Denise McMillan Chairman, HVCCLT BITRE Colloquium: June 2008, Canberra

1. Denise McMillanChairman, HVCCLTBITRE Colloquium: June 2008, Canberra

2. Despite the debate about Climate Change, coal will continue to be in strong demand into the medium term – although “costs” are likely to increase with carbon taxes or equivalent: “There will be a 55% growth in coal power generation (2.1m MW) by 2020 “ By 2020 China will have twice the coal fired power generation capacity of the US; - But only half the capacity per capita “ Coal remains the most cost effective option for power generation”….….…. McLLvaine Report: Coal Fired Boilers; World Analysis and Forecast 2007 Coal Outlook

3. Coal Price Movement

4. Demand

5. Hunter Valley Coal Chain: The Worlds Largest Coal Export Operation • 40 Coal Mines • 17 Producers • 30 Load Points • > 80 Different Brands of Coal • 2 Above Rail Operators • 29 Trains/15,000 trips per year • 2 Track Owner/Operators • Haulage distances up to 350km • 2 Coal Loading Terminals – KCT & CCT • 5 Dump Stations • 1.5Mt of Working Stockyard • 5 Ship Berths and Loaders, “4 Queues” • Approx. 1000 vessels per year • Average vessel size is 84kt • Avg 2 Cargoes per Vessel • Multiple Components per Cargo • Tidal constrained river port • 10% Domestic Consumption • 90% Export – mostly Thermal coal • 70% to Japanese Power Stations • Turn of Arrival loading port • JIT cargo assembly process • 16 independent organisations required to move each tonne of coal • No control over demand – only two weeks visibility and highly variable volumes • Avg 5 days clean coal on stock at the mines Q: How to maximise system throughput and drive efficient asset utilisation?

6. HVCCLT: A Cooperative Planning and Operating Model • Joint Venture between the organisations that own the train, track, terminal and port infrastructure • The movement of every tonne of domestic and export coal is planned via the HVCCLT • HVCCLT provides a ‘system wide’ forum for pursuing operational improvements and making efficient decisions about future investment in infrastructure • Provides centralised planning services on behalf of its members: • Short term objective – focus on maximising daily capacity and throughput • Long term objective – realise cohesive investment planning • Established under an MoU in July 2005 – operates on a premise of cooperation between the member organisations • Membership includes all transport asset owners in the Hunter Valley – and the newest operator, NCIG, have expressed intent to participate in the model • 30 Employees seconded from member organisations • $5 million investment in state-of-the-art constraint based planning technology and models

7. Minimum Throughput Estimate : Base Coal Chain Capacity 118Mt Less Planned ARTC & PWCS Asset Unavailability 11Mt Less Risk Adjustment (Demand profile, Reliability, Other) 2Mt Less 10% Unplanned Capacity Losses 10Mt Minimum Throughput Estimate (Mtpa) ~95Mt Declared Capacity 2008

8. HVCC Performance – YtD Performance to 8 June 2008

9. Vessel Queue Newcastle End of Month Vessel Queue Actual & Forecast (Updated 1 June 2008) Effect of June 8th Storms Vessel Queue with CBS Avg Approx 18, but with big fluctuations Offshore Vessel Queue Pre-CBS Vessel Queue CBS Reinstated CBS Effectively Concluded CBS Commenced by PWCS

10. Track Infrastructure: ARTC / RIC Port Coal Handling Services: PWCS NCIG Train Operators: Pacific National QRN HVCCLT: Planning for performance Is it as simple as “building more infrastructure” ?

11. The Challenge Target delivered capacity 3rd Track Maitland to Whittingham NCIG Full MB-A Dup & 3 Exp aligned Base Case unable to achieve a “target” demand of 145Mtpa of delivered capacity and results in unacceptably high vessel turn around times

12. Strengths Clearer definition of issues Integrated planning is now occurring Formal structure System assets utilisation is being maximised Each member still has full responsibility for assets HVCCLT Model – The Opportunities

13. Weaknesses Is a cooperative collaboration… - Fragile Disparate data sources can lead to non shared understanding Staff are still employed by member organisations – perceptions of independence Model currently excludes producers as members Pieces of the chain are ‘linked’ – not ‘bonded’…. HVCCLT Model – Opportunity

14. Capacity Development: Use & Allocation Demand Profile? What ‘Toys’ ? Funding Risk Profile Risk Sharing Contractual Alignment Queue Management “Hardware” vs “Software”: Coal Chain Complexities & The HVCCLT Model

15. Common understanding and alignment between Producers, Ports, Track & Operatorswith respect to: Demand Profile Asset suite to deliver reliable capacity Investment Triggers Contractual & Commercial Alignment Certainty of Outcome Moving Forward

16. “Greiner” Review Outcomes: Agreement of Coal Chain Principles Establishment of HVCCC as legal entity Producer & Service Provider Board representation HVCCC to employ staff directly Industry commitment to 10 year take or pay rolling contracts Contracts & performance to reflect capacity utilisation HVCCC – Proposal

17. Appendix I – For information only HVCCLT members recognise that infrastructure planning must be undertaken as a holistic system plan HVCCLT members are working together to ensure all plans are complementary and will meet future system needs Note plans are constantly reviewed and future works may change subject to delivery schedules, demand expectations or better options are resolved. The following is an outline of current planned investments to future system development HVCCLT – Overview of planned Investment

