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Our Ref: 190212 - Circular To Creditors Re 2nd Extension.Docx

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Dear Sir / Madam NORTHERN ENERGY CORPORATION LIMITED (ADMINISTRATORS APPOINTED) ACN 081 244 395 (“NEC”) COLTON COAL PTY LTD (ADMINISTRATORS APPOINTED) ACN 140 768 636 (Collectively referred to as “the Companies”) We, Said Jahani and Shaun McKinnon, refer to our appointment as the Joint and Several Administrators of the Companies on 17 October 2018. We also refer to our notice to creditors dated 21 November 2018. The Federal Court of Australia (“the FCA”) ordered following a hearing on 16 November 2018 that, pursuant to Section 439A(6) of the Corporations Act 2001 (“the Act”), the convening period within which we, as the Administrators of the Companies, must convene the second meeting of creditors as prescribed by Section 439A(5) of the Act be extended up to and including 21 February 2019. Deed of Cross Guarantee Proceedings

There is a Deed of Cross Guarantee dated 31 July 2012 (“DOCG”) between New Hope Corporation Limited (“New Hope”) and a number of its subsidiaries. The DOCG purports to guarantee the debts and obligations of a number of New Hope subsidiaries by New Hope, should the subsidiaries ever be wound up (enter liquidation). At the hearing held on 16 November 2018, Wiggins Island Coal Export Terminal Pty Limited (“WICET”) appeared at the hearing to extend the convening period and opposed an extension being granted. The basis upon which WICET opposed the extension was that it would prevent them from enforcing the terms of the DOCG. Conversely, New Hope claim that the DOCG does not hold it liable for the debts of the Companies. In an attempt to resolve this dispute, New Hope (and various other related entities) has commenced proceedings in the Supreme Court of New South Wales (“the Court”) (“the Proceedings”) to have the Court adjudicate on the operation of the terms of the DOCG, including whether or not New Hope is liable for the debts of the Companies, once they are wound up. In this regard, the Court listed the matter for directions on 8 February 2019 before Justice Hammerschlag who noted that he would have the proceeding determined

To the Creditor as Addressed

12 February 2019

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expeditiously and before the middle of this year but would not set the matter down for final hearing at present. The matter has been listed for directions on 1 March 2019. A full timetable of the Proceedings is as follows:

Date Event Representative Orders On or before 11 February 2019 The plaintiffs serve any evidence on which

they intend to rely in support of prayers 1 to 6 of the Summons filed on 1 February 2019 (copy enclosed) (“the Representative Orders Application”).

On or before 2.00pm on 15 February 2019 The defendants serve any evidence on which they intend to rely in respect of the Representative Orders Application.

On or before 4.00pm on 15 February 2019 The parties file and serve submissions. 19 February 2019 The Representative Orders Application be

listed for hearing. Pleadings On or before 22 February 2019 The defendants to file and serve commercial

list responses and cross-claims and list statements.

On or before 27 February 2019 The plaintiffs to file and serve any commercial list reply and responses to cross-claims.

1 March 2019 The matter be listed for directions. As noted from the above timetable and the enclosed Summons, it is proposed that WICET act as the representative creditor in the Proceedings (so as to bind all other creditors to any judgment the Court makes). As the Administrators of the Companies, we will be supporting WICET with their submissions arguing that the DOCG does apply based on our interpretation and legal analysis of the DOCG. We note that our consent to commence the Proceedings pursuant to Section 440D(1)(a) of the Act was provided to the Court on 6 February 2019. Our consent was provided on the condition that:

1. An undertaking be provided to the Court by New Hope not to revoke the DOCG that is the subject of the Proceedings until after the conclusion of the second meeting of creditors; and

2. New Hope do not seek costs of the Proceedings as against the Companies or us as the Administrators of the Companies.

Proposed Deed of Company Arrangement

New Hope has proposed a Deed of Company Arrangement (“DOCA”) on the premise that it will win the Proceedings. If New Hope do win the Proceedings, then the DOCG will not hold New Hope liable for the debts of the Companies. At this stage, we estimate that the DOCA proposal may provide a return to creditors of between 9 and 24 cents in the dollar (this return is in additional to funds that may be available to creditors by way of security, including bank guarantees). However in our opinion, at this stage, a DOCA cannot be properly considered by creditors until the outcome of the Proceedings is determined (such that we are able to report to creditors if they have the benefit of the DOCG or not).

