdings of key management personnel and directors

Balance at the Balance at beginning of the Granted as On exercise Net change the end of the financial year remuneration of options/PR other financial year Ord Ord Ord Ord Ord

Year ended 30 June 2008DirectorsM R Brown 28,170 - - - 28,170P W Cassidy 13,591 - - 14,913 28,504R P Gregson 35,207 - - 23,892 59,099G J W Martin - - - 10,000 10,000G J Pritchard 13,334 - - 13,000 26,334

ExecutivesD Kent 4,000 - - - 4,000C R Murray 8,832 - 16,870 10,623 36,325

Total 103,134 - 16,870 72,428 192,432

Directors and key management personnel excluded from the above table have nil shareholdings during the year ended 30 June 2008.C S Laurie resigned on 14 December 2007. As at this date, he held 21,394 shares.J W McInnes resigned on 31 August 2007. As at this date, he held 750 shares.

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(c) Shares (continued)

(i) Shareholdings of key management personnel and directors (continued)


Year ended 30 June 2007DirectorsM R Brown 28,170 - - - 28,170P W Cassidy 13,461 - - 130 13,591R P Gregson 34,868 - - 339 35,207C S Laurie 11,284 - - 110 11,394G J Pritchard 26,668 - - (13,334) 13,334

ExecutivesD Kent 4,000 - - - 4,000J W McInnes 750 - - - 750C R Murray 8,747 - - 85 8,832

Total 127,948 - - (12,670) 115,278

Directors and key management personnel excluded from the above table have nil shareholdings during the year ended 30 June 2007.

All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length.

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Indemnification of officersDuring the financial year, a related body corporate paid an insurance premium in respect of a contract insuring the Company’s directors against liabilities arising as a result of work performed in their capacity as directors. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of directors’ and officers’ liability insurance contracts, as such disclosure is prohibited under the terms of the contract. The Company Constitution also contains an indemnity provision in favour of each director, Company Secretary and executive officer against liability incurred in this capacity, to the extent permitted by law. The Company has also entered into indemnity deeds with directors of the Company also containing similar indemnity provisions.

Environmental regulation and performanceThe Consolidated Entity’s operations in Australia, Europe and the United States are subject to environmental laws in these jurisdictions. The Company operates a rigorous environmental compliance program, and reports to the appropriate authorities against relevant compliance standards. During the year, no member of the Consolidated Entity was prosecuted nor was any fine imposed on it for breach of environmental laws in any jurisdiction.

Auditor’s independence declarationRefer to the following page for the auditor’s independence declaration.

Audit servicesIn addition to the audit fees, the Consolidated Entity paid $274,230 to the auditors, Ernst & Young, for audit work performed in relation to the refinance of the Australian Syndicated Facility and provision of professional taxation and advisory services for a project in the United Kingdom. The nature and scope of these services means that auditor independence was not compromised.

Significant matters since year endOn 11 June 2008, subsequent to the explosion at Apache Energy’s Varanus Island gas processing plant which interrupted the Company’s usual gas supply source, the Company announced that it had secured alternative gas supply and pipeline transport arrangements on a short term basis to enable production of liquefied natural gas to continue at the West Kimberley Power Project’s Karratha LNG plant. Subsequent to year end, the Company has assessed the event to be an insurable event and expects that its insurance coverage will compensate for additional costs arising from this incident subject to usual insurance terms including a 30 day deductible. The Company has included additional gas purchase costs relating to the current financial year of $0.6 million (after tax) as a specific item in the financial statements. Further costs in relation to this incident will be recognised as incurred in the next financial year.

On 4 July 2008, the Company announced that it would undertake a review of its strategic options. The strategic review will seek to identify and assess expressions of interest from third parties, as well as reviewing other value enhancing business strategies. There is no certainty that the review will result in a disposal of all or any portion of the Company. A committee of independent non-executive directors has been formed to oversee the process. It is anticipated that the strategic review will take approximately three to six months from the date of its announcement. The total internal and external costs of the strategic review will ultimately depend on its outcome which cannot be accurately determined at this stage. External costs incurred to date on the strategic review, including legal, financial and other advisory costs, are estimated at $1.5 million.

On 26 August 2008, the directors declared an unfranked final dividend of 6.0 cents per share on ordinary shares in respect of the 2008 financial year. The total amount of the dividend is $9.0 million. The dividend has not been provided for in the 30 June 2008 financial statements.

Directors’ profiles The directors’ qualifications, experience and special responsibilities are included in page 18 of the annual report.

Signed in accordance with a resolution of the directors:

G J Pritchard Director

Brisbane, 26 August 2008

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AUDITOR’S INDEPENDENcE DEcLARATION TO ThE DIREcTORS Of ENERGY DEVELOPMENTS LIMITED

In relation to our audit of the financial report of Energy Developments Limited for the financial year ended 30 June 2008, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Mike ReidPartner


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for the year ended 30 June 2008INCOME STATEMENT

cONSOLIDATED cOMPANY

2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

Sales revenue 2 195,771 176,981 - -Cost of sales excluding depreciation and amortisation of operating assets (91,577) (71,142) - -

Gross profit 104,194 105,839 - -Other income 2 4,446 3,510 98,000 18Corporate and general expenses including provisions 2 (5,586) (6,097) (4,193) (714)Development expense 2 (9,367) (9,571) - -Gain on sale of King County landfill gas rights 2 5,061 - - -Executive termination payments 2 (1,593) - - -Additional West Kimberley Power Project (WKPP) gas purchase costs from Apache Varanus Island incident 2 (892) - - -Loss on sale of Taiwan associate 2 - (1,697) - (1,697)Provision for impairment of WKPP 2 - (60,000) - -Share of net results of associates and joint venture partnership accounted for using the equity method 2,28 3,992 2,497 - -

Profit/(loss) from continuing operations before depreciation, amortisation, borrowing costs and income tax 100,255 34,481 93,807 (2,393)Depreciation and amortisation 2 (44,110) (38,609) - -Interest income 2 6,811 6,966 53,433 31,170Borrowing costs 2 (32,982) (25,147) (30,466) (14,003)

Profit/(loss) from continuing operations before income tax 29,974 (22,309) 116,774 14,774Income tax (expense)/credit 3 (8,633) 5,709 (5,394) (4,677)

Profit/(loss) attributable to members of the Company 21,341 (16,600) 111,380 10,097

Basic earnings per share (cents) 5 14.3 (11.3) Diluted earnings per share (cents) 5 14.3 (11.3)

The accompanying notes form an integral part of this income statement.

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BALANCE SHEETas at 30 June 2008


2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

Current assetsCash assets 21(a) 90,196 98,572 441 409Receivables 6 32,329 27,978 - -Inventories 7 9,121 5,825 - -Current tax receivable - - 183 -Green credits held for sale 22,436 16,354 - -Financial instruments – derivatives 8 1,935 2,542 - -Other 10 8,414 6,462 - -

Total current assets 164,431 157,733 624 409

Non-current assetsReceivables 6 787 475 372,120 432,469Deferred tax assets 16 - - 22,100 17,684Investments accounted for using the equity method 28 42,536 33,125 - -Investments at cost 320 320 320 320Financial instruments – derivatives 8 11,594 8,257 - -Property, plant and equipment 9 685,307 617,390 - -Investment in controlled entities - - 334,500 230,000Other assets 10 216 126 - -

Total non-current assets 740,760 659,693 729,040 680,473

Total assets 905,191 817,426 729,664 680,882

Current liabilitiesPayables 11 44,702 45,893 - -Borrowings 12 34,245 67,644 - -Financial instruments – derivatives 13 235 - - -Provisions 14 3,980 4,243 - 95Current tax liability 1,124 1,576 - 657Unearned grant income 776 776 - -

Total current liabilities 85,062 120,132 - 752

Non-current liabilitiesPayables 5,926 4,579 - -Borrowings 15 478,467 381,760 - -Deferred tax liabilities 16 16,931 7,742 - -Provisions 17 1,326 1,598 - 116Unearned grant income 13,329 14,106 - -Financial instruments – derivatives 18 629 - - -Payables to controlled entities - - 138,434 196,319

Total non-current liabilities 516,608 409,785 138,434 196,435

Total liabilities 601,670 529,917 138,434 197,187

Net assets 303,521 287,509 591,230 483,695

EquityContributed equity 19 432,758 423,439 432,758 423,439Reserves (436) 878 8,347 8,177Retained profits/(accumulated losses) (128,801) (136,808) 150,125 52,079

Total equity attributable to members of the Company 303,521 287,509 591,230 483,695

Minority interests in controlled entitiesContributed equity 20 13,449 13,449 - -Accumulated losses 20 (13,449) (13,449) - -

Total minority interests - - - -

Total equity 303,521 287,509 591,230 483,695

The accompanying notes form an integral part of this balance sheet.

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for the year ended 30 June 2008STATEMENT OF CHANGES IN EQUITY

cONSOLIDATED

Deferred (loss)/ Foreign gain on Retained currency Employee financial profits/ Employee trans- Capital share instru- (accu- Issued share lation profits benefits ments Total mulated Total capital loans reserve reserve reserve reserve reserves losses) equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 July 2006 419,489 (429) (3,557) 6,720 1,050 (2,333) 1,880 (113,618) 307,322

Currency translation differences - - (11,491) - - - (11,491) - (11,491)Net gains on cash flow hedges - - - - - 10,082 10,082 - 10,082

Total income/(expense) for the period recognised directly in equity - - (11,491) - - 10,082 (1,409) - (1,409)Loss for the period - - - - - - - (16,600) (16,600)

Total income/(expense) for the period - - (11,491) - - 10,082 (1,409) (16,600) (18,009)

Issue of share capital 4,199 - - - - - - - 4,199Tax effect on share issue costs 68 - - - - - - - 68Repayment of employee share loan - 112 - - - - - - 112Equity dividends - - - - - - - (6,590) (6,590)Cost of share based payments - - - - 407 - 407 - 407

At 30 June 2007 423,756 (317) (15,048) 6,720 1,457 7,749 878 (136,808) 287,509

At 1 July 2007 423,756 (317) (15,048) 6,720 1,457 7,749 878 (136,808) 287,509

Currency translation differences - - (2,636) - - - (2,636) - (2,636)Net gains on cash flow hedges - - - - - 1,152 1,152 - 1,152

Total income/(expense) for the period recognised directly in equity - - (2,636) - - 1,152 (1,484) - (1,484)Profit for the period - - - - - - - 21,341 21,341

Total income/(expense) for the period - - (2,636) - - 1,152 (1,484) 21,341 19,857

Issue of share capital 6,754 - - - - - - - 6,754Tax effect on share issue costs (34) - - - - - - - (34)Employee performance rights (279) - - - - - - - (279)Employee share options 2,870 - - - - - - - 2,870Repayment of employee share loan - 8 - - - - - - 8Equity dividends - - - - - - - (13,334) (13,334)Cost of share based payments - - - - 170 - 170 - 170

At 30 June 2008 433,067 (309) (17,684) 6,720 1,627 8,901 (436) (128,801) 303,521

The accompanying notes form an integral part of this statement of changes in equity.

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for the year ended 30 June 2008STATEMENT OF CHANGES IN EQUITY

cOMPANY

Retained Employee profits/ Employee Capital share (accu- Issued share profits benefits Total mulated Total capital loans reserve reserve reserves losses) equity $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 July 2006 419,489 (429) 6,720 1,050 7,770 48,572 475,402Profit for the period - - - - - 10,097 10,097Issue of share capital 4,199 - - - - - 4,199Tax effect on share issue costs 68 - - - - - 68Repayment of employee share loan - 112 - - - - 112Equity dividends - - - - - (6,590) (6,590)Cost of share based payments - - - 407 407 - 407

At 30 June 2007 423,756 (317) 6,720 1,457 8,177 52,079 483,695

At 1 July 2007 423,756 (317) 6,720 1,457 8,177 52,079 483,695Profit for the period - - - - - 111,380 111,380Issue of share capital 6,754 - - - - - 6,754Tax effect on share issue costs (34) - - - - - (34)Employee performance rights (279) - - - - - (279)Employee share options 2,870 - - - - - 2,870Repayment of employee share loan - 8 - - - - 8Equity dividends - - - - - (13,334) (13,334)Cost of share based payments - - - 170 170 - 170

At 30 June 2008 433,067 (309) 6,720 1,627 8,347 150,125 591,230

The accompanying notes form an integral part of this statement of changes in equity.

Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations.

Capital profit reserve

The capital profit reserve is used to record the difference between issue and buy-back prices of preference shares.

Employee share benefits reserve

The employee share benefits reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration.

Deferred gain/(loss) on financial instruments reserve

The deferred gain/(loss) on financial instruments reserve records the portion of the movements in the fair value of cash flow hedges under AASB 139 Financial Instruments: Recognition and Measurement requirements.

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for the year ended 30 June 2008CASH FLOW STATEMENT


2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

Inflows/(outflows) Inflows/(outflows)

Cash flows from operating activitiesReceipts from customers 192,762 175,753 - 18Grant revenue - 10,006 - -Payments to suppliers and employees (110,334) (90,486) - -Executive termination payments (1,593) - - -Interest received 5,808 5,264 53,430 31,177Interest and other finance costs paid (30,327) (23,619) (30,465) (14,003)Income tax refunded/(paid) (4,239) (25) (717) 550

Net operating cash flows 21(b) 52,077 76,893 22,248 17,742

Cash flows from investing activitiesPayments for property, plant, equipment (127,719) (217,807) - -Proceeds from sale of King County landfill gas rights 6,011 - - -Proceeds from the sale of property, plant and equipment - 66 - -Proceeds from the sale of Taiwan associate - 3,290 - 3,290Joint venture partnership distribution 455 311 - -

Net investing cash flows (121,253) (214,140) - 3,290

Cash flows from financing activitiesProceeds from issue of shares 14 110 14 110Proceeds from borrowings 196,194 286,568 - -Repayment of borrowings (120,938) (144,924) - -Dividends paid (6,837) (2,649) (6,837) (2,649)Loans to equity accounted investees (3,588) (1,073) - -Loans to subsidiaries - - (17,980) (18,249)Other (2,848) (384) 2,587 2

Net financing cash flows 61,997 137,648 (22,216) (20,786)

Net increase/(decrease) in cash held (7,179) 401 32 246Cash at the beginning of the financial year 98,572 99,116 409 163Effects of exchange rate changes on cash (1,197) (945) - -

Cash at the end of the financial year 21(a) 90,196 98,572 441 409

The accompanying notes form an integral part of this cash flow statement.

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for the year ended 30 June 2008NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY Of SIGNIfIcANT AccOUNTING POLIcIES(a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on an historical cost basis, except for derivative financial instruments which have been measured at fair value. The financial report of Energy Developments Limited for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Board of directors on 26 August 2008.

(b) Statement of complianceThe financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Consolidated Entity has adopted AASB 7 Financial Instrument Disclosures (applicable from 1 July 2007) and all subsequent amendments. Adoption of this standard has only affected the disclosures in these financial statements. It has had no impact upon reported financial results.

A number of revisions exist to current Australian equivalents to International Financial Standards with future application dates for the Consolidated Entity including AASB 8 Operating Segments which will be implemented for the year beginning 1 July 2009. These revisions are not expected to result in any significant impact upon reported results.

(c) Summary of significant accounting policies

(i) Basis of consolidation

The consolidated financial statements include the financial statements of the Company, Energy Developments Limited and its controlled entities, referred to collectively throughout these financial statements as the Consolidated Entity.

Minority interests in the results and equity of controlled entities are shown separately in the consolidated income statement and balance sheet respectively.

All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased.

Financial statements of foreign controlled entities, associates and joint venture partnership presented in accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with Consolidated Entity policy and Australian Accounting Standards.

(ii) Sales revenue

Sales revenue represents revenue earned from the sale of electricity and separate sale of green credits. Electricity revenue is recognised or accrued at the time of supply. Green credit revenue is recognised as earned.

(iii) Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by annual instalments.

(iv) Borrowing costs

Borrowing costs are expensed as incurred except where they relate to the financing of projects under development, in which case they are capitalised up to the date of commissioning or sale.

(v) Income tax

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences, and carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses, can be utilised, except where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(vi) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2008

NOTE 1: SUMMARY Of SIGNIfIcANT AccOUNTING POLIcIES (cONTINUED)

(c) Summary of significant accounting policies (continued)

(vii) Foreign currency translation

Both the functional and presentation currency of Energy Developments Limited and its Australian subsidiaries is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

All exchange differences on foreign currency transactions in the consolidated financial report are taken to the income statement.

Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currencies of the overseas subsidiaries (EDL Holdings (UK) Limited and EDL Holdings (US), Inc and their subsidiaries) are Great British pounds (£) and United States dollars (US$) respectively.

As at the reporting date, the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Energy Developments Limited at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period.

The exchange differences arising on the translation of overseas subsidiaries are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

(viii) Cash

Cash includes cash on hand and in banks and deposits at call, which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts.

(ix) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is assigned on a first-in-first-out basis.

(x) Trade and other receivables

Trade receivables, which generally have 21–30 day terms, are recognised and carried at original invoice amount.

(xi) Property, plant and equipment

Property, plant and equipment are measured at cost and depreciated or amortised over their useful economic lives as follows:

Life Method

Owned plant and equipment:

– power plants and associated facilities 20–40 years straight line

– other 2–9 years straight line

Leased plant and equipment 3–5 years straight line

Depreciation or amortisation is charged from the commencement of the following month after the property, plant and equipment is placed in service.

Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate.

Major items of plant and equipment, comprising a number of components that have different useful lives, are accounted for as separate assets. The components may be replaced during the useful life of the complex asset and are then depreciated over their estimated useful lives.

Impairment

The carrying values of property, plant and equipment are reviewed for impairment at each reporting date when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount and included as an other expense in the income statement.

The recoverable amount of property, plant and equipment is the greater of fair value less costs to sell, and value in use. 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.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

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NOTES TO THE FINANCIAL STATEMENTS





(xii) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Consolidated Entity substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the income statement.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

(xiii) Development expenditure

Development expenditure is capitalised when it is incurred for a specific project and when it is probable that future economic benefits attributable to the project will flow to the Consolidated Entity. The costs incurred for specific projects are amortised from the commencement of commercial production on a straight line basis over the period of expected benefit.

(xiv) Investments in associates and joint venture partnership

Interests in associates and joint venture partnership are included in non-current investments and brought to account using the equity method. Under this method, investments are initially recorded at cost of acquisition and the carrying value is subsequently adjusted for increases or decreases in the investor’s share of post-acquisition results and reserves of the associates and joint venture partnership. The investments in associates and joint venture partnership are decreased by the amount of dividends received or receivable. Investments in associates and joint venture partnership are carried at the lower of the equity accounted amount and recoverable amount of the Consolidated Entity’s share of the investee company.

(xv) Impairment of financial assets

If there is objective evidence that an impairment loss on receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate (ie the effective interest rate computed at initial recognition). The carrying amount of the asset would be reduced either directly or through use of an allowance account. The amount of the loss would be recognised in profit or loss.

(xvi) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any establishment costs for facilities, and any discount or premium on settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process.

(xvii) Provisions

Provisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(xviii) Employee benefits

Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date, are recognised in other payables 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.

Long service leave

The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with other employee benefits above. The liability for long service leave expected to be settled more than 12 months from the reporting date 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 the employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the future cash outflows.

Employee benefit on-costs

Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.F

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(xix) Share based payment transactions

The Consolidated Entity provides benefits to employees (including key management personnel) of the Consolidated Entity in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

Employee share plan

An employee share plan was established in 1993. Under this plan, interest free loans were provided to employees of the Consolidated Entity to assist in the purchase of ordinary shares in the Company. The plan was suspended during the 2000 financial year. No issue has been made under this plan since 1999.

Employee tax exempt share acquisition plan

This plan was established in June 2005 pursuant to which eligible employees can apply for up to $1,000 of fully paid shares per annum at nil cost. During the current year, 98,431 (2007: 59,769) shares were issued to employees pursuant to the plan at a price of $2.60 (2007: $4.35) paid for by the Company. Shares are subject to a holding lock until the earlier of three years from the date of acquisition or until the employee ceases to be an employee.

Employee share option plan

In 1999, the Company established an employee share option plan. Under the plan, the Company may, at the discretion of the Board, grant options or performance rights (PR) over the ordinary shares of the Company to executives and certain members of staff of the Consolidated Entity. The options, issued for nil consideration, are granted in accordance with plan rules approved by shareholders in general meeting.

No options as described in the previous paragraph were issued during the financial year. During the year, 1,204,000 (2007: 708,000) PR were issued for a term of 10 years and are exercisable subject to the satisfaction of certain performance hurdles and other rules of the plan. The PR issued to overseas employees in 2006 and 2007 entitled the holder to receive the cash equivalent of ordinary shares in the Company (cash-settled transactions).

Equity and cash-settled transactions

The cost of equity and cash-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of PR and options is determined using the Binomial option pricing model and Black Scholes model respectively. These models take into account factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the options and PR. In determining the fair value of PR, the Binomial model also takes into account market based performance conditions for vesting of these rights.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Energy Developments Limited (market based performance conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Consolidated Entity’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market based performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for equity-settled transactions that do not ultimately vest, except for such transactions where vesting is only conditional upon a market based performance condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options or PR is reflected in the computation of earnings per share.

The fair value of cash-settled transactions is expensed over the period until vesting with recognition of a corresponding liability. The liability is remeasured at each balance sheet date up to and including settlement date with changes in fair value recognised in the income statement.

(xx) Financial instruments – derivatives

The Consolidated Entity uses financial instruments such as foreign currency contracts and interest rate swaps to hedge its risk associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are stated at fair value.

The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

For the purposes of accounting, these are classified as cash flow hedges where they hedge exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or a forecast transaction. F

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(xx) Financial instruments – derivatives (continued)

In relation to cash flow hedges (forward foreign currency contracts and interest rate swaps) to hedge firm commitments which meet the conditions for special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in the income statement.

At the inception of a hedge relationship, the Consolidated Entity formally designates and documents the hedge relationship to which the Consolidated Entity wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been effective throughout the financial reporting periods for which they were designated.

When the hedged firm commitment results in the recognition of a non-financial asset or a non-financial liability, then at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.

For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the income statement in the same year in which the hedged firm commitment affects the net profit or loss (eg when a forecast purchase actually occurs).

For financial instruments that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

(xxi) Derecognition of financial instruments

The derecognition of a financial instrument takes place when the Consolidated Entity no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

(xxii) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(xxiii) Earnings per share

Basic earnings per share is calculated as net profit/(loss) attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit/(loss) attributable to members of the Company, adjusted for:

costs of servicing equity (other than dividends);•

the after-tax effect of dividends and interest associated with dilutive •potential ordinary shares that have been recognised as expenses; and

other non-discretionary changes in revenues or expenses during •the period that would result from the dilution of potential ordinary shares,

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(xxiv) Significant accounting judgements, estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share based payment transactions

The Consolidated Entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the assumptions detailed in Note 24.

The Consolidated Entity measures the cost of cash-settled share based payments at fair value at the grant date using the Binomial option pricing model taking into account the terms and conditions upon which the instruments were granted, as discussed in Note 24.

(xxv) Rounding of amounts

The Company is 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.

