Sustainability Report 2011 - Pacific Hydro · the period 1 July 2010 to 30 June 2011. The document reports on ... Sustainability Report 2011 1. Welcome to our 2011 Sustainability

Sustainability Report 2011

http://pacifichydro.com

Contents

About Us 1

Governance 9

Business Partners 11

Community 18

Environment 23

Workplace 30

GRI and UNGC Index 37

• Frontcoverimage:CodringtonWindFarm,Australia

About this Report

ThisisPacificHydroPtyLtd’sthirdannualSustainabilityReport,coveringthe period 1 July 2010 to 30 June 2011. The document reports on sustainability topics and indicators for all of our majority-controlled assets andofficesinAustralia,BrazilandChile,exceptwherenoted.TinguiriricaEnergía(TE),our50:50jointventureinChile,producesitsownSustainabilityReport,whichcanbeviewedatwww.tinguiriricaenergia.cl

WehaveappliedtheGlobalReportingInitiative(GRI)G3.1GuidelinesandtheElectric Utilities Sector Supplement to a B Level. This has been checked by theGRI.Thereportisnotexternallyassured.Worktowardsobtainingexternalassurancewillcommencein2012aspartofour5-yearsustainabilityplan.

AlldollaramountsareinAustraliandollars,unlessotherwisestated.

Duringthereportingperiod,wedivestedourshareoftheBakunHydroprojectinthePhilippinestoourjointventurepartnerAboitizPower.

www.tinguiriricaenergia.cl

$151.9million

Clean energy generated

Employees Operating assets

Net sales

1.7million

314 17

megawatt hours (MWh)

About Us

Pacific Hydro is a leading renewable energy company, producing clean power from natural resources.For nearly 20 years, we have lived our vision – powering a cleaner world – by identifying, delivering and operating renewable energy projects and providing clean power and carbon abatement products and services to customers across the globe.With hydro, wind, solar and geothermal power projects at varying stages of development, construction and operation in Australia, Brazil and Chile, we continue to provide strong returns for the environment, local communities and investors. We have over 850 MW of operating hydro and wind assets and a further 2,000+ MW in our project development pipeline. Our operating assets abate an estimated 1.5 million tonnes of greenhouse gas emissions every year.We are also active in the carbon market, with proven success in the production and trading of carbon credits from our run-of-river hydro projects registered under the Clean Development Mechanism of the Kyoto Protocol.

Company Profile

Sustainability Report 2011 1

Welcome to our 2011 Sustainability Report.We are committed to building a sustainable future for Pacific Hydro and our stakeholders. Over the past financial year, we have continued to live our vision – “powering a cleaner world” – through the development, delivery and operations of our renewable energy projects, making substantial progress towards achieving our business objectives and long-term growth.

It was a year of great challenges and achievements for our business.

More than 1.7 million megawatt hours of clean, renewable energy were generated by our assets, leading to the abatement of 1.3 million tonnes of greenhouse gas emissions.

We remained committed to continuous improvement in health, safety and the development of our people.

Our Total Recordable Injury Frequency Rate (TRIFR) reduced by ten per cent from last year. During the year we also achieved 100 per cent compliance with our lead health and safety key performance indicators, which will translate to further TRIFR improvements next year.

We had a large number of internal placements company-wide, which have created opportunities for our staff to take on new roles and further develop their careers.

We remained profitable despite our hydro assets in Chile experiencing the driest hydrological year in the past 50 years, transmission constraints, project commissioning delays and regulatory challenges. In addition, we saw depressed energy and Renewable Energy Certificates prices in Australia throughout the reporting period.

Despite these challenges, we achieved a number of significant milestones.

In Australia, we celebrated the ten year anniversary of the completion of theCodrington Wind Farm, the country’s first commercial wind farm. We were also selected to build Australia’s largest solar photovoltaic project as part of the Moree Solar Farm consortium. This represents a milestone in achieving our technology and geography diversification objectives in that market.

Our wind farms in Brazil’s northeast achieved their second full year without any lost time or medical treatment injuries. Brazil became the world’s seventh biggest economy in 2010 and is currently experiencing favourable social and economic development, creating many potential opportunities for Pacific Hydro in the clean energy sector.

Following the successful inauguration by the President of Chile in October 2010, our joint venture hydro power plants La Higuera and La Confluencia commenced generation, making Pacific Hydro one of the largest renewable energy companies in Chile. As we closed the financial year, we were on track to deliver our Chacayes hydro project on time and to budget.

Locally and globally, we take pride in our social development programs and the excellent relationships we maintain with our host communities. Our community programs in Australia, Brazil and Chile continue to provide opportunities for innovation and social cohesion, achieving positive, long-term community goals.

In July 2010, we were accepted into the United Nations Global Compact and are committed to further integrating this initiative into our operations.

The year ahead is looking promising for Pacific Hydro.

In Australia, changes to the policy environment for the clean energy industry are set to create new opportunities for us as we look to progress our wind, solar and geothermal development projects. Our Brazilian business unit will explore growth opportunities in the unregulated clean energy market to attract large mining, industrial and utility companies as potential customers for our projects.

Finally, a shortage of new projects in an energy-constrained Chilean economy is very promising for our pipeline of development projects in the Cachapoal Valley following the conclusion of the Chacayes project.

I hope you enjoy reading about our continued sustainability journey.

Rob Grant

A Message from our CEO

2 Sustainability Report 2011

VisionPowering a cleaner world.MissionTo produce electricity profitably through the innovative commercialisation of clean energy resources.

Our LEADing ValuesLeadership – Having the courage to lead and innovate.Energy – Helping to meet the world’s energy needs while making a positive and lasting difference to the environment.Action – Achieving our goals by working together, with integrity and an entrepreneurial spirit.Dedication – We are dedicated to ensuring a healthy and safe environment for our employees, the sustainability of our business and positive outcomes for our communities.


Our Global Projects

Hydro Wind Solar Geothermal


What Sustainability Means to Us

Our Sustainability Framework

Wearecommittedtoensuringthesustainability of our industry and company and this is embedded in the waywework.Aswedevelop,deliverandoperaterenewableassetsinourhostcommunities,wetakealong-termviewoftheenvironmentinwhichweoperateandtherelationshipswedevelopwithallourstakeholders.This enables us to maintain a social license to operate for the lifecycle oftheassets,identifyanddevelopbusinessopportunities,managerisks,advocatethebestcleanenergypoliciesand attract and retain the best staff.

OurSustainabilityFrameworkisbuiltonfourpillars:community,environment,workplaceandbusinesspartners. These pillars provide our businesswithaclearfocusanddriveour sustainability practices.

Community

We aim to develop mutual trust andrespectwithcommunitiesthroughhonestandopencommunication.Ourgoalistodelivercommunityprogramsandinitiatives that provide clear benefits andmeaningfuloutcomesthatmakealastingdifferencetoourhostcommunitiesandwhicharealignedwiththecompany’sobjectives. Actions are undertaken inlinewithourglobalCommunityCharterwhichisaguidingframeworkforconsistentstandardsacrossourglobaloperations.

Workplace

Asanindustry-leadingemployerofchoice,weaimtoprovideaworkplacethatissafefrominjuryand harm for our staff and contractors. We support initiatives to improve employee health and wellbeingintheworkplace. Traininganddevelopmentopportunities are provided for employeesatalllevelsandwevaluediversityinourorganisation.

Environment

We aim to provide a net benefit toourplanetbyproducingcleanenergywithminimalimpactonbiodiversity,naturalresourcesand our climate. Environmental ManagementSystemsareimplementedatoursitesandweset environmental objectives and targets.Weareworkingtomeasureandreduceourowncarbonfootprint.Weengagewithpolicymakers,communities and the public on renewableenergyissuesandadvocateclimatechangepolicies.

Business Partners

Weaimtodeliverlong-termvalueto our shareholders and partners inatransparent,ethicalandeconomicallysustainableway.Best practice and continuous improvementaresoughtinthemanagementofourdevelopment,construction and operation of sites andisgovernedbyourinternalManagementSystemsandAssetManagementFramework.AsasignatorytotheUnitedNationsGlobalCompact,weadvocatefor responsible business practices withinoursphereofinfluence.

•Right:CoyaIntake,CachapoalRiver,Chile


Key Sustainability Issues

Ourbusinessplanningandriskprocessesandengagementwithstakeholders help us to identify our keysustainabilityimpacts,risksandopportunities.Alloftheeconomic,social and environmental issues are assessed,resultingintheidentification of priority areas for each of our SustainabilityPillars,summarisedontheright.Thisprocessenablesustodetermine the topics to be included in the report and are taken into account whenwesetourbusinessstrategiesandgoalsfor2011/16(refertop.8).

Community

•ConsultationandEngagement•CommunityDevelopment

andFunding

Workplace

•HealthandSafety•Attracting,Rewarding

andRetainingStaff

Environment

•Biodiversity•Compliance,Reporting,

Accountability

Business Partners

•FinancialReturns•RenewableEnergyPolicy

and Advocacy

Our Stakeholders

Our stakeholders are those individuals andgroupsimpactedbyouractivitiesorthosewhocanimpactonourfuturedevelopment.Thegroupisdiverseandweadaptourapproachandengagementactivities as required to best address their areas of interest. The table on the rightshowsthestakeholdergroupswhohavebeenidentifiedasthekeyaudiencesforthisreport.Thesegroupswereconsultedspecificallytodeterminematerial issues for this report.

Communicationandengagementwithourstakeholdersoccursinthefollowingways:

Our Priority Areas

Stakeholder group Methods of engagement

Shareholders(Owner) BoardandCommitteemeetings;investorupdates;5yearBusinessPlanningprocess;strategyreviews

BanksandFinanciers Formalandinformalmeetings;writtencorrespondenceandphonecalls;sitevisits;health,safety,sustainabilityandoperationalreportingasrequired

Communities and Landholders Formalandinformalcommunityconsultationsessions;communityliaisonofficers;newsletters;communityengagementandinvestment activities

Employees Monthlye-newsandCEOupdate;monthlylunchtimeforumshostedbyCEO,generalmanagersorfunctionalteams;6monthlyperformancereviews;regularsocialfunctionsandevents;annualOrganisationalAlignmentSurvey;intranet

Contractors and Suppliers ExpressionsofInterest;quotationsandtenderprocesses;meetings;surveyon sustainable functions of suppliers andcontractors;contractsacrossthe projectlifecycle–development,delivery and operations

Customers Regularmeetings

Government Authorities –Local,StateandFederal

Regularmeetings;writtensubmissions;formal participation and representation on industry and other bodies


Determining Materiality

Inordertoproduceameaningfulandrelevantreport,wehaveanumberof internal and external processes to help us identify the issues that are most important to our business and our stakeholders.

Todeterminematerialissuesweanalysedourpastcorporatereports,company policies and business strategies,riskregisters,stakeholderfeedback and sustainability reports produced by peers and competitors.

Inadditiontothis,interviewswereconducted to help us understand the issuesstakeholdersfeelmoststronglyabout and to provide feedback on last year’s report. Independent consultants spokewith43internalandexternalstakeholders,resultinginalistofmaterial issues recommended for inclusioninthereport.Foreachpillarofoursustainabilityframework,issuesarelistedinorderofdecreasingpriority.Allkeyissuesidentifiedthroughourprocessofdeterminingmaterialityhavebeenaddressedinthisyear’sreport:

Community: consultation and engagement(p.19);impactassessment(p.19);renewableenergyadvocacy(p.15);development(p.21);spending(p.19);educationofthecommunity(p.19–20);andlocalpoliticaldialogueandpublicdebate(p.15).

Environment:biodiversity(p.24);birdstrike(p.25);noise(p.29);climatechangeandrelatedpublicpolicies(p.14,26);complianceandregulatoryissues(p.29);water(p.28);and environmental accountability and reporting(insidefrontcover).

Workplace:healthandsafety(p.31);diversity and equal employment opportunity(p.34);traininganddevelopment(p.35);internalcommunicationandcoordination(p.36);turnoverreduction(p.35);improvingcontractorsafety(p.31);andtransparencyaroundjoblevelsandremuneration(p.35).

Business Partners:improvingfinancialreturns(p.12);economicdevelopmentofcommunities(p.12);purchasingpoliciesandlocalsourcing(p.20);developmentandpromotionofrenewableenergy(p.13–14);briberyandcorruption(p.10);businesscaseforsustainability(p.14);andgovernmentlobbyingandpublicpolicy(p.15).