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New Hope have requested that we apply to the Court for an extension to the voluntary administration period (the convening period currently expires on 21 February 2019) for a further five (5) months to allow the Proceedings to be completed. We believe that the extension is in the interests of creditors as it will allow them to determine the future of the Companies with the knowledge of the effect (if any) of the DOCG. Further particulars of this DOCA, including the DOCA term sheet, will be provided in our second report to creditors.

Purported Antecedent Transactions

On 31 January 2016, approximately five (5) years subsequent to New Hope’s acquisition of NEC, the shares in three 100% owned subsidiaries of NEC were distributed as an in-specie dividend to Arkdale Pty Limited (“Arkdale”). Arkdale is 100% owned by New Hope. The shares in the three entities that were transferred are Taroom Coal Pty Limited, Yamala Coal Pty Limited and Elimatta Pastoral Pty Limited (collectively referred to as “the Transferred Entities”). The Transferred Entities had an aggregate carrying book value of assets of $43.8 million and liabilities of $45.9 million in the records of NEC. On this basis, this in-specie dividend resulted in a net liability assumption of approximately $2.1 million for Arkdale. WICET submitted to the FCA that it will vote against any DOCA proposal and that it would like for this in-specie dividend to be further investigated by a liquidator as it may present as an antecedent transaction (a transaction that may be recoverable by a liquidator). We are currently investigating this in-specie dividend in relation to it being a potential antecedent transaction, including investigating the following:

1. Whether it was effectuated at ‘market value’; 2. Whether it was undertaken for the purpose of seeking to defeat creditors; and 3. Any other factors that would question its bona-fide purpose.

Our investigations remain ongoing in this regard and will be detailed in our second report to creditors. However, a consideration to our investigations is the solvency of the Companies at the time of the transactions. The solvency of the Companies may be dependent on whether the DOCG applies to the debts of the Companies. Again, for this reason, it is our view that it is in the interests of the creditors to extend the convening period to allow the Proceedings to be concluded so the correct operation of the DOCG can be known. Proposed Second Extension of Convening Period

Having regard to the proceedings in relation to the DOCG, we intend to apply imminently to the FCA for a further five (5) month extension to the convening period. We believe this extension is in the interests of creditors as it is enables a sufficient amount of time to have the Court opine on the DOCG and therefore:

1. Avoids having to incur potentially unnecessary costs associated with a liquidation while the critical issue of whether the DOCG applies is determined by the Court;

2. Creditors are not prejudiced as the extension application is being funded by New Hope who have also separately provided an updated indemnity (see below) to us to ensures we can advocate in the Proceedings as necessary and will therefore not deplete assets of the Companies from a creditors’ perspective;

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3. In the event the DOCG is not binding on New Hope (i.e. New Hope wins the Proceedings), it preserves the prospect of resolving to accept New Hope’s DOCA proposal at the second meeting of creditors that may deliver a better return to creditors than what would be available in a liquidation, subject to the outcome of our investigations into the antecedent transactions;

4. New Hope (and the other plaintiffs to the Proceedings) have provided an undertaking not to attempt to revoke the DOCG until the end of the second meeting of creditors (so that if the Proceedings hold that the DOCG apply to New Hope, the creditors of the Companies will have the benefit of the DOCG as against New Hope);

5. Creditors are not prejudiced by waiting the five (5) months as any rights regarding the purported antecedent transactions remain preserved and are not affected by any statutory time restrictions by which proceedings must be commenced; and

6. It will allow us to conclude the ongoing asset sale process and thus provide a greater clarity to creditors regarding the outcome of the sale process.

Updated Declaration of Independence, Relevant Relationships and Indemnities

We enclose our updated Declaration of Independence, Relevant Relationships and Indemnities dated 12 February 2019.

Report to Creditors and Second Meeting

A report to creditors prepared pursuant to Section 75-225 of the Insolvency Practice Rules will be provided to creditors convening the second meeting of creditors five (5) business days prior to the meeting being held. Should you have any further queries, please do not hesitate to contact Chris Hillier of our office on (02) 8297 2645. Yours faithfully Said Jahani Joint and Several Administrator Enc.