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2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

NOTE 2: PROfIT AND LOSS ITEMS

Profit/(loss) from continuing operations is after crediting the following revenues: Sales revenueElectricity sales 160,785 143,962 - -Green credit revenue 34,986 33,019 - -

Total sales revenue 195,771 176,981 - -

Other incomeDividend Income - - 98,000 -Other 4,446 3,510 - 18

Total other income 4,446 3,510 98,000 18

Share of net results of associates and joint venture partnership accounted for using the equity method Share of net results of associates 28 3,412 1,674 - -Share of net results of joint venture partnership 28 580 823 - -

Total 3,992 2,497 - -

Total income 204,209 182,988 98,000 18

Profit/(loss) from continuing operations is after charging the following expenses: Corporate and general expenses including provisionsCorporate and general expenses 5,684 6,022 4,193 714Foreign exchange losses/(gains) (98) 75 - -

5,586 6,097 4,193 714

Borrowing costsInterest and finance charges paid or payable to: – unrelated corporations 30,826 23,193 - -– controlled entities - - 30,466 14,003Amortisation of borrowing costs 2,156 1,526 - -Finance charges related to leases - 428 - -

32,982 25,147 30,466 14,003

Interest incomeInterest received or receivable from: – associates 1,138 1,060 53,433 31,170– other unrelated corporations 5,673 5,906 - -

6,811 6,966 53,433 31,170

Specific itemsGain on sale of King County landfill gas rights 5,061 - - -Executive termination payments (1,593) - - -Additional WKPP gas purchase costs from Apache Varanus Island incident (892) - - -Provision for impairment of WKPP - (60,000) - -Loss on sale of Taiwan associate - (1,697) - (1,697)

2,576 (61,697) - (1,697)

Other expense itemsEmployee benefits: – wages and salaries 30,425 24,246 - -– workers’ compensation costs 380 339 - -– long service leave provision 17 191 - -– other employee benefits 891 672 - -– share based payment expense 557 783 144 709

32,270 26,231 144 709

Net loss on sale of non-current assets 46 28 - -Operating lease rentals 3,774 3,224 - -

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2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

NOTE 2: PROfIT AND LOSS ITEMS (cONTINUED)

Depreciation and amortisationDepreciation and amortisation of property, plant and equipment 44,110 38,609 - -

44,110 38,609 - -

Allocation of depreciation and amortisation expense by functionCost of sales including depreciation and amortisation 135,687 108,941 - -Corporate and general expenses including provisions, depreciation and amortisation 5,586 6,907 4,193 714Development expense including depreciation and amortisation 9,367 9,571 - -

150,640 125,419 4,193 714

Reconciles to the following items disclosed in the income statement: Cost of sales (including amortisation of leased assets) 91,577 71,142 - -Corporate and general expenses including provisions 5,586 6,097 4,193 714Development expense 9,367 9,571 - -Depreciation and amortisation expense 44,110 38,609 - -

150,640 125,419 4,193 714

NOTE 3: INcOME TAx(a) Income tax expense/(credit)Current tax 4,321 1,947 9,354 (4,234)Deferred tax 4,611 (7,378) (3,769) 9,300Under/(over) provided in prior years – current tax (116) 346 490 88Under/(over) provided in prior years – deferred tax (183) (624) (681) (477)

8,633 (5,709) 5,394 4,677

Income tax expense is attributable to: Profit/(loss) from continuing operations 8,633 (5,709) 5,394 4,677

Aggregate income tax expense/(credit) 8,633 (5,709) 5,394 4,677

Deferred income tax expense/(revenue) included in income tax expense/(credit) comprises: Decrease/(increase) in deferred tax assets 16 12,707 (12,145) (4,450) 8,823Increase/(decrease) in deferred tax liabilities 16 (8,279) 4,143 - -

4,428 (8,002) (4,450) 8,823

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 3: INcOME TAx (cONTINUED)

(b) Numerical reconciliation of income tax expense/(credit) to prima facie tax payable

Profit/(loss) from continuing operations before income tax 29,974 (22,309) 116,774 14,773

Tax at the Australian tax rate of 30% (2007: 30%) 8,992 (6,693) 35,032 4,432

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: – non-assessable income - - (29,400) -– non-deductible expenses 14 92 - -– other deductible expenses (34) (72) (34) (33)– depreciation and amortisation 25 (324) - -– share of net results of associates (574) (261) - -– loss on sale of investment - 513 - 513– share based payments (12) 154 (13) 154– unrecognised tax losses and temporary differences 460 1,714 - -– other 61 101 - -

8,932 (4,776) 5,585 5,066Change in overseas tax rates - (655) - -Under/(over) provision in prior years (299) (278) (191) (389)

Income tax expense/(credit) attributable to profit from continuing operations 8,633 (5,709) 5,394 4,677

(c) Amounts recognised directly in equityAggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity:

Deferred tax – debited/(credited) directly to equity 5,525 4,520 34 (68)

5,525 4,520 34 (68)

(d) Deferred tax asset not taken into accountThe potential deferred tax asset in a controlled entity, which is a company, arising from tax losses and temporary differences has not been recognised as a net asset because recovery of the tax losses and temporary differences is not probable at 30 June 2008:

Tax losses carried forward 27,070 28,974 - -Temporary differences (3,049) (3,727) - -

24,021 25,247 - -

(e) Tax consolidationEnergy Developments Limited and its 100% wholly owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2003. Energy Developments Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing arrangement that provides for the allocation of income tax liabilities between the entities based on individual tax obligations should the head entity default on its tax payment obligations. At balance date, the possibility of default is remote.

Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period, while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income Taxes.

The head entity, Energy Developments Limited, and the members of the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity is a modified separate taxpayer within the tax consolidated group.

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 4: DIVIDENDS

Final dividends paid Ordinary shares – franked to 20%, 5.0 cents (2007: 2.0 cents, unfranked) per share 7,357 2,925 7,357 2,925

Interim dividends paid Ordinary shares – unfranked, 4.0 cents (2007: 2.5 cents) per share 5,977 3,665 5,977 3,665

13,334 6,590 13,334 6,590

Franking account The balance of the franking account is $3,000 at 30 June 2008 (2007: nil). The impact on the franking account of the dividend recommended by the directors since year end but not recognised as a liability at year end will be reduction to the franking account of nil (2007: $631,000).

Subsequent event

Since the end of the financial year, the directors have declared a final unfranked dividend of 6.0 cents per share, payable to the holders of fully paid ordinary shares on 3 October 2008. The financial effect of this dividend has not been brought to account for the year ended 30 June 2008.

cONSOLIDATED

2008 2007

NOTE 5: EARNINGS PER ShARE

Basic earnings per share Cents 14.3 (11.3)Diluted earnings per share Cents 14.3 (11.3)Weighted average number of shares on issue used in the calculation of basic earnings per share Number 148,784,004 146,618,892Weighted average number of shares on issue used in the calculation of diluted earnings per share Number 148,868,643 147,189,852Earnings used in calculating basic and diluted earnings per share $’000 21,341 (16,600)

793,000 options (2007: 793,000) and 1,665,000 PR (2007: 1,302,400) to acquire ordinary shares were not considered dilutive at 30 June 2008.


2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 6: REcEIVABLES (cURRENT AND NON-cURRENT)

CurrentTrade debtors 29,727 25,760 - -Non-trade amounts owing by related parties:– associates 265 848 - -Other 2,337 1,370 - -

32,329 27,978 - -

Terms and conditions(i) Trade debtors are non-interest bearing and generally on 30 day terms.(ii) Amounts owing by related parties are on commercial terms (refer to Note 27).(iii) Details regarding the credit risk of current receivables are disclosed in this Note 6.

Non-currentNon-trade amounts owing by related parties: – wholly owned controlled entities - - 372,120 432,469Other 787 475 - -

787 475 372,120 432,469

Terms and conditions(i) Loans to wholly owned controlled entities are interest bearing at commercial rates. (ii) Other loans are non-interest bearing and have repayment terms of less than 24 months.

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2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

NOTE 6: REcEIVABLES (cURRENT AND NON-cURRENT) (cONTINUED)

At balance date, the ageing analysis of trade and other receivables is as follows: Total outstanding 33,116 28,453 372,120 432,469Unimpaired:– within terms 29,666 25,270 372,120 432,469– past due 1–30 days 2,073 113 - -– past due 31–60 days 476 441 - -– past due 60+ days 901 2,629 - -

Receivables past due but not considered impaired are: Consolidated Entity $3,450,000 (2007: $3,183,000); Company nil (2007: nil). Payment terms on these debts have not been renegotiated; however, discussions with the counterparties and/or receipts subsequent to reporting sheet date have satisfied management that payment will be received in full.

NOTE 7: INVENTORIES (cURRENT)Fuel and store items at cost 9,121 5,825 - -

9,121 5,825 - -

NOTE 8: fINANcIAL INSTRUMENTS – DERIVATIVES

Interest rate swaps (current) 30 1,935 2,542 - -Interest rate swaps (non-current) 30 11,594 8,257 - -

13,529 10,799 - -

NOTE 9: PROPERTY, PLANT AND EqUIPMENTFreehold land at cost 448 448 - -

Plant and equipmentCostOpening balance 681,272 613,971 - -Additions 268,781 88,670 - -Disposals (4,787) (869) - -Transfers from/(to) plant and equipment under lease 124 (204) - -Currency translation differences (24,727) (20,211) - -Other 46 (85) - -

Closing balance 920,709 681,272 - -

Accumulated depreciation and amortisationOpening balance 252,478 218,772 - -Depreciation and amortisation 44,369 38,972 - -Disposals (4,188) (764) - -Transfers from/(to) plant and equipment under lease 84 (141) - -Currency translation differences (6,749) (4,276) - -Other - (85) - -


Accumulated impairment lossesOpening balance 12,608 14,657 - -Currency translation differences (1,479) (2,049) - -


Net book value 623,586 416,186 - -

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 9: PROPERTY, PLANT AND EqUIPMENT (cONTINUED)

Plant and equipment under constructionCostOpening balance 200,713 132,380 - -Additions 141,985 234,801 - -Transfers to plant and equipment (328,051) (88,269) - -Transfers to development expenditure (2,462) - - -Transfers to other assets/liabilities (5,336) (12,006) - -Movement in provision for diminution in plant and equipment under construction 60,000 (60,000) - -Sales to associates and external parties (4,188) (4,747) - -Currency translation differences (1,388) (1,446) - -


Plant and equipment under leaseCostOpening balance 1,489 1,371 - -Disposals (1,106) (65) - -Transfers from/(to) plant and equipment (124) 204 - -Currency translation differences (38) (21) - -

Closing balance 221 1,489 - -

Accumulated amortisationOpening balance 1,446 1,201 - -Amortisation - 187 - -Disposals (1,106) (62) - -Transfers from/(to) plant and equipment (84) 141 - -Currency translation differences (35) (21) - -

Closing balance 221 1,446 - -

Net book value - 43 - -

Total property, plant and equipment at cost 982,651 883,922 - -

Total property, plant and equipment net 685,307 617,390 - -

Plant and equipment includes $26,595,000 (2007: $15,265,000) of net capitalised interest. These costs are capitalised to the asset up to the date the plant and equipment are commissioned as operational. Interest costs capitalised during the year to plant and equipment were $12,385,000 (2007: $9,879,000).

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2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

NOTE 10: OThER ASSETS (cURRENT AND NON-cURRENT)

CurrentPrepaid expenses 8,311 5,516 - -Other 103 946 - -

8,414 6,462 - -

Non-currentPrepaid expenses 216 126 - -

216 126 - -

NOTE 11: PAYABLES (cURRENT)Trade creditors and accruals 44,702 45,600 - -Interest payable - 293 - -

44,702 45,893 - -

Terms and conditions(i) Trade creditors are non-interest bearing and normally settled on 30 day terms.(ii) Interest is generally payable with quarterly repayments.

NOTE 12: BORROwINGS (cURRENT)Project borrowings (i) 33,590 66,895 - -Other bank loans (ii) 655 749 - -

34,245 67,644 - -

(i) Projects are generally debt financed on a limited recourse basis post construction, with lender recourse limited primarily to the relevant operating controlled entities and their assets. Interest payments and principal repayments under project borrowings will be funded by the respective project operating revenues under existing contractual arrangements for electricity sales.

(ii) Other bank loans are secured by a company guarantee at commercial interest rates.

