CORPORATE GOVERNANCE STATEMENT

DIRECTORS REPORT 22 CORPORATE GOVERNANCE STATEMENT 26 BALANCE SHEET 28 PROFIT AND LOSS STATEMENT 29 STATEMENT OF CASH FLOWS 30 NOTES TO THE FINANCIAL STATEMENTS 31 DIRECTORS DECLARATION 53 INDEPENDENT AUDIT REPORT 54 SHAREHOLDER INFORMATION 55 INANCIALS 21

DIRECTORS REPORT In accordance with a resolution of directors of Energy Developments Limited, the directors submit the following report in respect of the financial year ended 30 June 2000. DIRECTORS The names and details of the directors in office during or since the end of the financial year are: J M Carpenter BBus (appointed 2 December 1999) R N H Denton AO, FCA R C Edwards BBus, ASIA (resigned 12 July 1999) R P Gregson BSc (Hons), PhD, MBA, FRACI K G Hilless BE (Elec) W P Pahor BE, MBA P A Whiteman P J Willcox BA (Hons), MA K J Zagzebski CPA, MBA (resigned 2 December 1999). The qualifications, experience and special responsibilities of the directors are set out on the inside back cover of the annual report. Unless indicated otherwise, all directors held their position as a director throughout the entire financial year and up to the date of this report. PRINCIPAL ACTIVITIES The continuing principal activities of the consolidated entity during the year were the development and operation of power generation and waste-to-energy projects. RESULTS The consolidated profit after income tax of the consolidated entity for the financial year was $17,568,401 (1999: $11,035,155). DIVIDENDS The following dividends have been paid or declared by the Company since the end of the preceding financial year: Final dividend 1999 A final 1999 unfranked dividend of 2.3 cents per share was paid on 12 October 1999, totalling $2,245,196. Interim dividend 2000 An interim unfranked dividend of 2.4 cents per share was paid on 10 April 2000, totalling $2,631,713. Final dividend 2000 The directors have declared a final unfranked dividend of 2.5 cents per share to be paid on 18 October 2000, totalling $2,742,868. REVIEW OF OPERATIONS A review of the operations of the consolidated entity during the financial year is set out on pages 4 to 19 of the annual report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Other than matters mentioned in this report, there were no significant changes in the state of affairs of the consolidated entity during the financial year. SIGNIFICANT EVENTS AFTER BALANCE DATE The directors are not aware of any matter or circumstance not otherwise dealt with in this report or the consolidated financial statements that has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Likely developments and expected results in the operations of the consolidated entity have been discussed generally in the annual report. In the opinion of the directors, it would prejudice the interests of the consolidated entity if any further disclosure of information was included. 22

DIRECTORS REPORT (continued) ENVIRONMENTAL REGULATION The consolidated entity s operations in Australia, the United Kingdom and the United States are subject to environmental laws in these jurisdictions. During the year, no member of the consolidated entity was prosecuted nor was any fine imposed on it for breach of environmental laws in any jurisdiction, however, the following compliance issues arose. In Australia, there were minor breaches of environment protection licences at power generation plants at Appin and Lucas Heights (NSW), Broadmeadows (Vic), Karumba and Century Mine (Qld) and at the Whytes Gully green waste gasification plant (NSW). These were reported to the relevant regulatory authorities and remedial action taken. The breach at the Karumba power generation plant was caused by operating at a greater output than licensed to meet the customer electricity demand. Discussions are in progress with the customer to determine whether increased electricity demand will require amendment of environmental permits for the plant. DIRECTORS SHAREHOLDINGS At the date of this report, the interests of the directors in the shares and other equity securities of the Company were: Ordinary shares Options ordinary shares on conversion R N H Denton 130,186 200,000 R P Gregson 31,816 - W P Pahor 8,021,191 700,000 P A Whiteman 7,218,031 700,000 P J Willcox 102,162 - In addition, Messrs Hilless and Carpenter are executives of the NRG group, whose subsidiary, NRG Victoria III Pty Ltd, holds 14,609,670 ordinary shares and 16,800,000 preference shares in the Company. DIRECTORS MEETINGS The attendance of the directors at meetings of the full board and of standing committees during the financial year was: Full board Audit committee Nomination committee Remuneration committee J M Carpenter 4 (5) 2 - - (appointed 2 December 1999) R N H Denton 10 3 2 2 R C Edwards 1 - - - (resigned 12 July 1999) R P Gregson 10 3-2 K G Hilless 9 (10) - - 2 W P Pahor 10-2 - P A Whiteman 9 (10) - - - P J Willcox 10 3-2 K J Zagzebski 5 1 - - (resigned 2 December 1999) Where a director did not attend all meetings, the number of meetings which he was eligible to attend is shown in brackets. 23

DIRECTORS REPORT (continued) SHARE OPTIONS No options were granted to directors during or since the end of the financial year. Details of options previously issued and outstanding at the end of the financial year are set out in note 22 of the financial statements. During or since the end of the financial year, the following ordinary shares were issued as a result of the exercise of options issued to directors in 1996/1997: Number of shares Amount paid on each share 900,000 $2.50 DIRECTORS AND OFFICERS REMUNERATION The remuneration committee of directors has the function of reviewing and making recommendations to the board on remuneration packages and policies for both directors and senior executives. Directors fees are subject to annual review having regard to market levels. Such fees were not altered in the financial year and remain at their 1997/1998 levels. Options were issued in 1996/1997 to directors at an exercise price representing a premium to the market price at the time and, to that extent, were linked to the Company s performance. The remuneration committee reviews the performance of the two executive directors, being at the date of this report Messrs Pahor and Whiteman. Their remuneration is determined on the basis of their performance and the performance of the Company generally. They receive a remuneration package comprising salary, bonuses (which are performance based) and the options referred to above. The performance of senior executives (other than the executive directors) is reviewed at least annually. They receive salaries which are in line with prevailing market rates and which recognise performance. They also receive entitlements under the Company s employee share option plan, which replaced the employee share plan during the year. Details of remuneration provided during the financial year (including associated taxes paid by the consolidated entity) to directors and the five most highly remunerated officers, are as follows: Directors Base salary Bonus Pensions/ Employment Total Superannuation allowances $ $ $ $ $ J M Carpenter 14,167 - - - 14,167 R N H Denton 106,250 - - - 106,250 R C Edwards 7,416-724 - 8,140 * R P Gregson 3,542-38,958-42,500 K G Hilless 42,500 - - - 42,500 W P Pahor 417,933 75,000 7,067-500,000 P A Whiteman 417,933 75,000 7,067-500,000 P J Willcox 42,500 - - - 42,500 K J Zagzebski 28,333 - - - 28,333 Officers R V Byrne 139,205-24,832-164,037 W L Lazarus 166,562-29,688-196,250 R McClenachan 317,622 101,489 55,187 36,145 510,443 A W Rayne 202,083 - - 300,113 502,196 A J Smith 250,000 - - 53,637 303,637 * excludes post retirement benefits paid under an insurance policy 24

DIRECTORS REPORT (continued) INDEMNIFICATION OF OFFICERS During the financial year, a related body corporate paid an insurance premium in respect of a contract insuring the Company s directors against liabilities arising as a result of work performed in their capacity as directors. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of directors and officers liability insurance contracts, as such disclosure is prohibited under the terms of the contract. ROUNDING OFF OF AMOUNTS The parent entity is a company of the kind specified in Australian Securities & Investments Commission Class Order 98/0100. In accordance with that class order, amounts in the consolidated financial statements and the directors report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise. This report has been made in accordance with a resolution of directors. R N H Denton, director W P Pahor, director Melbourne, 5 September 2000 25