Updated Declaration of Independence, Relevant Relationships and Indemnities

Northern Energy Corporation Ltd (Administrators Appointed) ACN 081 244 395 (NEC)

Colton Coal Pty Ltd (Administrators Appointed) ACN 140 768 636 (Colton Coal)

(Collectively referred to as “the Companies”) Practitioner/s appointed to an insolvent entity are required to make declarations as to:

A their independence generally

B relationships, including

i the circumstances of the appointment

ii any relationships with the [company/debtor] and others within the previous 24 months

iii any prior professional services for the [company/debtor] within the previous 24 months

iv that there are no other relationships to declare and

C any indemnities given, or up-front payments made, to the Practitioner.

This declaration is made in respect of ourselves, our partners, Grant Thornton Australia Limited (GTAL) (the Firm) and any of the GTAL’s associated entities.

A Independence

We, Said Jahani and Shaun McKinnon of Grant Thornton Australia Limited have undertaken a proper assessment of the risks to our independence prior to accepting the appointment as Administrators of the Companies in accordance with the law and applicable professional standards. This assessment identified no real or potential risks to our independence. We are not aware of any reasons that would prevent us from accepting this appointment.

B Declaration of Relationships

Circumstances of appointment

This appointment was referred to us by Todd Barlow, Chief Executive Officer of Washington H Soul Pattinson & Company Limited (“WHSP”) and also a director of New Hope Corporation Limited (“NHC”). WHSP is an investment house with investments in a diverse portfolio of assets across a range of industries. WHSP has a 50% shareholding in NHC. From time to time, GTAL has undertaken accounting and advisory services for several of WHSP’s various investments.

We believe that this referral does not result in a conflict of interest or duty because:

• We have never provided any accounting and/or advisory services to the Companies or NHC; and • Referrals from business contacts are commonplace and do not impact on our independence in carrying out our

duties as voluntary administrators.

On or about 15 October 2018, we also had a conversation with Mr Davey of Tucker Cowen. The purpose of this conversation was to provide background for the need of a possible voluntary administrator appointment.

On 16 and 17 October 2018, we had several telephone conversations with Mr Matthew Busch, Chief Financial Officer of NHC, to understand the background of the Companies and also to negotiate the terms of an indemnity, the details of which are provided below.

We were also subsequently contacted by Mr Daniel Davey of Tucker Cowen, who acts as solicitor for several of the Companies’ directors in relation to this referral.

We received no fees in respect to the above referred discussions and believe they do not result in a conflict of interest or duty, or affect our independence for the following reasons:

• The Court and ARITA’s Code of Professional Practice specifically recognise the need for practitioners to provide advice on the insolvency process and the options available and do not consider that such advice results in a conflict or is an impediment to accepting the appointment;

• Advice was only provided to the Companies in respect of limited scope items. The advice and information given was limited to the financial situation of the Companies, consequences of insolvency and the options available to the Companies. No advice was provided to the board, directors, or any other stakeholders;

• The nature of the advice provided is such that it would not be subject to review and challenge during the course of the Voluntary Administration; and

• The pre-appointment advice will not influence our ability to be able to fully comply with the statutory and fiduciary obligations associated with the Voluntary Administration of the Companies in an objective and impartial manner.

We have provided no other information or advice to the Companies, the directors or its advisors prior to our appointment beyond that outlined in this DIRRI.

Relevant Relationships (excluding Professional Services to the Insolvent)

Concurrent Appointments

Nature of professional services

Reasons

We were concurrently appointed voluntary administrators of the Companies, being: • Northern Energy

Corporation Limited; and • Colton Coal Pty Limited.

We believe that this relationship does not result in a conflict of interest or duty because: • Colton Coal is a 100% owned subsidiary of NEC. The nature of the business

operations means that the voluntary administrations can be conducted more efficiently by one appointed firm.

• Following discussions with relevant persons whom have understanding of the Companies’ structure, we have not identified any conflicts of interest caused from real dispute as to the facts, or as to the validity of transactions between the Companies.

• We are not aware of any conflicts of interests as between the Companies. Should a conflict arise, we will keep creditors informed and take appropriate action to resolve the conflict.

• The appointment of us as voluntary administrators of the Companies will not influence our ability to fully comply with the statutory and fiduciary obligations associated with the voluntary administration of the Companies in an objective and impartial manner.