NOTE 13: fINANcIAL INSTRUMENTS – DERIVATIVES (cURRENT)Interest rate swaps 30 235 - - -

235 - - -

NOTE 14: PROVISIONS (cURRENT)Employee benefits 3,973 4,236 - 95Other 7 7 - -

3,980 4,243 - 95

NOTE 15: BORROwINGS (NON-cURRENT)Project borrowings 12(i) 475,121 377,973 - -Other bank loans 12(ii) 2,346 2,787 - -Other loans – unsecured 1,000 1,000 - -

478,467 381,760 - -

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 16: DEfERRED TAx LIABILITIES (NON-cURRENT)

Deferred tax liabilities

The balance comprises temporary differences attributable to:

Amounts recognised in profit or loss

Inventories 1,793 808 - -Development expenditure 292 3,850 - -Depreciation 30,815 40,169 - -Accrued revenue 6,731 4,958 - -Borrowing costs 306 - - -

39,937 49,785 - -Amounts recognised directly in equity

Interest rate swaps 4,025 2,970 - -Foreign exchange gains 3,280 - - -

7,305 2,970 -

Deferred tax liabilities – closing balance at 30 June 47,242 52,755 - -

MovementsDeferred tax liabilities – opening balance at 1 July 52,755 45,947 - -(Credited)/charged to the income statement (8,279) 4,143 - -Credited to equity 3,911 2,970 - -Charged to foreign currency translation reserve (1,145) (305) - -

Deferred tax liabilities – closing balance at 30 June 47,242 52,755 - -

Deferred tax assetsThe balance comprises temporary differences attributable to :

Amounts recognised in profit or loss

Accrued expenses 240 275 - -Provision for employee benefits 1,429 1,540 - -Provision for impairment of WKPP - 18,000 - -Deferred revenue 4,232 4,465 - -Interest in associate and joint venture partnership 453 819 - -Tax losses* 23,664 19,846 22,066 17,616

30,018 44,945 22,066 17,616Amounts recognised directly in equity

Amortisation of share issue costs 34 68 34 68Interest rate swaps 259 - - -

Deferred tax assets – closing balance at 30 June 30,311 45,013 22,100 17,684

MovementsDeferred tax assets – opening balance at 1 July 45,013 34,596 17,684 26,439(Charged)/credited to the income statement (12,707) 12,145 4,450 (8,823)(Charged)/credited to equity (1,614) (1,549) (34) 68Charged to foreign currency translation reserve (381) (179) - -

Deferred tax assets – closing balance at 30 June 30,311 45,013 22,100 17,684

Net deferred tax asset/(liability) (16,931) (7,742) 22,100 17,684

* The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

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2008 2007 2008 2007 Note $’000 $’000 $’000 $’000

NOTE 17: PROVISIONS (NON-cURRENT)

Employee benefits 1,057 1,303 - 116Other 269 295 - -

1,326 1,598 - 116

Movements in provisionsMovements in each class of provision during the financial year, other than employee benefits, are set out below:

Other (non-current)

Balance at the beginning of the financial year 295 311 - -Reversal of unused provision (26) (16) - -

Balance at the end of the financial year 269 295 - -

NOTE 18: fINANcIAL INSTRUMENTS – DERIVATIVES (NON-cURRENT)Interest rate swaps 30 629 - - -

629 - - -

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 19: cONTRIBUTED EqUITYIssued share capital

Attributable to members of the Company: Ordinary shares (i) 432,128 423,074 432,128 423,074Employee share loan (309) (317) (309) (317)Employee shares (i) 939 682 939 682

Total contributed equity attributable to members of the Company 432,758 423,439 432,758 423,439

Movements in employee share loan for the yearOpening balance (317) (429) (317) (429)Repayment 8 112 8 112

Closing balance (309) (317) (309) (317)

2008 2007 2008 2007 Number Number $’000 $’000

Movements in contributed equity for the yearOrdinary sharesOpening balance 147,136,053 146,236,813 423,756 419,489Performance rights - - (279) -Issued under employee share option plan 1,000,000 - 2,870 -Issued under dividend re-investment plan 2,306,424 839,471 6,497 3,939Issued under employee tax exempt share acquisition plan 98,431 59,769 257 260Tax effect on share issue costs - - (34) 68

Closing balance 150,540,908 147,136,053 433,067 423,756

A total of 3,404,855 (2007: 899,240) ordinary shares were issued by the Company during the financial year as follows:

2008 Purpose of issue Date issued Number issued Issue price

Dividend re-investment plan 4 October 2007 1,287,545 $3.21 Exercise of options 9 January 2008 208,659 $2.87 Exercise of options 15 January 2008 50,000 $2.87 Exercise of options 16 January 2008 100,000 $2.87 Exercise of options 17 January 2008 300,000 $2.87 Exercise of options 22 January 2008 341,341 $2.87 Dividend re-investment plan 3 April 2008 1,018,879 $2.32 Employee tax exempt share acquisition plan 23 June 2008 98,431 $2.60

3,404,855

2007 Purpose of issue Date issued Number issued Issue price

Dividend re-investment plan 4 October 2006 350,555 $4.25 Dividend re-investment plan 30 March 2007 488,916 $5.01 Employee tax exempt share acquisition plan 27 June 2007 59,769 $4.35

899,240

Employee options over ordinary shares in the CompanyInformation relating to the Company employee share option plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in Note 24.

(i) Terms and conditions Ordinary shares are fully paid and have the right to receive dividends as declared and, in the event of winding up of the Company, to participate

in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Employee shares have the same terms and conditions as ordinary shares.

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NOTE 19: cONTRIBUTED EqUITY (cONTINUED)

Capital managementWhen managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

The capital structure of the Consolidated Entity consists of debt, which includes the borrowings disclosed in Notes 12 and 15, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed in this Note 19 and the statement of changes in equity. The Consolidated Entity operates globally, primarily through subsidiary companies established in the markets in which the Consolidated Entity trades. None of the consolidated entities is subject to externally imposed capital requirements.

Operating cash flows are used to maintain and expand the Consolidated Entity’s electricity generating assets, as well as to make the routine outflows of tax, dividends and repayment of maturing debt. The Consolidated Entity coordinates borrowing centrally, using borrowing facilities and/or Australian market equity issues to meet anticipated funding requirements, as required.

Management periodically reviews the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may subject to Board approval, as appropriate, change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt or for other purposes. During 2008, the Company paid dividends of $13,334,000 (2007: $6,590,000).


Gearing ratio

The Consolidated Entity’s Corporate Finance Group reviews the capital structure on a regular basis. As a part of this review, the Company considers the cost of capital and the risks associated with each class of capital. The Consolidated Entity has a target gearing ratio of 40%–60% that is determined as the proportion of net debt to net debt plus equity. The Consolidated Entity will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt. The gearing ratios based on continuing operations at 30 June 2008 and 2007 were as follows:

cONSOLIDATED PARENT

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Total borrowings* 512,712 449,404 - -Less cash assets (90,196) (98,572) (441) (409)

Net debt 422,516 350,832 (441) (409)Total equity 303,521 287,509 591,230 483,695

Total capital 726,037 638,341 590,789 483,286

Gearing ratio 58% 55% 0% 0%

* Includes current and non-current borrowings as detailed in Notes 12 and 15.

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2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 20: MINORITY INTERESTSInterest in: Partnership contributions 13,449 13,449 - -Accumulated losses (13,449) (13,449) - -

- - - -

NOTE 21: NOTES TO ThE cASh fLOw STATEMENT

(a) Reconciliation of cashFor the purposes of the cash flow statement, cash includes cash on hand and in banks and deposits at call, which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts.

Cash at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

Current deposits with banks 90,196 98,572 441 409

Call deposits with banks are paying interest at current bank deposit rates.

Under certain project borrowing facilities, there are restrictions imposed on the timing of cash movements. These restrictions relate to a requirement to maintain funds to meet minimum debt servicing requirements and security for project borrowings. This amount is $54.6 million at 30 June 2008 (2007: $56.3 million).

(b) Reconciliation of net profit/(loss) to net operating cash flows Net profit/(loss) 21,341 (16,600) 111,380 10,097

Adjustments

Provision for impairment of WKPP - 60,000 - -Depreciation and amortisation 44,110 38,609 - -Share of net results of associates and joint venture partnership (3,992) (2,497) - -Loss on sale of Taiwan associate - 1,697 - 1,697Gain on sale of King County landfill gas rights (5,061) - - -Additional WKPP gas purchase costs from Apache Varanus Island incident 892 - - -Share based payments expense 557 783 144 709Other 3,450 (1,145) - -

Changes in assets and liabilities

Receivables (increase)/decrease (2,204) 2,741 (98,287) -Green credits on hand increase (6,083) (4,624) - -Other assets increase (2,600) (3,031) - -Inventories increase (2,857) (732) - -Other payables increase 1,874 1,045 4,334 -Interest payable (decrease)/increase (296) 173 - -Deferred income (decrease)/increase (776) 5,292 - -Deferred income tax liability increase/(decrease) 4,393 (5,734) 4,677 5,239Provisions (decrease)/increase (671) 916 - -

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NOTE 21: NOTES TO ThE cASh fLOw STATEMENT (cONTINUED)

(c) Finance facilitiesAt 30 June 2008, the Consolidated Entity had access to total financing facilities of $683,492,000 (2007: $611,568,000), of which $138,139,000 was unused at balance date (2007: $133,123,000). Details of these facilities in Australian dollars include:

AS AT 30 JUNE 2008 AS AT 30 JUNE 2007

Facility Facility Facility Facility Facility Facility Denominated available utilised unutilised available utilised unutilised Expiry currency A$‘000 A$‘000 A$‘000 A$‘000 A$‘000 A$‘000 date

Bank loan A$ 299,130 221,270 77,860 221,593 215,393 6,200 2008Other loan A$ 1,000 1,000 - 1,000 1,000 - -Bank loan A$ 163,723 146,083 17,640 202,000 133,812 68,188 2017Bank loan A$ 3,000 3,000 - 3,000 3,000 - 2006Bank loan A$ 42,595 7,747 34,848 - - - 2009Bank loan £ 136,386 133,956 2,430 135,857 88,233 47,624 2015Bank loan US$ 16,658 16,658 - 22,582 22,582 - 2013Bank loan US$ - - - 536 536 - 2007

662,492 529,714 132,778 586,568 464,556 122,012

Letters of credit/overdraft A$ 21,000 15,639 5,361 25,000 13,889 11,111 2006

Total facilities 683,492 545,353 138,139 611,568 478,445 133,123

(d) Financial guaranteesThe Consolidated Entity has provided guarantees to external parties which commit the Consolidated Entity to make payments on behalf of these entities upon failure to complete the contract. The fair value of these guarantees is considered to be immaterial, and the likelihood of not completing the contracts is minimal.


2008 2007 2008 2007 $’000 $’000 $’000 $’000

NOTE 22: ExPENDITURE cOMMITMENTS

(a) Operating lease expenditures (non-cancellable) are payable as follows:

Plant and equipmentNot later than one year 2,568 2,038 - -Later than one year but not later than five years 3,940 3,883 - -Later than five years 1,584 1,601 - -

8,092 7,522 - -

Operating leases have an average lease term of three to five years. Assets that are the subject of operating leases include vehicles and office equipment.

(b) Capital expenditure commitments are payable as follows:

Plant and equipmentNot later than one year 18,750 24,624 - -

Capital expenditure commitments represent expenditure to be incurred on major energy projects over the next financial year.

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NOTE 23: SEGMENT INfORMATIONGeographical segments

The Consolidated Entity’s geographical segments are determined based on the location of the assets and operations. Inter-segment sales/purchases are at cost.

