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BIL
BIBLT
BIL - BHP Billiton Limited Annual General Meeting
BHP Billiton Plc
Share code: BIL
ISIN: GB0000566504
For Announcement to Market
Please find attached addresses to shareholders currently being delivered at
BHP Billiton Limited`s Annual General Meeting by the Chairman and the Chief
Executive Officer.
The poll results will be communicated to the market shortly after the
conclusion of BHP Billiton Limited`s Annual General Meeting held in Perth
today.
Jane McAloon
Group Company Secretary
BHP Billiton Limited Annual General Meeting
Speeches by Jac Nasser, Chairman, BHP Billiton
and
Marius Kloppers, Chief Executive Officer, BHP Billiton
16 November 2010
Chairman`s Address
Good morning ladies and gentlemen. My name is Jac Nasser
and I will chair today`s meeting. It is a pleasure for
the Board to be here in Western Australia.
Before we start today`s business proceedings I would like
to recognise the traditional owners of the land on which
this meeting is being held, the Nyoongar people. Let me
ask Nyoongar elder, Mr Neville Collard, to the podium to
conduct the Welcome to Country. Mr Collard.
Thank you for your Welcome to Country Mr Collard.
A warm welcome to the 2010 Annual General Meeting of BHP
Billiton Limited and thank you for joining us. This
meeting is being webcast so let me also welcome those
shareholders on-line.
This is the 150th anniversary of your company. Over those
years BHP Billiton has developed into a global leader in
the resources industry with 100 operations in 25
countries. We have some of the finest assets in the
world, we are financially strong, with a team of 100,000
people who are committed to delivering financially and
operationally for you - and they are just as committed to
delivering on the promises we make as a company.
You will have seen from the opening video that we have
deep roots in Australia and particularly in Western
Australia. We are proud of that history.
Our Western Australian operations represent 20 per cent of
our global assets and include Petroleum, Iron Ore,
Stainless Steel Materials and Aluminium. Importantly we
have more than 66,000 shareholders who live in Western
Australia.
All of us at BHP Billiton are proud to play a role in the
ongoing economic development of Western Australia and we
remain committed to further investment in this great
state. We understand that to remain a successful company
we must continue to invest in projects that meet our
strategy and disciplined financial guidelines. We are
fortunate to have many internal growth projects in Western
Australia and elsewhere that meet our criteria.
We also need to demonstrate to the communities where we
operate that we are a strong local partner. The Purarrka
Indigenous Mining Academy in the Pilbara is a good
example. We developed this with the indigenous-owned
contractor, Ngarda Civil and Mining. Part of the program
addresses the real barriers to success in participants`
work and personal lives through the provision of skilled
and qualified mentors, as well as training and education.
We are proud of the achievements that are associated with
the Academy.
Introductions
Before I move on, let me introduce your Directors.
To my left is our Chief Executive Officer Marius Kloppers
Sitting in the audience are your Directors. John
Schubert, David Crawford, Carlos Cordeiro, Alan Boeckmann,
John Buchanan, Wayne Murdy and Keith Rumble. We also have
our two new Directors, Carolyn Hewson and Malcolm
Broomhead.
On the stage next to Marius, is Alex Vanselow, our Chief
Financial Officer and Chairman of the Investment Committee
and Financial Risk Management Committee. And next to me
is our Group Company Secretary, Jane McAloon.
In the audience we have Martin Sheppard from KPMG, our
external auditors.
We also have the Group Management Committee with us today.
Alberto Calderon, Andrew Mackenzie, Marcus Randolph, Karen
Wood and Mike Yeager.
Our Contribution - Developing World
Let me now outline some of our strategic thinking and how
this fits into a rapidly developing world.
As you have heard many times, our strategy is
straightforward. We own large, long life, low cost, export
oriented assets, diversified by commodity and geography
and we operate them according to our values. The core of
our mission is to ensure that BHP Billiton delivers value
to shareholders.
While this is our central focus, we understand we can only
succeed if we also deliver value to society as a whole -
and to our individual stakeholders such as our employees,
contractors, suppliers, customers and the communities and
countries where we operate.
The foundation of this value is the contribution our
products make to society. They help underpin advances in
economic development and living standards - advances that
are improving the quality of life of millions of people.