External Commitments

InearlyJuly2010,wewereacceptedinto the United Nations Global Compact (UNGC),avoluntaryframeworkwhichhelpsbusinessesaligntheirstrategiesandoperationswithtenuniversally–acceptedprinciplesonhumanrights,labourstandards,environmentalprotection and anti-corruption.

Duringtheyearwehavebeenworkingonourdiversitypoliciesandinitiatives,launchedaWhistleblowerDisclosureandInvestigationProcedureandcontinuedwiththedevelopmentofrenewableenergyprojectswhileadvocatingclimatechangepoliciesandawareness.Wealsodevelopedand trialled a sustainability supply chainsurveyandevaluationtool,whichwillhelpustounderstandandassess supply chain risks and impacts.

We have included more information regardingourprogressagainsttheUNGCprinciplesthroughoutthereport. See the UNGC and GRI Index formoredetails(p.37).

•Above:ValedosVentosWindFarm,Brazil

http://www.unglobalcompact.org/


Our Sustainability Performance and Goals

Progress on Our Sustainability Goals for 2010/11

Strategies Progress on Deliverables

Com

mun

ity StakeholdersBringconsistencytothewayinwhichwemanageinterfaceswithhostcommunities,assistbusinessunitsto maintain up-to-date information on stakeholder priorities and build sustainable relationships and communicationchannelswithkeystakeholdergroups.

Developed and commenced roll-out of acompany-wideCommunityCharter

Maintained and improved our stakeholder issues list

Refined our procedures for materiality assessments

United Nations Global Compact (UNGC) IntegrateUNGCprinciplesintobusinessstrategy,operations,cultureanddecision-makingprocesses.

o Currentlyidentifyingandanalysingkeyareas that UNGC principles can be effectively integratedinto

IntegratedreportingrequirementsoftheUNGCintooursustainabilityreportingpractices

AdvocatedtheUNGCwithinoursphereofinfluence

PartnershipsEngageinpartnershipstoadvancebroaddevelopmentgoals(suchastheMillenniumDevelopmentGoals).

✕ We intend to identify partnership opportunities oncewehavecompletedtheworkabove

Env

ironm

ent Carbon Management

Reduce the company’s carbon footprint.o Ourcarbonreductionstrategiesarestillin

development.Weareintheprocessofagreeingonreductiontargetswithinourbusinessunits

We continue to measure our carbon footprint and achieved a 37 per cent reduction since the previous year

Wor

kpla

ce Health and SafetyContinual improvement in health and safety performance,cultureandcompetencyacrossallbusinessunitsandlevelsoftheorganisation.

✕ WeachievedaTotalRecordableInjuryFrequencyRate(TRIFR)of7.2whichwasa10percentreduction.HoweverwehadsetaTRIFRtargetof6.8(15percentreduction)

✕ Ahealth,safetyandsustainabilitysoftwaresystemwasnotimplementedastheroll-outofhealthandsafetystandardsacrossthegroupbecameahigherpriority

EmployeesEducate employees on the importance and relevance of sustainability.

Every employee participated in at least three initiatives whichpromotedoreducatedemployeesaboutanaspectofhealth,safetyandsustainability

Bus

ines

s P

artn

ers Strategy and Performance

Provide accurate and reliable information to external stakeholdersregardingthecompany’sstrategyandperformance.

Strategicmarketingmaterialforkeystakeholdersandtosupportinvestoractivitieswasdeveloped

Quarterlybriefingprocessforinvestorswasintroduced

Sustainability StrategyDevelopasustainabilityframeworkandalong-termsustainabilityvisionandstrategy.

o Consultationsregardingthelong-termsustainabilityvisionandstrategyareongoing

Ourmaterialityassessmentprocesswasusedtohelpdeterminekeyissuesforstrategydevelopmentforthe2011/12strategy

Achieved o InProgress ✕ Not Achieved


Sustainability Goals for 2011/16

Community Environment Workplace Business Partners

2011

/12 Community Relations

Engageopenlywithourlocal communities and maintain our community relationsprograms

Community Investment

Continue and enhance our community investment programs (e.g.SustainableCommunitiesFundinAustralia and Creciendo JuntosinChile)

Environmental Management

Maintain environmental managementsystems and meet compliance obligations

Carbon Management

Developacarbonstrategyand value proposition includingcorporategoalsandtargets

Operational Excellence

Incorporate sustainability metrics (e.g.benchmarkingagainsttheInternationalHydropowerAssociationSustainability Assessment Protocol)intoannualoperations performance reviews

Health and Safety

Achieve a real year-on-year improvement for both leadandlaghealthandsafety key performance indicators

Benchmark construction and operational assets againstrelevantindustrybenchmarks

Develop and deliver health and safety leadershiptraining

Employees

Attract,recruit,developand retain employees to ensure the achievement ofbusinessgoals

Develop and implement aglobaldiversitystrategy

Economic Returns

Maximise shareholder returns

Renewable Energy Policy and Advocacy

Develop policy and regulatorypositionsforthe company and pursue these positions via appropriate channels

Sustainable Supply Chain

Reviewandimproveoursupply chain assessment processes

2012

/16 Furtherenhance

community relations andinvestmentprograms

Continue to reduce our carbon footprint

Improve data collection toenablefullecologicalfootprint calculation

Develop a corporate environmental audit program

Continue to improve health and safety performance

Continuetomeasure,maintain and improve employee satisfaction andalignment

Continue to maximise shareholder returns

Develop a sustainable supplychainstrategy


Governance

Our Owner

PacificHydroisawholly-ownedsubsidiaryoftheIndustryFundsManagement(IFM)AustralianInfrastructureFund.IFMisaninvestmentmanagementcompanyspecialisinginthemanagementofinvestmentproductsacrossprivateequity,infrastructure,debtandlistedequityportfoliosandiswhollyowned,throughIndustrySuperHoldingsPtyLtd,byalargenumberofAustraliansuperannuationfunds. Please see www.ifm.net.au for more informationaboutIFM.

Our Board

OurBoardofDirectorsishighlycommitted to the principles of sustainability. The Board is responsible forensuringthatthecompanymaintainsanappropriatecorporategovernancestructure,whichprotectsandfurtherenhancesshareholdervaluebyensuringtheintegrityofreportingandbymaintainingappropriateinternalcontrols.

Althoughunlisted,theBoardofDirectorsreferstotheAustralianStockExchangeCorporate Governance Council’s

“Corporate Governance Principles andRecommendations”(ASXStandards)asthebenchmarkforstandardsofgoodgovernancepractice.The Principles and Recommendations laysolidfoundationsformanagementandoversight,ensuretheeffectivenessoftheBoard,promoteethicaldecision-making,safeguardintegrityandtransparency,respectshareholderrights,recogniseandmanagerisk,andensurefair remuneration practices.

Asat30June2011,theboardconsisted of six non-executive members and one alternate Director. These includedthreerepresentativesfromIFMalongwiththreeindependentDirectorsand one alternate independent Director. This structure ensures robust governanceandcontinuousdisclosureto our shareholder. The Board comes fromdiversebackgrounds,professionsandworkingenvironments.Thirty-threepercent(2)ofBoardmembersarebetweentheagesof30–50,andtheremaining67percent(4)areolderthan50.Eighty-threepercent(5)aremaleand17percent(1)arefemale.

Board members are appointed by IFMbasedontheirqualificationsand expertise in the relevant areas. Each member performs a periodic self-assessment to evaluate their performance. They are paid Directors’ feesatalevelinlinewiththemarket.Their fees are not performance-based. Toavoidconflictsofinterest,membersare required to update a Declaration ofInterestateveryboardmeeting.This is confirmed on an annual basis.

The Board has three permanent committeeswhoseobjectivesaretoconsiderandgivedirectiononspecificareas on behalf of the Board. The Board receives a monthly report from managementonoureconomic,socialandenvironmentalperformance,whiletheHealth,Safety,PeopleandSustainability Committee has specific responsibilities in relation to sustainability performance and issues and meets at least four times a year.

More information about the Board andourgovernancecanbefoundatpacifichydro.com/investors/corporate-governance/

Pacific Hydro Board Members (As at 30 June 2011)

Name Position Committee Membership

Directors

Garry Weaven ChairmanandOwner’sRepresentative–IFM •Audit,FinanceandRisk•ProjectsandOperations•Health,Safety,PeopleandSustainability*

Brett Himbury Non-Executive Director andOwner’sRepresentative–IFM

•Audit,FinanceandRisk•Health,Safety,PeopleandSustainability

KyleMangini Non-Executive Director andOwner’sRepresentative–IFM

•Audit,FinanceandRisk•ProjectsandOperations

KateSpargo Independent Non-Executive Director •Health,Safety,PeopleandSustainability

Geoff Coffey Independent Non-Executive Director •Audit,FinanceandRisk•ProjectsandOperations

RogerGill Independent Non-Executive Director •ProjectsandOperations

Bernard Wheelahan * Alternate Director to Garry Weaven •Health,Safety,PeopleandSustainability

http://www.ifm.net.au

http://pacifichydro.com/investors/corporate-governance/

http://pacifichydro.com/investors/corporate-governance/


Ethical Behaviour

Our Code of Conduct provides guidanceonethicalbehaviourforouremployeesandDirectorsgloballyand outlines our approach and responsibilitiestocustomers,landholders,commercialpartners,shareholders and the financial community.AllnewemployeesreceivetraininginandarerequiredtosignourCodeofConductwhichoutlinesthe company’s standards and position onbribery,anti-competitivebehaviourand discrimination and applies to all employees and contractors.

AllManagersandemployeeswhoregularlydealwithoverseascounterpartiesreceiveperiodictrainingonForeignCorruptPracticesin Australia,BrazilandChile.Thetrainingexplains the policies and procedures relevanttothejurisdictionsinwhichweoperate.

DuringtheyearwedevelopedaWhistleblowerDisclosureandInvestigationProcedureforinvestigatingreportsfromwhistleblowers.Itcoversallegationsofimproperorcorruptconduct,breachesofcompanypolicy,theCodeofConductandanyrelevantlaws.

While monetary donations to political parties are prohibited under ourCodeofConduct,wedooccasionally participate in political fundraisingactivitiestoenhanceourcommunicationwithpolicymakers.

Therewerenoreportedincidentsofcorruption,anti-competitivebehaviour

ordiscriminationduringtheperiod.

Risk Management and Compliance

Sustainability is embedded in our EnterpriseWideRiskManagementFramework(EWRMF)andiskeytoachievingthecompany’svisionandmission,deliveringcorporateobjectives,managingriskandprovidinggreatercertaintyandconfidencetoourowner.

Weperiodicallyundertakearigorousrisk assessment of all development opportunities and operations. Our enterprise-wideapproachincludestheestablishmentofgovernance,controlsandcompliancemechanismstomanagekey risks in all of our business units. Internal and external assurance processes are adopted and any anomaliestriggerfurtherinvestigation.

TheAudit,FinanceandRiskCommitteeoverseesandreviewstheeffectivenessoftheframeworkwhiletheCEOandGeneralManagementteamareresponsibleforimplementingtheappropriaterisk-mitigationstrategiesinaccordancewiththeEWRMF.Managementresponsibilityforcompliance is reinforced by a yearly requirementforeachGeneralManagerto provide an Annual Compliance Report dealingwiththestateofcompliancewithintheareasoftheirmanagementresponsibility.

Therewerenoreportednon-complianceswithanylawsorregulationsduringthereportingperiod.

Awards

•ClimateAlliance’s“BusinessLeaderoftheYear”Award

•HumanResources(HR)LeaderCompassAwardfor:

– “BestTalentManagementStrategy”(2ndplace)and

–“HRChampion(CEO)”(winner)

•CIGRE2010‘NewEntrepreneur’awardedtoTinguiriricaEnergíaby the Chilean Committee of the InternationalCouncilonLargeElectric Systems

•“BestProjectDeveloper–AsiaPacific”intheRenewableEnergyFinancecategory(Environmental Finance and Carbon Finance) byPlattsEnvironmentalFinance

•“BestSMEReport”forour2009Sustainability Report – Corporate ResponsibilityReportingAwards2011.