Primary segment – geographical

ELIMINATION AUSTRALIA UK/EUROPE UNITED STATES ENTRIES TOTAL

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Segment revenue – Electricity and green

credit sales 134,484 116,347 43,754 41,694 17,533 18,940 - - 195,771 176,981– Inter segment 258 1,186 - - - - (258) (1,186) - -– Other revenue 1,993 1,773 1,954 1,059 499 678 - - 4,446 3,510– Share of net results of

associates and joint venture partnership - - 3,992 2,497 - - - - 3,992 2,497

Total segment revenue 136,735 119,306 49,700 45,250 18,032 19,618 (258) (1,186) 204,209 182,988

Segment result (before interest, tax and specific items) 35,237 42,303 21,321 18,031 (2,989) (2,765) - - 53,569 57,569Specific items (2,485) (61,697) - - 5,061 - - - 2,576 (61,697)

Segment result (before interest and tax) 32,752 (19,394) 21,321 18,031 2,072 (2,765) - - 56,145 (4,128)Net borrowing costs (26,171) (18,181)

Consolidated Entity profit/(loss) from ordinary activities before income tax expense 29,974 (22,309)Income tax (expense)/credit (8,633) 5,709

Net profit/(loss) 21,341 (16,600)

Segment cash 77,203 85,680 9,071 9,819 3,922 3,073 - - 90,196 98,572Carrying amount of investments in associates and joint venture partnership - - 42,536 33,125 - - - - 42,536 33,125Segment other assets 620,625 486,780 90,945 102,866 60,889 71,692 - 24,391 772,459 685,729

Total assets 905,191 817,426

Segment liabilities – financing 366,417 342,608 129,637 83,677 16,658 23,119 - - 512,712 449,404Segment liabilities – operating 52,309 54,475 8,225 8,078 10,369 9,231 - (589) 70,903 71,195Tax liabilities 18,055 9,318

Total liabilities 601,670 529,917

Acquisition of segment assets 130,745 218,667 9,170 14,610 3,049 1,671 - 254 142,964 235,202Depreciation and amortisation 33,911 27,612 6,110 6,094 4,089 4,903 - - 44,110 38,609

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NOTE 24: ShARE BASED PAYMENTS

(a) Employee share and option plans

Employee share plan

An employee share plan was established in 1993. Under this plan, interest free loans were provided to employees of the Consolidated Entity to assist in the purchase of ordinary shares in the Company. The plan was suspended during the 2000 financial year. No issue has been made under this plan since 1999.

Employee tax exempt share acquisition plan

This plan was established in June 2005 pursuant to which eligible employees can apply for up to $1,000 of fully paid shares per annum at nil cost. During the current year, 98,431 (2007: 59,769) shares were issued to employees pursuant to the plan at a price of $2.60 (2007: $4.35) paid for by the Company. Shares are subject to a holding lock until the earlier of three years from the date of acquisition or until the employee ceases to be an employee.

Employee share option plan (Employee Plan)

In 1999, the Company established an employee share option plan. Under the plan, the Company may, at the discretion of the Board, grant options or PR over the ordinary shares of the Company or PR to executives and certain members of staff of the Consolidated Entity. The options, issued for nil consideration, are granted in accordance with plan rules approved by shareholders in general meeting. The options are issued for a term of 7–10 years and are exercisable beginning on the third anniversary of the date of grant.

No options as described in the previous paragraph were issued during the financial year. During the year, 1,204,000 (2007: 708,000) PR were issued for a term of 10 years to executives and other members of staff and are exercisable subject to the satisfaction of certain performance hurdles and other rules of the plan. At the 2005 AGM, the shareholders approved the modifications to the Employee Plan to allow for executive directors to be eligible for participation under this plan. Refer to (c)(ii) for details of PR issued to directors under this plan. Further details of PR issues are discussed in Note 25. PR issued to overseas employees in 2006 and 2007 are cash settled. PR issued to overseas employees in 2008 are equity settled.

(b) Grants/issues made under Employee Plan (excluding grants to directors – see below for details)

(i) Options

Balance at the Forfeited Balance at the Weighted beginning of the during the end of the average financial year financial year financial year Grant date Expiry date Vesting date exercise price Number Number Number

Year ended 30 June 20087 Jul 2000^ 7 Jul 2010 7 Jul 2003 * 441,000 (43,000) 398,000^29 Nov 2001^ 2 Nov 2011 2 Nov 2004 * 28,000 (1,000) 27,00019 Feb 2002^ 19 Feb 2012 19 Feb 2005 $6.13 25,000 - 25,00025 Nov 2002 25 Nov 2012 25 Nov 2005 ** 49,000 - 49,000

543,000 (44,000) 499,000

Weighted average exercise price $7.21 $7.50 $7.19

Year ended 30 June 20077 Jul 2000^ 7 Jul 2010 7 Jul 2003 * 457,000 (16,000) 441,00029 Nov 2001^ 2 Nov 2011 2 Nov 2004 * 33,000 (5,000) 28,00019 Feb 2002^ 19 Feb 2012 19 Feb 2005 $6.13 25,000 - 25,00025 Nov 2002 25 Nov 2012 25 Nov 2005 ** 52,000 (3,000) 49,000

567,000 (24,000) 543,000


* Options were issued at an exercise price of $7.50 plus 15% of any surplus over $7.50 in the market price of ordinary shares when exercised.** Options were issued at an exercise price of $5.00 plus 15% of any surplus over $5.00 in the market price of ordinary shares when exercised.^ The amortisation of these options has not been recognised as an expense in accordance with AASB 2 as the options were granted on or before

7 November 2002 and terms and conditions have not been subsequently modified.

No options were granted or exercised during the current or prior year.

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NOTE 24: ShARE BASED PAYMENTS (cONTINUED)

(b) Grants/issues made under Employee Plan (excluding grants to directors – see below for details) (continued)

(ii) PR

Balance at Balance at Weighted the beginning Granted Lapsed Exercised the end average of the during the during the during the of the exercise financial year financial year financial year financial year financial year Grant date Expiry date Vesting date price Number Number Number Number Number

Year ended 30 June 2008 2 Feb 2005 2 Feb 2015 Subject to $0.01 360,800 - (72,000) (114,468) 174,332 satisfaction conditions of plan5 Dec 2005 2 Dec 2015 Subject to - 256,000 - (73,000) - 183,000 satisfaction conditions of plan28 Nov 2006 28 Nov 2016 Subject to - 516,000 - (160,000) - 356,000 satisfaction conditions of plan17 Jan 2008 17 Jan 2018 Subject to - - 1,054,000 (78,000) - 976,000 satisfaction conditions of plan

Year ended 30 June 2007 2 Feb 2005 2 Feb 2015 Subject to $0.01 510,400 - (149,600) - 360,800 satisfaction conditions of plan5 Dec 2005 2 Dec 2015 Subject to - 322,000 - (66,000) - 256,000 satisfaction conditions of plan28 Nov 2006 28 Nov 2016 Subject to - - 558,000 (42,000) - 516,000 satisfaction conditions of plan

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(c) Grants made to directorsShare options are not now issued to non-executive directors. Options have previously been issued to executive directors on approval by shareholders at an AGM. At the 2005 AGM, the shareholders approved the modifications of the employee share option plan to allow for executive directors to be eligible for participation under this plan. During the year, 150,000 (2007: 150,000) PR were issued for a term of 10 years to executive directors and are exercisable subject to satisfaction of certain performance hurdles and other rules of the plan. Refer to (c)(ii) and Note 25 for further details.

(i) Options

Balance at Balance at the beginning Expired Exercised the end of the during the during the of the Exercise financial year financial year financial year financial year Name Grant date Expiry date Vesting date price Number Number Number Number

Year ended 30 June 2008G J Pritchard 25 Jun 2001 25 Jun 2011 25 Jun 2004 $8.56 250,000*^ - - 250,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2005 $2.87 150,000 - - 150,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2006 $3.11 150,000 - - 150,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2007 $3.24 150,000 - - 150,000C S Laurie 28 Jan 2003 28 Jan 2008 28 Jan 2005 $2.87 1,000,000 - (1,000,000) -

1,700,000 - (1,000,000) 700,000


Year ended 30 June 2007M R Brown 8 Nov 2001 8 Nov 2006 8 Nov 2003 $10.16 200,000^ (200,000) - -G J Pritchard 25 Jun 2001 25 Jun 2011 25 Jun 2004 $8.56 250,000*^ - - 250,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2005 $2.87 150,000 - - 150,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2006 $3.11 150,000 - - 150,000G J Pritchard 1 Oct 2003 1 Oct 2008 1 Oct 2007 $3.24 150,000 - - 150,000C S Laurie 28 Jan 2003 28 Jan 2008 28 Jan 2005 $2.87 1,000,000 - - 1,000,000

1,900,000 (200,000) - 1,700,000


* Issued under employee share option plan.^ The amortisation of these options has not been recognised as an expense in accordance with AASB 2 Share-Based Payment as the options

were granted on or before 7 November 2002.

No options were granted to directors during the current or prior year.

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(c) Grants made to directors (continued)

(ii) PR

Balance at Balance at the beginning Granted Exercised the end of the during the during the of the Exercise financial year financial year financial year financial year Name Grant date Expiry date Vesting date price Number Number Number Number

Year ended 30 June 2008C S Laurie 5 Dec 2005 5 Dec 2015 30 Jun 2008 - 150,000 - (150,000) -G J Pritchard 5 Dec 2005 5 Dec 2015 30 Jun 2008 - 50,000 - - 50,000C S Laurie 4 Oct 2006 5 Oct 2016 30 Jun 2009 - 100,000 - (100,000) -G J Pritchard 5 Oct 2006 5 Oct 2016 30 Jun 2009 - 50,000 - - 50,000C S Laurie 30 Aug 2007 30 Aug 2017 30 Jun 2010 - - 100,000 (100,000) -G J Pritchard 30 Aug 2007 30 Aug 2017 30 Jun 2010 - - 50,000 - 50,000

Year ended 30 June 2007C S Laurie 5 Dec 2005 5 Dec 2015 30 Jun 2008 - 150,000 - - 150,000G J Pritchard 5 Dec 2005 5 Dec 2015 30 Jun 2008 - 50,000 - - 50,000C S Laurie 4 Oct 2006 5 Oct 2016 30 Jun 2009 - - 100,000 - 100,000G J Pritchard 5 Oct 2006 5 Oct 2016 30 Jun 2009 - - 50,000 - 50,000

(d) Weighted average remaining life and fair value of options/PR outstanding at reporting datesThe weighted average remaining contractual life of share options outstanding at the end of the period was 1.7 years (2007: 1.3 years). The weighted average remaining contractual life of PR outstanding at the end of the reporting period was 8.6 years (2007: 8.4 years). The weighted average fair value of PR granted during the financial year is $2.29 (2007: $3.83).

(e) Fair value of options grantedThe fair value of equity-settled share options is estimated at date of grant using the Black Scholes model taking into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, and the risk free interest rate for the term of the option. The expected price volatility reflects the assumption that the historical volatility is indicative of future trends which may not necessarily be the actual outcome. No options were granted during the current or prior financial year.

(f) Fair value of PR grantedThe fair value of equity-settled PR granted to employees is estimated at the date of the grant using a Binomial model taking into account the terms and conditions upon which the PR were granted.

The following table lists the inputs into the model used for the years ended 30 June 2008 and 30 June 2007:

2008 2007

Dividend yield (per annum) 1.66% 1%Expected volatility 29% 28%PR exercise price $0.00 $0.00Share price at grant date $3.34 $4.56Interest rate (per annum) 6.18% 5.8%

The fair value of the cash-settled PR is measured at the grant date using the Binomial Pricing model taking into account the terms and conditions upon which the instruments were granted. The services received and a liability to pay for those services are recognised over the expected vesting period. Until the liability is settled, it is remeasured at each reporting date with changes in fair value recognised in profit and loss.

The carrying amount of the liability relating to the cash-settled share based payment at 30 June 2008 is $240,000 (2007: $213,000).

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(g) Expenses arising from share based payment transactionsTotal expenses arising from share based payment transactions recognised during the period as part of employee benefit expense were as follows:


2008 2007 2008 2007 $’000 $’000 $’000 $’000

Shares issued under employee tax exempt share acquisition plan 256 260 187 186Amortisation of PR issued under employee share option plan 298 509 (46) 509Amortisation of options issued to directors 3 14 3 14

557 783 144 709

NOTE 25: DIREcTORS AND ExEcUTIVES DIScLOSURES(a) Details of key management personnel and directors

(i) Directors

M R Brown Chairman (non-executive)B J Harker Deputy Chairman (non-executive)C S Laurie Managing Director (resigned 14 December 2007)G J Pritchard Managing Director (appointed 17 December 2007) (previously Finance Director)P W Cassidy Director (non-executive)R P Gregson Director (non-executive)G J W Martin Director (non-executive)

(ii) Executives

D Kent Managing Director – EuropeJ W McInnes Executive General Manager – Operations (Australia) (resigned 31 August 2007)C R Murray Executive General Manager – AustraliaJ Thomas President – Energy Developments, Inc (United States)B Gill Chief Financial Officer (appointed 9 June 2008)

(b) Key management personnel compensationIn accordance with the Corporations Regulation 2M.6.04, the remuneration disclosures required by paragraphs AUS 25.4 to AUS 25.7.2 of AASB 124 Related Party Disclosures have been transferred to the remuneration report.

