Downer News Issue 4 February-March 2016

Oil & Gas Sector

The importance of business innovation

Recent Water wins6

48 10

Downer NRL Auckland Nines

2 Issue 4 February-March 2016

OUR BUSINESS

A50 Australian Economic Forum

The A50 Economic Forum held in late January 2016 saw government and business representatives meet at the Sydney Opera House to discuss Australia’s transition from a mining-dominated economy to one focused on innovation and technology. n Pictured: Downer CEO Grant Fenn contributing to the discussion at the A50 Australian Economic Forum with, from

left to right: Anthony Moulder (Citi), The Hon. Andrew Constance (NSW Minister for Transport and Infrastructure), Scott Charlton (CEO Transurban), The Hon. Warren Truss (Deputy Prime Minister) and Grant Fenn.

Downer Half Year Results

Downer reported its results for the six months to 31 December 2015 on 4 February 2016. You can find copies of all the announcements and presentations on the Downer website and Group intranet.

Following the results, CEO Grant Fenn visited a number of sites to meet with employees, discuss the results and take questions. Thank you to everyone who took time to attend these presentations.

Half year results message from the CEODowner’s performance during the six month period was very credible in the light of tough market conditions and this reflects the strength of our market positions and the diversity of our operations.

Our customers are understandably very focused on costs and we must continue to work closely with them.

The health and safety of our people is paramount at Downer and Our Lost Time Injury Frequency Rate remains below one incident per million hours worked while our Total Recordable Injury Frequency Rate has reduced to 3.67 per million hours worked.

Tragically, however, there was a fatality in our Western Australian EC&M business in November last year. We spend an enormous amount of time and effort in keeping our employees safe and this shocking incident starkly reminds us that this focus can never be overdone. We must remain absolutely vigilant.

Thank you for your hard work and I remind you that helping our customers to be successful has never been more important to our business.

Most importantly, please ensure that you work safely and look out for yourself and your colleagues.

Grant FennCEO& Managing Director n

Results overview

$3,543.4 million Total revenue

$113.2 million Earnings Before Interest and Tax

$72.1 million Net Profit After Tax

$18.0 billion Work in hand

$178.1 million Operating cash flow

12 cents per share Interim dividend

Downer News 3

OUR BUSINESS OUR PEOPLE

Welcome Brendan Petersen, CEO EC&M

Brendan Petersen joined Downer in February as the new CEO of our Engineering, Construction and Maintenance (EC&M) division.

Following a 27 year career with John Holland, Brendan’s extensive experience in the engineering and associated specialist fields provides a strong strategic fit for our EC&M business.

In his first weeks with Downer, Brendan visited many EC&M offices to build his understanding of the business. This has included meeting with teams in informal Q&A sessions.

Brendan believes communication is critical to success: “I enjoy talking with people about their experiences and listening to their ideas about how we can improve our operations to benefit our customers.”

Brendan has been asking four key questions during his meetings:

1. What is EC&M better at delivering than our competitors?

2. What is it that we’re not good at?

3. What aren’t we doing that we should do?

4. What are we doing that we should stop doing?

Responses to these questions have provided valuable feedback which Brendan will be working through with the EC&M leadership team.

As an outsider looking in, Brendan says he always respected Downer as a formidable competitor with a solid safety record and strong capabilities. He says that his key task as CEO will be to match capability with emerging opportunities in EC&M’s fast changing markets.

Brendan places a strong emphasis on ensuring safety is at the forefront of all business decisions and activities, whilst at the same time delivering on financial targets.

Committed to building effective and capable leadership teams, Brendan recently held a strategy planning session with EC&M leaders and says he is looking forward to visiting more EC&M sites and offices over coming weeks to meet with our people and customers. n

From left to right: Peter Borden, Will Taylor, Brett Sangster and Brendan Petersen.

AUCKLAND NINES

4 Issue 4 February-March 2016

Downer NRL Auckland NinesSince its establishment in 2014, the NRL Auckland Nines has soared in popularity and become the unofficial kick-off for the National Rugby League season.

The two day tournament, which involves all 16 NRL clubs, is marketed as “The Greatest Weekend” and Auckland enthusiastically embraced the competition once again this year.

Downer was contacted just a few weeks before the beginning of the tournament and asked if we would be this year’s naming rights sponsor, following the late withdrawal of Dick Smith. We decided to take up this excellent opportunity to showcase our brand in our key markets – Australia and New Zealand.

The event was held at the famous Eden Park over New Zealand’s Waitangi Day long weekend and Downer employees took up over 1,100 tickets that were offered for free or at a large discount. As you can see from the photos, many of our people joined the festive and family friendly atmosphere by dressing up in some fantastic outfits.