As governments around the world embrace the need for significant cuts in carbon emissions, the opportunities for cleaner energy production have never been greater. In an increasingly competitive market place, our strong reputation, expertise and innovative culture set us apart. We have a clear strategy to achieve growth, increase shareholder value and returns, and provide clean energy to meet increasing demand.Our strategy for sustainable economic growth involves:•Optimisingtheoperationalefficienciesandearningfromexistingassets;•Developingadiversifiedportfolioofrenewableenergyassets through

developmentoracquisitionsthatdelivergrowthandaddeconomicvalue;•Reviewingandcapturingappropriateemergingrenewabledevelopments

and acquisitions;and•Developingverticalintegrationopportunitiesthatcomplement

the operation and development of new projects.

$136.9million

Development expenditure

Increase in sales revenue since 2009/10 Our installed capacity increased by 24%

Construction capital expenditure

Our Approach

$10.7million

5% 622.5

Business Partners

MW



Our Economic Performance

Salesrevenuewas$151.9millionforthereportingperiod(excludingequityaccountedinvestments),anincreaseof five per cent from the previous year. ThiswasdrivenbytheincreaseincontractpriceforthesupplyofpowerfromtheOrdHydro,higherenergyprices in Chile and partially offset by lowerspotpricesinSouthAustraliaand the unfavourable impact of the weakeningUSdollar.

Capitalspendof$136.9millionwasincurredinthe2010/11financialyear,primarilyontheChacayesprojectin Chile.

Indirect Economic Impact

Inadditiontodirectlydistributingeconomicvaluethroughinvestmentreturns,salariesandwages,taxesandpurchasesofgoodsandservices,werecognisethatourbusinesshasindirecteconomic effects in the communities whereweoperate.

Our developments assist in stimulatinglocaleconomicandsocialdevelopment,suchasprovidinglocalemployment and business opportunities andestablishingnewlocalbusinessand areas of expertise in our host communities. Impacts are described inmoredetailonpages16,20and21.

We have identified an opportunity to improve our methods of quantification ofindirecteconomicimpacts,includingjob creation and indirect local expenditure estimates.

Installed Capacity (MW)

Asat30June2011(includesonlyinstalledcapacityownedbyPacificHydro)

Australia – Total 303

Hydro 43

Wind 260

Brazil – Total 58

Wind 58

Chile – Total 261.5

Hydro 232.5

Thermal backup 29

Total Installed Capacity 622.5

Furtherinformationonourdevelopmentprojectsandoperatingassetscanbefound at pacifichydro.com/projects/our-global-projects/

Direct Economic Impact

FY 2010/11 FY 2009/10 FY 2008/09

Total$’000

Total$’000

Total$’000

Economic Value Generated

Revenues 151,904 144,836 118,767

Economic Value Distributed

OperatingCosts (45,376) (38,192) (32,935)

EmployeeWagesandBenefits (41,607) (34,930) (34,346)

PaymentstoProvidersofFinance (56,677) (39,470) (19,673)

Payments of Income Tax (8,144) (3,224) (5,904)

CommunityFundInvestments (450)# (604) (632)

* Numbersinbracketsrepresentacost,lossorcashoutflow.# Decreased due to exit of Pacific Hydro from the Philippines.

http://pacifichydro.com/projects/our-global-projects/

http://pacifichydro.com/projects/our-global-projects/


Products and Services

PacificHydroproducesrenewableenergyfromaportfolioofwindfarmandhydropowerassetsinAustralia,BrazilandChile.Wesellandtradeelectricity,electricityderivativeproductsandenergy-relatedenvironmentalproducts,includingRenewableEnergyCertificates and EU Certified Emission Reduction Credits. Our customers includeenergyretailers,miningcompaniesandlargeconsumerssuchasbusinessesandgovernment.

Detailsoftheenergy-relatedenvironmentalproductswesellareprovidedbelow.

•Certified Emission Reductions (CERs): International carbon-based instruments that can be utilised by countries that have committed to carbonemissionreductiontargetsthroughtheKyotoProtocol,orbycompanies required to reduce emissions under mandated schemes such as the European Emissions TradingScheme.

•Renewable Energy Certificates (RECs):InAustralia,allelectricityretailersandsomelargeconsumersofelectricity,arerequiredtopurchasea minimum amount of electricity from renewablesources(20percentby2020)undertheRenewableEnergy

Target(RET).ThesecompaniesachievethisbyprocuringRECs.AllofPacificHydro’sAustralianrenewableenergyprojectscommissionedpost-January 1997 are qualified to produce and sell RECs.

•GreenPower: As part of the Australian GreenPowerAccreditedRenewableEnergyProgram,GreenPowercanbe purchased voluntarily by Australian electricity consumers in preference tonon-renewableelectricitysources.This voluntary action adds to the demandforrenewableelectricitycreated by the Australian RET. All ofPacificHydro’sAustralianrenewableenergyprojectscommissionedpost-January 1997 are qualified toproduceandsellGreenPower.

Therewerenoincidentsofnon-compliancewithregulationsconcerningmarketingcommunications,noranycomplaintsregardingbreachesofcustomerprivacyduringthereportingperiod.

Operational Excellence

Withtwonewprojectsachievingfirstgenerationduringthereportingperiod,weexperiencedaturningpoint,movingfrom a construction to an operational focus,makingoperationalexcellencea key priority.

OperationalexcellenceissoughtinthemanagementofallouroperationalsitesandisgovernedbyourinternalmanagementsystemsandAssetManagementFramework.Ourassetevaluationandmanagementsystemsensure that operational aspects are consideredinthedesignphase,resultingingreatercertaintyofoperatingcosts,shortandlong-termavailabilityandreliabilityofourgenerationassets.

Anumberofassetmanagementbenchmarkingexercisesandoperationsperformancereviewswereconductedduringthereportingperiod.Theseinitiatives evaluated the effectiveness ofoursystemsandprocesses,ourassetperformance relative to business expectationsandgeneralassetcondition. These studies form the basis ofourstrategicdecisionsinrelationtotheuse,maintenanceandexpectationsof the plant.

InAustralia,wecontinuetobringtheoperationsandmaintenanceofourwindfarmsin-house,andhaveexperiencedsubstantialcostsavingsandavailabilityimprovements as a result.

Globally,ourinstalledcapacityincreasedby24percentto622.5MW,andourcleanenergygenerationincreasedby7percentto1.7millionMWh(includingjointventures).

Wedivestedour50percentstakeintheLuzonHydroCorporation,Philippines,inlinewithourstrategytofocus on our core markets of Australia

and South America.

Pacific Hydro. Supplier of

•Below:DannyHalstead,WindFarmSupervisoratPortland,Australia


Our Response to Climate Change

Ourcommitmenttopoweringacleanerworldreflectsourdedicationtoaddressingclimatechange.Wearecommittedtoreducinggreenhousegasemissionswhilemeetinggrowingglobalenergyneeds.Therearefourkeycomponentstoourresponsetoclimatechange:

1 Developingmorenewrenewableenergyprojectstohelpreducetheglobalrelianceonfossilfuels;

2 Helpingourcustomersmeettheirclimatechangemitigationobligationsbyprovidingmoreproductsandservices;

3 Advocatingforgovernmentactiontoreducecarbonemissions;and

4 Minimisingourowncarbonfootprint.

Ourdevelopmentpipelineofrenewableenergyprojectsincludesrun-of-riverhydrofacilities,windfarms,conventionalgeothermalprojectsandalarge-scalesolarfarm.TheseprojectsarelocatedinAustralia,BrazilandChileandareatvariousstagesofdevelopment.

Wearelookingatwaystoimproveourproductsandservicestomeetthecurrentandfutureneedsofourcustomers.Perenia,oneofourjointventures,isaspecialistfirmestablishedtosupportcompanieslookingtorespondtotheopportunitiesandchallengesassociatedwiththeimpactofclimatechange(refertop.17).

Acrossourthreekeygeographicmarkets,weadvocatepolicyandindustryresponsestoclimatechange.Thisoccursinarangeofways,fromworkingwithgovernmentstoaddressregulatorymarketissuesimpactingrenewableenergygeneration,tolobbyingfortheintroductionofawell-designedcarbonpricetosupportthetransitiontoalow-carboneconomy(refertop.15).

Thisyearourcarbonfootprintreducedby37percent,primarilyduetoadecreaseinconstructionactivities(refertop.26).

Climatechangepresentssignificantopportunitytoourbusinessandalsoconsiderablerisk.Changestolongtermrainfallandwindspeedtrendsandthenumberofextremeweatherevents,havethepotentialtoimpactourrevenueandoperatingcosts.Regulatorychangesrelatedtoclimatechangeinareassuchascarbon,electricityandgovernance,posepotentialrisksoropportunities.Ourbusinessmodelwillallowustoactonopportunitiestoexpandourgeographicspreadanddiversifyintootherrenewabletechnologiessuchassolarandgeothermal.Inaddition,wearewellplacedtoincreasebusinessandcommunityawarenessofclimatechangethroughour stakeholder relationships.

Opening of La Higuera and La Confluencia

TinguiriricaEnergía,our50:50jointventurewithNorwegiancompanySNPowerInvest,wascreatedtodevelopcleanenergyprojectsintheTinguiriricaValleyinChile.Throughthispartnership,twolarge-scalerun-of-riverhydroprojectsweredeveloped–LaHigueraandLaConfluencia.BothhydroswereofficiallyopenedbyChileanPresident,SebastianPiñera,ataninaugurationceremonyinOctober2010.

Combined,theprojectsinjectmorethan300MWofnewgenerationcapacity intotheChileanenergymarket,equivalenttopoweringonemillionChileanhomesannually.Theyarethelargesthydrostobe commissioned in Chile since 2000 and are our first development projects to be delivered in Chile. Construction ofthetwoprojectscostover$800millionandtheircompletionsawPacificHydrorankedamongstthelargestrenewablegeneratorsinChile.Bothprojectsproducetradeablecarboncreditsandareregisteredunder the Kyoto Protocol’s Clean Development Mechanism.

The construction of these projects had asignificantimpactonlocaleconomies,creatingjobsforlocalresidentsandprovidingopportunities for contractors and suppliers. Infrastructuresuchasroadswerebuiltorimprovedandtheinfluxofworkersprovidedotherbusinessopportunitiesincludingcafes,restaurants,accommodationandtouristattractions.

TinguiriricaEnergíahasacomprehensiveCommunityRelationsPlan,whichaimstostrengthentiesbetweenthecompanyandlocal communities.

• Above:PresidentPiñerawithmembersofPacificHydro’sBoardandGeneralManagementTeam


Public Policy and Advocacy

Weplayaleadingroleinadvocacyfortherenewableenergyindustry.Independentlyandaspartofbroaderindustrybodies,wepromotethebenefitsofrenewableenergyandactivelyseekopportunitiestoprovideaccurateinformationandinformedadvicetoarangeoflocal,stateandfederalpolicymakersandregulatorybodies.Inaddition,wecontributetopublicpolicydevelopmentanddebatesbyprovidinginformationandcommenttoourexternalstakeholders,includinglocalcommunities,serviceproviders,media,politiciansandpolicymakers.

ThekeystrategicadvocacyissuesinAustraliaduringthereportingperiodwereasfollows:

ISSUE POSITION

Carbonpricepolicypackage An explicit price on carbon is the most important foundationpolicytoassistAustralia’stransitiontoalowcarboneconomy,drivingjobsandinvestmenttowardscleanerenergyandlowercarbonindustries.Longterminvestorcertaintywillalsobeachieved.

Internationalemissionstrading Internationalemissionstradingprovideseconomicefficiencyandglobalenvironmentalbenefits.Providedsufficientsafe-guardsonqualityandintegrityareinplace,internationalemissionstradingenablesthemostcost-effectivecarbonabatementtobesourced,deliveringeconomicefficiencyandenvironmentaloutcomes.Additionally,internationallylinkedcarbontradingsupportsothercountries’effortstoencourageglobalinvestmentandinteresttowardslowercarbonopportunities.

Energymarketreforms Thereisaclearroleforaprocessofcomplementaryenergymarket reform. We continue to advocate for reforms to transmissionandinterconnectorinvestmentframeworks,transmissionprojectfundingreforms,andemissionsstandards fornewgenerationplants.

The Australian Senate Inquiry into the Social andEconomicImpactofRuralWindFarms

Whilewedonotbelievethereisalinkinhealthcomplaintsandwindturbineoperation,wearewillingtoparticipateinaproperlyconductedstudywhichconsidersallhealthfactors,includingpsychosomatic issues.

The value of industry-lead best practice communityengagement

Wearecommittedtomaintainingourhighstandardofplanningandcommunityconsultationinternallyandpromotingstandardsacross the industry.