Options, PR and share holdings of directors and key management personnel

(c) Options

(i) Options granted and/or vested during the year

No options were granted to directors during the financial year. The following options vested during the year:

VESTED NUMBER

2008 2007

Director G J Pritchard 150,000 150,000

Executive C R Murray - 55,000

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NOTE 25: DIREcTORS AND ExEcUTIVES DIScLOSURES (cONTINUED)

(c) Options (continued)

(ii) Option holdings of key management personnel and directors



Year ended 30 June 2008DirectorG J Pritchard 700,000 - 700,000 700,000 700,000


Total 805,000 - 805,000 805,000 805,000

Directors and key management personnel excluded from the above table have nil option holdings.

No options held by directors or key management personnel were granted or exercised during the current financial year.

C S Laurie resigned on 14 December 2007. As at this date, he held 1,000,000 vested options.



Year ended 30 June 2007DirectorsM R Brown 200,000 (200,000) - - -C S Laurie 1,000,000 - 1,000,000 1,000,000 1,000,000G J Pritchard 700,000 - 700,000 550,000 550,000


Total 2,005,000 (200,000) 1,805,000 1,655,000 1,655,000

Directors and key management personnel excluded from the above table have nil option holdings.

No options held by directors or key management personnel were granted or exercised during the prior financial year.

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(d) PR

(i) PR granted and/or vested during the year

PR were granted to specified directors on 29 and 30 August 2007, and executives on 17 January 2008, under the long term incentive plan as equity compensation benefits, as disclosed below. The PR were issued at a nil exercise price per share and expire on 30 August 2017 and 17 January 2018 respectively. Each PR entitles the holder to one fully paid ordinary share if certain key performance criteria are achieved within a specified performance period (two and a half to three years).

Value Vested of PR at First number Granted grant date exercise granted in % % Number $ date 2006 Vested Forfeited

Year ended June 2008Directors C S Laurie^ 100,000 100,640 30 Jun 2010 - - 100%G J Pritchard 50,000 50,320 30 Jun 2010 50,000 33.3% -

Executives D Kent 60,000 58,690 17 Jan 2011 16,870 11.4% 7.5%J W McInnes^^ - - - - - 100%C R Murray 70,000 56,926 17 Jan 2011 16,870 10.7% 7%J Thomas 50,000 40,661 17 Jan 2011 - - -



PR were granted to specified directors on 4 and 5 October 2006, and executives on 28 November 2006, under the long term incentive plan as equity compensation benefits, as disclosed below. The PR were issued at a nil exercise price per share and expire on 5 October 2016 and 28 November 2016 respectively. Each PR entitles the holder to one fully paid ordinary share if certain key performance criteria are achieved within a specified performance period (two and a half to three years).

Value of PR at First Granted grant date exercise Vested % % Number $ date Number Vested Forfeited

Year ended June 2007Directors C S Laurie 100,000 230,122 30 Jun 2009 - - -G J Pritchard 50,000 115,061 30 Jun 2009 - - -

Executives D Kent 40,000 91,141 28 Nov 2009 - - -J W McInnes 40,000 91,141 28 Nov 2009 - - -C R Murray 40,000 91,141 28 Nov 2009 - - -J Thomas 40,000 91,141 28 Nov 2009 - - -

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(d) PR (continued)

(ii) PR holdings of key management personnel and directors

Granted as Balance at the remuneration Exercised Lapsed Balance at beginning of the during the during the during the the end of the financial year financial year financial year financial year financial year Number Number Number Number Number

Year ended 30 June 2008DirectorsC S Laurie^ 250,000 100,000 - (350,000) -G J Pritchard 100,000 50,000 - - 150,000

ExecutivesD Kent 88,000 60,000 (6,496) (11,130) 130,374J W McInnes^^ 88,000 - - (88,000) -C R Murray 88,000 70,000 (16,870) (11,130) 130,000J Thomas 40,000 50,000 - - 90,000

Total 654,000 330,000 (23,366) (460,260) 500,374

Year ended 30 June 2007DirectorsC S Laurie 150,000 100,000 - - 250,000G J Pritchard 50,000 50,000 - - 100,000

ExecutivesD Kent 48,000 40,000 - - 88,000J W McInnes 48,000 40,000 - - 88,000C R Murray 48,000 40,000 - - 88,000J Thomas - 40,000 - - 40,000

Total 344,000 310,000 - - 654,000

^ C S Laurie resigned on 14 December 2007.^^ J W McInnes resigned on 31 August 2007.

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(e) Shares

(i) Shareholdings of key management personnel and directors


Year ended 30 June 2008DirectorsM R Brown 28,170 - - - 28,170P W Cassidy 13,591 - - 14,913 28,504R P Gregson 35,207 - - 23,892 59,099G J W Martin - - - 10,000 10,000G J Pritchard 13,334 - - 13,000 26,334

ExecutivesD Kent 4,000 - - - 4,000C R Murray 8,832 - 16,870 10,623 36,325

Total 103,134 - 16,870 72,428 192,432

Directors and key management personnel excluded from the above table had nil shareholdings during the year ended 30 June 2008.C S Laurie resigned on 14 December 2007. As at this date, he held 21,394 shares.J W McInnes resigned on 31 August 2007. As at this date, he held 750 shares.


Year ended 30 June 2007DirectorsM R Brown 28,170 - - - 28,170P W Cassidy 13,461 - - 130 13,591R P Gregson 34,868 - - 339 35,207C S Laurie 11,284 - - 110 11,394G J Pritchard 26,668 - - (13,334) 13,334

ExecutivesD Kent 4,000 - - - 4,000J W McInnes 750 - - - 750C R Murray 8,747 - - 85 8,832

Total 127,948 - - (12,670) 115,278

Directors and key management personnel excluded from the above table had nil shareholdings during the year ended 30 June 2007.

All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length.

(f) Other transactions with key management personnel and directorsDr B J Harker is a director of investment bank and fund manager, HRL Morrison & Co Limited. Consulting services were provided by HRL Morrison & Co Limited for a total value of $9,301 (2007: $103,372) during the current financial year. This transaction was conducted on commercial terms and conditions.

P W Cassidy is a director of OZ Minerals Limited (ASX: OZL). A subsidiary of OZL is a remote area power customer of a subsidiary of the Company. Revenue of approximately $2,233,826 was earned through the supply of electricity and provision of associated services to this customer during the current financial year (2007: $2,115,553). This remote area power transaction was conducted on commercial terms and conditions.

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2008 2007 2008 2007 $ $ $ $

NOTE 26: REMUNERATION Of AUDITORS

Amounts received or due and receivable by the auditor for audit or review of the financial report Ernst & Young (Australia) 378,562 347,500 - -Ernst & Young affiliates: – Ernst & Young (United Kingdom) 147,397 184,320 - -– Ernst & Young (Greece) 24,972 11,629 - -

550,931 543,449 - -

Amounts received or due and receivable by the auditor for other services* Ernst & Young (Australia) 49,440 25,847 - -Ernst & Young affiliates: – Ernst & Young (United Kingdom) 224,790 - - -

274,230 25,847 - -

* Other services primarily represent audit work performed in relation to the refinance of the Australian Syndicated Facility and provision of professional taxation and financial services for a project in the United Kingdom.

NOTE 27: RELATED PARTY DIScLOSURES(a) Transactions with other related parties

Interest received/ Repayments receivable Interest Amounts Amounts Loans received Sales to from paid to owed by owed to advanced to from related related related related related related related parties parties parties parties parties parties parties Related parties $’000 $’000 $’000 $’000 $’000 $’000 $’000

2008 Consolidated Associates 4,652 772 - 33,360 - 6,006 6,013

Company Controlled entities - 53,433 30,466 372,120 138,434 - -

2007 Consolidated Associates 3,370 1,165 - 28,151 - - 4,951

Company Controlled entities - 31,170 14,003 432,469 196,319 - -

For disclosures relating to key management personnel and directors, refer to Note 25.

Terms and conditions of transactions with related parties

All transactions with other related parties are conducted on commercial terms and conditions.

No allowances for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties.

Loans to related parties are unsecured.

(b) Ultimate controlling entityThe ultimate controlling entity of the Consolidated Entity is Energy Developments Limited, incorporated in Australia.

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NOTE 28: INVESTMENTS AccOUNTED fOR USING ThE EqUITY METhODDetails of interests in material associates and joint venture partnership are as follows:

OwNERShIP INTEREST cARRYING AMOUNT

2008 2007 2008 2007 Name and principal activities Place of incorporation % % $’000 $’000

Greece* Greece 50 50 9,512 6,724– Beal EPE – Tomi ED1 Operations EPE Gastec SNC* France 50 50 31,187 24,464Gastec Packington Partnership* UK 50 50 1,837 1,937

42,536 33,125

* Associates and the joint venture partnership have the same reporting date as the Consolidated Entity. Principal activity is the development and operation of landfill gas power projects.

cONSOLIDATED

2008 2007 $’000 $’000

Share of associates’ net results Profit from continuing operations before income tax 4,274 2,192Income tax expense (862) (518)

Share of net results of associates 3,412 1,674

Revenues 17,718 12,930Expenses (14,306) (11,256)

Share of net results of associates 3,412 1,674

Share of associates’ assets and liabilitiesCurrent assets 7,510 5,676Non-current assets 53,146 45,005Current liabilities (5,864) (5,783)Non-current liabilities (45,759) (39,795)

Net assets 9,033 5,103

Share of joint venture partnership’s net resultsProfit from continuing operations before income tax 580 823Income tax expense - -

Share of net results of joint venture partnership 580 823

Revenues 5,213 5,367Expenses (4,633) (4,544)

Share of net results of joint venture partnership 580 823

Share of joint venture partnership’s assets and liabilitiesCurrent assets 2,256 2,505Non-current assets 1,042 941Current liabilities (1,560) (1,609)Non-current liabilities (170) (193)

Net assets 1,568 1,644

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NOTE 29: cONTROLLED ENTITIESThe consolidated financial statements include the following controlled entities:

% Of ShARES/ INTERESTS hELD

Name of controlled entity Place of incorporation/formation 2008 2007

EDL CNG (NT) Pty Ltd Australia 100 100EDL CSM (NSW) Pty Ltd Australia 100 100EDL CSM (QLD) Pty Ltd Australia 100 100EDL Holdings (Australia) Pty Ltd Australia 100 100EDL Developments (Australia) Pty Ltd Australia 100 100Brightstar Environmental Holdings Pty Limited Australia 100 100Brightstar Environmental Partnership Australia 88.125 88.125Coal Seam Power Pty Limited Australia 100 100Cosmo Power Pty Ltd Australia 100 100EDL Group Operations Pty Ltd Australia 100 100EDL International Holdings Pty Limited Australia 100 100EDL LFG (ACT) Pty Ltd Australia 100 100EDL Operations (Belrose) Pty Ltd Australia 100 100EDL Operations (Berwick) Pty Ltd Australia 100 100EDL Operations (Broadmeadows) Pty Ltd Australia 100 100EDL Operations (Brooklyn) Pty Ltd Australia 100 100EDL LFG (Qld) Pty Ltd Australia 100 100EDL LFG (Vic) Pty Ltd Australia 100 100EDL Operations (Corio) Pty Ltd Australia 100 100EDL Operations (Eastern Creek) Pty Ltd Australia 100 100EDL NGD (WA) Pty Ltd Australia 100 100EDL Operations (Highbury) Pty Ltd Australia 100 100EDL LFG (NSW) Pty Ltd Australia 100 100EDL Operations (Lucas Heights) Pty Ltd Australia 100 100EDL Operations (Lyndhurst) Pty Ltd Australia 100 100EDL Operations (Pedler Creek) Pty Ltd Australia 100 100EDL Operations (Tea Tree Gully) Pty Ltd Australia 100 100EDL LFG (SA) Pty Ltd Australia 100 100EDL Operations Pty Limited Australia 100 100EDL Operations (Australia) Pty Ltd Australia 100 100EDL Properties Pty Ltd Australia 100 100EDL Technologies Pty Ltd Australia 100 100Energy Corridors (Holdings) Pty Ltd Australia 100 100Energy Developments International Pty Ltd Australia 100 100Karumba Power Pty Ltd Australia 100 100EDL Projects (Australia) Pty Ltd Australia 100 100EDL NGD (NT) Pty Ltd Australia 100 100EDL LNG (WA) Pty Ltd Australia 100 100EDL NGD (Qld) Pty Ltd Australia 100 100Tower Energy Pty Limited Australia 100 100Whytes Gully Environmental Pty Ltd Australia 88.125 88.125Bio Energy (UK) Limited United Kingdom 100 100Bio Energy II (UK) Limited United Kingdom - 100Brightstar Environmental Investments Limited United Kingdom 100 100Brightstar Environmental Partnership United Kingdom 88.125 88.125EDL Holdings (UK) Limited United Kingdom 100 100EDL Operations (Barling) Limited United Kingdom 100 100EDL Operations (Bellhouse) Limited United Kingdom 100 100EDL Generation Ltd United Kingdom 100 100EDL Operations (Cromwell Bottom) Limited United Kingdom - 100EDL Operations (LFG 1) Limited United Kingdom 100 100

