ECHO CHIEF EXECUTIVE OFFICER, JOHN REDMOND SPEAKING AT THE SYDNEY BUSINESS CHAMBER

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1 28 May 2013 ECHO CHIEF EXECUTIVE OFFICER, JOHN REDMOND SPEAKING AT THE SYDNEY BUSINESS CHAMBER Good afternoon and thank you for the opportunity to address you today. The timing is appropriate. As you will know, Echo is close to finalising our proposal for The Star under the State Government s Unsolicited Proposals process. These are plans that will position The Star in Sydney for the remaining 80 years of its license here, building on our recently completed Stage Two developments, which have added the world class Darling Hotel, award-winning restaurants, bars, and a nightclub, the extraordinary Events Centre and VIP Gaming facilities, at a cost of $870m. While it is still early days, we are already seeing the impact of this transformational development, with, for example, significant increases in volume of patrons enjoying our non-gaming facilities, occupancy at the Darling at around 90%, and The Star winning share of the VIP market from Crown, having grown from 17% in FY2010 to around 24% in FY2012. At the same time, there is obviously significant public interest and debate on Sydney s future direction, not just as a tourism drawcard but also how we best develop the city s entertainment precinct for its own residents. As an out of towner my own impression of Sydney is one of huge opportunity. Like many ex-pats I feel very lucky to be living in Sydney. Its natural beauty is unsurpassed, and its proximity to Asia provides business and tourism links that in many ways are still in their infancy. This is clearly where the potential lies, and learning from recent Asian success stories is important as we enter these growing markets. One such story is the emergence of integrated resorts and their proven pulling power to help turbo charge a country s tourism offering. The term integrated resort often seems to be bandied around these days. I worked at what I would consider to be the first real Integrated Resort, Caesar s Palace in Las Vegas, way back in The term really came to the fore with the emergence of two large Singaporean casino-based vacation resorts, being Marina Bay Sands and Resorts World Sentosa. Since opening in 2010 these two large scale integrated resorts have had a well-documented remarkable impact on tourism in Singapore. What is interesting about these integrated resorts is that they are so much more than just a casino offering. Families from middle class China and South-East Asia are visiting Singapore for the nongaming facilities, which include hotels, shopping, great bars and restaurants, theme parks, and live shows. Increasingly the business community is also turning to such resorts for their accommodation

2 and conference and convention facilities. These resorts have real scale too, as well as this diversity of offering. Sydney is clearly different to Singapore, but some lessons can be learnt from the great success of their integrated resorts. First and foremost Singapore did not fragment the market. While the growth of the resorts is impressive there was only a very small gaming industry in place before the two resorts were constructed. This market structure provided the environment for the operators in Singapore to invest close to S$7bn each in large scale destinations. Here in Sydney we already have a large mature gaming market which is well illustrated by the number of electronic gaming machines in NSW alone around 97,500, less than 2% of which are in The Star. Electronic Gaming Machines in pubs and clubs in NSW generate revenue of around $5bn per annum a similar amount of revenue generated by both casinos in Singapore. Such a fragmented and mature gaming market helps explain why in Sydney there is only one casino, and indeed why such a licence model has been replicated successfully across all other capital cities in Australia. The model does and will continue to work well because it has allowed operators like Echo to move forward with certainty around large scale investments, particularly on the non-gaming side of the equation and co-exist with local pubs and clubs. More than 75% of our recent investment, for example, was in non-gaming infrastructure. Looking at our Asian neighbours, there is no doubt that integrated resorts do make a difference to tourism. Echo s vision for Sydney is to replicate such an integrated resort complex with scale to compete with the best in the region, in the new feature entertainment precinct of the city. Our recent development has set us on that path. Most importantly, our plans for the next stage of The Star s development, and its 80 year licence, are predicated on the new Board and management s recognition that the future of our business relies on aligning The Star s plans with the best outcomes for the city. The Star in Sydney is and always will be Echo s flagship property. Following the recently completed redevelopment we have a substantial asset and a base from which further investment will clearly deliver the step change benefits to tourism and the NSW economy. I believe the plans we will put forward will deliver on that in spades. We will combine Sydney s destination with the proven pulling power of integrated resorts for Australia s primary growing tourism audience. This investment will undoubtedly deliver Australia s premier integrated resort to Sydney. The Star will anchor Sydney s new feature entertainment precinct and be a critical element in delivering on the NSW Government s goal of making Sydney No.1 again.