There was a special connection for Downer as Nathan Ross, who until last year worked for Downer in Hexham in New South Wales, played for the Newcastle Knights (see photo on page 5).

The tournament provided a great opportunity to entertain some of our customers while John Key, the Prime Minister of New Zealand, and Nikki Kaye, Member for Auckland and Minister for Civil Defence and Youth, visited the Downer corporate box.

The Kiwi crowd loudly cheered the New Zealand Warriors to the final, but they were beaten by the Parramatta Eels in a sunny finale to what was a wonderful weekend for rugby league and Downer. n

Our people enjoyed the fancy dress festivities.

AUCKLAND NINES AUCKLAND NINES

Downer News 5

Downer NRL Auckland Nines

The Parramatta Eels were victorious in the end.

Grant Fenn with former Downer employee, Nathan Ross, who played for the Newcastle Knights.

There was a fantastic atmosphere on the day.

OUR SECTORS: OIL & GAS

6 Issue 4 February-March 2016

Downer in the Oil & Gas sectorYou may be aware of Downer’s participation in large oil and gas projects but did you know that we’re now expanding into the Northern Territory?

Projects across AustraliaOn the east coast, our EC&M division has participated in all three major coal seam gas projects. We are also currently contracted to CB&I for the ExxonMobil KTT project in Gippsland, Victoria for the provision of E&I construction services on the gas plant area of the project. In Queensland we continue to provide a unique combination of upstream LNG field services centred on the delivery of mechanical, E&I, sustaining capital, optimisation and maintenance. Our multi-discipline experience and capability ensures that we are operationally ready to deliver field services that meet and exceed the expectations of our key customers including Santos and Origin Energy.

In the west, we’re participating in Chevron’s major LNG projects including significant E&I packages on Wheatstone, and the provision of SMP, E&I, miscellaneous civil and commissioning works at Gorgon. On these two projects alone we currently have over 1,800 people engaged and this number will continue to grow in 2016.

The latest news is that we are now expanding into the Northern Territory with Downer awarded the major maintenance services contract with ConocoPhillips Australia at its Darwin LNG plant. We are providing plant maintenance and repair as well as shutdown planning and execution services over a three year contract.

Relationships Creating Success Across all projects we are recognised as providing motivated and skilled teams committed to safety. In fact our safety focus was recognised late last year when Bechtel awarded Downer the Safety Subcontractor of the Month award for both October and December; this was for our work on the Chevron-operated Wheatstone Project.

Awards and recognition are valuable measures in demonstrating how we are forming relationships that create success. Another key measure is winning new and repeat business. The recent extension of our contract with Chevron on the Gorgon project

and new contract awarded by ConocoPhillips for the Darwin LNG operation demonstrates that customers value our services and the work of our teams in delivering success for their businesses.

In speaking with the Gorgon and Wheatstone teams in Perth recently, Grant Fenn recognised the contribution of these teams in delivering valued services: “It’s great to see our customers selecting Downer for construction, long-term maintenance, turnaround and shutdown services in the oil and gas sector,” he said. “This shows that our people and the systems that support our people are working well.”

Recruiting nowWe are currently recruiting people for the Gorgon, Wheatstone and Darwin LNG projects. For more information visit our People and Careers page www.downergroup.com/People-and-careers/ n

Chevron-operated Wheatstone Project, Western Australia

OUR SECTORS: OIL & GAS OUR PEOPLE

Downer News 7

Earlier this year, six of our people at Roy Hill raised their hands to undertake our industry-first and 100% site based, traineeship in vehicle servicing and work towards receiving a nationally recognised qualification – all while performing their day jobs.

The Certificate II in Heavy Vehicle Servicing is a 12-month program incorporating theory and practical components, providing our service personnel and trade assistants with a stepping stone towards a Certificate III qualification.

The program was developed by Andrew Scudds, Mining Maintenance Training Superintendent, in partnership with Polytechnic West with the pilot launched at our Christmas Creek operation. Its success at Christmas Creek (where the program will run again in 2016), attracted interest from Roy Hill Superintendents Dave Routley and Dayle Wallis.

“I can see a day very soon when this Cert II in Servicing will become mandatory for all service people or trade assistants,” said Dave. “The modules of the traineeship are designed specifically to provide on-the-job training and give the candidate the best opportunity at developing their skills.”

“Another great thing about this traineeship is that it provides increased safety awareness for people who work around mobile plant and equipment who aren’t tradespeople.”

