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BRIERE ie x ; Seeds Ling Wen entero he Aundemvat 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 ‘Ad 22 xibahels, Dongcheng Distt, Being _ = 2ip: 100015 BRIE 2 ae CHN ENERGY Ling Wen Acnbnn of Boomer 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; ‘Acs 22 Xibahels, Dongeheng Disc, Baling a = 2p: 100011 BRED CHN ENERGY Ling Wen ireoneae wen? 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 ‘Ad 22 xibanels, Dongcheng Distt, Being _—— a ip: 100011

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