To deliver these products:
* we develop the best resources around the world - in the
last five years we have invested over $31 billion in
internal growth projects;
* we build supporting infrastructure like ports and rail
to transport the mined material;
* we bring technology, systems and processes to sell the
product to our customers; and
* we create highly skilled jobs that require people with
deep technical and operational expertise who facilitate
the entire process.
We are not alone in doing this. We act together with
other companies, governments and communities - but as one
of the world`s largest companies, we are a major
contributor. We are proud of that contribution and take
the responsibilities that come with it very seriously. I
will come back to this point shortly.
First though, in the context of the important recent
debate in Australia about taxation and national
competitiveness, I want to make some comments on our
direct financial contribution to society.
The once in a generation surge in demand driven by
industrialisation and urbanisation, primarily in Asia,
provides a unique opportunity for resource rich countries
like Australia to capture the benefits.
The question governments and communities are always
entitled to ask is whether the balance is right between
the return to those who risk their capital and the return
to the community who own the raw resources before they are
developed. No one country has a monopoly on the
development of resources. Countries compete for capital
because the resources are only of real value when the
capital and skills are applied to develop them.
There are many opportunities around the world for large
scale resource projects. Those that will be developed
first are in the countries that are competitive in terms
of flexible labour regimes, efficient business regulation
and, importantly, a stable and fair tax system.
It is the right of governments to change policy
parameters, for example tax regimes, and to decide if,
where and when resources will be developed. However, it
is important that a country`s competitiveness, and its
attractiveness as an investment destination, is not
negatively affected in the process.
Major, export oriented resource projects require billions
of dollars to be invested. These are complex, large and
long term decisions.
When we are successful, as we have been in recent years,
the return to the community is considerable both directly
and indirectly. The returns come in the form of increased
employment, the creation of new small and medium size
businesses, export earnings and a boost to economic
growth.
When resources are developed, companies like BHP Billiton
pay royalties and taxes to governments, which in turn,
contribute to community development and economic growth.
In 2010 for example we paid over $7 billion directly in
company taxes and royalties and $850 million in taxes
collected on behalf of our employees. Our highest tax
payments are made in Australia, where we are the largest
tax payer and also have the majority of our assets. Here
in Western Australia, we have 20,000 employees and
contractors and paid nearly $3 billion in taxes and
royalties last year.
Our Diversification Strategy
Let me return to the importance of our strategy. We
believe that our core business strategy of diversifying
our investments across geographies and commodities,
differentiates us - and more importantly continues to
deliver value to our shareholders.
The last two years have seen almost unprecedented
disruption in financial markets with many countries still
facing fragile economic conditions. This weakness in most
developed countries has resulted in significant price
volatility for our commodities. Our strategy helps counter
that volatility and generates greater stability in our
cash flows.
This slide illustrates the point. It shows our profit
margins since the BHP Billiton merger for each of our
commodities. The volatility is quite dramatic. However,
when looked at in total, as shown by the black line, you
can see the impact of our strategy in reducing volatility.
In practical terms, this means more robust financial
performance through commodity and economic cycles. This
in turn, allows us to invest more consistently and deliver
progressive dividends. The financial and other strategic
benefits of this are detailed in the Annual Report.
The combination of our strategy, together with the hard
work of our people, delivered BHP Billiton`s strong
performance in 2010.
Let me highlight some key points:
* underlying earnings before interest and tax increased by
8 per cent to $19.7 billion;
* profit increased by 16 per cent to $12.5 billion;
* we generated net operating cash flow of $17.9 billion
allowing us to reduce net debt to $3.3 billion;
* and we have 20 projects in our growth pipeline, and
expect to invest $15 billion in capital expenditures this
year;
* importantly, for shareholders, the full year dividend
was increased by 6 per cent to 87 cents a share,
consistent with our progressive dividend policy.
This slide shows that since the merger of BHP and Billiton
in 2001 there has been a 420 per cent increase in the
total cumulative shareholder return. Overall a very solid
performance.
Long Term Economic Environment
Marius will talk in some detail about the long term global
economic environment. As you know, it has a very
significant influence on our business and our strategy.