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NOTE 29: cONTROLLED ENTITIES (cONTINUED) % Of ShARES/ INTERESTS hELD

Name of controlled entity Place of incorporation/formation 2008 2007

EDL Operations (Lower Spen) Limited United Kingdom - 100EDL Operations (Mucking) Limited United Kingdom 100 100EDL Operations (Ockendon) Limited United Kingdom - 100EDL Operations (Packington) Limited United Kingdom 100 100EDL Operations (Pitsea) Limited United Kingdom 100 100EDL Operations (Poole) Limited Untied Kingdom - 100EDL Operations (Rainham) Limited United Kingdom 100 100EDL Operations (Sandy Lane) Limited United Kingdom - 100EDL Operations (Sugden End) Limited United Kingdom - 100EDL Operations (Water Hall) Limited United Kingdom - 100EDL Operations (West Riding) Limited United Kingdom - 100EDL Operations (Withyhedge) Limited United Kingdom - 100EDL (UK) LFG Generation Ltd United Kingdom 100 100Energy Developments (Operations) Limited United Kingdom 100 100Energy Developments (UK) Limited United Kingdom 100 100Ryton Energy Limited United Kingdom 100 100EDL Hellas Monoprosopi EPE Greece 100 100EDL Holdings (Europe) BV The Netherlands 100 100Bio Energie (France) EURL France 100 100EDL Holding (France) SARL France 100 100Bio Energy (I), LLC United States of America 100 100Bio Energy (II), LLC United States of America 100 100Bio Energy (III), LLC United States of America 100 100Bio Energy (Austin), LLC United States of America 100 100Bio Energy (Austin II), LLC United States of America 100 100Bio Energy (Azusa), LLC United States of America 100 100Bio Energy (California), LLC United States of America 100 100Bio Energy (Georgia), LLC United States of America 100 100Bio Energy (Chateau Fresno), LLC United States of America 100 100Bio Energy (Illinois), LLC United States of America 100 100Bio Energy (Keller Canyon), LLC United States of America 100 100Bio Energy (Ohio), LLC United States of America 100 100Bio Energy (Ohio II), LLC United States of America 100 100Bio Energy (Pennsylvania), LLC United States of America 100 100Bio Energy (Tennessee), LLC United States of America 100 100Bio Energy (Texas), LLC United States of America 100 100Bio Energy (Tower Road), LLC United States of America 100 100Bio Energy (US), LLC United States of America 100 100Bio Energy (Washington), LLC United States of America - 100Bio Energy (Wisconsin) LLC United States of America 100 100EDL Holdings (US), Inc United States of America 100 100Energy Developments, Inc United States of America 100 100Energy Developments (Operations), Inc United States of America 100 100Brightstar Environmental, LLC United States of America 88.125 88.125Brightstar Environmental Holdings, LLC United States of America 100 100BSC Holding Co United States of America 65 65BSC Projects (Texas) Co 1 United States of America 65 65BSC Technology Co 1 United States of America 65 65Brightstar Synfuels Co 1 United States of America 65 65Brightstar – Jasper Co 1 United States of America 65 65Broadlands Energy Limited 2 Sri Lanka 52.63 52.63

The financial year of all controlled entities is the same as that of the Company, unless otherwise noted.1 Controlled entity which is 100% owned by BSC Holding Co.2 The minority interests in the profit and equity of Broadlands Energy Limited are nominal amounts.

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NOTE 30: fINANcIAL INSTRUMENTS

Financial risk management objectives and policiesThe Consolidated Entity’s principal financial instruments, other than derivatives, comprise bank loans and overdrafts, cash and deposits. The main purpose of these financial instruments is to raise or provide finance for the Consolidated Entity’s operations. The Consolidated Entity has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The main financial risks arising from the Consolidated Entity’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Consolidated Entity uses different methods to measure and manage these risks to which it is exposed. These include entering into derivative transactions, including interest rate swaps and forward currency contracts to manage its exposure to interest rate and currency risks arising from the Consolidated Entity’s operations and its sources of finance. Reports are reviewed on a monthly basis detailing the Consolidated Entity’s exposure to these key financial risks (excluding credit risk). This includes reviews of the levels of hedging for each finance facility, any foreign exchange exposure above a set limit and foreign currency contracts entered into to manage this risk as well as comparisons of cash flow forecasts projecting available cash and credit against specified minimum liquidity levels. It is, and has been throughout the period under review, the Consolidated Entity’s policy that no speculative trading in financial instruments shall be undertaken. Ageing analysis is also undertaken to manage credit risk.

The policies for managing each of the financial risks identified above are outlined below.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1.

(a) Interest rate riskThe Consolidated Entity’s exposure to the risk of changes in market interest rates relates primarily to the Consolidated Entity’s long and short-term debt obligations with a floating interest rate. The level of debt at respective balance dates is disclosed in Notes 12 and 15.

The Consolidated Entity’s policy is to manage a proportion of its interest cost using interest rate swap agreements. These swap agreements are used to convert floating interest rate exposures on certain non-recourse debt to fixed rates. These swaps also entitle the Consolidated Entity to receive, or oblige it to pay, the amounts if any, by which actual interest payments on nominated loan amounts exceed or fall below specified interest amounts. The Consolidated Entity’s general policy is to hedge a minimum of at least 80% of its non-recourse borrowings at fixed rates of interest. The table below details the actual hedging cover as at 30 June 2008 for facilities in each of its geographic regions. Other than cash and borrowings covered by hedges, there are no other financial assets or liabilities in the Company or Consolidated Entity exposed to interest rate risk.

2008 2007

Hedging Effective Hedging Effective cover rate pa cover rate pa

Interest bearing borrowings Australia – Australian Syndicated Facility 86% 8.56% 70% 7.83%– WKPP 90% 7.22% 90% 7.53%UK 61% 6.74% 100% 6.62%US 67% 4.86% 71% 5.60%

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NOTE 30: fINANcIAL INSTRUMENTS (cONTINUED)

(a) Interest rate risk (continued)

Cash flow hedge – interest rate swaps

At 30 June 2008, the Consolidated Entity had interest rate swap agreements in place with a notional amount of $397,199,000 (2007: $393,238,000) whereby it pays a fixed rate of interest and receives a variable rate equal to the BBSY, LIBOR UK or LIBOR US as applicable on the notional amount. The secured loans and interest rate swaps have the same critical terms. As at 30 June 2008, after taking into account the effect of interest rate swaps, approximately 86% (2007: 84%) of the Consolidated Entity’s borrowings are at a fixed rate of interest. The Consolidated Entity regularly analyses its interest rate exposure taking into consideration potential renewals of existing positions, alternative financing and alternative hedging positions.

At 30 June 2008, if interest rates had moved, as illustrated in the table below, with all other variables held constant, the Consolidated Entity’s post-tax profit and equity would have been affected as follows:

PROfIT AfTER TAx EqUITY hIGhER/(LOwER) hIGhER/(LOwER)

2008 2007 2008 2007 Interest rate risk $’000 $’000 $’000 $’000

Judgements of reasonably possible movements Consolidated +1% pa (100 basis points) (182) 16 10,063 24,835 –1% pa (100 basis points) 182 (16) (10,063) (24,835)

Company +1% pa (100 basis points) 1,636 1,656 1,636 1,656 –1% pa (100 basis points) (1,636) (1,656) (1,636) (1,656)

The amounts recognised in ‘Profit after tax’ in the above table represent the Consolidated Entity’s sensitivity to movement in interest rates on its unhedged portion of borrowings. Movement in interest rates will also change the fair values of interest rate swaps recognised in equity on the balance sheet.

At 30 June 2008, the interest rate swap agreements met the test of effectiveness under AASB 139 Financial Instruments: Recognition and Measurement, thereby qualifying for hedge accounting. The gain or loss from remeasuring these hedging instruments at fair value is deferred in equity in the deferred loss/(gain) on financial instruments reserve, to the extent that the hedge is ineffective, and reclassified into profit and loss when the hedged interest expense is recognised. No ineffectiveness was recognised at 30 June 2008 (2007: nil). Interest rate swaps are recognised on the balance sheet at fair value of $12,665,978 (2007: $10,799,223). These are exposed to fair value movements in interest rate changes. The movements in profit for the Company and Consolidated Entity are due to movements in variable rate debt and cash balances, based on movement of interest rates only. The movement in equity for the Consolidated Entity includes movement in the fair value of interest rate swaps. Interest rate swaps are subject to fair value movements if interest rates change which are recognised directly in equity. The movement of these fair values is detailed in the financial instruments reserve in the statement of changes in equity. The fair value of interest rate swaps is specified in paragraph (e) Net fair value of derivative financial assets and liabilities.

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(b) Foreign currency riskThe Consolidated Entity has transactional currency exposures arising from project commitments and sales and purchases denominated in currencies other than the Consolidated Entity’s functional currency (A$). The Consolidated Entity requires the use of forward exchange contracts to reduce currency exposures on such project commitments where the unhedged commitments exceed US$5 million at any one time and the timing of the commitments is firmly established. It is the Consolidated Entity’s policy not to enter forward contracts until a firm commitment is in place. At 30 June 2008 and 2007, no unhedged project commitments exceeding US$5 million were in place. At 30 June 2008 and 2007, the Consolidated Entity held no forward exchange contracts designated as hedges of contracted future project commitments.

The Consolidated Entity has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Consolidated Entity’s foreign operations is managed primarily through matching with borrowings denominated in the relevant foreign currencies. The Company has no direct exposure to foreign currency risk.

The table below indicates the currencies to which the Consolidated Entity has significant exposures at balance date. Had the exchange rate in relation to each of the currencies increased or decreased by 5% from rates as at the end of the the 2008 and 2007 financial year, with all other variables remaining constant, the impact on the profit after tax and equity of the Consolidated Entity would have been as follows:

+5% -5% hIGhER/(LOwER) hIGhER/(LOwER)

Carrying amount Profit Equity Profit Equity Foreign exchange rate risk $’000 $’000 $’000 $’000 $’000

Year ended 30 June 2008Financial assetsUS dollar 6,322 - (296) - 327Great British Pounds 21,257 - (924) - 1,021Euro 2,414 - (115) - 127

- (1,335) - 1,475

Financial liabilitiesUS dollar 23,286 - 1,109 - (1,226)Great British Pounds 140,967 - 6,713 - (7,419)Euro 4,012 - 191 - (211)

- 8,013 - (8,856)

Net exposure - 6,678 - (7,381)

Year ended 30 June 2007Financial assetsUS dollar 7,724 - (372) - 403Great British Pounds 21,700 - (1,044) - 1,131Euro 1,318 - (62) - 69

- (1,478) - 1,603

Financial liabilitiesUS dollar 29,743 - 1,416 - (1,566)Great British Pounds 129,641 - 6,174 - (6,823)Euro 2,772 - 132 - (146)

- 7,722 - (8,535)

Net exposure - 6,244 - (6,932)

The movement in exchange differences of the above currencies would be recognised directly in equity. The above movements that would be recognised in equity represent the Consolidated Entity’s foreign currency exposure to investment on foreign operations. These movements in exchange differences would be recognised in the foreign currency translation reserve in the statement of changes in equity.