Neither our, nor our firm, have, or have had within the preceding 24 months, any other relationships with the Companies, an associate of the Companies, a former insolvency practitioner appointed to the Companies or any person or entity that has security over the whole or substantially whole of the Companies’ property.

Prior Professional services to the Insolvent

Neither our, nor our firm, have provided any professional services to the Companies in the previous 24 months.

No other relevant relationships to disclose

There are no other known relevant relationships, including personal, business and professional relationships, from the previous 24 months with the Companies, an associate of the Companies, a former insolvency practitioner appointed to the Companies or any person or entity that has security over the whole or substantially whole of the Companies’ property that should be disclosed.

C Indemnities and up-front payments

We have been provided with the following indemnity for the conduct of the Administration of the Companies:

Name Relationship with the Company Nature of indemnity or payment

NHC Ultimate shareholder and secured creditor of the Companies

On 17 October 2018, we entered into a Deed of Indemnity (“the First Indemnity”) with NHC that provided up to an amount of $150,000 (plus GST) to meet the fees and disbursements incurred in conducting the Administration of the Companies. There were no specific performance obligations connected to the First Indemnity other than to provide a consent pursuant to Section 440B(2) of the Act to NHC as a secured creditor with a registered charge over all or substantially all of the assets of the Companies. On 8 November 2018, NHC agreed by email to increase the First Indemnity by $30,000 (plus GST) to a total amount of $180,000 (plus GST). This additional $30,000 was sought to meet the costs incurred applying to the Federal Court of Australia to extend the period during which the second meeting of creditors was to be held. On 7 February 2018, we entered into a Deed of Amendment for the Deed of Indemnity (“the Amended Indemnity”). The Amended Indemnity increased the previously agreed amount of $180,000 up to an amount of $780,000 (plus GST) with an ability to further increase this amount in $100,000 increments, as mutually agreed between the Administrators and NHC. The Amended Indemnity was provided by NHC to ensure adequate funding was available to:

1. The Administrators to ensure we can participate in the proceedings in respect to the enforceability of the Deed of Cross Guarantee dated 31 July 2012 (“the DOCG”) which were commenced by NHC (“the Proceedings”); and

2. The Administrators to allow them to apply to the Federal Court of Australia to further extend the convening period for a period of five (5) months to enable sufficient time for the Supreme Court of New South Wales to opine on the DOCG (specifically whether NHC is liable for the debts of the

Companies, in the event the Companies are liquidated).

Pursuant to Section 440D of the Act, we have consented to the commencement of the Proceedings as we believe they are in the interests of creditors as the proposed course of action addresses the dispute in relation to the DOCG in a logical and expedited manner. At the same time, we also secured an undertaking from NHC and the other plaintiffs to the DOCG proceedings not to take steps to revoke the DOCG until the end of the second meeting of creditors of the Companies. The provision of the Amended Indemnity is not conditional to any position adopted by us in relation to the interpretation of the DOCG. Furthermore, we advised NHC prior to agreeing to the Amended Indemnity that we hold an opposing view to NHC, that being the DOCG holds NHC liable for the debts of the Companies, in the event the Companies are liquidated. In addition, NHC will continue to provide an uncapped indemnity in relation to any claims, damages, remediation costs or similar in respect to any environmental or rehabilitation works required by any authority.

This does not include statutory indemnities. We have not received any other indemnities or upfront payments that should be disclosed.

Dated: 12 February 2019

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SAID JAHANI SHAUN MCKINNON JOINT AND SEVERAL ADMINISTRATOR JOINT AND SEVERAL ADMINISTRATOR

Note:

1 If circumstances change, or new information is identified, we are are required under the Corporations Act 2001 and the ARITA Code of Professional Practice to update this Declaration and provide a copy to creditors with our next communication as well as table a copy of any replacement declaration at the next meeting of the insolvent’s creditors. 2 Any relationships, indemnities or up-front payments disclosed in the DIRRI must not be such that the Practitioner is no longer independent. The purpose of components B and C of the DIRRI is to disclose relationships that, while they do not result in the Practitioner having a conflict of interest or duty, ensure that creditors are aware of those relationships and understand why the Practitioner nevertheless remains independent.