Brighter Energy for Today and Tomorrow

Clean Energy Legislation in Australia Australian Government's Clean Energy legislation was passed by the Senate in November 2011 including the following components • Default target of 5% abatement on 2000 emissions by 2020 • • A carbon pricing mechanism which commenced on 1 July 2012, starting with a fixed carbon price of A$23 per tonne rising at 2.5% per annum in real terms for the first three years (up to 1 July 2015) From 1 July 2015, Australia will move to an emissions trading scheme with the carbon price set by the market A floor price of $15/tonne was originally proposed under the scheme post July 2015. However the scheme was changed in August 2012 to remove the floor price and instead link the Australian scheme to the European ETS. Consequently post 2015 up to 50% of an entity's liability may be met through international permits (either EUAS or CERS etc) with a limit of 12.5% from CERs. As a result Australian carbon prices from July 2015 onwards are expected to be somewhat lower than under the original scheme - given that the current price of carbon in Europe is lower than the previous price floor of $15/tonne; An Energy Security Fund was established to administer . • . Transitional assistance provided for generators with emissions intensity of over 1.0 tonnes/MWh (rate capped at 1.3 tonnes/MWh) Transitional assistance is in the form of cash compensation of A$1 billion in the first year and annual permits (free carbon units) of 41.7 million per annum for four years from 1 July 2013² Negotiation for the closure of 2,000MW of electricity generation capacity by 2020 was originally proposed (generator intensity at least 1.2 tonnes/MWh will be eligible). However no commercial agreement could be reached and this has subsequently lapsed. EnergyAustralia is expected to receive the following transitional carbon assistance payments and permits from the federal government: FY- - June end year Cash compensation (A$m) $257.5m FY12 FY131 FY14 FY15 FY16 FY17 1. 2. Source: Company estimates and Clean Energy Act 2011 Permits² Carbon price (A$) Total compensation (A$m) $257.5m 23.0 10.7m 24.2 $259.4m 10.7m 25.4 $272.3m 10.7m Floating price 10.7m Floating price The absence of compensation in FY13 is a function of timing. Cash compensation was received in FY12, prior to the commencement of carbon pricing, while the first set of permits are allocated in FY14, the second year of carbon pricing Each permit represents one tonne of carbon equivalent pollution C EnergyAustralia 20 20

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