CORPORATE GOVERNANCE STATEMENT The directors of Energy Developments Limited are responsible for the corporate governance of the consolidated entity. The directors guide and monitor the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The following are the main corporate governance practices which the consolidated entity had in place during the year. BOARD OF DIRECTORS The composition of the board is determined in accordance with the following general principles: at least half the directors must be non-executive directors; the chairperson must be a non-executive director; and directors appointed are those who are able to contribute to the affairs of the consolidated entity and, once appointed, they may retain office (subject to re-election) so long as they are able to so contribute. Under an agreement with NRG Victoria III Pty Ltd ("NRG"), which was approved by shareholders on 16 September 1997, NRG may nominate two directors. The directors in office at the date of this statement are: Name R N H Denton J M Carpenter R P Gregson K G Hilless W P Pahor P A Whiteman P J Willcox Position Chairman, Non-Executive Director Non-Executive Director (NRG nominee) Non-Executive Director Non-Executive Director (NRG nominee) Managing Director Executive Director Non-Executive Director NOMINATION COMMITTEE The nomination committee is responsible for devising criteria for board membership, reviewing the composition and procedures of the board and the performance of individual directors, and identifying potential candidates for nomination. It comprises the Chairman and the Managing Director. REMUNERATION COMMITTEE The remuneration committee has as its principal function, reviewing and making recommendations to the board on remuneration packages and policies applicable to directors and senior executives. It comprises four non-executive directors: R N H Denton, R P Gregson, K G Hilless and P J Willcox. The committee is authorised to obtain information from officers and independent professional advisors, at the expense of Energy Developments Limited. AUDIT COMMITTEE The audit committee s primary objective is to assist the board in fulfilling its responsibilities in relation to the accounting and reporting practices of the consolidated entity, including: selecting the external auditors; reviewing the quality of the external audit; acting as a channel for communication between the board and the external auditors; providing an independent, objective review of financial information provided by management to shareholders and regulatory authorities; and reviewing the consolidated entity s financial control practices. The members of the audit committee are four non-executive directors: R N H Denton, J M Carpenter, R P Gregson and P J Willcox. Executive directors may attend meetings by invitation. 26

CORPORATE GOVERNANCE STATEMENT (continued) RISK MANAGEMENT AND COMPLIANCE The audit committee also has the function of reviewing management practices in relation to the identification and management of significant business risk areas and regulatory compliance. Formal systems have been introduced for regular reporting to the board on business risk and compliance matters. CODE OF CONDUCT The board has formally adopted a code of conduct for directors, comprising a number of basic principles to be complied with by directors in the discharge of their duties and guidelines to assist directors in complying. The code provides for directors to obtain independent expert advice, at the expense of the Company, where necessary in order to discharge their duties properly. 27

BALANCE SHEET As at 30 June 2000 Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Current assets Cash 19 33,183 21,513 481 28 Receivables 6 22,196 14,509 50 - Inventories 2,069 1,241 - - Other 2,406 1,435 12 - Total current assets 59,854 38,698 543 28 Non-current assets Receivables 7 5,389 4,956 118,143 143,800 Investments 8 12,768 5,449 104,632 8,630 Property, plant and equipment 9 378,271 335,518 - - Development expenditure 10 39,632 50,175 - - Intangibles 11 35,169 - - - Total non-current assets 471,229 396,098 222,775 152,430 Total assets 531,083 434,796 223,318 152,458 Current liabilities Accounts payable 12 12,776 9,430-24 Borrowings 13 18,787 14,952 - - Provisions 14 7,639 6,892 2,743 2,234 Deferred income 384 384 - - Total current liabilities 39,586 31,658 2,743 2,258 Non-current liabilities Borrowings 15 216,553 210,143 18,056 17,782 Provisions 16 25,648 24,318 18 - Deferred income 4,681 5,021 - - Total non-current liabilities 246,882 239,482 18,074 17,782 Total liabilities 286,468 271,140 20,817 20,040 Net assets 244,615 163,656 202,501 132,418 Shareholders equity Parent entity interest Share capital 17 195,714 128,519 195,714 128,519 Retained profits 41,549 29,355 6,787 3,899 Total parent entity interest in equity 237,263 157,874 202,501 132,418 Outside equity interest Share capital 17 7,352 5,782 - - Total outside equity interest 7,352 5,782 - - Total shareholders equity 244,615 163,656 202,501 132,418 The accompanying notes form an integral part of the balance sheet. 28

PROFIT AND LOSS STATEMENT For the year ended 30 June 2000 Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Operating revenue 2 88,834 76,429 11,398 6,996 Operating profit before depreciation, amortisation and net borrowing costs 52,005 44,219 4,079 1,816 Depreciation and amortisation (17,147) (14,084) - - Borrowing costs, net (16,771) (13,091) 4,201 2,804 Operating profit before income tax 18,087 17,044 8,280 4,620 Income tax expense attributable to operating profit 3 (519) (6,009) (18) - Operating profit after income tax (a) 17,568 11,035 8,262 4,620 Retained profits at the beginning of the financial year 29,355 22,071 3,899 3,645 Adjustment to retained profits at the beginning of the financial year on adoption of UIG Abstract 26 Accounting for Major Cyclical Maintenance - 615 - - Total available for appropriation 46,923 33,721 12,161 8,265 Dividends provided for or paid 4 (5,374) (4,366) (5,374) (4,366) Retained profits at the end of the financial year 41,549 29,355 6,787 3,899 Basic earnings per share (cents) 5 16.6 11.6 Diluted earnings per share (cents) 5 16.4 11.4 (a) Interests in operating profit after income tax of the consolidated entity Members of the parent entity 17,568 11,035 Outside equity interest - - 17,568 11,035 The accompanying notes form an integral part of the profit and loss statement. 29

STATEMENT OF CASH FLOWS For the year ended 30 June 2000 Cash flows from operating activities Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Inflows/(outflows) Inflows/(outflows) Receipts from customers 78,853 68,436 19 - Payments to suppliers and employees (35,209) (30,639) (2,970) (2,084) Dividends received - - 6,980 3,900 Interest received 1,232 1,018 4,337 3,096 Interest and other borrowing costs paid (18,428) (13,024) (172) (292) Distribution from partnership - 900 - - Net operating cash flows 19(b) 26,448 26,691 8,194 4,620 Cash flows from investing activities Payments for property, plant, equipment, development expenditure and intangibles (76,883) (68,191) - - Payments for controlled entities 19(c) (1,302) (21,715) (95,981) (19) Payments for investment in other entities (6,598) (5,122) (22) (5,123) Net investing cash flows (84,783) (95,028) (96,003) (5,142) Cash flows from financing activities Proceeds from issue of shares 69,614 8,801 69,614 8,801 Share issue costs paid (2,301) - (2,301) - Proceeds from borrowings 91,305 103,127 - - Repayment of borrowings (82,282) (35,194) - - Repayment of finance lease principal (927) (932) - - Dividends paid (4,877) (4,073) (4,877) (4,073) Loans to employees under employee share plan - (885) - (885) Proceeds from employees under employee share plan 948-948 - Loans to related parties (1,475) - (1,475) (3,308) Proceeds from repayment of loans to related parties - - 26,353 - Net financing cash flows 70,005 70,844 88,262 535 Net increase in cash held 11,670 2,507 453 13 Cash at the beginning of the financial year 21,513 15,665 28 15 Cash balances of controlled entities not previously consolidated - 3,341 - - Cash at the end of the financial year 19(a) 33,183 21,513 481 28 The accompanying notes form an integral part of the statement of cash flows. 30