We are witnessing an extraordinary structural shift and
period of growth in the global economy towards China and
other emerging markets and we are still only at the
beginning of this era of growth and change. While Europe,
the US, Japan and other mature markets remain significant
contributors to overall commodity demand, it is the
emerging markets that are the drivers of growth.
This slide demonstrates the point using copper demand as
an example. It is the forces of industrialisation,
urbanisation and improved living standards in the
developing world - particularly in China - that is driving
this unprecedented growth.
The building blocks of this growth, and improved living
standards, are resources - the very products that are at
the centre of our strategy - such as iron ore, coal,
copper and energy.
Our products are the basic ingredients for everyday goods.
These range from trucks, trains, consumer electronics, and
household appliances - to construction equipment, building
materials and the energy needed to keep the world powered,
mobile and productive. We believe that our products,
combined with our capacity to scale up to meet this
unprecedented demand, positions BHP Billiton in a pivotal
time and place in history.
This is a major opportunity and it brings true meaning to
our brand `Resourcing the Future.`
Let`s put this in some context.
This year China overtook Japan as the second largest
economy in the world at about $5 trillion - an impressive
feat.
On the other hand, China`s population is about ten times
that of Japan - which means that China`s income per person
is just one tenth of Japan`s. With this background, there
is no doubt that China will continue to have significant
growth potential as its income per person and living
standards continue to improve.
At the same time there are a number of other economies
that are at the initial stages of their development -
India is the most obvious example. India`s economy is
only one quarter the size of China`s, even though its
population is about 90 per cent of China`s. Many analysts
predict that India`s growth rate could be similar to that
of China`s in the next few years.
As a Board, we feel confident that these factors will
drive continued global economic growth and, importantly,
long term demand for our diversified portfolio of
products.
Social Licence to Operate
Now - I mentioned earlier, that to deliver value to
shareholders we must deliver value to society, beyond our
financial performance. We understand the need to be
welcomed as partners into the communities in which we
operate, at both the national and local levels - and to
work with integrity. We call this our social licence to
operate.
Broad community support is crucial to our continued
success as a company. It requires us to listen carefully
to our stakeholders and to respond to their concerns,
recognising that we don`t always get things totally right
and there is always room for improvement.
Working with integrity and maintaining our social licence
to operate are fundamental to the way we work and to our
success. There are three elements to this - health and
safety, social responsibility and environmental
sustainability - all of which I will touch on.
First - I cannot overstate the importance of safety to us.
For us, safety is a fundamental value and is integrated
into the way we work. Although we have shown improvement
in this area, the fact is that five of our people lost
their lives while working for us in the last year - this
is simply unacceptable.
I would like to recognize each of them. On behalf of the
Board and Management we offer our condolences to their
families and friends. This reminds us of the challenges
ahead to achieve a workplace where there are no
fatalities.
Social responsibility is the second element of our licence
to operate.
I talked earlier about how BHP Billiton`s products are at
the foundation of economic growth, particularly for the
developing world, and is therefore central to our broad
contribution to society.
Society, however, faces a dilemma - rapidly rising living
standards bring opportunities, but rising living standards
also impact the environment. Accordingly, society faces
complex decisions as it determines the right balance
between these sometimes competing demands.
I want to share some of our views on these challenges.
First, let me make some comments on the role of a company
within society, and about what people should and should
not expect from businesses like ours on these issues.
For clarity, BHP Billiton makes investment decisions,
within our core strategy, based on two criteria: firstly,
can we operate within our high standards for health and
safety, community support, environmental protection and
ethical behaviour - and secondly, is there a good return
for shareholders.
Operating within our standards is clearly within our
control and fully our responsibility.
However, decisions we make on investments in coal,
uranium, oil and gas for example, are ultimately made
based on our assessment of long term market demand and
commercial returns.
It is government policy, set in response to public
debates, that helps determine market demand - which
influences the returns to shareholders. So, it is for
society as a whole to decide the direction to take on the
broader global issues, like climate change and the future
of energy. While we contribute to public debates on these
issues, including sharing our knowledge, experience and
opinions the broad direction society chooses is not our
decision to make.
As I have said, we accept full responsibility for our
direct impacts such as the safety and quality of life of
our people, and the impact on the communities and the
local environment. We are always happy to engage and hear
suggestions of where we can improve in this area.