By investing in our employees we continue to develop our talent pool, enabling our people to step up the career ladder and lead our business into the future. n

Craig West, General Manager, Northern - Infrastructure Services (New Zealand), was recently honoured as 2015 Young Executive of the Year in the Deloitte Top 200.

The judges’ comments included: “We were incredibly impressed with Craig’s ‘mana’, personal ethos, integrity, drive and level of achievement… and this resulted in him being named the Young Executive of the Year.”

The judges said Craig epitomised the Downer philosophy of being “humbly smart”, preferring to compliment his team’s work over his own abilities. They were impressed with the way he worked and connected with others and his evident commitment to his people.

Growing up, Craig’s passion was in rugby, playing for the Chiefs and New Zealand Maori All Blacks rugby teams. He was 28 when he was injured and decided to have a go at business as, prior to playing rugby, he had been involved in civil engineering.

Craig got a job as a cadet at Downer and has been with the company for 15 years, moving through the ranks from Cadet to General Manager.

Leadership is about people skills, he says.

“Being able to articulate the vision and purpose and try to create and engender that passion and motivation in people and inspire people – those are a couple of the key things for me in terms of communication, but also emotional intelligence and being quite self-aware in terms of how you encourage others to succeed and take those next steps.” n

Employees receive formal qualifications while on-the-job

Craig West wins Young Executive of the Year

The Cert II in Servicing candidates with the Roy Hill team (from left): Maintenance Training Superintendent Andrew Scudds, Polytechnic West Lecturer Damir Stajduhar, Brad Congdon, Michael Haigh, Mark Donnelly, Peter Wyatt, Peter Murray, Brandon Weston, Maintenance Superintendent Dave Routley, HSET Superintendent Emma Cullen.

Craig West, General Manager, Northern – Infrastructure Services (New Zealand).

FUEL FOR THOUGHT: INNOVATION

8 Issue 4 February-March 2016

Today, businesses like Downer face constant instability and disruption. Significant changes in customer behaviour, technology, and regulatory compliance demands we take innovative action otherwise we risk losing revenue and market share to more forward thinking and agile competitors. It’s no longer a question of why Downer should innovate; it’s now about how fast and what we’re innovating.

The need to innovateInnovation does not necessary require a large budget or investment in research and development. It’s not just about designing a new product or service to sell – it also focuses on existing business processes and practices to improve efficiency, find new customers, cut down on waste and increase profits.

The commercial benefits of innovation are well known. How businesses respond is critical to their continued success and ultimately, their existence.1

Innovation and lean engineering

Based on the ideas of continuous incremental improvement and respect for others, Lean engineering leverages a similar customer-centric methodology (used in Lean start-ups) to continuously improve any process through the elimination of waste.

The basic principles of Lean are:

n Focus on effectively delivering value to your customer

n Respect and engage people

n Improve the value stream by eliminating all types of waste

n Maintain flow

n Pull through the system

n Strive for perfection

With Lean, the customer defines value or value-add with three conditions:

1. It must transform the product or service.

2. The customer must be willing to “pay” for it.

3. It must be done correctly the first time.

If you don’t meet all three of these criteria, then you have non-value-added activities or waste. As the diagram shows, this way of thinking allows businesses to create order (not chaos) by providing tools to test a vision or strategy continuously. This approach isn’t simply about spending less money or failing fast and failing cheap. It is about putting a process, a framework around the development of products and services – essentially, your ideas – and continuously developing them into tangible business outcomes.

The importance of business innovationInnovation is critical to fuelling business growth and maintaining market share. With Downer’s core markets becoming increasingly competitive, innovation will provide us with a key point of differentiation.

1 Why are big businesses looking to start-ups for innovation? © 2015 KPMG

LEARN

BUILD

MEASURE

CONTINUOUSFEEDBACKSplit TestingSurveysInterviews

CONTINUOUS ANALYTICSContinuous Delivery AnalysisReal-time MonitoringInstrumentation

CONTINUOUS DELIVERYMinimal Viable ProductContinuous IntegrationDeployment Pipeline

Source: The Undocumented API, Bob Familiar, November 2014.

FUEL FOR THOUGHT: INNOVATION FUEL FOR THOUGHT: INNOVATION

Downer News 9

Accelerating innovationCorporate innovation can generate new products and services. It can also create a new type of process or new customer approach. It can solve problems we don’t even realise we have. In 2016, Downer will commence an accelerator program that helps our staff to accelerate their innovative ideas, building on the great contributions from our inaugural innovation competition, Future Box. This program will help innovative minds within Downer to flourish and to help the business create and capture value. The Downer six month program is an intensive program designed to accelerate the success of innovations that support Downer’s growth. These may be products, services, or business processes.

