Efficiency 2Reliability 013
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EFFICIENCY 2RELIABILITY 013 ANNUAL REPORT 2012/2013 Page Operations Review Achievements 2012/2013 3 Chairman’s Report 4 Chief Executive Officer’s Report 6 Working with Us 8 Our People and their Health and Safety 9 Financial Performance 10 Operational Performance 12 Operational Performance Highlights 12 Our Assets 15 Verve Energy Sites 16 Our Market 17 Sustainability Report 18 Community Partnerships 21 Statutory Information 23 Key Personnel 25 Glossary 26 Financial Report 27 Directors’ Report 28 Statements of Comprehensive Income 38 Statements of Financial Position 39 Statement of Changes in Equity - Group 40 Statement of Changes in Equity - Corporation 41 Statements of Cash Flows 42 Notes to the Financial Statements 43 Directors’ Declaration 87 Independent Audit Report 88 Verve Energy Achievements 2012/2013 RELIABILITY Verve Energy is the leading generator of electricity in Western Australia, contributing to the welfare of households and businesses by providing safe, reliable and competitive energy. Verve Energy’s purpose is to commercially generate, market and sell electricity to retail customers and large users within the South West Interconnected System. We own and operate an extensive and diverse portfolio of fossil fuelled and renewable power generating facilities located between Coral Bay in the north, Kalgoorlie in the east and Albany in the south, along with major generating sites in Collie, Kwinana and Pinjar. Achievements 2012/2013 • Stable financial performance • Group NPAT of $60.4 million • Increased electricity sales volumes • Forced Outage Factor reduced to 1.4% • Plant availability increased to 88.7% • Increased generation to 9,788GWh • Solar farm and wind farm completed • Renewable energy generation 111.8GWh (up from 88.1GWh) Verve Energy Annual Report 2013 3 EFFICIENCY Chairman’s Report I was very pleased to be appointed as the in the context of the impairment associated with the Chairman of Verve Energy effective 1 July Corporation’s necessary acquisition of 100% of Vinalco Pty 2013. In my role as Chairman of Synergy Ltd, the joint venture responsible for the Muja AB Project. over the last six years, the major customer While Muja AB has presented Verve Energy with of Verve Energy, I have come to know the an extremely challenging set of circumstances, the organisation and its people and have always organisation remains committed to completing the project and believes that Muja AB will return a profit held it in high regard. over its operating life and increase the fuel security of 1 July 2013 saw a substantial change for Verve Energy the South West Interconnected System as we move with four of its Board members leaving. I would like into a challenging future gas contracting environment. to acknowledge the contribution of Verve Energy’s Verve Energy’s electricity sales increased to 11,343GWh previous Chairman David Eiszele and former Directors (2011/12: 10,673GWh) during a period of flat overall Harvey Collins, Gaye McMath and Duncan Clegg. market growth; a 5% increase in energy market share I would also like to welcome to the Verve Energy Board for the year. This was a good result in a year where total four new Directors; Eric Hooper, Margaret Seares, system demand remained flat. Michael Goddard and Mark Chatfield and thank Keith The performance of Verve Energy’s generating portfolio Spence for his continuing role. was very pleasing. On the back of a sophisticated My time as Chairman has confirmed the view that I asset management program and steady maintenance previously held that Verve Energy, as Western Australia’s investment over recent years, Verve Energy’s forced largest electricity generator, plays a critical role in the reliable, outage rate has reduced to 1.40% and total availability secure and efficient supply of electricity to the State. improved to 88.7%, an excellent result when the age of Verve Energy has a large and diverse portfolio of Verve Energy’s portfolio is taken into account. generating plant backed by a strong, long term fuel 2012/13 also saw the new High Efficiency Gas Turbines position and is staffed by capable people and, on this (HEGTs) enter the market with immediate results. basis, I believe its prospects for the future are positive. Recent increases in the quantity of wind energy Verve Energy’s consolidated 2012/13 net profit after entering the electricity network has increased the load tax (NPAT) result of $60.4 million is a pleasing outcome following burden placed on Verve Energy by the market. Verve Energy Annual Report 2013 4 Chairman’s Report continued However, the HEGTs, since commencing commercial round of change for Verve Energy and the electricity operation, have dramatically improved Verve Energy’s sector broadly. The merging of Verve Energy and capability in this regard and also reduced the load Synergy will result in the formation of a substantial following costs borne by the market. integrated utility that will be ideally placed to play a major role in the development