Within that context, I would like to make some comments on
the third element of our social licence to operate -
environmental sustainability - and in particular climate
change.
For several years now, we have recognised that the science
of climate change demonstrates that human activities have
a negative impact on our climate, and consequently pose
risks to our society and economic well-being.
While there are a variety of public views on this topic,
mainstream science has concluded that there is more than
adequate evidence to warrant action.
The science also tells us that reducing these risks to an
acceptable level, translates into limiting global warming
to no more than two degrees celsius above the pre-
industrial global average temperature. This is the target
agreed to by the world`s major governments at Copenhagen,
including China, India, Europe and the United States.
The world needs ever increasing energy supplies to sustain
the economic growth and development that is lifting
millions of people out of poverty. On this basis it is
clear that new energy solutions are required and the
energy market will see change over the coming years.
While climate change is a challenge to society, and to
companies involved in traditional energy production and
marketing, it also creates an environment for innovation
to provide solutions to a carbon constrained world.
A benefit of our diversified portfolio is that we face
lower strategic risk from the inevitable shifts that
issues like climate change drive. While coal and oil for
example, have potential downside risk in a shift to a
lower carbon economy, uranium and gas have upside
potential.
The International Energy Agency`s mid range forecast is
that by 2030 nuclear energy will comprise 14 per cent of
electricity supply, natural gas 21 per cent and renewables
29 per cent. But, with the same forecasts showing 34 per
cent of global electricity demand to be met by coal,
reducing emissions from this source of energy is a
pressing issue for us all.
One of the areas we have been investigating, along with
many others, is how to deal with the carbon dioxide
emissions from coal with particular emphasis on carbon
capture and storage technology. I should say that
progress in this area has been slower than expected.
Therefore, while we are pleased with the continuing
contribution of our coal business, the Board and
Management are paying close attention to the developments
in technology, government policy and market responses
around the world.
On balance, however, we remain optimistic that the
emergence of innovative technologies will play a
significant role in the overall long term energy solution.
This will include carbon capture and storage as well as
increased energy efficiency measures, renewable energy,
gas, nuclear power and changes to traditional power
generation patterns. Combined with good government
policies this will, over time, deliver the clean energy
the world needs.
Additionally, we believe there is an advantage if
Australia acts now on climate change. Economies that defer
action are likely to face higher long-term costs, as
global investment is redirected to early movers. As one
of the most carbon-intense economies, if Australia acts
strongly to reduce its carbon footprint, its emissions-
intensive sectors are likely to maintain or improve their
competitiveness in a low-emissions world.
Clearly, this matter is of considerable interest to you as
shareholders - and to all Australians. We will continue to
contribute to the debate as it develops in the countries
in which we operate.
Recent Transactions
You will have seen our announcement yesterday that we have
withdrawn our offer for PotashCorp and announced the
reactivation of the remaining $4.2 billion share buy-back.
We are disappointed because we believe the acquisition
would have delivered considerable value to PotashCorp
shareholders, and importantly, to BHP Billiton
shareholders. Although we believe that our ownership of
PotashCorp would have created net benefits to Canada, we
respect the Canadian Government`s decision.
We have been in business in Canada in various operations
for over 40 years and, specifically, we remain committed
to investing in Canada`s potash basin. I should emphasise
that our aim is always the pursuit of transactions that we
believe offer significant opportunities to increase
shareholder value.
The transactions we pursued over recent times, PotashCorp
and the joint venture with Rio Tinto, would have added
considerable value for shareholders whether in the form of
iron ore synergies available in Western Australia or by
accelerating our market position in commodities such as
potash.
As one of the world`s largest and most successful
resources companies, your Board has an obligation to look
for options that create shareholder value. And your Board
believes that it was in the interests of you, our
shareholders, to pursue these transactions.
However, it is also our obligation to end transactions
when the Board believes shareholder value cannot be
delivered. This can happen when conditions change or
risks increase. We experienced this with the global
financial crisis in 2008 and recently, as I said earlier,
in Canada with the proposed acquisition of PotashCorp.
These are not easy decisions to make but you can expect
that we will always adopt the same disciplined approach to
investment decisions.