TO THE FINANCIAL STATEMENTS Note 1: Statement of significant accounting policies BASIS OF ACCOUNTING The financial statements have been prepared as a general purpose financial report which complies with the requirements of the Corporations Law, Australian Accounting Standards, and Urgent Issues Group Consensus Views. The accounting policies used are consistent with those adopted in the previous financial year unless otherwise stated. The financial statements have also been prepared in accordance with the historical cost convention and do not take account of changes in the general purchasing power of the dollar. Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the financial statements of the parent entity, Energy Developments Limited, and its controlled entities, referred to collectively throughout these financial statements as the "consolidated entity". All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. Financial statements of foreign controlled entities presented in accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with consolidated entity policy and generally accepted accounting principles in Australia. SALES REVENUE Sales revenue represents revenue earned from the sale of products and services. Sales revenue is recognised or accrued at the time of the provision of the product or service. GRANT REVENUE Grants received for contributions to assist in the acquisition of non-current assets are recognised as revenue when the consolidated entity gains control of the contributions. DEFERRED INCOME Where the consolidated entity receives payments from customers that are to be earned on a performance basis, they are deferred and recognised over the relevant period. FOREIGN CURRENCY TRANSACTIONS Foreign currency items are translated to Australian currency on the following bases: transactions are converted at exchange rates approximating those in effect at the date of each transaction; amounts receivable and payable are translated at the average of the buy and sell rates available on the close of business at balance date; the financial statements of integrated foreign operations are translated using the temporal method; and the financial statements of self-sustaining operations are translated using the current rate method. Exchange differences relating to monetary items are included in the profit and loss statement, as exchange gains or losses, in the period when the exchange rates change, except where: the exchange difference relates to the cost of acquisition of an asset under construction or otherwise being made ready for future productive use by the consolidated entity in its own operations, or under construction for another entity pursuant to a construction contract. In these cases, the exchange difference is included in the cost of the asset; or the exchange difference relates to a transaction intended to hedge the purchase or sale of products or services, in which case the exchange difference is included in the measurement of the purchase or sale. BORROWING COSTS Borrowing costs are expensed as incurred except where they relate to the financing of projects under development, in which case they are capitalised up to the date of commissioning or sale. INCOME TAX The financial statements apply the principles of tax-effect accounting. The income tax expense in the profit and loss statement represents the tax on the pre-tax accounting profit adjusted for income and expenses never to be assessed or allowed for taxation purposes. The provision for deferred income tax liability and the future income tax benefit include the tax effect of differences between income and expense items recognised in different accounting periods for book and tax purposes, calculated at the tax rates expected to apply when the differences reverse. The benefit arising from estimated carry forward tax losses is recorded as a future income tax benefit where realisation of such benefit is considered to be virtually certain. 31

Note 1: Statement of significant accounting policies (continued) CONSTRUCTION CONTRACTS Profit is recognised on construction contracts in proportion to their stage of completion when all of the following conditions are satisfied: For fixed price contracts: it is probable that the economic benefits arising from the contracts will flow to the consolidated entity; the total contract revenues to be received and the costs to complete the contract can be reliably estimated; the stage of contract completion can be reliably determined; and the costs attributable to the contract to date can be clearly identified and can be compared with prior estimates. For cost plus construction contracts: it is probable that the economic benefits arising from the contracts will flow to the consolidated entity; and the costs attributable to the contract to date can be clearly identified. Any material losses on construction contracts are brought to account as soon as they are probable. INVENTORIES Inventories are valued at the lower of cost and net realisable value. Cost is assigned on a first-in first-out basis. RECOVERABLE AMOUNTS OF NON-CURRENT ASSETS All non-current assets are reviewed at least annually to determine whether their carrying amounts require write down to recoverable amount. Recoverable amount is determined using net cash flows which, where relevant, have been discounted to present values. ASSOCIATED ENTITIES Interests in associated entities are included in non-current investments and brought to account using the equity method of accounting. Under this method, investments are initially recorded at cost of acquisition and the carrying value is subsequently adjusted for increases or decreases in the investor s share of post-acquisition results and reserves of the associate. The investment in associated entities is decreased by the amount of dividends received or receivable. Investments in associates are carried at the lower of cost and recoverable amount in the accounts of the parent entity. OTHER INVESTMENTS Interests in non-subsidiary, non-associated entities are included in investments at the lower of cost or recoverable amount. Dividend income is brought to account when declared. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are depreciated or amortised over their useful economic lives as follows. Life Method Owned plant and equipment - power plants and associated facilities 20-30 years straight line - other 2-8 years straight line Leased plant and equipment 3-5 years straight line Property leasehold improvements unexpired period of lease straight line Depreciation or amortisation is charged from the commencement of the following month after the property, plant and equipment is placed in service. Major items of plant and equipment, comprising a number of components that have different useful lives, are accounted for as separate assets. The components may be replaced during the useful life of the complex asset. LEASED ASSETS Assets acquired under finance leases are capitalised and amortised over the life of the relevant lease or, where ownership is likely to be obtained on expiration of the lease, over the expected useful life of the asset. Lease payments are allocated between interest expense and reduction in the lease liability. Operating lease assets are not capitalised and, except as described below, rental payments are charged against operating profit in the period in which they are incurred. Gains or losses on the sale and leaseback of assets are deferred and amortised over the lease term when the leaseback is a finance lease. When the leaseback is an operating lease, gains or losses representing the difference between the fair value and the carrying amount of the asset at the time of the sale are included in operating profit. NON-CURRENT ASSETS CONSTRUCTED BY THE CONSOLIDATED ENTITY The cost of plant and/or equipment constructed by the consolidated entity includes the direct cost of construction, project management and finance costs directly attributed to the construction of the assets and an appropriate proportion of overhead. These costs are capitalised to the asset up to the date the plant and/or equipment is commissioned as operational. 32

Note 1: Statement of significant accounting policies (continued) DEVELOPMENT EXPENDITURE Costs incurred on development projects are accumulated in respect of separate geographic areas. Such costs, including allocations of finance and overhead charges, are deferred to future periods to the extent that there is a reasonable expectation that such costs will be recovered. These costs are subsequently included in the cost of successful projects generated from the relevant area. Costs are amortised from the commencement of commercial production on a straight line basis over the period of expected benefit. INTANGIBLE ASSETS Costs of intangible assets are deferred to future periods to the extent that future benefits are expected, beyond reasonable doubt, to equal or exceed those costs and any future costs necessary to give rise to the benefits. These assets are amortised over the period in which the related benefits are expected to be realised, commencing when the benefit is first derived. ACQUISITION OF CONTROLLED ENTITIES On acquisition of a controlled entity, any difference between the purchase consideration plus incidental expenses and the fair value of identifiable net assets acquired is initially brought to account as goodwill or discount on acquisition. Any such goodwill is amortised on a straight line basis over the period during which the benefits are expected to arise. PROVISION FOR EMPLOYEE ENTITLEMENTS Provision has been made in the financial statements for benefits accruing to employees in relation to such matters as annual leave and long service leave. No provision is made for non-vesting sick leave as the anticipated pattern of sick leave taken indicates that accumulated non-vesting leave will never be paid. All on-costs are included in the determination of provisions. Annual leave and the current portion of long service leave are measured at their current amounts. Provisions for employee entitlements which are not expected to be settled within 12 months are discounted using the rates attaching to national government securities at balance date which most closely match the terms of maturity of the related liabilities. In determining the provision for employee entitlements, consideration has been given to future increases in wage and salary rates and the consolidated entity s experience with staff departures. EMPLOYEE SHARE PLAN In previous financial years, certain employees participated in an employee share plan. Loans were provided to assist in the purchase of shares. The details of issues under the plan are described in note 21. No remuneration expense is recognised in respect of employee shares issued. Amounts outstanding on employee share loans are included in non-current receivables. EMPLOYEE SHARE OPTION PLAN Certain employees are entitiled to participate in an employee share option plan. No remuneration expense is recognised in respect of employee share options issued. Refer note 21. FINANCIAL INSTRUMENTS INCLUDED IN EQUITY Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders. Non-voting preference shares bear special terms and conditions. These shares have limited voting rights and are convertible to ordinary shares under certain restricted circumstances. They have the same right to receive dividends and participate in other distributions as ordinary shares. FINANCIAL INSTRUMENTS INCLUDED IN LIABILITIES Limited recourse debt is initially recorded at the amount received on advance from the lender. Interest on debt that is unpaid at balance date is separately accrued. Loans and notes payable are recognised when issued at the amount of the net proceeds received. Interest is recognised as a borrowing cost on an effective yield basis. The amount receivable or payable under interest rate swap agreements is progressively brought to account over the period to settlement. FINANCIAL INSTRUMENTS INCLUDED IN ASSETS Trade debtors are initially recorded at the amount of contracted sales proceeds. Forward currency exchange contracts and foreign currency options are initially recognised as either an asset or liability, at an amount equal to the option premium paid or received and the premium or discount on the forward currency exchange contracts. The assets and liabilities recognised are subsequently remeasured by reference to exchange rates at balance date. The gain or loss on remeasurement is brought to account in the profit and loss statement unless the contracts are entered into to hedge anticipated future transactions, in which case the gain or loss is deferred and included in the initial measurement of the anticipated item being hedged. Where a hedge transaction is terminated early and the anticipated transaction is still expected to occur, the deferred gains and losses that arose on the foreign currency hedge prior to its termination continue to be deferred and are included in the measurement of the purchase or sale when it occurs. Where a hedge transaction is terminated early because the anticipated transaction is no longer expected to occur, deferred gains and losses that arose on the foreign currency hedge prior to its termination are included in the profit and loss statement for the period. Bank deposits, bills of exchange, loans, marketable securities and marketable equity securities are carried at cost. Interest revenue is recognised on an effective yield basis. 33