3 We will unveil our plans once the Unsolicited Proposal bids close on June 21. They have been in development for some time, and I am excited about unveiling them to the people of New South Wales. Any future investments will be made prudently. Echo is in a position of strength with conservative gearing (net debt to EBITDA of 1.7x) and significant cashflow generation as the earnings at The Star benefit from the completed investment program. Echo s sole focus on the Australian market makes it a perfect partner for the NSW Government. For the people of Sydney and NSW the Star is already delivering on this objective for tourism and other economic benefits. Our plans mean we can expand on this without the need for a second casino in Sydney. I feel I should say a few words about the competing proposal for Sydney, put forward by our most significant competitor, Crown Limited, which owns and operates resorts in Melbourne and Perth. There has been so much written about the proposed development of Crown Barangaroo, and so little public discussion for such a significant change. Simply keeping track of the Crown Proposal requires a certain mental dexterity due to the continual changes. Two points that need further discussion are; Does Crown Barangaroo really warrant the tag an integrated resort? The proposal is offering a 350 room hotel, which will provide a 1.4% increase in Sydney s hotel room capacity. Integrated resorts normally have several hotels of different qualities, multiple options for dining and bars, concert arenas, museums, theme parks, night clubs, shopping options and much more. It is a place international tourists can bring the whole family and everyone: wife, husband, kids of all ages can be entertained in different ways.and it includes a casino. This is NOT what we understand has been proposed by Crown for Barangaroo, and so no, it is not an integrated resort and with 350 rooms simply cannot have a material impact on tourism no matter how tall it is or how many luxury apartments it accommodates. It simply does not offer the scale and diversity of attraction required to draw the Chinese middle class in large volumes as has been claimed. This claim seems particularly obvious when Crown does in fact already have a genuine integrated resort in Melbourne, Crown s flagship property and currently Australia s largest with 1600 hotel rooms and diverse attractions. In Sydney, most of the variety I just referred to is already available 500 metres away where The Star is located at the centre of Sydney s entertainment precinct. Our new proposal will provide the necessary scale for Sydney. The other key point which has been largely undiscussed is how Crown s plans have transmogrified significantly. Originally it was announced as a boutique VIP gaming facility to support a 6-star

4 hotel. Now the hotel is only a small part of the project, which has substantially become a casino. The casino tower is on steroids and the podium appears to be over-running the public open space, filling in a large part of the Southern Cove. The boutique VIP gaming facility is clearly now a significant casino at risk of over-running Barangaroo. The podium in the designs, together with several floors of gaming in the tower, would appear to comprise in the vicinity of 10,000+m 2 of gaming floor almost two football fields. Now, let s be clear I like casinos, but do Sydneysiders really know what they might be signing up for? It amazes me as a newcomer to this city that there has been no public response or discussion. Don t be fooled by the it s not a casino because it doesn t have poker machines argument either. There is a significant difference between a casino and a club or a pub. Casinos have gaming tables and the others have slot machines. A casino is not identified by its slot machines, but by its table games. And for complete clarity, I can tell you today that our proposal will not involve adding to the number of poker machines in NSW either. Sydney does not have a lack of table games for domestic or international players. As part of the concessions that Echo negotiated with the NSW government in relation to our current licencing exclusivity, we have no cap on the number of tables we can offer should the future demand be there. There are already currently around 320 tables at The Star, approximately 120 of which were added as part of the recent redevelopment. The majority of Sydney-siders, more than 65 per cent if you believe the surveys, categorically do not want a second casino in Sydney. In the end it is a decision for the government to balance the benefits and the issues that will come from issuing a second casino licence for Sydney. We have no issue with a new six star hotel in Barangaroo. That would be good for Sydney. Our issue and our concern, is that there is no public transparency about what is really being proposed by our competitor from Melbourne because it is mislabelled and it keeps changing. Another concern is that if Crown is given the go ahead it will go on changing and evolving and growing and expanding, as it has done to date, in every direction. Because what was originally proposed as a boutique VIP gaming facility to support a 6-star hotel has already evolved into a large casino. We ve seen similar concession creep in both Melbourne and Perth. Remember, the structure of one casino per major city in Australia has proven to work effectively for this market, particularly given the proliferation of slots in pubs and clubs. It has and will continue to permit casino operators to invest in destinations that have the quality and critical mass which can compete with the best in the region. Once there is a second casino, the model is broken and you cannot then turn back the tide.

5 In relation to The Star, we have recently bedded down our $870 million investment on time and on budget. We have received numerous international awards and accolades for our hotel, bars and restaurants. But more than that, we have an operation that has already delivered to the NSW economy. The Star is estimated to have already contributed in the order of $4 billion in taxes, license fees and other charges to Government since commencing in The evidence of the Integrated Resort effect is already being seen with The Star s tax contribution increasing by $100m (or 70%) since the recent redevelopment. The Star s operations make a considerable ongoing contribution to the NSW economy with an estimated Gross State Product contribution of $470m per annum. This is currently expected to increase to over $1.1bn per annum by FY2025. The Star is the State s largest single site employer, with almost 4,500 staff here, and with around 11 million guests per year we are amongst the State s most visited attractions. Our proposal, when they are presented on June 21, will build on that platform to play a major role in the State s pursuit of its challenging tourism and economic growth targets for To double NSW s tourism numbers in the next ten years, Sydney must attract at least its share of the large Chinese middle class traveller. To do this, Sydney needs a genuine large scale Integrated Resort. Even better if it is adjacent to a new Convention and Exhibition Precinct! Only Echo can provide that, and we are committed to working in partnership with the NSW Government, and with you, our fellow members of Sydney First, to deliver a place that we will all be proud of. Thank you