18. Port Waratah Coal Services Limited (PWCS) is an unlisted public company owned by the Hunter Valley Coal Industry (70%) and Japanese Coal Customers (30%) PWCS is the worlds largest coal handling facility and currently exports coal valued above $5 billion per year PWCS’ terminals are an important part of regional, state and national economies - coal exported through PWCS facilities counts as Australia’s largest commodity export PWCS owns and operates two coal handling facilities in the Port of Newcastle, Carrington Terminal at a capacity of 25 million tonnes per year and Kooragang Terminal at a capacity of 77 million tonnes per year following the completion of the Project 3D expansion in March 2007 Port Waratah Coal Services

19. Expansion to 102 Mtpa (Project 3D- new pad & stacker) was completed in March 2007, nine months ahead of schedule and under budget Development Application approval to increase the throughput capacity of the Kooragang Terminal to 120 Mtpa (total PWCS approved capacity of 145 Mtpa) was received on 13 April 2007 Board considered expansion at May 2007 Board meeting Announcement of further expansion of Kooragang Terminal at a cost of $458 Million to 88 Mtpa (combined PWCS capacity of 113 Mtpa) made on 20 June 2007 Expansion beyond 113 Mtpa (fourth operating berth, western extension of stockpile pads C and D, the remainder of upgrades to the original stacking stream and the replacement of the remaining two original Kooragang Terminal stacking machines) will be considered in the future in order to meet long term Customer requirements Port Waratah Coal Services

20. Newcastle Coal Infrastructure Group- NCIG • NCIG established August 2004 • Objective : To increase total export capacity for Port of Newcastle via construction of a third coal terminal • Members (shareholding): • BHP Billiton – through Hunter Valley Energy Coal (35.46%) • Centennial Coal (8.78%) • Donaldson Coal (11.60%) • Peabody Energy (17.68%) • Felix Resources (15.4%) • Whitehaven Coal (11.06%)

21. NCIG Status & Timetable • Project Approval granted 13 April 2007 • Quarter 4 2007 : Commence construction of the project and dredging • Quarter 2 2009 : Complete dredging • Quarter 1 2010 : Commence operations (first ship loaded) • End 2010 : Commence full operations – 30 Mtpa

22. Port of Newcastle – Future Capacity PWCS – Kooragang : 88 Mtpa – mid 2009 PWCS – Carrington : 25 Mtpa NCIG – Kooragang : 30 Mtpa – 2010 TOTAL : 143 Mtpa 2010

23. Project 2007-2012 Strategy 2007-2012 Timing Strategy Cost Order of Magnitude Newcastle-Muswellbrook Sandgate Grade Separation Completed 80 km/h approaching Minimbah Bank Completed Muswellbrook Loop & Junction Completed 80 km/h approaching Nundah Bank Completed Antiene to Grasstree duplication Q1 2009 $ 29,891,000 Bidirectional signalling Maitland to Branxton Q3 2009 $ 22,500,000 Bidirectional signalling Grasstree – St Heliers Q3 2009 St Heliers – Muswellbrook duplication Q3 2009 $ 27,000,000 Minimbah Bank 3rd road Q4 2009 $100,000,000 Newdell Junction Q1 2010 $ 7,200,000 Drayton Junction upgrade 2011 $ 6,000,000 Minimbah – Maitland 3rd road 2012 $270,000,000 Muswellbrook – Ulan Ulan line CTC Completed Mangoola (304km) loop Q4 2008 $ 9,030,000 Rylestone Rd (381 km) loop Q4 2008 $ 9,000,000 Wollar (410 km) loop Q4 2008 $ 10,726,000 Aerosol Valley (370 km) loop 2010 $ 9,000,000 Worondi (348 km) loop 2010 $ 9,000,000 Radio Hut (319 km) loop 2012 $ 9,000,000 Muswellbrook – Bengalla duplication 2012 $ 30,000,000 ARTC Investment

24. Project 2007-2012 Strategy 2007-2012 Timing Strategy Cost Order of Magnitude Muswellbrook – Narrabri Togar loop extension Completed Murulla loop extension Completed Gunnedah loop (RIC) Completed Willow Tree loop extension Completed Werris Creek loop extension Completed Ardglen loop extension Q2 2008 $ 9,782,000 Breeza loop extension (RIC) Q3 2008 $ 3,500,000 Curlewis loop extension (RIC) Q3 2008 $ 3,500,000 Werris Creek to Gunnedah CTC (RIC) Q3 2008 $ 10,000,000 Gunnedah – Narrabri CTC (RIC) 2010 $ 10,000,000 Emerald Hill loop extension (RIC) 2010 $ 3,500,000 Boggabri loop extension (RIC) 2010 $ 3,500,000 Braefield passing loop 2010 $ 9,000,000 Murrundi loop extension 2011 $ 6,500,000 Werris Creek Bypass 2011 $ 17,200,000 Parkville loop extension 2011 $ 6,500,000 Scone reconfiguration 2011 $ 1,700,000 Watermark passing loop (RIC) 2011 $ 9,000,000 Muswellbrook – Koolbury duplication 2011 $ 35,000,000 Quipolly passing loop 2011 $ 9,000,000 Wingen passing loop 2012 $ 9,000,000 South Gunnedah passing loop (RIC) 2012 $ 9,000,000 New Liverpool Range alignment 2012 $290,000,000 Burilda loop extension 2012 $ 9,000,000 TOTAL PROGRAMME COST > $1 Billion ARTC Investment

25. Together, the members of the NSW HVCCLT are committed to delivering the most efficient ‘Pit to Port’ shipment of coal for customers. The current structure ensures current system assets are being used to deliver the maximum amount of coal throughput. Short term, HVCCLT focuses on planning & performance of current assets Medium term, investment in complementary infrastructure and operating systems is already underway to ensure we can meet known demand. Long term, HVCCLT members will engage in rolling review of whole of system investment strategies to create a holistic plan ensuring demand and capacity are always in alignment going forward. Conclusion