Consolidated Parent Note 2: Operating profit 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Operating profit is after crediting the following revenues: Sales revenue 84,182 72,628 - - Other revenue Interest from: - controlled entities - - 4,333 3,093 - other unrelated corporations 1,232 1,018 16 3 Dividends from controlled entities - - 6,980 3,900 Share of partnership profit - 668 - - Share of net results of associated entities 28 721 - - - Construction contract revenue 143 1,774 - - Grant revenue 2,000 - - - Other 556 341 69 - Total operating revenue 88,834 76,429 11,398 6,996 Operating profit is after charging the following expenses: Borrowing costs Interest and finance charges paid or payable to: Other unrelated corporations 18,003 14,109 148 292 Finance charges related to leases 45 58 - - Depreciation and amortisation Depreciation of property, plant and equipment 16,867 13,804 - - Amortisation of leased assets 280 280 - - Provisions Employee entitlements 713 527 - - Overhauls and repairs - 250 - - Other 434 330 - - Other Operating lease rentals 266 211 - - 34

Note 3: Income tax (a) Income tax expense Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 The differences between income tax expense provided in the financial statements and the prima facie income tax expense is reconciled as follows: Operating profit before income tax 18,087 17,044 8,280 4,620 Prima facie tax on operating profit at 36% 6,511 6,136 2,981 1,663 Tax effect of permanent and other differences: Non-assessable income (105) (198) - - Non-deductible expenses 488 337 7 - Non-recognition of timing differences 578 94 - - Rebateable dividends - - (2,513) (1,404) Research and development allowances (1,194) (319) - - Share of net results of associated entities (260) - - - Effect of lower rates of tax on overseas income (30) (41) - - Amounts over provided in prior years (940) - - - Restatement of deferred tax balances due to change in income tax rates in future years - current year (943) - - - - previous years (3,586) - - - Transfer of tax losses for nil consideration - - (457) (259) Total income tax expense attributable to operating profit 519 6,009 18 - (b) Future income tax benefit not taken to account The potential future income tax benefit in a controlled entity, which is a company, arising from tax losses and timing differences has not been recognised as an asset because recovery of tax losses is not virtually certain and recovery of timing differences is not assured beyond any reasonable doubt: Tax losses carried forward 3,285 1,772 - - Timing differences (2,209) (1,517) - - 1,076 255 - - The potential future income tax benefit will only be obtained if: (i) the relevant company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised, or the benefit can be utilised by another company in the consolidated entity; (ii) the relevant company and/or the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and (iii) no changes in tax legislation adversely affect the relevant company and/or the consolidated entity in realising the benefit. Note 4: Dividends Interim dividend paid Ordinary shares - unfranked 2,228 1,762 2,228 1,762 Preference shares - unfranked 403 370 403 370 Dividends proposed Ordinary shares - unfranked 2,323 1,848 2,323 1,848 Preference shares - unfranked 420 386 420 386 Franking account The balance of the franking account is nil at 30 June 2000 (1999: nil). 5,374 4,366 5,374 4,366 35

Note 5: Earnings per share Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Basic earnings per share (cents) 16.6 11.6 Diluted earnings per share (cents) 16.4 11.4 Weighted average number of shares on issue used in the calculation of basic earnings per share 105,987,526 95,228,784 All potential shares, being options to acquire ordinary shares, are considered dilutive. Note 6: Receivables (current) Trade debtors 10,422 9,521 - - Amounts due from construction contracts 4,515 4,988 - - Non-trade amounts owing by associated entities 6,565 - - - Other 694-50 - 22,196 14,509 50 - Note 7: Receivables (non-current) Loans to employees - employee share plan 3,902 4,956 3,902 4,956 Non-trade amounts owing by related parties: - wholly owned group - - 112,766 138,844 - outside equity interest 1,403-1,403 - - associated entities 72-72 - Other 12 - - - 5,389 4,956 118,143 143,800 Note 8: Investments (non-current) Interests in associated entities 28 12,768 5,449 5,470 5,449 Shares in unlisted controlled entities - at cost 29 - - 99,162 3,181 12,768 5,449 104,632 8,630 Note 9: Property, plant and equipment Freehold land - at cost 114 145 - - Plant and equipment - at cost 392,978 357,876 - - Less: accumulated depreciation (76,878) (59,400) - - 316,100 298,476 - - Plant and equipment under construction - at cost 59,273 34,463 - - Plant and equipment under lease - at capitalised cost 1,835 2,485 - - Less: accumulated amortisation (318) (1,376) - - 1,517 1,109 - - Property leasehold improvements - at cost 1,792 1,618 - - Less: accumulated amortisation (525) (293) - - 1,267 1,325 - - 378,271 335,518 - - Plant and equipment at cost includes $11,069,000 (1999: $10,214,000) of capitalised interest. These costs are capitalised to the asset up to the date the plant is commissioned as operational. 36

Note 10: Development expenditure (non-current) Included in development expenditure is nil (1999: $24,161,298) of costs relating to the development of waste processing and thermal gasification technologies. In the current year, these costs have been classified as intangible assets, as this technology has been licensed to a controlled entity within the consolidated entity. Licence fees will be paid by the licensee. Note 11: Intangibles (non-current) Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Technology development, at cost 35,169 - - - Accumulated amortisation - - - - 35,169 - - - Technology development represents expenditure on waste processing and thermal gasification technologies. These technologies are yet to be commercially proven and active and significant development activities are continuing. Ultimate recoupment of these costs is dependent upon the successful development and commercial exploitation or sale of the technologies. The directors expect that the costs will be recouped by future exploitation or sale of the technologies. Amortisation charges for waste processing and thermal gasification technologies are determined on the basis of estimated waste processing capacity which is reassessed anually. Any change in this estimate is recognised in the financial year of the change and in future years. Note 12: Accounts payable (current) Trade creditors and accruals 12,342 8,691-24 Interest payable 434 739 - - Note 13: Borrowings (current) 12,776 9,430-24 Project borrowings 17,211 13,624 - - Finance lease liability 20(b) 329 845 - - Notes payable 402 483 - - Other loans 845 - - - 18,787 14,952 - - Project borrowings Projects are generally debt financed on a limited recourse basis, with lender recourse limited primarily to the relevant operating controlled entities and their assets. Interest payments and principal repayments under project borrowings will be funded by the respective project operating revenues under existing contractual arrangements for electricity sales. Note 14: Provisions (current) Dividends 2,743 2,234 2,743 2,234 Employee entitlements 2,774 2,814 - - Other 2,122 1,844 - - Note 15: Borrowings (non-current) 7,639 6,892 2,743 2,234 Project borrowings 13 205,139 190,387 - - Finance lease liability 20(b) 1,319 298 - - Notes payable - 362 - - Other loans - unsecured 10,095 19,096 - - Loans from controlled entities - - 18,056 17,782 216,553 210,143 18,056 17,782 37

Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Note 16: Provisions (non-current) Employee entitlements 1,445 646 - - Deferred income tax liability, net of future income tax benefit attributable to tax losses of $21,245,000 (1999: $14,797,000) 24,203 23,672 18-25,648 24,318 18 - Note 17: Share capital Issued share capital Parent entity interest: Ordinary shares 158,754 91,559 158,754 91,559 Non-voting preference shares 36,960 36,960 36,960 36,960 Total parent entity interest 195,714 128,519 195,714 128,519 Outside equity interest: Ordinary shares 7,352 5,782 - - Total outside equity interest 7,352 5,782 - - Total share capital 203,066 134,301 195,714 128,519 Movements in issued shares for the year Number of ordinary Number of non-voting shares preference shares 2000 1999 2000 1999 Opening number of shares 80,334,891 75,608,815 16,800,000 16,800,000 Issued by private placement 10,000,000 - - - Issued under dividend reinvestment plan 182,658 446,588 - - Issued under employee share plan - 480,000 - - Issued under share purchase plan 1,545,165 1,581,238 - - Options converting to shares 900,000 2,251,250 - - Acquired and cancelled under employee share plan buy-backs (38,000) (33,000) - - Closing number of shares 92,924,714 80,334,891 16,800,000 16,800,000 A total of 12,627,823 ordinary shares were issued in the parent entity during the year as follows: Purpose of issue Date issued Number issued Issue price Options exercised 10 August 1999 to 26 November 1999 900,000 $2.50 Private placement 11 October 1999 10,000,000 $5.70 Dividend reinvestment plan 15 October 1999 102,080 $5.71 Share purchase plan 24 November 1999 to 18 January 2000 1,545,165 $5.70 Dividend reinvestment plan 10 April 2000 80,578 $11.94 A total of 38,000 ordinary shares were cancelled during the year following buy-backs under the employee share plan at an average price of $2.80 a share. 38

Note 18: Share premium reserve Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Movements in the share premium reserve: Opening balance - 96,616-96,616 Transfer to share capital on 1 July 1998 - (96,616) - (96,616) Closing balance - - - - Note 19: (a) Reconciliation of cash Notes to the statement of cash flows For the purposes of the statement of cash flows, cash includes cash on hand and in banks and deposits at call, which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows: Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Call deposits with banks (i) 33,183 21,513 481 28 (i) Call deposits with banks are paying interest at current bank deposit rates. Details of the average rates are disclosed in note 30. (b) Reconciliation of operating profit after income tax to net cash flows from operating activities Operating profit after income tax 17,568 11,035 8,262 4,620 Adjustments Depreciation and amortisation 17,147 14,084 - - Provisions 1,147 1,107 - - Share of partnership profit - (668) - - Distribution from partnership - 900 - - Share of net results of associated entities (721) - - - Changes in assets and liabilities Receivables (increase)/decrease (7,688) (2,639) (62) - Prepayments (increase)/decrease - (62) - - Inventories (increase)/decrease (829) - - - Interest payable increase/(decrease) (355) 593 (24) - Deferred income increase/(decrease) (340) (3,668) - - Provision for deferred income tax liability increase/(decrease) 519 6,009 18 - Net operating cash flows 26,448 26,691 8,194 4,620 39

Note 19: Notes to the statement of cash flows (continued) (c) Controlled entities acquired The following controlled entities were acquired by the consolidated entity at the dates stated and their operating results have been included in the profit and loss statement from the relevant date: Entity Consideration Date acquired Proportion of Consolidated given shares acquired 2000 1999 $000 $000 Tower Energy Pty Limited Cash 13 October 1998 100% - 12,993 BSC Holding Co Cash 1 January 1999 63% - 13,037 BSC Holding Co Cash 30 September 1999 2% 1,302 - Total consideration 1,302 26,030 The amounts of assets and liabilities acquired by major class are: Cash - 4,315 Receivables - 1,047 Prepayments - 228 Land - 31 Property, plant and equipment - net - 53,079 Property, plant and equipment under construction - 82 Intangibles 1,469 17,258 Other assets - 13 Accounts payable - (962) Borrowings - (38,176) Notes payable - (845) Provision for deferred income tax liability - (4,258) 1,469 31,812 Outside equity interests at acquisition (167) (5,782) 1,302 26,030 Outflow of cash to acquire the entities, net of cash acquired: Cash consideration 1,302 26,030 Cash balance acquired - (4,315) Outflow of cash 1,302 21,715 40

Note 19: Notes to the statement of cash flows (continued) (d) Finance facilities At 30 June 2000, the consolidated entity had access to total financing facilities of $306.2 million (1999: $278.9 million), of which $72.6 million was unused at balance date (1999: $54.95 million). Details of these facilities include: 2000 1999 Expiry Facility Facility Facility Facility date available unutilised available unutilised million million million million Bank loan 2000 $5.0 $5.0 $5.0 $5.0 Bank loan 2000 $0.5 $0.5 $0.5 $0.5 Notes payable 2000 US$0.2 - US$0.6 - Bank loan 2001 $20.0 $20.0 $20.0 $5.8 Bank loan 2001 $0.7 - $1.1 - Bank loan 2001 Stg3.0 Stg1.5 - - Bank loan 2003 US$3.0 - US$3.0 US$1.1 Other loan 2007 $2.0 - $2.0 - Bank loan 2008 $16.4 - $18.7 - Bank loan 2009 $69.3 - $73.5 - Bank loan 2009 $50.4 $6.5 $51.0 $5.9 Bank loan 2011 Stg24.8 Stg14.0 Stg13.5 Stg11.5 Bank loan 2011 $29.6 - $31.9 - Bank loan 2013 $35.3 - $37.0 $8.2 (e) Non-cash financing and investing activities During the financial year, the consolidated entity acquired plant and equipment with a net fair value of $1,392,364 (1999: $268,634) by means of finance leases. Note 20: Expenditure commitments (a) Expenditure commitments in respect of long-term electricity supply contracts are payable as follows: Consolidated Parent 2000 1999 2000 1999 Note $ 000 $ 000 $ 000 $ 000 Not later than one year 171 171 - - Later than one year but not later than five years 243 413 - - (b) Finance lease expenditures are payable as follows: 414 584 - - Not later than one year 436 899 - - Later than one year but not later than five years 1,212 316 - - Later than five years 358 - - - 2,006 1,215 - - Less: future finance charges (358) (72) - - Net finance lease liability 1,648 1,143 - - Reconciled to: Current liability 13 329 845 - - Non-current liability 15 1,319 298 - - 1,648 1,143 - - Finance leases are entered into as a means of funding the acquisition of construction plant and equipment. Rental payments are fixed. 41