•Above:CapeNelsonSouthWindFarm,Australia

Codrington Wind Farm Celebrates 10 Successful Years of Operation

LocatednearPortFairyinsouth-westVictoria,theCodringtonWindFarmwasourfirstwindenergyproject,andAustralia’slargest,whenitwasofficiallyopenedin2001.WecelebratedCodrington’stenyearmilestoneinJune2011withtwoseparateevents,bothintendedtothank the local community and the Moyne Shire Councilfortheirstrong,continuedsupportof the project.

Creating sustainable communities

SinceestablishingtheCodrington/YambukSustainableCommunitiesFund,wehaveinvestedover$280,000into63localcommunityprojects,supportinglocalprojectsandencouragingcommunity cohesion and sustainability.

Powering a cleaner world

In its first ten years of operation the project has already abated more than half a million tonnes ofgreenhousegasemissionsandproduced437,895MWhofelectricity,theequivalentenergyneedsofaround10,000Australiahomesannually.

Renewable jobs

TheprojectwasthefirstprivatewindprojecttobedevelopedinAustralia,markingthebeginningofthewindindustryinAustralia.Ourpresenceinthe area has provided opportunities to a number oflocalbusinesses:

Days Electrical

Familyownedandrunbusiness,DaysElectrical,werethemainelectricalcontractorforCodrington.DaysElectricalhave since provided electrical services for someofourotherwindfarmprojects,includingtheYambuk,CapeBridgewaterandCapeNelsonSouthWindFarms.

Codrington Settlement and Gardens Bed and Breakfast

GeoffTonks,alongwithhiswifeYuan,operatestheCodringtonSettlementandGardensBedandBreakfast,welcomingthousandsofvisitorsannually.Likeotherneighbouringresidents,Geoffisastrongsupporterofthewindfarm.Hehasconstructedaviewingplatformonthegroundsofthepropertytotakeadvantageofthepanoramicwindfarmviewsandtofurthereducatehisguestsonrenewableenergy.

Keppel Prince Engineering

TheCodringtonwindfarmtowerswerethefirstwindfarmtowersmanufacturedbyKeppelPrinceEngineeringinPortland,Victoria.Sincethen,KeppelPrincehavebecomeawellrespectedwindtowermanufacturerinAustralia,providingjobsforaround150localpeople.

• Left:Communitymembersattendingthe tenyearcelebrationsatCodringtonWindFarm; Right:SteveGarner,GeneralManagerofKeppelPrinceEngineering,Portland

Spotlight on Codrington – 10 Years



Memberships

Strategicmembershipswithlocal,nationalandglobalassociations help drive the sustainable development ofourindustry.Theseassociationsinclude:

•ABEEolica(BrazilianWindEnergyAssociation)•AustraliaBrazilChamberofCommerce•AustraliaChileChamberofCommerce•AustraliaLatinAmericaBusinessCouncil•AustralianGovernment’sCouncilonAustralia

Latin America Relations•AustralianSustainableEnergyAssociation•BrazilianNationalTechnicalRulesAssociation

(HealthandSafetyCommittee)•ChileanGeneratorAssociation•CleanEnergyCouncil•CommitteeforPortland•GlobalFoundation•TheChileanAssociationofRenewableEnergy•TheClimateInstitute•TheCommitteeforEconomicDevelopmentofAustralia

Inaddition,weholdpositionswithinthefollowingorganisations:CouncilonAustraliaLatinAmericaRelations;RenewableEnergyTaskforceoftheAsiaPacificPartnershiponCleanDevelopmentandClimate;CleanEnergyCouncilofAustralia;ChileanGeneratorAssociation;ABEEolica;andaCoalitionofAustralianbusinessessupportingAustralia’stransitiontoalow-carboneconomy.

Perenia

Ourcarbonconsultingbusiness,Perenia,isajointventurewithengineeringconsultants,SnowyMountainsEngineeringCorporation(SMEC)andJapanesetradinghouse,Mitsui&Co.Ltd. Perenia offers complete carbon solutions. This includes partneringwithprivateandpublicsectorclientstoauditandassesstheiroperations,developstrategiestomanagegreenhousegasemissionsandsatisfyregulatoryrequirements,facilitate emission reduction projects and create and broker the transaction of carbon credits. Perenia has developed a diverse portfolioofemissionreductionprojectsinbothdevelopingandindustrialisedcountries,operatingthroughoutAustraliaandAsia.

Moree Solar Farm Partnership

In2009theAustralianFederalGovernmentannouncedthe$1.5billionSolarFlagshipsprogram,aninitiativetosupporttheconstructionofuptofourlarge-scale,grid-connectedsolarpowerstationsinAustralia,usingthermalandphotovoltaic(PV)technologies.Theprimaryobjectiveoftheprogramistoprovidethefoundationforlarge-scale,grid-connected,solarpowertomakeasignificantcontributiontoAustralia’sfutureelectricity supply.

TogetherwithconsortiumpartnersFotowatioRenewableVentures(FRV)andBPSolar,PacificHydroappliedforfundingthroughtheprogram.InJune2011theMoreeSolarFarm

consortiumwasidentifiedasthesuccessfulbidderandwaschosentodevelopAustralia’sfirstutility-scalesolarPVprojectundertheSolarPVtechnologycategory.

BasedinMoree,NewSouthWales,theprojectissettobeoneoftheworld’slargestsolarPVgenerationfacilitiesandwilloperateforatleast25years.

Thisground-breakingutilityscalesolarpowerplantwillbedevelopedusingmulti-crystallinesolarPVtechnology.TheinstallationwillprovideademonstrationoftheviabilityofutilityscalesolarprojectsinAustraliaandwilladdressanumberofkeyresearchissues,includingenhancingunderstandingoftheinteractionofutilityscalesolarwiththeAustralianelectricitygrid.

Theprojectwilldelivermultiplebenefitstovariousstakeholders.Theseinclude:

•Creatingmanyemploymentopportunitiesboth inandaroundMoree;

•Deliveringadditionalindirecteconomicopportunities;

•Creatingneweducationalandskills-basedtrainingopportunities;

•DeliveringnewcleanelectricitytomeetAustralia’sincreasingenergyneedsandprovidingenoughsolarpowerforapproximately45,000homes;

•Reducingthetown’srelianceonagriculture;

•CreatingopportunitiesfortheIndigenouscommunity;

•FurtheringthedevelopmentoftheAustraliansolarPVindustry;and

•AttractingadditionaltouriststoMoree.

Sustainable Supply Chain

In2010wedevelopedasustainabilitysuppliersurveyand evaluation tool to help us better understand our supply chainimpactsonpeople,theenvironmentandtheeconomy,and identify key sustainability risks and opportunities in our supplychain.Thesurveyaddressedgovernance,ethics,policies,riskmanagement,systems,reportingandkeyareasincludingsafety,labourstandards,communityengagementandenvironmentalmanagement.

ThequestionnairewastrialledontwoprocurementcomponentsofawindenergydevelopmentprojectinWesternAustralia.Thisprocesshelpedusidentifyopportunities,includingsuppliersalreadyactiveinlocalIndigenousprograms,aswellasareaswewouldneedtoworkwithsupplierssuchasimprovingcapabilitiesinreportinggreenhousegasemissions.

Ournextstepwillbetorefineandadaptthesurveytosupportvarious parts of the business.


Locally and globally, we aim to be socially responsible, maintaining good relations with our host communities. Our global strategy is to deliver positive outcomes to our host communities by being a responsible neighbour and community member. We aim to be involved in, and support, public events near our project sites so we can better understand and become part of our host communities. This may be in the form of sponsorship, consultation, participation in local events or financial contributions through our community investment programs.Local community engagement, impact assessments and development programs have been implemented at all of our operations.

Invested in Communities

Employees agree that we contribute positively to the wider community

Community funds

Developed Pacific Hydro’s first Community Charter

$450,000

93% 7

2010

Community


Our Approach

In


Community Consultation

Our community consultation process provides stakeholders withtheopportunitytoparticipateinthedevelopmentofaproposed project. Consultation styles are adapted to best suit each community’s needs. Our methods of communication includeformalandinformalcommunityconsultationsessions,communityliaisonofficers,newsletters,surveysandviaourcommunityengagementandinvestmentactivities.

WedevelopedaCommunityCharterduringtheyear (pacifichydro.com/wp-content/uploads/2011/10/Pacific-Hydro-Community-Charter.pdf)whichisaguidingframeworkonhowweengageandworkwithcommunitiesinaconsistentwayacrosstheglobe.ImplementationoftheCharterwillcontinueoverthecomingyear.InBrazil,wecontinuetoimplementourCommunityAffairsPolicywhichisalignedwiththeCommunityCharterandprovidesguidancetoemployeesondevelopingandsustainingrelationshipswithlocalcommunities.

Impacts

Community Investment Programs

Inanefforttoencouragesocialdevelopmentandsustainabilityinitiatives,localcommunityengagement,impactassessmentsanddevelopmentprogramshavebeenimplemented at 100 per cent of our operations. Except for ourAustralianhydroprojects,communityinvestmentfundshave also been established at all of our operations.

A portion of profits made by each project are invested back into thelocalcommunitythroughgrantsintheareasofeducation,healthandsafety,sport,environment,cultureandthearts.

Ourapproachisnotphilanthropic,butstrategic.Throughourfunds,wepromoteinnovativesolutionstolocalissues,encourageorganisationstoformpartnershipstodelivercommunityservicesandworktowardspositive,long-termoutcomes for broader community benefits.

Applicantsmustmeetcertaincriteriaandwehaveacomprehensiveprocessfordeterminingsuccessfulapplicants.Thisincludesmeetingwithregionalauthoritiesand representatives from the local municipality to ensure fundingisbeingallocatedappropriatelywithintheregion.

Australia

ThebenefitsofourSustainableCommunitiesFundsreachmuchfurtherthantheimmediatebeneficiarygroupsorindividuals.OneofourfundrecipientsthisyearwastheMen’sShedinPortFairy,Victoria.Men’sShedplaysacriticalroleinregionalcommunities,helpingaddressmentalandphysicalhealthissuesandsocialisolationwiththeultimateaimofimprovedhealthawareness.Aswellasprovidingaplaceformentotalkfreelyaboutissues,Men’sShedparticipatesinongoingcommunity-basedprojects.Thisallowsolderretiredmentocontinuetousetheirskills,includingwoodworkandmetalwork,whilementoringyoungermeninthecommunity.

Brazil

Nowinitssecondyear,ourBraziliancommunityfundwasbroadlybasedonthecompany-wideframework.However,weareimplementinganumberoflocalchangestoensurethefundisstructuredappropriatelyforthecommunitieswherewearelocated.OurCommunityLiaisonOfficerisworkingwiththelocalcommunitiestodevelopanapplicationmethodwhichcanbeutilisedbyallcommunitymembers.Inadditiontoworkingwithindividualsandcommunitygroupsaspartofthecommunityfund,ourCommunityLiaisonOfficeralsoworkswithlocalauthorities to focus efforts on sustainable development and other community concerns.

Chile

Creciendo Juntos,thenameofourChileanfund,translatesto‘growingtogether’.Wehavetakenthisapproachliterally,withthescopeofthefundgrowingasweaimtocontributetoimprovingthequalityoflifeforlocalcommunities.Inadditiontothefund,ourcommunityinvestmentactivitiesincludesupportingcultural,sportingandcommunaleventsandprovidingmaterialcontributionsforlocalinitiatives.Thisyear,wehavecontinuedtogrowourcommunityinvestmentprogram,establishingandleveraginganumberofpublic-privatepartnerships.Involvingcommunitymembers,localbusinessesandotherstakeholders,the partnerships provide opportunities for self-sufficiency and promote tourism and local development.

Community Investment Fund Spend

Australia

Chile including

TE Joint Venture

Chile

Brazil

07/08 08/09 09/10 10/11

$

0

100,000

200,000

300,000

http://pacifichydro.com/wp-content/uploads/2011/10/Pacific-Hydro-Community-Charter.pdf

http://pacifichydro.com/wp-content/uploads/2011/10/Pacific-Hydro-Community-Charter.pdf


TinguiriricaEnergía,our50:50jointventureinChile,alsohasacommunityinvestmentprogram,TinguiriricaParticipa,or‘TinguiriricaParticipates’.AswellasprovidingfundingopportunitiesforlocalslivingintheTinguiriricaValley,TinguiriricaParticipaworkswithcommunityandgrassrootsleaders,providingtrainingandassistingwithpreparingsocialandcommunityneedsassessments.Theprogramalsoworkswithcommunitygroupsandindividualstoidentifyadditionalpublicandprivatesourcesoffunding.