While we invested time and money in pursuing each
opportunity, we continue to believe that the potential
returns outweighed the risk of not being in the position
to proceed.
And can I say, that BHP Billiton`s strength gives us the
almost unique ability to pursue these opportunities but
not be distracted by them. As you can see from our
results this has not been a distraction to delivering our
strategy and returns for our shareholders.
Concluding Remarks
Now before I ask Marius to give his CEO address, I would
like to make a final comment.
This is my first Annual General Meeting in Australia as
your Chairman and I want to acknowledge your support. I
also want to thank on behalf of all Directors and
shareholders, the 100,000 BHP Billiton people who are
responsible for the results.
For shareholders here today, your Directors and I look
forward to seeing you at the end of the meeting.
Marius, can I ask you to address the meeting?
Chief Executive Officer`s Address
Thank you Jac and good morning everyone.
As Jac mentioned, BHP Billiton`s operations have continued
to deliver solid results in a very volatile period.
Today I would like to talk about the long term drivers of
those results, and how we believe we can meet the
challenges and prosper from the opportunities that will
arise. In particular I will talk about:
* The global shift in economic power and what it means for
short term economic growth and the demand for our
products;
* Secondly, about our commitment to the health and safety
of our people, and to the environment and communities in
which we operate;
* I will also talk about how we are positioned to grow
safely, supported by a simple and scaleable organisation;
* And finally I will say a few words about our bid for
PotashCorp.
New Balance of Power
For a global company like ours, the dynamics of the
economic and political environment will inevitably shape
the way we do business.
Jac has already commented on the fact that the
distribution of wealth in the world is changing. These
changes will continue to result in a significant shift in
the balance of global economic power.
China is the most successful emerging economy today and
has become the second largest economy in the world. It has
been remarkably successful in transitioning from a
centrally planned economy into a more market-oriented one.
Urbanisation and industrialisation are the key drivers
that are transforming the lives of people in China, and
they are also driving change in other emerging countries
like Brazil, India and Russia.
But these countries are not alone; we are also seeing the
rise of yet another group of fast developing countries
including Indonesia, Mexico and Turkey.
The future success of BHP Billiton will depend on our
ability to seize the opportunities that these changes
present.
Short Term Economic Growth
Presently, emerging economies are growing at approximately
three times the rate of the developed countries and, as
this slide shows, are becoming more important to the
global economy. BHP Billiton`s growth is leveraged to
these higher growth rates.
While Japan, the United States and the EU are finding it
difficult to generate growth, overheating is in fact a
larger issue in the emerging economies.
China has been successful in engineering a slowdown to
prevent overheating and, in the same vein, both India and
Brazil have raised interest rates.
Demand for our products
So despite our overall modest outlook for the world
economy, we are encouraged by the incremental demand for
our products driven by these emerging economies.
The pull back in investments by our competitors during the
global financial crisis means that supply is lagging. As
a result, the overall supply-demand conditions are
favourable to us.
Our balance sheet strength, quality of assets, and policy
of investing throughout the cycle, positions BHP Billiton
well to capture these opportunities.
The importance of Health, Safety and Environment and the
focus on Communities
As we discussed, BHP Billiton is positioned to continue
growing. This makes how we do things even more important
and we take this responsibility very seriously.
I cannot begin to talk about this without reflecting on
the fact that, as Jac mentioned, five of our people lost
their lives at work this year. This happened despite the
continued trend towards fewer injuries that we have
achieved in the last four years. I would like to take
this opportunity to offer my condolences to their
families, friends and colleagues.
Reducing the risks in our business requires strong,
accountable leadership, with a focus on identifying
hazards and putting in place effective controls that limit
the risk to an individual`s health and safety.
We are also continuing to address possible occupational
health issues by reducing exposures that can cause long-
term harm. I am pleased to report that we have achieved
our targets to date in this area, and that the total
number of occupational illnesses continues to fall.
Energy Use and Greenhouse gas emissions trend
BHP Billiton also has targets in energy use, greenhouse
gas emissions and water usage amongst others. I`m pleased
to report that we have made significant progress in all of
these areas.