Note 20: Expenditure commitments (continued) (c) Operating lease expenditures (non-cancellable) are payable as follows: Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Not later than one year 2,415 2,121 - - Later than one year but not later than five years 7,281 5,486 - - Later than five years 1,846 828 - - 11,542 8,435 - - (d) Expenditure commitments in respect of royalties are payable as follows: Not later than one year 173 132-132 (e) Capital expenditure commitments are payable as follows: Not later than one year 6,025 7,889 - - Note 21: Employee share plan An employee share plan was established in 1993 under which employees of the consolidated entity were issued ordinary shares in the parent entity. That plan was terminated during the year and replaced by an employee share option plan. No issues were made under either plan during the financial year. Ordinary shares 2000 1999 Total number issued to employees during the year - 480,000 Total number purchased from employees during the year under the employee share plan buy-back scheme 38,000 33,000 Total number issued to employees since commencement of the plan 3,412,800 3,412,800 Total number of employees eligible to participate in the plan not applicable 267 Total market value of issues during the year - $1,464,000 Proceeds received and receivable from issues during the year - $1,464,000 Note 22: Share options Share options outstanding as at 30 June 2000 in respect of the following unissued ordinary shares were: Number of shares subject to options Issue date Expiry date Price per share 1,600,000 6 November 1996 6 November 2001 $2.50 The following amounts were recognised in the financial statements of the parent entity in relation to share options exercised during the financial year: Parent 2000 1999 $ 000 $ 000 Share capital 2,250 3,219 Note 23: Economic dependency The consolidated entity s sales of electricity are primarily to electricity distribution/retail companies in Australia and the United Kingdom. 42

Note 24: Segment information The consolidated entity operates in predominantly one industry, being electricity supply and three geographical segments, being Australia/Asia, the United Kingdom/Europe and the United States. Geographical segment information is as follows: Segment revenue Segment result (i) Segment assets 2000 1999 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Australia/Asia 81,574 66,324 18,739 16,793 382,645 356,517 United Kingdom/Europe 7,238 5,609 1,067 573 99,729 44,490 United States 22 4,496 (1,719) (322) 48,709 33,789 Total 88,834 76,429 18,087 17,044 531,083 434,796 (i) segment result comprises operating profit before income tax Note 25: Remuneration of officers Consolidated Parent 2000 1999 2000 1999 Income of directors The numbers of directors of the Company who were paid, or were due to be paid, income directly or indirectly from the Company or any related party, as shown in the following bands, were: $ 0-9,999 1-10,000-19,999 1-20,000-29,999 1-40,000-49,999 3 4 100,000-109,999 1 1 260,000-269,999-1 470,000-479,999-2 500,000-509,999 2 - Total income paid or payable, or otherwise made available to all directors of the Company and controlled entities, from the Company or any related party $3,157,825 $2,463,500 $1,284,390 $1,491,250 Income of executive officers The numbers of executive officers whose total income for the year falls within the following bands, were: $ 160,000-169,999 1 - - - 190,000-199,999 1 - - - 260,000-269,999-1 - 1 300,000-309,999 1 - - - 370,000-379,999-1 - - 450,000-459,999-1 - - 470,000-479,999-2 - 2 500,000-509,999 1 - - - 510,000-519,999 1 - - - The aggregate income of the executives referred to above $1,676,563 $2,048,900 - $1,215,000 For the 1999 financial year these bands and total remuneration include executive directors. 43

Note 26: Remuneration of auditors Amount received, or due and receivable, by the auditors for: Consolidated Parent 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Auditing or review of the financial statements 337 262 - - Other services 103 421 - - Note 27: (a) Directors Related party disclosures 440 683 - - The following persons held the position of director of Energy Developments Limited during all of the past two financial years unless otherwise stated: J M Carpenter (appointed 2 December 1999) R N H Denton R C Edwards (resigned 12 July 1999) R P Gregson K G Hilless W P Pahor P A Whiteman P J Willcox K J Zagzebski (resigned 2 December 1999) (b) Transactions with directors and director-related entities Parent 2000 1999 Ordinary shares acquired/(sold) Acquisitions 307,240 130,927 Sales (1,452,247) (1,459,322) Options issued/(exercised) Exercised (300,000) * (2,251,250) Issued - - * not including 500,000 options exercised by a former director and 100,000 options transferred by a director. Dividends Directors and their director-related entities received normal dividends on ordinary shares. (c) Interests in shares of the Company held by directors and their director-related entities Shares Aggregate ordinary shares held by directors and their director-related entities 15,503,386 18,887,062 Options Aggregate options to purchase ordinary shares held by directors and director-related entities 1,600,000 2,500,000 44

Note 27: Related party disclosures (continued) (d) Transactions with other related parties Transaction type Class of related Consolidated Parent party 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 Loan advanced Outside equity interest 1,403 - - - Loan advanced Associated entities 72 - - - Interest received or receivable Outside equity interest 12 - - - Payment for consulting services Outside equity interest 119 - - - Sales of equipment Associated entities 20,254 3,909 - - Development fees charged Associated entities 1,330 500 - - Engineering services received Associated entities 606 596 - - All transactions with other related parties are conducted on commercial terms and conditions. (e) Ultimate controlling entity The ultimate controlling entity of the consolidated entity is Energy Developments Limited, incorporated in Australia. (f) Loans to directors Consolidated Parent 2000 1999 2000 1999 Loan to R C Edwards outstanding at balance date under the employee share plan - $113,572 - $113,572 45

Note 28: Associated entities Details of interests in material associated entities are as follows: Name and principal activities Voting power Ownership interest Carrying amount 2000 1999 2000 1999 2000 1999 % % % % $ 000 $ 000 Cleanaway Energy Services Limited (i) 50 50 49 49 5,827 5,106 - development of landfill gas power projects Other investments - at cost (ii) 6,941 343 12,768 5,449 (i) (ii) Cleanaway Energy Services Limited has the same reporting date as the consolidated entity. Its principal activity was the development and operation of a power generation project. It is incorporated in Taiwan. Other investments includes $6,576,000 (1999: nil) interest in the development of a landfill gas power project in Greece. This project was in the construction phase at 30 June 2000. Share of associated entities net results Consolidated 2000 1999 $ 000 $ 000 Operating profit before income tax 721 - Income tax expense - - Share of net results of associated entities 721 - Aggregate carrying amount of associated entities 2000 Retained Cost Total profits carrying amount $ 000 $ 000 $ 000 Balance at the beginning of the year - 5,449 5,449 Movements during the year Share of net results of associated entities 721-721 Investments acquired - 6,598 6,598 Balance at end of the year 721 12,047 12,768 46

Note 29: Controlled entities The consolidated financial statements as at 30 June 2000 include the following controlled entities: Name of controlled entity Place of incorporation/formation % of shares/units/interests held 2000 1999 Appin Power Partnership Australia 100 100 Appin Power Pty Ltd Australia 100 100 Bio Energy Pty Limited Australia 100 100 Bio Power Pty Limited Australia 100 100 Biomass Energy Pty Limited (ii) Australia 51 51 Biomass Energy Services & Technology Pty Ltd (i) Australia - - Brightstar Environmental Holdings Pty Limited (formerly Enrec Corporation Limited) Australia 100 100 Brightstar Environmental Partnership Australia 88.125 - Coal Seam Power Pty Limited Australia 100 100 Cosmo Power Pty Ltd Australia 100 100 EDL Group Operations Pty Ltd Australia 100 100 EDL International Holdings Pty Limited Australia 100 100 EDL Operations (ACT) Pty Ltd Australia 100 100 EDL Operations (Belrose) Pty Ltd Australia 100 100 EDL Operations (Berwick) Pty Ltd Australia 100 100 EDL Operations (Broadmeadows) Pty Ltd Australia 100 100 EDL Operations (Browns Plains) Pty Ltd Australia 100 100 EDL Operations (Clayton) Pty Ltd Australia 100 100 EDL Operations (Corio) Pty Ltd Australia 100 100 EDL Operations (Eastern Creek) Pty Ltd Australia 100 100 EDL Operations (Gosnells) Pty Ltd Australia 100 100 EDL Operations (Highbury) Pty Ltd Australia 100 100 EDL Operations (LHII) Pty Ltd Australia 100 100 EDL Operations (Lucas Heights) Pty Ltd Australia 100 100 EDL Operations (Lyndhurst) Pty Ltd Australia 100 100 EDL Operations (Pedler Creek) Pty Ltd Australia 100 100 EDL Operations Pty Limited Australia 100 100 EDL Operations (Tea Tree Gully) Pty Ltd Australia 100 100 EDL Operations (Wingfield) Pty Ltd Australia 100 100 EDL Power (NWQ) Pty Limited Australia 100 100 EDL Properties Pty Ltd Australia 100 100 EDL Technologies Pty Ltd Australia 100 100 Energy Corridors (Holdings) Pty Ltd Australia 100 100 Energy Corridors (NT) Pty Ltd Australia 100 100 Energy Developments International Pty Ltd Australia 100 100 Energy Developments International Trust No 3 Australia 100 100 Energy Developments (Operations) Pty Ltd (formerly EDL Plant Services Pty Ltd) Australia 100 100 Karumba Power Pty Ltd Australia 100 100 Lawn Hill Power Pty Ltd Australia 100 100 McArthur River Power Pty Ltd Australia 100 100 Northern Power Pty Limited Australia 100 100 NWQ Power Pty Ltd Australia 100 100 Pine Creek Power Pty Ltd Australia 100 100 Tower Energy Pty Limited Australia 100 100 Whytes Gully Environmental Pty Ltd Australia 88.125 100 Wingfield Gas Pty Ltd Australia 100 100 47