Job Opportunities and Local Sourcing

Hiringemployeesandcontractorslocallyprovidesbenefitsto both local communities and our business. While no formal policyexistsregardinglocalemployment,wehirefromlocalcommunitieswhereappropriateandweencourageourcontractors to do the same.

Aspartofourcommitmenttolocalemployment,wehavecommittedtohiringalocalIndigenousconsultanttosurveyearthworksonceconstructioncommencesatourCrowlandsWindFarminVictoria,Australia.

InChile,allourmajorcontractsrequirecontractorstoprovidejobopportunitiestolocalresidentswherepossible.Wealsoprovidetrainingtolocalcommunitymemberstogaintheskillsnecessaryforemploymentandtodeveloptheirownbusinessesas service providers on our projects.

AtourChacayesHydroproject,weworkcloselywithalocalWorkforceCommitteethatassistsunemployedmenandwomenfromnearbytownstogainemployment.Asconstructioncomestoanend,thenumberofemployeesandcontractorsrequiredonsitediminishes.TheCommitteenegotiatedwithourmaincontractortoensurethattheremainingworkersonsitearepredominantlyfromthelocaltownsinordertoprolongtheiremployment.Inaddition,theCommitteehasnegotiatedforanumberofongoingmaintenanceservicestobeprovidedbylocalworkersafterprojectcompletion.Aspartofourcontinuouscommitmenttoimprovecommunityrelations,wehaveprovidedtheCommitteewithanoffice,computersandtrainingonhowto keep and analyse accurate statistical data.

Aswellashiringlocalemployees,itiscommonpracticetosourcefromlocalorregionalsupplierswhereproductsandservicesarecompetitiveinquality,priceandservice.DuringtheearlystagesofprojectdevelopmentinAustralia,roadshowsareheldwithlocalindustry,providinginformationtolocal contractors and suppliers on business opportunities created by our project. We undertake detailed assessments of thehealth,safety,environmentalandsustainabilityperformanceofcontractorspriortoanymajorcontractbeingawarded.

Sourcinglocallyimprovessupply,supportsthelocaleconomy,increasesefficiencyandhelpsusmaintaingoodcommunityrelations.

Visual Impact – Wind Farms

Constructionofawindfarminevitablycreatesachangetothelocallandscapeandleadstovisualimpactwhich,insomecases,isnotalwayswelcomedbyallmembersofthecommunity.Westrivetobeopenandresponsivetocommunityconcerns,workingwithcommunitiestofindsolutionstovalidconcerns.

LandscapeandVisualImpactAssessmentsareincludedintheenvironmentalassessmentsundertakenwhenplanningawindfarm.Thepurposeoftheseassessmentsistoidentifysignificantfeaturesofthelandscapewithinthevicinityofawindfarm;assessthelandscapeandvisualvaluesofthesiteandareawithinthewindfarm;anddiscussanypotentialmitigationmeasuresthatcanbeusedtoavoidvisualimpactstosurroundingneighbours.

Duringthecommunityconsultationprocess,photomontagesareproducedasawayforcommunitiestovisualisetheexistinglandscapefromdifferentvantagepointsbeforeandafterthewindfarmisconstructed.

Atoneofourdevelopmentsites,locatedinKeyneton,SouthAustralia,ongoingcommunityconsultationrevealedneighbours’concernsabouttheproposedwindfarmrelatingto the cluster of turbines closest to them. A number of issues wereraised,includingvisualamenity.Basedontheconcernsraised,threeturbineshavebeencompletelyremovedfromtheinitialprojectdesignandafurthertwowererelocated.

Noise and infrasound impacts can be found in the Environment section(refertop.29).


The temporary nature of some employment opportunitiesintheAltoCachapoalValley,nearourChacayesprojectinChile,isamajorissue faced by local residents. This means that onceemploymentceases,somehouseholdslose their sole source of income.

Inanefforttoaddressthisissue,improvequality of life and promote sustainable entrepreneurshipintheValley,wedevelopedacapacity-buildingtrainingprogram.Bydeliveringspecialisedtrainingprogramstoteachorstrengthenexistingskillsandincreaseentrepreneurialcapabilities,householdscouldbeprovidedwithadditionalmeansofincome.WepartnerwithOrganismoTécnicoIntermediodeCapacitaciónandCorporaciónLaEsperanzatoprovidethistrainingannually.CorporaciónLaEsperanzaisanon-governmentalorganisationthatpromotesdevelopmentforindividuals,families,groupsandcommunitieslivingeitherinpoverty,orinmarginalisedsectionsofthe community.

RepresentativesfromPacificHydromeetwithlocal community members on a monthly basis todiscussanyissuesoropportunitiesarisingfrom our construction project. Communities identifyareasofdevelopmentinterests,whichwethenworktowardsachievingcollaboratively.Itisatthesemeetingsthatpotentialtrainingcoursesaredetermined,evaluatedagainstcriteriaincludingsocialrelevance,technicalfeasibility,socialequity,sustainability,timingand cost.

Throughthetrainingprogram,manysmallbusinesseshavebeenestablishedandexistingbusinessesgiventhecapacitytoexpand.BertaGemaContreras,alocalresident,hasparticipatedin a number of courses offered and runs a small fast food business in Coya.

“I’vebeenabletolearnandutilisenewtools that have enabled me to become a microentrepreneur,deliverabetterserviceand boost my business. The support I’ve receivedfromPacificHydroduringthecourseandevenfollowingitscompletion,hashelpedmetoachievemypersonalgoals”,shesaid.

• Below: Local employee at Chacayes tree nursery, Chile

Creating Opportunities in Local Communities


Indigenous Rights

IndigenousheritageisprotectedunderFederalandStatelegislationaswellasthroughourHealth,SafetyandSustainability(HSS)Policy,whichensuresthatlandandresourcesunderourcarearemanagedwithsensitivityandthatwehaveduecareforculturalheritage,localconditions and concerns.

InAustralia,weacknowledgeAboriginalpeopleasbeingtheTraditionalOwnersofthelandwhereweoperateandrecognisetheirplaceasprimaryguardiansofAboriginalculturalheritage.Aspartofourenvironmentalassessmentandplanningprocess,consultantarchaeologistsandanthropologistsworkwiththeTraditionalOwnerstoundertakeculturalheritageandethnographicsurveysofthesite.Thisprocessallowsustoidentifyandavoidimpactingareasofculturalorethnographicvalue.Priortoconstruction,CulturalHeritageManagementPlansorsimilaragreementsaredevelopedwiththeTraditionalOwners.Theseplansoutlinemethodsusedtoavoid,minimiseandmitigateourimpactsonareasofculturalheritage,archaeologicalvalueorIndigenoussignificance.

InChile,sitesofculturalorarchaeologicalheritagevaluearealso protected. As part of the Environmental Impact Assessment forourChacayeshydroproject,aCulturalandArchaeologicalPropertyManagementPlanwasdevelopedandcontinuestobe implemented. The Plan ensures that sites of potential culturalorarchaeologicalvaluearenotimpactednegativelybyourpresence.Archaeologicalclearingandinspectionactivitiesoccurpriortoandduringexcavationactivities,andifanyareasofpotentialsignificanceareidentified,constructionactivitiesceaseuntiltherelevantauthoritiesarenotified,andappropriatemeasures applied.

Accordingtostudiesconductedbeforeconstructionofourwindfarms,noneofourprojectsinBrazilarelocatednearindigenousorculturalheritage.

Respecting Rights

Werespecttherightsofouremployees,contractorsandthebroadercommunity.Wecomplywithallrelevantlawsrelatingtohumanrightsandourhumanrightscommitmentsarecoveredbythefollowingpolicies:

•EqualOpportunitiesPolicy

•CodeofConduct

•WhistleblowersDisclosureandInvestigationProcedure

•Health,SafetyandSustainabilityPolicy

•CommunityCharter

Ourrecentsupplychainworkincludesasustainabilityassessmentwhichcontainscriteriaonhumanrights(refertop.17).WearealsoactivemembersoftheUnitedNationsGlobalCompactHumanRightsWorkingGroupforBusiness,bothpresentingandparticipatinginsessionsintendedtosharelearningsonhumanrightschallengesandopportunitiesforbusinesses.

Therewerenoincidentsofgrievancesrelatedtohumanrightsduringthereportingperiod.

• Top:SurveyingatourChacayeshydroproject,Chile; Bottom:Localcommunitymembers,Brazil


Producing energy from clean, renewable energy sources and abating harmful greenhouse gas emissions helps us to power a cleaner world. We apply a clear, strategic approach to managing our environmental footprint, implementing environmentally sound practices across our global operations. Land and resources under our care are managed with sensitivity, having due regard for cultural heritage, local conditions and the biodiversity of the region.

Clean energy generated

C02-equivalent (C02-e) abated during the reporting period

Employees agree that Pacific Hydro is environmentally responsible

CO2-e abated since 1994

1.3million

98%

Environment

1.7million

9.4million

MWh

tOnnES

tOnnES

Our Approach


Biodiversity

Werecognisethatourpresencehasaneffectonbiodiversityandweaimtominimiseourimpactonthenaturalenvironmentwhereverpossible.Biodiversityisamajorconsiderationwhenplanningdevelopmentprojectsandwearecommittedtopreservingbiodiversityinareaswherewearepresent.

PartoftheannualmaintenanceatTheDrop,oneofourhydropowerplantslocatedinNewSouthWales(NSW),Australia,includesdrainingthepondagearea.Thepondageishometoanumberoffishspecies,someofwhicharethreatened.WeworkwithFisheriesNSWtorelocatethefishtoanearbyriverandtoremoveanyexoticfishharmfultonativespecies.Thisyear,almost800,000fishwererelocatedaspartofthisprogram.

WearealsoconductinganongoingcumulativeeffectsstudyintheAltoCachapoalValleyinChile.Currentlyinitsfirstphase,thestudywillhelpuspredictandmitigatefutureeffects,notonlyforspecificprojects,butalsotheimpactofallfutureprojectsintheValley.Duringthisperiod,environmentalandsocialimpactsoccurringasaresultofourpresenceintheValleyarecloselymonitored.Onceenoughdatahasbeencapturedtoperformtrendanalysis,wewillmovetothesecondphase.Thiswillinvolvedevelopingatooltoassistwithfutureprojectsbyallowingustobettermanagethesignificantenvironmentaland social impacts of our current and future projects.

TwoofourwindfarmsarelocatednearanareaofpermanentenvironmentalprotectionclosetothecoastinnorthernBrazil.Thisareaishometoaspeciesofmonkeyswhichhadbeenthetargetofillegalhunters.Sincetheprojectswerecompleted,thepresenceofourwindfarmoperatorsandsecuritypersonnelhaspreventedthehuntersfromreturning,allowingthemonkeystoreturntotheirnativehabitatandpreventingillegaltree-cuttingin the area.

Thetableonpage25identifiesconservation-significantspecieswithhabitatswhichmaypotentiallybeaffectedbyouroperations. While none of these species are directly impacted byouroperations,theyareidentifiedinourenvironmentalmanagementplansandappropriatemitigationmeasuresarealsoinplace.Theseincluderegularandseasonalmonitoringactivities,reclaimingdisturbedareasasquicklyaspossibleandpromotinghabitatdiversitywithinreclaimedareas.

GreenPower program helping the Victorian State Government

TheVictorianGovernmentiscommittedtodeliveringservicessustainablyandhasaproventrackrecordinmanaginggreenhousegasemissions.Asidefromimprovingenergyefficiencyacrossgovernmentoperations,resultinginsubstantialemissionsreductionsandcostsavings,theGovernmenthasalsopurchasedsignificantamountsofGreenPower.In2010and2011,alldepartments,aswellas12agencies,sourcedaminimumof25percentofelectricityfromrenewablesourcesthroughthepurchaseofaccreditedGreenPower.

Thispurchasingeffortwasledbythe Department of Sustainability andEnvironment(DSE)onbehalfoftheGovernment.TheDSEleadstheVictorianGovernment’seffortstosustainablymanagewaterresourcesandcatchments,climatechange,bushfires,parksandotherpublicland,forests,biodiversityandecosystemconservation.