What is an accelerator program?Corporate accelerators provide a workable solution to the difficulty that corporates like Downer face when trying to innovate as well as to the difficulty that start-ups have getting off the ground. When a corporate develops its own sector-specific accelerator, it creates opportunities for meaningful encounters focused on the rapid advancement of talented individuals. The innovations that arise can go on to make a real difference to both parties.

Why run an accelerator program in Downer?Accelerators introduce agility to big companies by separating innovation efforts from business as usual processes. They also create a structure for the business to evaluate innovations and to reach a decision on adoption within a set timeframe. Decisions are not, however, made in the dark. Emphasis is placed upon evidence of success from the rapid trialling of ideas. Not only does this approach quickly give rise to valuable innovations, but it also encourages business like ours to behave in a more agile manner with respect to internal matters.

What happens if an idea is a success?Candidates that earn a place in the Downer accelerator program will be coached by an experienced Mentor over a period of six months to help bring their idea to fruition. This exposure to senior Downer staff, entrepreneurs, and experienced financial staff will provide an invaluable experience in terms of turning ideas into marketable products, services or business processes.

What happens if an idea isn’t a success?Failure comes in many forms and the increasing complexity of our projects and the hyper-connected world that we operate in doesn’t help. Despite our best efforts, learning the hard way is often the only way. Perhaps this is why modern start-up culture has rallied around the mantra, “Fail fast. Fail early. Fail often.” Failure can indeed be a better teacher than success. It can also be a sign of creativity. The best way to avoid short-term failure is to keep churning out the same old products and ideas, though in the long term this may spell your doom. Businesses cannot invent the future without taking risks. n

Did you know?Downer is working closely with the Auckland Council in the assessment of stormwater pipe conditions using SL-RAT, a new innovative technology that sends an acoustic tonal pulse down a pipe, receiving a blockage assessment in less than three minutes.

Assessments can also be conducted with no confined space entry and no flow contact, meaning this innovation is cost effective and very simple to use.

When Sydney Water trialled SL-RAT, the results showed nearly 60% of our cyclic cleaning program consisted of clean pipes not requiring any further cleaning. So we thought, why clean clean pipes?

Daqri Smart HelmetFor LA-based augmented reality company Daqri, innovation is business as usual. Their latest project specifically designed and created for workers in industrial settings such as oil rigs, water treatment plants and construction sites, demonstrates how innovative solution can increase productivity, efficiency and safety. The tech company has recently developed a smart hardhat that gives onsite engineers, construction works, and technicians additional layers of information about their surroundings. It is a wearable device that enables an augmented reality – the real world overlaid with computer imagery.

In an attempt to change the nature of blue-collar work, the Android-powered hard hat allows users to take work instructions and augment data or information right on top of the actual work environment. Through a combination of cameras and sensors, the smart hat can capture and record real-time information about the user’s surroundings from valve readings to thermal data. It can also show the user stored information like safety guidelines and worker instructions.

With the integration of building information modelling (BIM) software, the device will also be able to display to users the insides of structural elements, such as the interior of a pipe.

Source: http://daqri.com/home/product/daqri-smart-helmet/

The Downer six month program is an intensive program designed to accelerate the success of innovations that support Downer’s growth.

For more information contact:

Steve Killeen Steve.Killeen@downergroup.com

Innovations in WaterThought Leadership is one of the four pillars underpinning the Downer brand, recognising the importance of innovation and challenging the status quo.

Our Utilities business has recently implemented a number of innovations in process design, equipment selection and operational efficiency to a number of commissioned and operating full-scale plants in Queensland and Western Australia.

These innovations include:

n A variable volume bioreactor design, linked with an intermittent membrane filtration operation, to provide intra-plant flow balancing that also reduces membrane bioreactor (MBR) power consumption. Our Utilities business has been fine tuning this design since 2008 and the current results, when implemented in full-scale plants, demonstrate excellent operating efficiencies and sustainability outcomes;

n The use of intermittent aeration configurations and the incorporation of improved nitrogen removal processes into conventional activated sludge plant designs. The initial results are promising, showing a more efficient denitrification process, avoiding the need for additional carbon dosing, and improving the overall reliability of meeting the ever tightening regulations on effluent discharge of nitrogen concentrations; and

n The use of high solids capable ultra-filtration membranes for algae removal and disinfection in a single step process for recycled water treatment. This approach has been implemented on two of our 6 ML/day recycled water treatment plants to produce “Class A” quality recycled water from facultative pond sewage treatment systems cost effectively.

Want to know more about some of our proven innovation?

