DOWNER EDI LIMITED — Capital/Financing Update 2011

Mar 2, 2011

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3 March 2011

Company Announcements Office ASX Limited Exchange Centre Level 4, 20 Bridge Street SYDNEY NSW 2000

RE: Fitch Affirms Downer’s Rating of Outlook Stable

Please find attached a copy a Media Release issued by the company in relation to the Fitch Ratings report following release of the company’s half year results and announcement of the accelerated renounceable rights offer.

Yours faithfully

Downer EDI Limited

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Bruce Crane Company Secretary

A Triniti Business Campus, 39 Delhi Road, North Ryde NSW 2113 P PO Box 1823, North Ryde NSW 2113 T +61 2 9468 9700 | F +61 2 9813 8915 | W downergroup.com

Downer EDI Limited ABN 97 003 872 848

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Media Release

Fitch Affirms Downer’s Rating of Outlook Stable

3 March 2011

Downer EDI Limited (Downer) said today that Fitch Ratings had affirmed its BBB- Long-Term Issuer Default Rating and senior unsecured ratings as Outlook Stable.

This rating action applies to all senior unsecured debt issued or guaranteed by Downer.

Fitch’s full statement is attached to this announcement.

CONTACT DETAILS

Investors: Ross Moffat, EGM, Investor Relations M: +61 412 256224 Media: Michael Sharp, Group Head of Corporate Affairs M: +61 439 470145

Downer EDI Limited (www.downergroup.com) provides comprehensive engineering and infrastructure management services to the public and private Minerals & Metals, Oil & Gas, Power, Road & Rail Infrastructure, Telecommunications, and Water sectors across Australia, New Zealand, the Asia Pacific region and the United Kingdom.

A Triniti Business Campus, 39 Delhi Road, North Ryde NSW 2113 P PO Box 1823, North Ryde NSW 2113 T +61 2 9468 9700 | F +61 2 9813 8915 | W downergroup.com

Downer EDI Limited ABN 97 003 872 848

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Fitch Ratings-Sydney/Singapore-27 February 2011: Fitch Ratings has today affirmed Downer EDI Limited's (Downer) 'BBB-' Long-Term Issuer Default Rating (IDR) and senior unsecured ratings. The Outlook is Stable. This rating action applies to all senior unsecured debt issued or guaranteed by Downer, including debt issued by Downer Group Finance Pty Limited and Works Finance (NZ) Limited.

On 26 January 2011, Fitch placed Downer's ratings on Rating Watch Negative after the company announced that, as a result of further production delays caused by train software problems and the discovery of asbestos at the main Waratah manufacturing facility in Cardiff Australia, the first Waratah train is now expected to be presented to RailCorp by end-April 2011. Downer announced on 8 December 2010 that the first train would likely be delivered in January 2011. As a result of that delay, and changes to the manufacturing production schedule and project costs, Downer also announced that a new provision of up to AUD250m will be applied to the Waratah contract. This followed an earlier provision of AUD190m made in June 2010 against the same project.

The resolution of the Rating Watch Negative follows further discussion between Fitch and Downer management, which focused around several aspects detailed below.

Upon investigation, there is limited evidence that the first provision associated with Waratah has negatively impacted new contract wins. Downer's order book remains strong, with around AUD20bn of business in the pipeline, the majority originating from the mining and rail divisions. Fitch expects that a large proportion of Downer's growth in coming years is likely to be resource sector related. With this in mind, it is unlikely that a known and now long-standing problem in the company's rail division will lead to contract losses in its mining and other divisions from the perspective of potential customers having a lack of confidence in Downer's execution capability. There may be customer concern that the additional Waratah costs have fundamentally weakened the company's finances to the extent that it cannot achieve the capex ramp-ups necessary when taking on large new projects. However, Downer has remained successful in attracting external finance to allow it to execute new contract wins. The 28 February 2011 announcement that Downer will raise approximately AUD279m of new equity should also alleviate potential concerns in this area. In terms of the broader risk management processes in place related to contract tendering and execution, Fitch is of the view that these processes have improved over the past 6 months and that the highly publicised troubles with the Waratah project execution are not indicative of the contract risk management standards now applied across the company.

The new management team, headed by CEO Grant Fenn, have taken positive steps since taking over in August 2010. The most notable of these, as far as the Waratah project is concerned, is the recruitment of experienced rail Project Director Ross Spicer, who is now implementing specific changes to the train build process to minimise the chance of additional Waratah delays. Nevertheless, the Waratah train project remains a complex bespoke design where challenges will continue until the first train is accepted by RailCorp and the build process moves into a demonstrably successful mass-production phase. Challenges will also remain to deliver the remaining 77 train sets within the required time frame. Fitch believes there is still a risk that additional incremental costs could be incurred over and above those implicit in the latest AUD250mWaratah provision. Were these additional costs to materialise, Fitch would look to any

breaches of previously published credit metric guidance as the trigger for a potential downgrade, as opposed to the simple fact that Downer has made another admission related to additional Waratah costs. The agency would also take into account the trading of the overall Downer business (i.e. all divisions) before making any rating decision.

A large part of the negative cash impact of the Waratah provisions, as well as concerns over contract execution, were already factored into Downer's IDR downgrade from 'BBB' to 'BBB-' in June 2010. The marginal cash impact of this latest provision is not sufficient to breach Fitch credit metric guidance. For a 'BBB-' IDR, Fitch would expect Downer to maintain adjusted net debt to operating EBITDAR below 3.25x and FFO interest cover above 3.75x. Fitch has now updated its Rating Case projections. These take into account new management projections, including AUD279m of equity issuance, capex associated with the large mining contracts won in 2010, and the additional Waratah costs. The result is that Fitch expects adjusted net debt to operating EBITDAR to remain within the range 2.4x to 2.2x across the period FY11E to FY14E and FFO interest coverage in the range of 4.4x to 6.6x over the same period.

Downer's liquidity remains strong. Against the requirement to refinance around AUD280m of drawn debt over the next 24 months, the company retains committed undrawn liquidity under syndicated bank facilities approaching AUD260m (maturing in over 12 months) plus current unrestricted cash balances of around AUD170m. The agency does not expect that the new Waratah provision will lead to immediate or future breaches of financial covenants in Downer's existing debt facilities. Finally, there is little evidence that finance providers are backing away from Downer as a result of the problems associated with Waratah. On 30 November 2010, after the first Waratah provision, Downer announced that it had signed a new syndicated loan facility totalling AUD400m (subsequently upsized to AUD420m in December 2010) which received strong support from both domestic and international banks and new lenders to the Downer group.

Downer's 1H11 trading performance, also announced on 28 February 2011, was in line with Fitch expectations.

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Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.