The DSE ran a formal competitive tender processtoselectaGreenPowerprovider.The evaluation criteria included requirements ofanylargepurchasingprocess,suchastechnicalcapability,pastperformanceandvalue for money. In addition to these standard factors,applicantswereassessedonqualitysystems,ethicalpurchasingpolicies,environmentalmanagementsystemsand corporate attitude and actions on sustainability. Based on our performance againsttheevaluationcriteria,PacificHydrowaschosentobecometheGreenPowersuppliertotheVictorianStateGovernment.

TheVictorianStateGovernment’smanagementofitsowncarbonemissionsisastrongexampleofGovernmentleadershipandweareproudtohaveassistedtheGovernmentinachievingthistarget.

• Above:CapeBridgewaterWindFarm, Victoria,Australia


Birds and Bats

Concernsrelatingtothepotentialimpactofwindturbinesonbird life are occasionally raised by stakeholders. As part of the planningandenvironmentalassessmentprocess,extensivesurveys and site assessment studies are performed to identify and quantify bird and other fauna in and around the site. The studiesallowustopredicttheextentandmagnitudeofpotentialimpacts.Consultantecologistsproviderecommendationsformitigationmeasures,suchasavoidingcertainhabitattypesorinclusionofbuffersaroundnestingandbreedingsites.

These recommendations can be incorporated into the project design,allowingourprojectengineerstoavoidplacingturbinesinareaswithsensitivebirdactivity,includingmigratoryflightpathsandnestingsites.

Monitoringtheactivityofbirdsandbatsforanumberofyearsfollowingwindfarmconstructionisoftenarequirementoftheplanningpermit.Whilewehavemetourbirdmonitoringobligationsforourwindfarmstodate,wecontinuetomonitorbirdactivityinthePortlandareatoincreaseourunderstandingof their movements.

Wealsoprovidedsupporttooneofourbirdmonitoringconsultants,EmmaPaulding,topresentataninternationalconferenceduringthereportingperiodontheeffectiveness

ofusingdogstomonitorbirdandbatmortalities.

1 InternationalUnionforConservationofNature(IUCN)‘RedList’,

2 EnvironmentProtectionandBiodiversityConservation(EPBC)Act1999

3 TheFloraandFaunaGuarantee(FFG)Act1988

4 NationalForestryCorporationofChile(CONAF)RedBook (1989&2007editions)

5 RegulationsfortheClassificationofWildlifeSpecies(SupremeDecree75,2004)oftheGeneralSecretariatofGovernment(SupremeExecutiveDecree50,publishedonMarch24,2007)and(SupremeExecutiveDecree51,publishedonJune30,2008)

Species – Common and Scientific Names Conservation Status

AUSTRALIA

Orange-belliedParrot(Neophema chrysogaster) CriticallyEndangered1CriticallyEndangered,MarineandMigratory2Threatened 3

White-belliedSeaEagle(Haliaeetus leucogaster) Least Concern 1 MarineandMigratory2Threatened 3

SouthernBent-wingBat(Miniopterus schreibersii bassanii) CriticallyEndangered2Threatened 3

CHILE

Small Catfish (Tricomycterus areolatus) Vulnerable5

TorrentDuck/PatoCortacorrientes(Merganetta armata) Least Concern 1

TricahueParrot/LoroTricahue/BurrowingParakeet (Cyanoliseus patagonus)

Least Concern 1,Vulnerable5

PuyaChagual(Puya berteroniana) Vulnerable4

Cactus Rojo (Eriosyce curvispina) Vulnerable5

CiprésdelaCordillera(Austrocedrus chilensis) Vulnerable1Vulnerable4

Bailahuén(Haplopappus taeda) Vulnerable5


Greenhouse Gas Emissions

ThisyearPacificHydroassetsgeneratedmorethan 1.7millionmegawatthoursofclean,renewableenergy,leadingtotheabatementofmorethan1.3milliontonnesofgreenhousegasemissions.

During2010/11,4,744tonnesofgreenhousegasemissions1 weregeneratedthroughprojectconstruction,on-goingoperationsandoffice-basedactivitiesofourmajority-ownedassets. The construction of the Chacayes run-of-river hydro project in Chile accounted for 83 per cent of the company’s totalgreenhouseemissionsduringthereportingperiod.Over1.1millionlitresofdieselfuelwasconsumedatChacayes,primarily by construction vehicles. As the project neared completiontowardstheendofthereportingperiod,dieselfuelconsumptiondecreased.Thisresultedina42percentreductioninprojectgreenhouseemissionsanda37percentreductioninthecompany’stotalgreenhouseemissionsfromtheprevious year.

InAustralia,greenhouseemissionsweremorethan60percentlowerthanthepreviousyear,largelyduetotheconstructionofClementsGapWindFarmreachingcompletionduring2009/10.

InBrazil,themainsourceofgreenhouseemissionswasvehiclefuelconsumption.Brazilisthefirstofthethreegeographicbusinessunitstocommencetrackingindirect(scope3)greenhousegasemissionssuchasairtravel.

Emissionsfromourjointventureprojects,LaHigueraandLaConfluencia,aredetailedintheTinguiriricaEnergíaSustainabilityReport,“Reporte de Sostenibilidad 2009–2010.”

Greenhouse Intensity of Operations (tonnes CO2-e/MWh)

Country Greenhouse Intensity

Australia 0.00012

Brazil 0.00128

Chile 0.00134

1 Includes scope 1 and 2 emissions only. Includes 100 per cent of emissionsfromChacayesHydroproject(73percentownership).Excludesregionalornationalemissionsfactorsforpurchasedelectricityincaseswhereelectricityissourceddirectlyfromlocalrenewableenergysources.

Total Greenhouse Gas Emissions – Scope 1 and 2

Global Emissions by Source

09/10

340.8

76.2

7169.4

116.6

146.2

4480.8

10/11

Australia

Chile

Brazil

Tonnes of CO2-e

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Stationary Energy LPG (scope 1)

Purchased Electricity (scope 2)

Stationary EnergyDiesel (scope 1)

Transport EnergyPetrol (scope 1)

Wastewater (scope 1)

Transport Energy Diesel (scope 1)

18%

9%66%

3%

3% 1%


Children’s Books Developed in Chile

Eachyear,weundertakeinitiativestoincreaseenvironmentalawarenessintheAltoCachapoalValley,locatedintheO’HigginsregioninChile.AsapartofourenvironmentalandsocialobligationstofinanciersundertheloanagreementfortheChacayesproject,theinitiativesprovideuswithanopportunitytostrengthentieswithourneighboursandlocalcommunitieswhileproducingnetenvironmentalbenefits.

Twoyearsagowedevelopedthe‘Alto Cachapoal Valley Atlas: Stories about its flora and fauna.’ The Atlas described the glaciers,rivers,plantsandotherspeciesthatlivewithintheValley.Collectablecardswerepublishedwiththelocalnewspaperandschoolchildrenwereencouragedtocollecttheseriestocreatetheirownlocalisedatlas.The success of the Atlas drove us to continue theinitiativesandthisyearwecommissionedtwochildren’sauthorstowriteaseriesofshortstoriesontherichecologicalandculturalvalueoftheValley.ThebooksweredistributedtoallschoolsinMachalí,theareaclosest to our sites and all public schools in Rancagua,thenearestregionalcentre.Aplaywithanenvironmentalthemewasperformedatthelaunchandcopiesofthebookswerealso provided to national senators and deputies,localdignitariesandauthorities.

WealsodevelopedamapofthewholeValley,whichcontainsinterestingenvironmentalfacts,tobedistributedtothe visitors of the Cipreses River National Reserve. These initiatives support our commitment to the environment and our desiretohaveacloserrelationshipwiththecommunitiesneighbouringourprojects.

• Above: Alfredo Zañartu, Development Manager, presenting the books to local school children

Energy Use

InChile,weranacampaignonefficientenergyuse,focusingonreducingourpaperandelectricityconsumption.OurSantiagoofficereplaceddichroicbulbswithLEDluminariestoreduceenergyconsumption.TheelectricityconsumedduringconstructionofChacayescamefromCoyaandPangal,ouroperationalhydropowerplants,locatednearby.

OurMelbourneofficepurchases100percentGreenPowerandthemajorityofenergyconsumedatourwindfarmssitesinAustraliaissourcedfromourowngeneration.

InBrazil,wereplacedregularwindowswithglassbrickstoaidinsulationandhaverecordedsavingsof120kWhpermonth.

Total Direct Energy Consumption (Scope 1) by Primary Source

Energy Type Gigajoules

StationaryEnergy–Diesel 11,490

StationaryEnergy–Petrol 2

StationaryEnergy–LPG 6,834

TransportEnergy–Diesel 41,810

TransportEnergy–Petrol 2,000

TransportEnergy–E-25 150

Total 62,286

Total Indirect Energy Consumption (Scope 2) by Primary Source

Electricity Type Gigajoules

Electricity–Renewable 21,820

Electricity–Non-renewable 780

Total 22,600


Native Vegetation

We adhere to local and national regulationsrelatingtoallaspectsofnativevegetation.Occasionallyour construction activities require ustoremoveorinterferewithnativevegetation.Throughsystematicsitevegetationsurveys,weareabletominimisetheremovalofvegetation.Followingconstruction,werehabilitatethe site to its natural condition as much as possible. Contractors are also required to abide by this commitment. At our ChacayesconstructionprojectinChile,agroupofcommunitymemberswereemployedtorestorenativevegetation,providinganinvaluableservicetoourenvironmental performance on site. Theworkerswereinvolvedinthenativespeciesnursery,forestplantingandother associated maintenance activities.

OurspeciesrelocationprogramatChacayes has also been successful. After assessments revealed our constructionactivitieswouldhaveanegativeimpactonPuyaChagualandCactusRojo,twonativespeciesofflora,anumberofrelocationsiteswereidentified and soil protection and preparationworksundertaken.Thespecieswererescuedandrelocated,andtodate,95percentofrelocatedplantsarenowwellestablished.Lossesarebeingreplacedtenfold.

InVictoria,Australia,projectdevelopersare required to offset the removal of nativevegetationbypreservingasimilartype,qualityandareaofnativevegetationelsewhere.UndertheNativeVegetationRegister,NativeVegetationCreditspurchased by project developers ensure thatvegetationofaspecificconservationvalue(similartothatlost)isprotectedandsecuredinperpetuity.Forexample,the losses incurred at our Cape Nelson SouthWindFarmwereoffsetbythepurchaseofcreditsthroughtheVictorianGovernment Department of Sustainability and Environment’s Bushbroker scheme. These credits came from an area of nativevegetationadjacenttothewindfarm site.

Water

Althoughourrightsarenon-consumptive,werelyonwatertopowerourhydroprojects. Water is diverted from a river orpre-existingstoragesourcethroughourpowerstationsandthenreturnedtothe adjacent river system. This method ensuresminimalfloodingandhasalowenvironmental impact.

InChile,wemonitorwaterlevelstoensurewaterflowisadequatetopreserve aquatic life and river bank-dwellingspecies.Waterqualityisalsomonitoredforallnewprojects.Ourwaterconsumptionfluctuatesdependingonthestageofourprojects,withconstructionsitesrequiringwaterforproduction of concrete and in certain cases,dustsuppression.

Ourwindfarmsrequireonlyminimalwaterandwatertankshavebeeninstalled for this purpose. In Australia wedonotcurrentlyhavesystemsinplacetomeasureourwaterusageatmanysitesaswehavechosentofocusonreducingpaper,energyconsumptionandwastegenerationinstead.InBrazil,wemeasureourwateruseandhavesetafivepercentwaterreductiontarget.

Waste

Regulardonationsofelectricalhardwarearemadetolocalcommunitygroups,providingthemwithequipmentsuchas personal computers and printers. OurInformationTechnologyteaminMelbourne coordinated the third annual e-wasterecyclingprogramduringthereportingperiod.

RecyclingoccursatallsitesinAustraliaexcept Ord Hydro in Western Australia. Althoughwearestilldevelopingaformalwastemeasurementsystem,anumberofinitiativeswereimplementedtoreducewastegeneration.Wasteauditsforallsiteswereundertakenandanumberofareaswereidentifiedasweaknesses.Weareimprovingoursystemsandwillidentify and implement three initiatives toreducewasteduringthenextreportingperiod.

InSantiago,ourwastepaperismanagedbyadoptioncharityFundación San José.Aswellasachievingtheenvironmentalbenefitsofrecycling,thecharity receives cashinreturnforrecyclingpaper.