Note 29: Controlled entities (continued) Name of controlled entity Place of incorporation/formation % of shares/units/interests held 2000 1999 Bio Energy (UK) Limited United Kingdom 100 100 Brightstar Environmental Investments Limited United Kingdom 100 - Brightstar Environmental Partnership United Kingdom 88.125 - EDL Holdings (UK) Limited United Kingdom 100 100 EDL Operations (Barling) Limited United Kingdom 100 - EDL Operations (Bellhouse) Limited United Kingdom 100 - EDL Operations (Brazier) Limited United Kingdom 100 100 EDL Operations (Cromwell Bottom) Limited United Kingdom 100 100 EDL Operations (LFG 1) Limited United Kingdom 100 100 EDL Operations (Lower Spen) Limited United Kingdom 100 100 EDL Operations (Mucking) Limited United Kingdom 100 100 EDL Operations (Ockendon) Limited United Kingdom 100 100 EDL Operations (Pitsea) Limited United Kingdom 100 100 EDL Operations (Poole) Limited Untied Kingdom 100 100 EDL Operations (Rainham) Limited United Kingdom 100 100 EDL Operations (Sandy Lane) Limited United Kingdom 100 100 EDL Operations (Sugden End) Limited United Kingdom 100 100 EDL Operations (Water Hall) Limited United Kingdom 100 - EDL Operations (Westmill) Limited United Kingdom 100 100 EDL Operations (West Riding) Limited United Kingdom 100 100 EDL Operations (Withyedge) Limited United Kingdom 100 - Energy Developments (UK) Limited United Kingdom 100 100 Ryton Energy Limited United Kingdom 100 100 EDL Hellas Monoprosopi EPE Greece 100 - EDL Holdings (Europe) BV The Netherlands 100 100 Bio Energy (I), LLC United States of America 100 100 Bio Energy (II), LLC United States of America 100 100 Bio Energy (Austin) LLC United States of America 100 - Bio Energy (Azusa), LLC United States of America 100 100 Bio Energy (Chateau Fresno), LLC United States of America 100 100 Bio Energy (Keller Canyon),LLC United States of America 100 100 Bio Energy (Ohio), LLC (formerly Bio Energy (Model Landfill), LLC) United States of America 100 100 Bio Energy (Ohio II), LLC (formerly Bio Energy (Ohio), LLC) United States of America 100 100 Bio Energy (Tower Road), LLC United States of America 100 100 Bio Energy (US), LLC United States of America 100 100 EDL Holdings (US), Inc United States of America 100 100 Energy Developments, Inc United States of America 100 100 Brightstar Environmental, LLC United States of America 88.125 - Brightstar Environmental Holdings, LLC United States of America 100 - BSC Holding Co United States of America 65 63 BSC Projects (Texas) Co (iii) United States of America - - BSC Technology Co (iii) United States of America - - Brightstar Synfuels Co (iii) United States of America - - Brightstar - Jasper Co (iii) United States of America - - Broadlands Energy Limited (ii) (iv) Sri Lanka 52.63 52.63 The financial year of all controlled entities is the same as that of the Company, unless otherwise noted. (i) controlled entity which is 100% owned by Biomass Energy Pty Limited (ii) the outside equity interests in the profit and equity of Biomass Energy Pty Limited and Broadlands Energy Limited are nominal amounts (iii) controlled entity which is 100% owned by BSC Holding Co (iv) controlled entity which is 52.63% owned by Energy Developments Limited and incorporated in Sri Lanka; the balance date is 31 March 2000; the auditors of this company are KPMG Fords, Rhodes, Thornton and Company 48

Note 30: Financial instruments (a) Objectives for holding derivative financial instruments The consolidated entity uses derivative financial instruments to manage specifically identified interest rate and foreign currency risks. The purposes for which specific derivative instruments are used are as follows: (i) (ii) the consolidated entity raises short-term and long-term debt at floating rates. Interest rate swap agreements are used to convert floating interest rate exposures on certain debt to fixed rates. These swaps entitle the consolidated entity to receive, or oblige it to pay, the amounts, if any, by which actual interest payments on nominated loan amounts exceed or fall below specified interest amounts; and the consolidated entity is primarily exposed to the risk of movements in certain foreign currencies, including the United States Dollar, the Pound Sterling, the German Deutschmark, the Greek Drachma and the New Taiwan Dollar relative to the Australian Dollar and relative to each other. Foreign currency options and forward exchange contracts are purchased as appropriate to hedge the specified currency value of equipment purchases. Foreign currency options and forward exchange contracts entitle the consolidated entity to buy foreign currency at agreed rates of exchange. (b) Interest rate exposures The consolidated entity is exposed to interest rate risk through primary financial assets and liabilities, and anticipated future transactions modified through derivative financial instruments such as interest rate swaps and interest rate options. The following table summarises interest rate risk for the consolidated entity, together with effective interest rates as at balance date: 2000 Maturing in Non-interest Total Average interest rate (pa)(i) 1 year over 1 year more than bearing Floating (ii) Fixed or less to 5 years 5 years $ 000 $ 000 $ 000 $ 000 $ 000 Financial assets Cash - Australia 14,151 - - - 14,151 5.95% - - United Kingdom 14,194 - - - 14,194 5.75% - - United States 244 - - - 244 6.25% - - Greece 4,594 - - - 4,594 7.50% - Receivables (current) - - - 22,196 22,196 - - Receivables (non-current) - 1,475-3,914 5,389 8.65% - 33,183 1,475-26,110 60,768 Financial liabilities Trade creditors - - - 5,924 5,924 - - Finance lease liability 329 961 358-1,648-7.06% Project borrowings - Australia 16,077 97,787 81,352-195,216 7.40% - - United Kingdom 1,134 11,644 14,356-27,134 7.24% - Other borrowings - Australia - - - 2,000 2,000 - - - United Kingdom - 3,866 - - 3,866 7.24% - - United States 1,247 4,229 - - 5,476 7.62% 12.00% Interest payable - Australia 306 - - - 306 7.29% - - United States 128 - - - 128 7.14% - 19,221 118,487 96,066 7,924 241,698 Interest rate swaps - Australia 10,751 83,033 69,223-163,007-9.61% - United Kingdom 1,896 21,645 2,232-25,773-7.91% 12,647 104,678 71,455-188,780 (i) (ii) both fixed and floating rates for financial liabilities include a weighted average interest rate margin the floating interest rate represents the most recently determined rate applicable to the instrument at balance date 49