and implementation of I am also pleased to see that two renewable energy the Government’s future energy policy while working projects undertaken by Verve Energy in joint venture to apply consistent downward pressure on electricity arrangements successfully entered commercial prices. operation during the year. The 10MW Greenough River Solar Farm (GRSF) project, undertaken with GE The new merged entity will seek to achieve this by Financial Services, is Australia’s first and largest utility optimising plant operations, ensuring the efficient scale solar farm and is a project that I am very proud procurement and use of fuels and making better long to be associated with. The 55MW Mumbida Windfarm term decisions regarding the future development is a joint venture project with Infrastructure Capital of new power projects. The new merged entity will Group and, along with the GRSF, supplies the Water retain core generation and retail business units that Corporation’s Southern Seawater Desalination Plant. I will work to achieve the highest possible standards of would like to thank the Water Corporation and our Joint safety, customer service, reliability and efficiency. I look Venture Partners for their support. forward to the opportunities presented by the merger of Verve Energy and Synergy in 2014 and into the future. Verve Energy also continued to make inroads during 2012/13 in regards to achieving a sustainable In closing I would like to acknowledge the efforts of improvement to its safety performance. A new safety the staff of Verve Energy over the 2012/13 period and I strategy was launched and the structure and resources thank you for your support since my commencement as available to support the Corporation’s journey to zero Chairman on 1 July 2013. harm has been refreshed and improved. Key initiatives around the safe and efficient integration of contractors into Verve Energy’s operations and increased investment in safety related training and development of staff will undoubtedly bring about the safety improvement that is central to the organisation’s vision. Michael Smith Looking ahead to 2014, the merger between CHAIRMAN Verve Energy and Synergy will bring about a further Verve Energy Annual Report 2013 5 Chief Executive Officer’s Report The year ended 30 June 2013 was a challenging The State Government’s announcement of the merger but successful year for Verve Energy. of Verve Energy and Synergy will result in Verve Energy’s brand name being retired as we partner with Synergy to We recorded a consolidated net profit after tax (NPAT) for become an integrated electricity retail and generation 2012/13 of $60.4 million; a stable result considering our business. The merger with Synergy is an exciting 2011/12 NPAT was $61.3 million. This result includes the opportunity that will see the creation of a substantial impact of consolidating Vinalco Energy Pty Ltd as a result new entity that will be focussed on leveraging off the of taking control over that entity as of 20 June 2013. achievements of both businesses to create a new Our electricity sales volumes for 2012/13 increased corporation that ensures the safe, customer focused, 5% to 11,343GWh, however this increased sales reliable and efficient delivery of electricity to our volume was offset by lower sales prices resulting in customers. flat performance on electricity sales revenue once the On 1 July 2013 we welcomed a new Board which impact of carbon is removed. Although overall demand will guide both Verve Energy and Synergy towards on the South West Interconnected System (SWIS) was the merger on 1 January 2014 and oversee the new estimated to be largely the same as for the 2011/12 Synergy. The new Board members are Michael Smith financial year, outages at Independent Power Producer (Chairman), Eric Hooper, Margaret Seares, Michael plants and improved market balancing arrangements Goddard, Mark Chatfield and Keith Spence (former provided Verve Energy with the opportunity to increase Verve Energy Director). I would like to welcome the the utilisation of its generating assets. new Directors to Verve Energy - we look forward to As foreshadowed in our annual report for 2011/12, the their future guidance and support. carbon tax was introduced on 1 July 2012, with the I would like to acknowledge the hard work and dedication effect of adding $224.5 million to our cost of production. of the former Board. Our former Chairman David Eiszele This cost was fully recovered from our customers. and Directors Harvey Collins, Gaye McMath and Duncan We invested $53.9 million of sustaining capital in our Clegg made a substantial contribution to Verve Energy existing plant during 2012/13 in addition to maintenance during their terms. expenditure of $142.1 million. Our carefully planned Mindful of operating within our generation cap of maintenance investment over recent years has been a 3,000MW and balancing ongoing costs against future contributor to our 2012/13 plant availability of 88.7%, market demand and available revenue, Verve Energy an improvement of 81.1% from last year.