InApril2011,weconductedamajorrecallofhazardouswastestoredatourmainwarehouseatChacayes.Atotalof12,960kgofsoil,sawdust,cardboardandotherfabricsweredisposedoffromminor spills and maintenance activities. Waste measurement systems have been establishedatsomeofoursitesinBrazilandwewillbegintrackingwasteattheremainingsitesduringthenextreportingperiod.AtourValedosVentosandMillenniumsites,weachievedaonepercentreductioninwastesincetheprevious year.

•Below:RevegetationworksatChacayes,Chile


Environmental Compliance

Werecogniseourresponsibilitytoprotect and improve the environment andarecommittedtoconductingourbusinessinaccordancewiththespiritand letter of all applicable environmental lawsandregulations.Ineachofourcountriesofoperation,allobligationsrequiredbylaworbyourenvironmentalmanagementsystemarekeptinaregister.Wedidnotrecordanysignificantspills and did not receive any fines or non-compliances for environmental incidentsduringthereportingperiod.

Country-levelHealth,SafetyandEnvironmentManagersareresponsibleforachievingcomplianceagainstthisregister.TheenvironmentalcommitmentswithinourHealthSafetyand Sustainability Policy are implementedthroughourEnvironmentalManagementSystem(EMS),whichallowsustomonitorandimproveenvironmentalmanagementpracticesonsite.OurAustralianandBrazilianoperatingsitesarecertifiedtotheinternationalenvironmentalmanagementstandard,ISO14001.TwoofourChileanoperatingassets,CoyaandPangalHydros,arenotcurrentlycertifiedtoISO14001.Theseprojectsarealmost100 years old and many of the permits required for certification did not exist at thetimethesesiteswerebuilt.Weareintheprocessofobtainingthesepermitsto enable us to apply for certification underISO14001.

Noise

Whilemodernwindturbinesaredesignedtominimisenoiselevels,theystill produce some noise. Wind turbine noisecanbeattributedtotwomainsources. Mechanical noise comes from componentswithintheturbineitself,suchasthegeneratororgearbox.Advancedengineeringmeansthatthisisnotasignificantfeatureofthetotalnoise emissions. The main source is aerodynamicnoiseoriginatingfromthewindpassingovertheblades,makinga‘swish’sound,thelevelsofwhichdependonthewindspeed.Thesenoiselevelsdiminishwithdistancefromthewind

farm and may be masked considerably bythebackgroundnoiseenvironment,especiallyfromwindpassingthoughtreesandaroundbuildings.Neartothewindfarm,itmaybeaudibleattimesdependingonthelocationandfactorssuch as the number of turbines operating,windspeedandwinddirectionand other atmospheric conditions like temperatureorhumidity.Importantly,thenoiselevelsatsurroundingdwellingsarerestrictedaccordingtogovernmentregulationsand/orplanningconditionsprotectingtheamenityofthesurrounds.

InAustralia,wecommunicatewithlandholders,neighboursandcommunitiesaboutwindfarmnoiseemissionsgeneratedbywindfarms,includingourdesignapproachandcompliancerequirements,throughourcommunityconsultationprogram.Duringtheplanningstage,independentacousticconsultants prepare noise impact assessments,includingbackgroundnoisemonitoring,todemonstratecompliancewiththegovernmentregulationsand/orplanningconditions.

Onceconstructioniscomplete,weconductadditionalnoisemonitoringtoensurecompliancewiththeregulationis achieved. We also have a formal complaintsprocedurewhichcanbeusedby members of the community if they haveconcernsrelatingtoPacificHydro,includingissuesrelatingtonoise.

Infrasound

There has been recent debate about infrasonicemissionsfromwindfarms.Infrasoundcanbegeneratedbynaturalsourcessuchaswaves,waterfallsandwind,orman-madesourcesincludingvehicles,air-conditioningsystemsandwindfarms.Intheinterestsofinformingthedebate,inNovember2010wecommissionedanacousticconsultingfirm,Sonus,tomeasureandcompareinfrasoundlevelsfromtwoofourwindfarmswithothercommonenvironmentalinfrasoundsources,bothnaturalandman-made. Their report found that the infrasoundgeneratedbywindturbinesiswellbelowestablishedguidelineperceptionthresholdsandalsobelowlevels produced by other natural and man-made sources. The full Sonus reportcanbefoundonourwebsite:pacifichydro.com.au/files/2011/10/Sonus-Report.pdf

The recent Australian Senate Inquiry on‘TheSocialandEconomicImpactsofRuralWindFarms’foundthattherewasnodirectlinkbetweenadversehealtheffectsandwindturbines.Infact,noscientificpeer-reviewedliteraturesuggeststhatinfrasoundproducedbywindfarmscausesanyhealth impacts. International and nationalhealthbodies,governmentdepartments and medical professionals rejectalinkbetweenthetwo.

•Below:CodringtonWindFarm,Australia

http://www.pacifichydro.com.au/english/information-centre/faqs-2/noise-and-infrasound/?language=en

http://www.pacifichydro.com.au/english/information-centre/faqs-2/noise-and-infrasound/?language=en

30 Sustainability Report 201130 Sustainability Report 2011

Our people are paramount to our success and their health, safety and wellbeing is our priority. Developing and managing our employees and their talents allows us to improve as a business and we are committed to fostering a diverse, innovative and inclusive work environment. Training and development opportunities are provided to employees at all levels.

Employee training and development spend

Reduction in Total Recordable Injury Frequency Rate since 2007

Total Recordable Injury Frequency Rate

Employees placed through our internal recruitment policy

$920,000

36

59%

7.2

Workplace

Our Approach


Health, Safety and Wellbeing

Health and Safety Performance

We aim for continual improvement in ourhealthandsafetyperformancewiththeultimategoalofachievingzeroincidents,injuriesorillnesses.Significantresourcesarededicatedtoensuringaworkplacesafefrominjuryorharm,althoughresponsibilityforhealthandsafetyisalsoplacedwitheachemployee.

OurHealth,SafetyandSustainability(HSS)Policyoutlinesourcommitmentstoensuringahealthyandsafeenvironment for our employees. Aggressivetargetsaresetannuallyat a corporate and business unit level toimproveourworkplacehealthandsafety performance. This approach hasseena59percentreductioninTotalRecordableInjuryFrequencyRate(TRIFR)inthepastfiveyears.Preventative and corrective measures areappliedthroughourriskidentificationprocessesandincidentsareinvestigatedwhereappropriatetoavoidrecurrences.

Relevanthealthandsafetytrainingis provided to site and office-based employees and contractors to ensure ourstaffareequippedwiththeknowledgerequiredtoperformtheirjobsafely. This includes first aid education sessions,audiometrictesting,heightsmedicaltesting,regularhealthchecks,fluvaccinations,accesstoourEmployeeAssistanceProgramandmanualhandlingprograms.

Health and Wellbeing Initiatives

Lookingafterthehealthandwellbeingof our employees improves productivity andengagementwithourbusiness.Ourhealthandwellbeingprogramhasabroadrangeofstrategies,includingcoreinitiativeswhichareimplementedglobally,inadditiontoanumberofinitiativesspecifictoeachregion.

Annual health checks are available toallemployees,andfreshfruitissuppliedtoallouroffices.EnglishlessonsareofferedinChileandBrazil,and Spanish classes are provided to Australian employees. Our leave purchasepolicyallowsemployeesto purchase additional leave in Australia andChile.InAustralia,initiativesincludeamothers’feedingroomaswellasareturntoworkbonusfrommaternityorpaternityleave.InAustraliaandChile,weprovidetrainingsessionsonstressmanagementandworklifebalance.Australian and Chilean employees also have access to our Employee Assistance Program,whichprovidesafreecounsellingservicetoemployeesandtheirimmediatefamilies.InBrazilandChile,mealvouchersandhealthinsurance are provided to all employees. InBrazil,wealsohaveadentalplanforstaff. Our Chile business provides employeeswithaccesstochildcarelocatedwithinourSantiagoofficebuildingandanemergencyloanservice.

Contractor Health and Safety

Contractorsformalargepartofourworkforce,especiallyduringconstruction. Contractors accounted for90percentofallhoursworkedduringthereportingperiod.Therefore,thehealth,safetyandwellbeingofourcontractorsisimportanttous.Awiderangeofcontractorsperformworkonourbehalfandarechargedwithresponsibility for associated project risks. All contractors are required to meet our standards,whichincluderelevantinternalpoliciesandprocedures,legislation,international standards such as ISO14001,OHSAS18001andindustrybest practice. Audits for contractor performanceagainstthesestandardsandourpoliciesoccurregularlytoensureworkisbeingperformedinamanner that meets our expectations.

Weworkcloselywithourcontractorstoensurewearepreparedintheeventofanemergency.Testexercisesandemergencydrillsareperiodicallyperformedatallsitesandoffices,sometimesinvolvinglocalemergencyservices,toprepareemployeesandcontractorsforsituationsincludingsiteevacuation,fire,emergencyrescueandrescuefromheights.

‘Be Responsible, Save Lives’ Road Safety Campaign

Our Chacayes construction project is located in the foothills of the AndesMountains,around150kmsouth-westofSantiagoinChile.Roadsand vehicle accidents are one of the greatestriskstoouremployeesandcontractors. We launched a road safety campaigninDecember2010asanengagingandeducationalwaytoreducethisrisk.Thecampaignpromotedresponsible behaviour for employees andcontractors,atworkandathome.

Members of Carabineros,thelocalpolice,spoketoouremployeesandcontractors about the importance of roadsafetyandpamphletswithsafetytipsweredistributedtoallworkersenteringthesite.

The‘ChacayesCup’soccertournamentwasjointlylaunchedbyPacificHydroandAstaldiFeGrande,ourmainEngineering,ProcurementandConstructioncontractor.Twelveteams,representingdifferentfunctionsofthetwoorganisations,participatedin the tournament in an environment whichfosteredfriendshipsandasenseof responsibility for the safety of our colleaguesandtheirfamilies.


Whilsttheabsolutenumberofincidentsincreased,theTRIFRdecreased due to an increase in labour hours at our construction project in Chile.

WefollowtheUSOccupationalHealthandSafetyAssessmentSeries(OHSAS18001)whenreportingworkplaceinjuries.

Total Recordable Injury Frequency Rate is calculated using the following formula: (Number of Lost Time Injuries + Number of Medical Treatment Injuries) ÷ Number of Hours Worked x 1,000,000.

‘LostTime’referstonumberofscheduledworkdayslost.

2006/2011 Overall Total Recordable Injury Frequency Rate

2007/2011 Total Recordable Injury Frequency Rate by Business Unit

Total Number of Incidents Reported

Achieving Best Practice Health and Safety in Brazil

Providing a healthy and safe environment for our employees is our top priority. We set challenging health and safety targets each year with the ultimate goal of achieving zero harm to our employees and contractors. Our Brazilian business unit has risen to the challenge, completing 35 months without a Lost Time Injury or Medical Treatment Injury (as at 30 June 2011). This is an outstanding achievement and demonstrates the strong culture of health and safety we have worked hard to establish.

Some of the risks our Brazilian employees face each day on site include working at heights, working with high voltage electricity, contact with poisonous animals and using vehicles on unsealed roads. It is a testament to both our employees and our health and safety management system that these risks have been mitigated and managed so effectively.

Our senior management team in Brazil, as in all our business units, has made a strong commitment to health and safety. The team’s dedicated commitment provides a healthy and safe environment for our workers, improves overall employee behaviour and guarantees the efficiency of our health and safety management system.

We aim for continuous improvement and have started implementing an employee behaviour-based safety management program. Designed to support early identification of risks and hazards, the program will increase the safety awareness and understanding of employees and contribute to our overall performance against health and safety targets.

• Above (L-R): Wagner de Assis Quintino, Marci Andrade, Agildo Araújo and Leandro Ribeiro Alves da Silva, members of our Health and Safety and Operations teams in Brazil.