If you are in Melbourne in May, visit us at Ozwater’16 where Mark Newland, Downer’s Principal Process Design Engineer, Infrastructure Services will be presenting on ‘Practical Innovations in Wastewater and Recycled Water Treatment Plant Design and Operation’. Ozwater is Australia’s international water conference and trade exhibition and will be held at the Melbourne Convention & Exhibition Centre from 10-12 May, 2016.

Alternatively, you can email us at info@downergroup.com n

OUR SECTORS: WATER

10 Issue 4 February-March 2016

Recent Water winsMareeba Wastewater Treatment PlantDowner has secured a water contract with Mareeba Shire Council located in Far North Queensland, 60 kilometres west of Cairns.

The 14-month project involves the design and construction of a new wastewater treatment plant at Mareeba, to meet effluent licence requirements and future growth of the local community.

The contract is worth about $14 million.

In the report issued by Council, our success was attributed to our previous work in the area on a number of plants in Northern Queensland including Kuranda, Malanda and Atherton, our previous relationship with the customer, and our value for money solution.

Our innovative robust process design coupled with our proven experience of implementing this technology solution was also a key driver in helping us secure this project.

Mark Newland, Principal Process Design Engineer, Infrastructure Services.

OUR SECTORS: WATER OUR SECTORS: WATER

Downer News 11

Recent Water winsSunbury Recycled Water Plant upgrade In February 2016, Lisa Neville, the Victorian Minister for Environment, Climate Change and Water, announced the start of a $53 million upgrade of the Sunbury Recycled Water Plant with Downer selected to deliver the design, build, operate and maintain component of the upgrade for a period of 10 years.

The upgrade will increase the volume of wastewater the plant is able to treat from 5.9 to 9.2 million litres a day, catering to high population growth expected in Sunbury and Diggers Rest in Victoria.

Despite the significant increase in treatment capacity, the innovative design means the upgrade will remain within the footprint of the existing treatment plant. It will also reduce the amount of energy consumed per megalitre of effluent treated.

The upgrade will see more than 50 full and part time jobs during construction, including apprentices and trainees, and is scheduled to be finished in early 2018. n

Pictured from left to right: Terry Larkins (Western Water Chairman), Josh Bull (Member for Sunbury), Sergio Cinerari (CEO Downer Infrastructure Services), Neil Brennan (Western Water Managing Director) and Hon Lisa Neville (Minister for Environment, Climate Change and Water) at the existing Sunbury Recycled Water Plant.

These wins demonstrate

our leadership in the water

and wastewater industry through

the innovation and value we

bring to our customers when

working together as one team.

Congratulations to all involved.

COMMUNITY

12 Issue 4 February-March 2016

Have you got a story idea? Know how we can make Downer News better? Send your suggestions to: Corporate.Affairs@downergroup.com

72kg of carbon (CO2) were neutralised using Campbell Design Group for this project. www.cdgroup.biz

Supporting JawunDowner is a proud supporter of Jawun, a not-for-profit organisation which works with corporate, government and philanthropic partners to offer skills and resources to Indigenous communities. Owen O’Brien, a Project Engineer based in Western Australia, spent six weeks on a Jawun secondment in late 2015.

“I was stationed in Broome to work with Nirrumbuk Aboriginal Corporation. This is a not-for-profit organisation working to facilitate the self-sustainability of Aboriginal people in the region through the use of training, apprenticeships, youth engagement and support, and employment services. Nirrumbuk has a number of trades companies through which they can direct their candidates. I was tasked with assessing the OH&S capability of each of the entities and carrying out a full business risk assessment for each of them.

The first week is an induction week during which we are given information, history, context and a really good look around. We are introduced to different organisations

and given an insight into how Indigenous Australians used to live, how they live now and how they intend to live in the future. This is the fun week. Everything is new and shiny. We have a planned itinerary designed to allow us to see all aspects of the area and the people, to get to know each other and, in a way, develop and grow the excitement and the enthusiasm we were already feeling for the days and weeks ahead.

The following five weeks involved full immersion into our respective companies as well as the local area. I learned about Broome and its rich history as a cultural melting pot made up of people from Aboriginal, European, Japanese and Chinese backgrounds. I spent time with local people working in their local

businesses, attempting to make a difference in the lives of the people around them.

I was able to use all the experience I have accumulated with Downer to assist the local people with their desire to improve the opportunities in their community. I have to say, the small part I played was very rewarding.

For me, the secondment has been life changing and I highly recommend it. It was an invaluable opportunity to challenge myself, step out of my comfort zone and actually make a difference in people’s lives.” n

Owen O’Brien near Broome, Western Australia.