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9 July 2018,
‘The Hon. Gladys Berejiklian MP
Premier of NSW
GPO Box 5341
SYDNEY NSW 2001
Dear Premier
‘Watermark Coal Mine ~ Renewal Application for Exploration Licence 7223
| am writing to you fo express our extreme disappointment in respect of the renewal
process for the Watermark Exploration Licence 7233 (Watermark EL).
To date Shenhua has invested some $750 million into this project. Definitive feasibility
siudies have been occurring in respect of it but a final decision on progressing has been
delayed due to the NSW Goverment ongoing delay in renewing the Watermark El
Shenhua is deeply concerned by the NSW Government's failure to grant the renewal for
the Watermark EL as per normal processes and in accordance with commitments given
by the NSW Government to Shenhua,
By way of background, Watermark EL was due (o lapse on 22 February 2016. A
renewal application for the entire exploration licence was lodged prior to the expiration
of the previous renewal of the Watermark EL.
The NSW Government approached Shenhwa in respect of the pending renewal
application and sought to have Shenhua only apply to for an exploration licence over
49% of the urea, in effect, relinguish 100 square kilometres of the Watermark EL area.
‘Agreement on this was reached on 29 June 2017 and a Deed of Settlement was signed
fon 29 June 2017 relating to the renewal of the Watermark EL. Shortly after, and in
accordance the agreement reached, Shenhus amended the pending renewal application
for the diminished area.
It should be made clear that Shenhua did not want to relinquishment any of the
Watermark EL and only did so in the spirit of good faith and cooperation with the NSW
Government.
{As part of the Deed of Settlement for the renewal of the Watermark EL, condition 2.2(a)
required that the NSW Government indicate if this amendment was in @ form acceptable
to the State. The NSW Government indicated in writing to Shenhua that the pending
renewal application was in a form acceptable 10
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Clause 2.2(b) of the Deed of Settlement also provides that the NSW Government will:
‘as soon as reasonably practicuble determine the Renewal Application (as
‘amended in accordance with the Amendment of Application) and notify
‘the Company of the determination in writing.
I note that the Department of Planning and Environment ~ Resources & Energy
(Department) website indicates that the service delivery standard for an exploration
licence renewal is 45 days.
Given the Department has indicated that the pending renewal application is adequate
and meets the Department's requirements, Shenhua cannot understand why the 45
business-day service delivery standard has not been met in respect of its application.
Further, it cannot see how the NSW Government has complied with its obligations
under cause 2.2(b) of the Deed of Seitiement to "as soon as reasonably practicable
determine the Renewal Application”,
Given it has been some 11 months since the Department indicated that the Watermark
EL renewal application was in a form acceptable to it, Shenhua sought and had a
meeting with Mr, Michael Wright (A/Deputy Secretary, Resources and Geoscience) on
17 May 2018
‘At this meeting Mr. Wright would not provide an explanation for the delay in the
processing of the Watermark EL. renewal application. but raised that one of the issues
delaying the project was the Government's consideration of whether Shenhua should be
required 10 provide an additional “Community Fund". In particular, Mr. Wright
requested an additional $2 million contribution to the "Community Fund" if the
Watermark EL is renewed.
‘The existing Watermark EL ineludes the following condition:
"The licence holder shall continue to provide AS/million per annum up to « total of
ASS milton under this and the previous licence during the continuation of its
exploration and feasibility program, 10 the already established Regional Community
Trust."
Shenhua has complied with this obligation and funded some 50 significant community
projects with these funds.
For the reasons outlined below Shenhua considers that itis completely unacceptable to
request that a new fund be created under an renewal of the Watermark EL:
1, it would be a breach of the Deed of Settlement reached with the State of NSW
for the grant of the Watermark EL;
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2. the primary reason the project has not progressed within the original S year
timeframe is the significant delays in gaining planning approvals caused by the
NSW Government. As an example, Direcior-General's Environmental
Assessment Requirements. usually @ 30 business-day process, took 9 months to
be issued. Other examples of delays could be shared with you if you require;
3. if this issue was valid it should have been raiscd as part of the commercial
arrangements for the relinquishment of part of the Watermark EL;
4. a8 part of its planning approval for the Watermark Coal Mine, Shenhua has
agreed 10 significant Voluntary Planning Agreements with the local councils.
The value of these is up to $7.5 million plus $0.06 cents per tonne of coal for
toad maintenance, Additionally other significant funds are required to be paid
for road upgrades and maintenance under the planning approval;
5. this issue has never been raised previously, and indeed in recent conversations
with the Minister for Mineral Resources and his staff it was not raised. This was
despite assurances from the Minister that the pending renewal application would
be dealt with in weeks and not months; and
16. the continued delays to the project emused by the NSW Government is costing
Shenhua significant operating costs and escalating capital costs
Overall, Shenhua considers this to be an example of the unacceptable sovereign risk of |
investing in NSW.
If the NSW Government does want the project to proceed, Shenhua requests that the
NSW Government mects its legal obligations and treals Shenhua with the respect that
such a significant overseas investment in the NSW economy deserves.
‘Shenhua expects that the Watermark EL will be renewed within a reasonably timeframe
from now. Shenhua requests a meeting, by early August 2018, with you so it can clarify
‘the Government's ongoing intentions.
Yours sincerely,
te oo
Dr LING Wen,
President & CEO
China Energy Investment Corporation
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