This year our total energy use and greenhouse gas
emissions were the lowest since 2007. We have reduced the
amount of greenhouse gas emitted per unit of production by
7 per cent in the last four years.
Similarly, we have improved the ratio of recycled water
used by 7 per cent in the past three years.
You will find more detailed information on all of these
and other topics in our Sustainability Report.
Climate Change
Now, I`m sure you are aware that we recently spoke about
climate change. We believe that before we get a unified
global approach, individual countries will take actions
that will only later come together in a global scheme.
Importantly, we acknowledge that there are no simple
answers to the carbon emissions issue and that a solution
will involve a combination of initiatives.
I won`t cover in detail today all the key design features
we advocate, but I would like to emphasise a few important
policy principles as the world thinks about emissions
reduction:
* A clear price signal will be necessary to reduce
consumption and reduce emissions;
* Governments must operate carbon reduction programs on a
revenue neutral basis, lest the carbon price just becomes
another tax. Therefore, the revenues raised must be
returned to individuals and businesses; and
* Emissions costs for trade exposed products must be
rebated, given that it will take time until a global
system is in place.
Finally, let me comment on our community involvement. Our
voluntary investment exceeded $200 million this year. In
doing so, we have met out target of investing one per cent
of our pre-tax profit in community programs. Since we set
this target, at the time of the merger of BHP and Billiton
we have contributed a total of $930 million to community
development.
A simple and scaleable company
You have heard me talk about our opportunities for growth.
Sometimes our investors ask: "Are you too large to grow?"
My answer to that question is: "We are a scaleable
organisation and a simple portfolio of large upstream
expandable assets."
Let me explain. By having a simple structure we can
organise work more effectively and let our people focus on
doing what is important. We standardise our work
processes so we can easily deploy them globally.
The disciplined execution of our strategy has given us a
portfolio of relatively few, but large assets. These
assets are of exceptional quality, low in operating cost
and expandable.
Now, the combination of this simple company structure, an
organisation of talented people focused on what is
important, and the shape of our portfolio, enables our
growth.
Which brings me to comment on our bid for PotashCorp. You
will have seen our announcement that we have withdrawn our
offer for PotashCorp on the basis that the condition to
the offer which requires Industry Canada approval cannot
be satisfied.
During the investment review process, we engaged
extensively with officials from the Investment Review
Division of Industry Canada. We believe that the reasons
provided by the Minister for Industry for his interim
decision would have required undertakings that would have
been adverse to our strategy and counter to creating
shareholder value.
Importantly, at BHP Billiton we take pride in doing what
we say we will do and standing by the commitments we make.
We have said all along that we plan to develop a
significant presence in the potash industry and this
remains true today. We therefore remain committed to
progress the evaluation of our Jansen project and our
other development opportunities in Saskatchewan. We look
forward to being a trusted partner of the people of Canada
for many decades to come.
Also, given these circumstances, we have decided to
reactivate the remaining component of $4.2 billion of our
previously suspended $13.0 billion buy-back program.
Closing
In closing - let me say that I believe that as
shareholders, you should be proud that BHP Billiton is a
major supplier of the materials that lift hundreds of
millions of people out of poverty, raising living
standards for many more and fuelling economic growth.
We recognise we need to do this while meeting the
increasing expectations in terms of sustainability. By
working to meet these expectations, maintaining high
standards of performance and working with integrity, we
are creating the conditions for the long term success of
the company.
With that, I`ll hand back to Jac. Thank you.
The Chairman then conducted the formal items of business
including Items on remuneration as follows:
Remuneration Items
We now move to items associated with remuneration.
The first is item 13, the Remuneration Report. This vote
is non-binding. It provides shareholders with an
opportunity to cast an advisory vote on our compensation
policies and practices for the previous financial year.
Even though the vote is non-binding, the Board takes the
outcome into account when reviewing the Group`s policies.
A key component of our remuneration policy, is to link a
very substantial portion of our senior executives` pay to
BHP Billiton`s performance, and the creation of long term
value for shareholders. As you can see from this slide,
around 28 per cent of the Chief Executive`s pay is fixed -
made up of base pay and pension and 72 per cent is at risk
- made up of short term and long term incentives.
The "at risk" pay is determined by performance against
financial and non financial measures, including the health
and safety of our workforce and the Group`s profitability.