Australia

Chile

Brazil

0

5

10

15

20

25

07/08 08/09 09/10 10/11

06/07 07/08 08/09 09/10 10/11 11/12

Actual

Target

0

4

8

12

16

20

Medical Treatment Injuries

First Aid Treatment Injuries

Lost Time Injuries

06/07 07/08 08/09 09/10 10/11

Near Misses0

50

100

150

200

250

300

350

400

450


Total Labour Hours

Site 2008/09 2009/10 2010/11

Employees Contractors Employees Contractors Employees Contractors

Australia

Operations 7,520 30,785 19,014 59,341 23,028 48,982

Construction 9,849 107,105 1,921 3,762 270 124

Office 85,948 2,684 63,346 793 65,827 552

Brazil

Operations 3,329 19,968 6,060 65,839 6,246 65,361

Construction 8,245 587,700 0 0 0 0

Office 39,786 5,201 50,111 26,322 53,292 7,742

Chile

Operations 42,445 311,159 43,809 291,248 51,785 418,692

Construction 45,736 1,586,476 85,486 3,778,934 120,620 4,664,196

Office 127,636 0 145,798 8,276 157,888 7,249

Corporate

Office 97,452 6,288 111,092 4,446 116,790 6,613

Health and Safety Objectives

Eachyear,corporateHealth,SafetyandSustainability(HSS)objectivesaresetwiththeaimofdecreasinginjuryrates,improvingmanagementsystemsandincreasingemployeeengagement.Performanceagainsttheseobjectivesisdirectlylinked to each employee’s performance appraisal and bonus payment. The tabletotherightsummarisesourperformanceagainstthesetargets.

Objective Result

Injury Rates AchieveaTRIFRnogreaterthan6.8by30June2011–a15percentreductioninTRIFRcomparedto2009/10.

✕ WeachievedaTRIFRof7.2whichwasa 10 per cent reduction.

Management System Improvements

Close out 80 per cent of all HSS-related corrective actions raised from 1 July 2010 to 30 June 2011 by their due date.

Total number of corrective actions closed out by 30 June 2011 was91percent.

Employee Engagement Recommend and implement three HSS-related initiatives withintheirbusinessor functional unit by 30 June 2011.

Employeesworkedinteams and achieved this objective.


Diversity

We are proud of our inclusive and diverse culture. Equalopportunitiesareprovidedtoallstaffandweleveragefromandencouragediversitytoenhanceourcompetitiveadvantage.Accordingtoourrecentemployeeengagementsurvey,theOrganisationalAlignmentSurvey,83percentofemployeesagreethatourcultureandpracticesareequallyfairtoallpeople,irrespectiveofgender,race,countryoforiginorreligiouspersuasion.

Equal employment opportunity and anti-discrimination are specificallyaddressedintheCodeofConduct.Inaddition,weareintheprocessofdevelopingaDiversityStrategyinlinewithouroverallgoalofattractingandretainingtalentedpeople.

Parental Support

Wefosterafamily-friendlyenvironmentinwhichouremployeescanmanagefamilycommitmentswithworkresponsibilities. Our Maternity and Paternity Policies in Australia gobeyondstatutoryrequirementswithrespecttomaternityandpaternityleaverights.Chileanlegislationallowsfor18weeksofcappedpay,thebalanceofwhichwemeetwhereemployees’salariesareabovethecap.InChile,employeesalsoreceiveachildcareassistanceallowancefromthegovernmentfortwoyears.InBrazil,employeesreceive24weeksoffullpay.Australianemployeesareeligibleforfourdayspaidmaternityorpaternityleaveandtheprimarycaregiverreceivesabonuspaymentupontheirreturntowork.Wealsoofferflexibleworkingarrangementstoensureasmoothtransitionforparentsreturningtowork.Sincetheendofthereportingperiod,ourMaternityandPaternityLeavePolicieshavebeensignificantlyimproved for our Australian employees.

Atotalofeightfemaleemployeestookmaternityleaveduringthereportingperiodandallreturnedtoworkafter

their maternity leave period ended.

Human Resources

Employee Profile – Males to Females by Region

Percentage of Males to Females by Employee Level

Percentage of Males to Females by Employment Type

Board EmployeesGeneral Managers

ExecutiveManagers

Males

Females

0

20

40

60

80

100

%

Full time ContractorPart timeMales

Females

0

20

40

60

80

100

%

Australia Brazil Chile

0

20

40

60

80

100

120

140

Males

Females


Turnover

Totalturnoverrateforthereportingperiodwas14percent,aonepercentincreaseonthepreviousyear.Werecogniseemployeeturnoverwillcontinuetobeanissuethisyearasthemarket for employees becomes more competitive in each of ourgeographicregions.

Wehaveimplementedasuccessionplanningframework,continuedourgloballeadershipprogramandinitiatedothertalentmanagementactivities.Theseinitiativesareintendedtofacilitatethedevelopmentofstaffandensurewearemotivatingandchallengingouremployees.

Training and General Development

Peopleareourmostvaluableassetandweseektodevelopourstaffinlinewithbusinessneedsandpersonalaspirations.

Eachemployeeisallocatedageneroustrainingbudgettoensurethatourpeoplereceivethetraininganddevelopmentnecessarytokeepthemmotivatedandchallenged.Duringthereportingyear,thetotalamountspentontrainingwas$920,000,whichequatestoalmost$3,000peremployee.

All employees receive annual performance appraisals. Performancetargetsaresetinlinewithourfive-yearbusinessplanandperformancereviewsareheldaftersixmonthstoassessprogressagainsttargets.Careerpathsandprofessionaldevelopmentopportunitiesarediscussedduringemployeeperformanceappraisalsandemployeesareencouragedtoprovidefeedbacktotheirmanagersduringthesereviews.Annualtrainingisofferedtoallemployeesandmanagerson effective performance appraisals.

We have systems in place to ensure a smooth transition foremployeesmovingfromworkinglifetoretirementorredundancy.InAustralia,careerendingsaremanagedthroughour Redundancy Policy and statutory requirements in Chile and Brazilincludesimilarprovisionsforemployeesinthoseregions.

Remuneration and Bonuses

Employeesareremuneratedinawaywhichisbothmarketcompetitiveandconsistentwithbestpractice.OurRemunerationPolicyaimstoattract,motivateandretainemployeesbyaligningteamandindividualrewardswithbusinessperformance.Itensuresglobalconsistencyofourremunerationstructureandrewardsbothfinancialandnon-financialperformance.

We did not employ any entry-level employees in Australia or Brazilduringthereportingperiod,butourminimumwagelevelsacrossallourregionsofoperationarewellabovelegalminimums.InChile,theratioofentrylevelwageswas2.0comparedwiththestatutoryminimumwage.

All benefits provided to full time employees are also provided to part time employees on a pro-rata basis.

2010/11 Turnover by Gender and Region

•Above:LizZorondo,JillyAdamsandKimDerriman,membersofourAustralianDevelopmentteam

AustraliaTurnover

= 9%

ChileTurnover= 18%

BrazilTurnover= 16%

Males

Females

0

5

10

6

5

27

2

23

15

20

25

30

35

Num

ber

of le

aver

s


Employee engagement

Organisational Alignment Survey

Employee satisfaction is measured and assessed yearly throughanOrganisationalAlignmentSurvey.Thisallowsustobenchmarkourperformanceagainstotherorganisations,address key areas of concern and ensure that the aspirations ofourorganisationarealignedwithourpeople.Whileourrankingshavedecreasedslightlysincelastyear,westillconsistentlyrankwellaboveotherglobalorganisationsusingthistool.Comparedtoallindicesoftheglobaldatabase,wearesubstantiallyaboveaverageinboththe‘clarityofourvision,missionandvalues’(76thpercentile)andthe‘consistencyofourstrategies,plans,projects,processes,actionsandoutcomes’ (73rdpercentile).

Whilsttheorganisation'ssupportforemployeeswassubstantiallyaboveaverage(72ndpercentile),ouroverallcommitmentrankingdeclinedfromthe74th to the 63rdpercentile.Thecommitmentrankingisinfluencedbythreekeyareas–employeesunderstandingoftheirrole,organisationalsupportforemployeesandemployees’supportfortheorganisation.Ourgoalforthenextfinancialyearistobringouroverallcommitmentscorebackabovethe75th percentile.

Respecting Rights at Work

Wecomplywithallapplicablelaws,regulationsandotherlegalrequirementswithrespecttolabour.5.6percentofouremployeesinAustraliaarecoveredbycollectivebargainingagreements.NoemployeesinChilearecoveredbycollectivebargainingagreementsandinBrazilemployeesarecoveredundertheirrelevantunionagreements.Wehavenotidentifiedanyrisksatanyofouroperationsrelatingtoouremployees’rightstofreedomofassociationorcollectivebargaining.

Grievance Practices

OurGrievanceProcedure,WhistleblowerDisclosureandInvestigationProcedure,EqualOpportunityPolicyandCodeofConductencourageemployeestodealwithanygrievancesthroughappropriatemechanisms.Whereinternalmeasuresdonotsufficientlyaddressissues,employeesareentitledtoseekexternalsupportthroughourEmployeeAssistanceProgramandrelevantexternalorganisations.

Internal Recruitment Policy

Werecognisethathavingtherightpeopleintherightjobssupportsthesuccessandlongevityofourbusiness.Tothisend,wehave developed an Internal Recruitment Policy,whichallowsustocapitaliseonthediversitywithinourworkforcebydevelopingandpromotingexistingemployeeswherepossible.Thepolicy,alreadybeingusedinAustralia,wassuccessfullyrolledouttoourChileanbusinessunitduringthereportingperiod.

Asarelativelysmallorganisation,oneofourchallengesisbeingabletoofferemployeesinterestingandchallengingcareerpaths.Encouragingandfacilitatingdevelopmentandcross-promotionofemployeesassistsuswithour retention rates and provides opportunities for employees to advance and develop to their full potential.

Internalrecruitmentisstronglysupportedby our company culture. Employees are encouragedtodevelopskillsandcompetencies to open up opportunities forcareerdevelopmentwithinourbusiness.Throughourannualreviewprocess,potentialcareergoalsareidentifiedandemployeesandtheirmanagersareabletoplanacareerpathbasedonthesegoals.Staffarealsoencouragedtomakeuseofinternalandexternalfacilitiestogaintheknowledge,skillsand behaviours necessary to meet current andfutureorganisationalneeds.

Therewereatotalof110appointmentsduringthereportingperiod,33percentofwhichwereinternalappointments.Ofourtotalnumberofinternalappointments,39percentwerefemaleand61percentmale.

• Above: Brett Dutton, Executive Manager, Group Operations, placed through our Internal Recruitment scheme


GRI and UnGC Index

Report section GRI indicators UNGC Principle

Page Reference

About this Report 2.1,2.8,2.9,3.1,3.3,3.6,3.7,3.8,3.11,3.13 Inside cover

About Us 1.1,1.2,2.2,2.3,3.5,4.8,4.12,4.14,4.15,4.16,4.17,EUSS19 7 1–8

Governance 1.2,2.6,4.1,4.2,4.3,4.4,4.5,4.6,4.7,4.8,4.9,4.10,4.11,LADMA,LA13,HR3,HR4,SODMA,SO3,SO4,SO6,SO7,SO8

1–6,10 9–10

Business Partners 2.5,2.7,4.13,4.14,ECDMA,EC1,EC2,EC8,EC9,ENDMA,EN6,SODMA,SO5,PR7,PR8,EUSSDMA,EUSS1,EUSS6

11–17

Community ECDMA,EC6,EC7,EC9,HRDMA,HR11,SODMA,EUSS19 1–10 18–22

Environment ENDMA,EN3,EN4,EN6,EN7,EN9,EN12,EN13,EN14,EN15,EN16,EN18,EN22,EN23,EN28,PR1

7–8 23–29

Workplace ECDMA,EC5,LADMA,LA2,LA3,LA4,LA7,LA8,LA10,LA11,LA12,LA15,HR5,EUSSDMA,EUSS16,EUSS17,EUSS21

1–6,10 30–36

Acknowledgements

TheSustainabilityteamwouldliketothankallthepeople,toonumeroustomention,whohaveassistedwithandsupportedthisproject.Itwouldnothavebeenpossiblewithoutyourinput.

ThetableaboveprovidespagereferencesfortheperformanceindicatorsreportedagainstandincludestheprinciplesoftheUnitedNationsGlobalCompact.AcompleteGRIIndexcanbefoundonourwebsiteatpacifichydro.com.au/sustainability/sustainability-report/. The complete set of GRI G3.1 and Electric Utility Sector Supplement indicators are also available from www.globalreporting.org

•Backcoverimage:CachapoalValley,Chile

http://pacifichydro.com/english/sustainability/sustainability-reports/

http://www.globalreporting.org

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Sustainability Report 2011 - Pacific Hydro · the period 1 July 2010 to 30 June 2011. The document reports on ... Sustainability Report 2011 1. Welcome to our 2011 Sustainability