(c) Credit risk exposuresCredit exposure represents the extent of credit related losses that the Consolidated Entity may be subject to on amounts to be exchanged under the derivatives or to be received from trade receivables. The notional amounts of derivatives are not a measure of this exposure. The Company minimises concentration of credit risk by undertaking transactions with a large number of customers from across the range of segments in which the Consolidated Entity operates. The Consolidated Entity, while exposed to credit related losses in the event of non-performance by counterparties to financial instruments, does not expect any counterparties to fail to meet their obligations given their high credit quality. Note 6 details further information on receivables by payment due status as at 30 June 2008 and 2007.

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(d) Commodity price riskThe Consolidated Entity’s exposure to price risk on financial instruments is minimal. As at 30 June 2008, the entity held $22,436,000 green credits for sale (2007: $16,354,000). The Company has a policy of entering into forward sales contracts for a proportion of green credits to manage its exposure to price risk on its green credit holdings.

(e) Net fair value of derivative financial assets and liabilitiesThe carrying amounts and estimated net fair values of financial assets and financial liabilities held at balance date are the same in 2008 and 2007. The net fair value of interest rate swaps is estimated by discounting the anticipated future cash flows to their present value, based on interest rates existing at balance date less an allowance for estimated disposal costs.

(f) Liquidity riskThe Consolidated Entity’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and working capital lines. The Consolidated Entity manages its liquidity requirements by use of both short and long term cash flow forecasts with a policy to maintain a minimum of $30 million of available cash and credit at all times. At 30 June 2008, available cash and credit lines amounted to $131,000,000 (2007: $91,000,000). The following is an analysis of the contractual undiscounted cash flows payable under financial assets and liabilities as at the balance sheet date:

MATURING IN

Less Over 6 Over 1 Over 2 Over 3 Over 4 Over 5 More Non- than months to year to years to years to years to years to than interest 6 months 12 months 2 years 3 years 4 years 5 years 10 years 10 years bearing Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

30 June 2008Financial assets Cash assets 90,196 - - - - - - - - 90,196Receivables 32,329 - 787 - - - - - - 33,116

122,525 - 787 - - - - - - 123,312

Financial liabilities Trade and other payables 44,704 - - - - 1,211 6,889 - - 52,804Borrowings 47,381 41,341 81,299 78,123 78,073 166,887 241,735 49,809 1,000 785,648Derivatives (2,311) (1,449) (2,719) (2,625) (2,495) (2,359) (9,009) (167) - (23,134)

89,774 39,892 78,580 75,498 75,578 165,739 239,615 49,642 1,000 815,318

30 June 2007 Financial assets Cash assets 98,572 - - - - - - - - 98,572Receivables 27,978 - 475 - - - - - - 28,453

126,550 - 475 - - - - - - 127,025

Financial liabilities Trade and other payables 45,600 - - - - - 7,795 - - 53,395Borrowings 66,536 34,602 224,699 26,341 26,465 96,189 72,242 46,399 1,000 594,473Derivatives (152) (217) (709) (767) (699) (632) (2,574) (214) - (5,964)

111,984 34,385 223,990 25,574 25,766 95,557 77,463 46,185 1,000 641,904

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(f) Liquidity risk (continued)

The remaining contractual maturities of the Company’s financial liabilities are:

cOMPANY

2008 2007 $’000 $’000

Financial liabilities Over 5 years 138,434 196,319

138,434 196,319

NOTE 31: cONTINGENT LIABILITIESThere are no contingent liabilities at 30 June 2008.

NOTE 32: SUBSEqUENT EVENTSOn 11 June 2008, subsequent to the explosion at Apache Energy’s Varanus Island gas processing plant which interrupted the Company’s usual gas supply source, the Company announced that it had secured alternative gas supply and pipeline transport arrangements on a short term basis to enable production of liquefied natural gas to continue at the West Kimberley Power Project’s Karratha LNG plant. Subsequent to year end, the Company has assessed the event to be an insurable event and expects that its insurance coverage will compensate for additional costs arising from this incident subject to usual insurance terms including a 30 day deductible. The Company has included additional gas purchase costs relating to the current financial year of $0.6 million (after tax) as a specific item in the financial statements. Further costs in relation to this incident will be recognised as incurred in the next financial year.

On 4 July 2008, the Company announced that it would undertake a review of its strategic options. The strategic review will seek to identify and assess expressions of interest from third parties, as well as reviewing other value enhancing business strategies. There is no certainty that the review will result in a disposal of all or any portion of the Company. A committee of independent non-executive directors has been formed to oversee the process. It is anticipated that the strategic review will take approximately three to six months from the date of its announcement. The total internal and external costs of the strategic review will ultimately depend on its outcome which cannot be accurately determined at this stage. External costs incurred to date on the strategic review, including legal, financial and other advisory costs, are estimated at $1.5 million.


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DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Energy Developments Limited, we state that in the opinion of the directors:

(a) the financial statements, notes and the remuneration report of the Company and of the Consolidated Entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and the Consolidated Entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards and the Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the year ended 30 June 2008.

On behalf of the Board:

GJ Pritchard Director


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for the year ended 30 June 2008INDEPENDENT AUDIT REPORT

Independent auditor’s report to the members of Energy Developments LimitedWe have audited the accompanying financial report of Energy Developments Limited and the entities it controlled during the year, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial ReportThe directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Auditor’s ResponsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit 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 our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls 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 controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

IndependenceIn conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Auditor’s OpinionIn our opinion:

1. The financial report of Energy Developments Limited is in accordance with the Corporations Act 2001, including:

– Giving a true and fair view of the financial position of Energy Developments Limited and the consolidated entity at 30 June 2008 and of their performance for the year ended on that date; and

– Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

2. The financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on the Remuneration ReportWe have audited the Remuneration Report included in pages 29 to 37 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s OpinionIn our opinion the Remuneration Report of Energy Developments Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

Ernst & Young

Mike Reid Partner

Brisbane 26 August 2008

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SHAREHOLDER INFORMATION

SUBSTANTIAL ShAREhOLDERS AS AT 8 SEPTEMBER 2008The following information is extracted from the notices of substantial shareholders.

fULLY PAID ORDINARY ShARES

Name Number %

Infratil Australia Limited 45,226,192 30.04% Investors Mutual Limited 17,389,134 11.64%Park Street SPV1 (Cayman) Ltd 12,745,457 8.47%BT Investment Management Limited 10,860,483 7.21%

TOP 20 hOLDERS Of fULLY PAID ORDINARY ShARES AS AT 8 SEPTEMBER 2008

fULLY PAID ORDINARY ShARES

Name Number %

Infratil Australia Limited 27,373,799 18.18HSBC Custody Nominees (Australia) Limited 17,985,774 11.95ANZ Nominees Limited (Income Reinvest Plan A/C) 15,493,957 10.29RBC Dexia Investor Services Australia Nominees Pty Limited (BKCUST A/C) 15,330,258 10.18Park Street SPV 1 (Cayman) Ltd 9,454,127 6.28ANZ Nominees Limited (Cash Income A/C) 8,772,255 5.83National Nominees Limited 8,581,948 5.70Citicorp Nominees Pty Limited 7,109,228 4.72Macquarie Investment Holdings No 2 Pty Limited 6,000,000 3.99J P Morgan Nominees Australia Limited 4,149,987 2.76HSBC Custody Nominees (Australia) Limited (A/C 2) 2,667,862 1.77Larec Pty Limited 2,240,000 1.49Sandhurst Trustees Ltd 878,000 0.58Citicorp Nominees Pty Limited 850,160 0.56McNeil Nominees Pty Limited 762,164 0.51Merrill Lynch (Australia) Nominees Pty Limited 703,445 0.47Woodross Nominees Pty Ltd 441,126 0.29MLEQ Nominees Pty Limited 359,197 0.24Merrill Lynch (Australia) Nominees Pty Limited 294,277 0.20RBC Dexia Investor Services Australia Nominees Pty Limited (MLCI A/C) 259,697 0.17

DISTRIBUTION Of ShAREhOLDINGS AS AT 8 SEPTEMBER 2008

Number of ordinary Number of ordinary Size of Holding shareholders option holders

1 to 1,000 2,346 121,001 to 5,000 2,769 475,001 to 10,000 574 1210,001 to 100,000 317 7100,001 and over 36 2F

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Term DefiniTionCNG Compressed natural gas.

Coal mine methane (CMM)

Gas trapped in coal seams that can be released by coal mining operations. If the gas is released into the atmosphere, it has more than 20 times the global warming potential of carbon dioxide. The gas can be extracted from coal mines by ventilation or direct drainage methods and used to produce electricity.

CO2 Carbon dioxide; a greenhouse gas.

$ Australian dollars.

GHG Greenhouse gas emissions, such as CO2.

GW Gigawatt. A measurement of energy. One gigawatt = 1,000 megawatts.

GWh Gigawatt hour. A measurement of energy used over time.

Landfill gas (LFG)

Gas created by the anaerobic decomposition of organic refuse deposited in landfills (rubbish dumps). The gas mostly consists of methane and carbon dioxide and, after impurities are removed, can be used to produce electricity.

LNG Liquefied natural gas.

Lost time injury (LTI)

An occurrence that results in time lost from work of one shift or more, not counting the shift in which the injury occurred.

Lost time injury frequency rate (LTIFR)

The number of lost time injuries incurred per one million hours worked that resulted in a lost day or shift.

MW Megawatt. A measurement of energy. One megawatt = 1,000,000 watts.

PJM World’s largest centrally dispatched grid. Territory covers 13 states: Delaware; Illinois; Indiana; Kentucky; Maryland; Michigan; New Jersey; North Carolina; Ohio; Pennsylvania; Tennessee; Virginia; West Virginia; and the district of Columbia.

Power purchase agreement (PPA)

A contract between a generator and a counter party to purchase electricity for an agreed price over an agreed time period.

WKPP West Kimberley Power Project.

regisTereD officeBuilding 17 2404 Logan Road Eight Mile Plains Queensland 4113

PO Box 4046 Eight Mile Plains Queensland 4113

Telephone: +61 7 3275 5555 Fax: + 61 7 3341 5150

Email: [email protected] Website: www.energydevelopments.com.au

invesTor enquiries Telephone: 1300 552 270 Email: [email protected]

AuDiTor Ernst & Young 1 Eagle Street Brisbane Queensland 4000

shAre regisTry Computershare Investor Services Pty Limited Level 19, CPA Building 307 Queen Street Brisbane Queensland 4000

sTock exchAnge lisTing Australia Stock exchange code: ENE

AnnuAl generAl meeTing Thursday 6 November 2008 at 2.00pm Ballroom Le Grand 1, Level 2 Sofitel Hotel 249 Turbot Street Brisbane Queensland 4000

DEFINITION OF KEY TERMS CONTACT US

ENERGY DEVELOPMENTS LIMITEDABN 84 053 410 263

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LANDFILL GAS COAL MINE METHANE REMOTE AREA SOLUTIONS LIQUEFIED NATURAL GAS/COMPRESSED NATURAL GAS



ANNUAL REPORT 2008ANNUAL REPORT 2008



www.energydevelopments.com

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LANDFILL GAS COAL MINE METHANE REMOTE AREA SOLUTIONS LIQUEFIED NATURAL GAS/COMPRESSED NATURAL GASPRINTED ON 100% RECYCLED, CHLORINE FREE PAPER.

EDL 1061 AR 2008 Outside Covers DM-FA.indd 1 15/9/08 10:41:03 AM

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Documents

ENERGY FOR A CHANGING WORLD For personal use only‘Energy for a changing world’ is the theme of this year’s annual report. This reflects the Company’s international position