That is, if the company performs well then executives also
benefit. This chart from the Report shows how the average
short term incentive for our senior executives over the
past 5 years is aligned with profit.
The increase in short term incentive between 2009 and 2010
was driven by improved profit and very good performance in
capital management - it represented 71.4 per cent of the
maximum possible under the plan.
The second element of "at risk remuneration" is the long
term incentive which is delivered in the form of
Performance Shares under the Group`s Long Term Incentive
Plan.
Performance is assessed at the end of five years. It is
measured by comparing BHP Billiton`s total shareholder
return against a group of other companies.
As this slide shows, over the five year period from 1 July
2005 BHP Billiton outperformed our peer group companies by
74 per cent. Therefore, all shares awarded under the 2005
Long Term Incentive Plan vested in August 2010. This
outperformance created $59.2 billion of shareholder value
over and above the average of our peer group.
The next matter for consideration, item 14, is a proposal
to amend the Rules of the Long Term Incentive Plan. The
details are set out in the Notice of Meeting.
The primary purpose of the plan is:
* to motivate sustained exceptional performance and the
creation of long term value for shareholders;
* to align executive and shareholder interests; and
* to attract and retain top talent.
As there has been considerable change - both within the
Group and the external remuneration environment since the
plan was first approved by shareholders in 2004, the
Remuneration Committee undertook a review to ensure that
the plan continues to meet its objectives.
In conducting the review, the Committee took advice from
Kepler Associates, the Committee`s independent expert. The
Committee concluded, that while the plan would benefit
from some changes, the overall design remains robust.
Specifically, there were two key findings. First, the
Committee found that the current 5-year performance period
is consistent with our longer term business cycle and
should be retained. At 5 years, the plan has a longer
performance period than the plans of most other ASX 200
companies. Nevertheless, we see the 5 year period as a
good feature that is more aligned with our business model.
The second finding was that the current design is highly
geared, meaning that it has the potential for extended
"all or nothing" outcomes. The Committee felt that this
aspect of the plan was not aligned with BHP Billiton`s
lower risk, diversified business strategy.
As a result the Committee considered potential changes to
the plan, and subsequently consulted with major
shareholders and shareholder advisory groups on these
changes. The changes to the plan that shareholders are
being asked to approve today follow this consultation.
In that context, the Committee endorsed three main changes
which it believes enhance the alignment of shareholder and
executive interests:
First, we recommend 25 per cent vesting of shares where
BHP Billiton`s performance is equal to the comparator
group average. Currently there is zero vesting at this
level of performance - and this is largely responsible for
the high level of gearing in the plan. It is worth noting
that BHP Billiton is the only company in the ASX 10 and
the FTSE 20 that does not vest at median.
Secondly, we recommend amending the rules to allow more
than one comparator group to be used, in assessing
performance over five years. For this year`s grants, we
are proposing to use a broad stock market index as the
comparator group, in addition to the existing industry
sector-based group.
Thirdly, we have expanded the sector-based comparator
group to include major oil and gas companies given the
importance of Petroleum in BHP Billiton`s portfolio.
These changes will result in a higher Expected Value for
each Performance Share, which will be taken into account
by the Committee in determining the number of performance
shares to grant to participants. Overall the Committee
and Board believe the changes will result in a plan which
is better aligned to shareholders` interests and the
changes are therefore recommended for approval.
Closing Remarks
Ladies and gentlemen, thank you for your patience.
Before I close the meeting, let me say again that the
results for the 2010 financial year demonstrate the
strength of BHP Billiton. This is a reflection of the
quality of our people, our unique set of assets and an
effective strategy.
On behalf of the Directors, I thank all our shareholders
for their support - you can be assured that we will
continue to strive for ongoing improvement on your behalf.
Thank you for attending. Please join us for refreshments.
BHP Billiton Limited BHP Billiton Plc Registration
ABN 49 004 028 077 number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 180 Registered Office: Neathouse
Lonsdale Street Melbourne Place London SW1V 1BH United
Victoria 3000 Kingdom
The BHP Billiton Group is headquartered in Australia
Date: 16/11/2010 07:37:00 Produced by the JSE SENS Department.
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