Note 30: Financial instruments (continued) (b) Interest rate exposures (continued) 1999 Maturing in Non-interest Total Average interest rate (pa)(i) 1 year over 1 year more than bearing Floating (ii) Fixed or less to 5 years 5 years $ 000 $ 000 $ 000 $ 000 $ 000 Financial assets Cash - Australia 16,417 - - - 16,417 4.75% - - United Kingdom 2,734 - - - 2,734 5.80% - - United States 2,362 - - - 2,362 5.90% - Trade receivables - - - 14,509 14,509 - - 21,513 - - 14,509 36,022 Financial liabilities Trade creditors - - - 2,955 2,955 - - Finance lease liability 845 298 - - 1,143-9.50% Project borrowings - Australia 13,385 69,492 116,292-199,169 6.19% - - United Kingdom 240 2,124 2,478-4,842 6.07% - Other borrowings - Australia - 14,200-2,000 16,200 5.83% - - United States 483 3,258 - - 3,741 6.22% 12.00% 14,953 89,372 118,770 4,955 228,050 Interest rate swaps - Australia 24,460 63,022 70,389-157,871-10.08% - United Kingdom - 20,728 3,508-24,236-7.73% 24,460 83,750 73,897-182,107 (i) (ii) both fixed and floating rates for financial liabilities include a weighted average interest rate margin the floating interest rate represents the most recently determined rate applicable to the instrument at balance date 50

Note 30: Financial instruments (continued) (c) Foreign exchange exposures The following table summarises by currency the Australian Dollar value of forward foreign exchange agreements and foreign currency options. Foreign currency amounts are translated at rates current at balance date. The buy amounts represent the Australian Dollar equivalent of commitments to purchase foreign currencies, and the sell amounts represent the Australian Dollar equivalent of commitments to sell foreign currencies. Contracts to buy and sell foreign currency are entered into from time to time to offset purchase and sale obligations so as to maintain a desired hedge position. Currency 2000 1999 2000 1999 Average exchange rate Buy Sell Buy Sell $ 000 $ 000 $ 000 $ 000 United States Dollars Three months or less - 0.65 - - (1,822) - Total - - (1,822) - The consolidated entity is exposed to currency exchange risk through primary financial assets and liabilities, and anticipated future transactions modified through derivative financial instruments such as currency options and currency swaps. The following table summarises by currency, in Australian Dollars, the foreign exchange risk in respect of financial assets and liabilities. Financial asset and liability captions in which all amounts are denominated in Australian Dollars are not included in this table. Greece United States United Kingdom 2000 1999 2000 1999 2000 1999 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Financial assets Cash 4,594-244 2,362 14,194 2,734 Receivables (current) 5,797-3,298 2,109 1,992 1,002 10,391-3,542 4,471 16,186 3,736 Financial liabilities Trade creditors - - 885 413 231 355 Borrowings - - 5,476 3,741 31,000 4,842 Interest payable - - 128 - - - - - 6,489 4,154 31,231 5,197 51

Note 30: (d) Credit risk exposures Financial instruments (continued) Credit exposure represents the extent of credit-related losses that the consolidated entity may be subject to on amounts to be exchanged under the derivatives or to be received from financial assets. The notional amounts of derivatives are not a measure of this exposure. The consolidated entity, while exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, does not expect any counterparties to fail to meet their obligations given their high credit quality. (e) Net fair value of financial assets and liabilities The carrying amounts and estimated net fair values of financial assets and financial liabilities held at balance date are the same except for derivatives associated with project borrowings. The relevant carrying amount and estimated net fair value is as follows: Consolidated Consolidated 2000 1999 Carrying Net fair Carrying Net fair amount value amount value $ 000 $ 000 $ 000 $ 000 Derivatives Interest rate swaps - (12,509) - (15,476) Foreign exchange contracts - - - (29) - (12,509) - (15,505) The net fair value of foreign exchange contracts and interest rate swaps is determined by reference to amounts quoted by the consolidated entity s banks. 52

DIRECTORS DECLARATION The directors declare that: (a) the financial statements and associated notes comply with the Accounting Standards and Urgent Issues Group Consensus Views; (b) the financial statements and notes give a true and fair view of the financial position as at 30 June 2000 and performance of the Company and consolidated entity for the year then ended; (c) in the directors opinion; (i) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (ii) the financial statements and notes are in accordance with the Corporations Law, including sections 296 and 297. This statement has been made in accordance with a resolution of directors. R N H Denton, director W P Pahor, director Melbourne, 5 September 2000 53

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF ENERGY DEVELOPMENTS LIMITED Scope We have audited the financial report of Energy Developments Limited for the financial year ended 30 June 2000, as set out on pages 28 to 53. The financial report includes the consolidated financial statements of the consolidated entity comprising the Company and the entities it controlled at year s end or from time to time during the financial year. The Company s directors are responsible for the financial report. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the Company. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and statutory requirements in Australia so as to present a view which is consistent with our understanding of the Company s and the consolidated entity s financial position and performance as represented by the result of their operations and their cash flows. The audit opinion expressed in this report has been formed on the above basis. Audit Opinion In our opinion, the financial report of Energy Developments Limited is in accordance with: (a) the Corporations Law, including: (i) giving a true and fair view of the Company s and consolidated entity s financial position as at 30 June 2000 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and the Corporations Regulations; and (b) other mandatory professional reporting requirements. Arthur Andersen Chartered Accountants R F Banham Partner Brisbane 5 September 2000 54

SHAREHOLDER INFORMATION SUBSTANTIAL SHAREHOLDERS AS AT 25 AUGUST 2000 The following information is extracted from the notices of substantial shareholders: Name Number of ordinary Number of shares preference shares Energy Developments Limited (by reason of deemed relevant interests in shares held by others) 30,944,076 16,800,000 NRG Victoria III Pty Ltd 14,609,670 16,800,000 Deutsche Australia Limited * 10,960,711 Oaktel Investments Pty Ltd and associates 8,021,191 Paul Whiteman and associates 7,218,031 Commonwealth Bank of Australia, Colonial Limited * 6,855,461 AMP Limited * 6,728,582 * and related bodies corporate DISTRIBUTION OF SHAREHOLDINGS AS AT 25 AUGUST 2000 Size of holding Number of ordinary Number of Number of ordinary shareholders preference shareholders share option holders 1 to 1,000 2,835 47 1,001 to 5,000 2,678 123 5,001 to 10,000 437 44 10,001 to 100,000 303 68 100,001 and over 69 1 6 Total holders 6,322 1 288 Shareholders with less than a marketable parcel (market value less than $500) 248 Voting rights All ordinary shares issued by Energy Developments Limited carry one vote per share without restriction. The preference shares do not carry voting rights, except under certain circumstances. 55

SHAREHOLDER INFORMATION (continued) TWENTY LARGEST SHAREHOLDERS AS AT 25 AUGUST 2000 Name Ordinary shares Preference shares Number % Number % NRG Victoria III Pty Ltd 14,609,670 15.72 16,800,000 100 Chase Manhattan Nominees Limited 12,439,226 13.39 ANZ Nominees Limited 7,781,866 8.38 National Nominees Limited 3,891,679 4.19 Paul Anthony Whiteman 3,801,151 4.09 PGNM Nominees Pty Ltd 3,314,222 3.57 Permanent Trustee Australia Limited 2,999,571 3.23 AMP Life Limited 2,645,272 2.85 Citicorp Nominees Pty Ltd 2,449,366 2.64 BT Custodians Limited 1,803,571 1.94 Westpac Custodian Nominees Limited 1,607,843 1.73 ANZ Managed Investments Ltd 1,271,356 1.37 Topsam Investments Pty Ltd 1,226,776 1.32 Commonwealth Custodial Services Limited 1,057,036 1.14 AMP Nominees Pty Limited 907,738 0.98 Queensland Investment Corporation 759,075 0.82 Perpetual Trustees Victoria Limited 659,489 0.71 Australian Foundation Investment Company Limited 576,956 0.62 National Australia Financial Management Limited 460,557 0.58 Government Superannuation Office 442,132 0.48 Total 64,704,552 69.75 16,800,000 100 56