Annual Report 2008-2009 CONTENTS

Highlights for 2008-2009 ...... 2 Customer and community Reﬂ ecting on our role with customers and the community...... 34 5 year ﬁ nancial summary ...... 3 People Statement of Corporate Intent Our performance regarding our staff and their development ...... 39 How we achieved our objectives in 2008-2009 .... 4

Safety Chairman’s report Our performance against our number Our Chairman reﬂ ects on the business one corporate value ...... 42 achievements of 2008-2009 ...... 6

Environment Directors’ proﬁ les Reﬂ ecting on our strategies to reduce our An overview of our board members...... 8 environmental impact ...... 46

Corporate governance Research and development Our strategies, performance and reporting Our strategies for meeting the needs of our of governance ...... 12 customers into the future ...... 51

CEO’s report Additional corporate reporting ...... 53 Our CEO reﬂ ects on how we are working for the South East Queensland community ...... 18 Financial highlights ...... 54 Executives The executive team behind ENERGEX ...... 20 Appendix 1 Glossary of terms ...... 57

Network Appendix 2 An overview of reliability and capacity of our Environmental approvals ...... 58 network in 2008-2009 ...... 23

Annual ﬁ nancial report ...... 59

ENERGEX Limited Corporate Ofﬁ ce 150 Charlotte Street, GPO Box 1461, Brisbane QLD Australia 4001 Telephone: +61 7 3407 4000 Facsimile: +61 7 3407 4609 ENERGEX Limited ABN: 40 078 849 055

Enquiries Telephone: 13 12 53 Hours: 8.00am–6.30pm Monday to Friday Email: [email protected]

To ﬁ nd out more information on any of the initiatives, projects, products and services mentioned in this Report and more, visit the ENERGEX website at www.energex.com.au

Thank you Thank you to all the staff and colleagues who contributed to this Annual Report.

Cover photo: Caroline Lovett (left), Customercare Project Offi cer and Ben Robertson (right), 2008 Apprentice of the Year. www.energex.com.au ABOUT ENERGEX Communication objective The ENERGEX Annual Report is a summary of our operational and fi nancial performance during the 2008-2009 fi nancial year. It demonstrates how we are building a robust and sustainable business to service the energy needs of South East Queensland. This report is aimed at our stakeholders who include:

• customers and community • our employees • Government, including shareholding Ministers • electricity retailers • electricity transmission distributor, Powerlink • electricity generators • regulators • suppliers.

We are committed to open and accountable governance and welcome your feedback. Feedback can be provided via [email protected].

This Annual Report and previous reports can be accessed at www.energex.com.au or via the Corporate Communications team on 13 12 53.

The term ‘last year’ refers to the 2008-2009 ﬁ nancial year.

Our purpose Powering Lifestyles Forever - articulates our vision, reinforces our strategic direction and provides a reference to guide both strategic planning and day-to-day business operations. The purpose supports our transition to becoming a customer-centric and sustainable business that delivers sustainable energy solutions and balanced commercial outcomes.

Our purpose represents the three core areas upon which we must focus to deliver our vision. A focus on ‘powering’ describes the core network that we own and operate, and the need for the corporation to utilise our people and technical capabilities to deliver network performance that achieves legislated Minimum Service Standards (MSS), Guaranteed Service Levels (GSLs), and associated network standards. Linked with this goal is a focus on ‘lifestyles’ which reﬂ ects our growing need to understand the changing lifestyle and business/economic preferences of our customers and the implications that this has for the way in which we deliver power. From a forward or ‘forever’ perspective, we must produce results that ensure the future sustainability of our network and corporation.

Our vision By 2015 we will transform ENERGEX into a customer-centric organisation providing sustainable energy solutions. Our skilled and capable people will see us as an employer of choice as we create new customer solutions and opportunities. We will support our customers’ 21st century lifestyle aspirations and partner with the community to build sustainable economic growth in South East Queensland. In alignment with our shareholders we will be a safe, efﬁ cient, environmentally sustainable and commercial organisation.

Photo: Two members of our Contact Centre team, Ramona Ansett (left) and Kylie Chambers (right) are leading the way in providing South East Queensland’s community with ﬂ exible and convenient access to information on their energy and network requirements. Both are national winners of the Australian Teleservices Association Awards (Australia’s peak body for the Contact Centre industry). Ramona was awarded Teleprofessional of the Year 2009, and Kylie Contact Centre Manager of the Year 2009. Our values • Put safety ﬁ rst • Respect and support each other • Impress our customers • Set a great example • Be a team player • Deliver balanced results. Who we are ENERGEX provides network services and infrastructure to distribute electricity into the homes and businesses of 2.8 million people in South East Queensland.

We are a Queensland Government Owned Corporation (GOC), our two shareholders are the Treasurer and Minister for Employment and Economic Development, The Honourable Andrew Peter Fraser MP; and the Minister for Natural Resources, Mines and Energy and Minister for Trade, The Honourable Stephen Robertson MP.

We own assets worth more than $8.0 billion including almost 50,000 kilometres of underground and overhead electricity lines and cables, more than 600,000 power poles and some 44,000 transformers. Our services are provided by around 3,700 employees.

We operate in accordance with various laws and regulations, the most signiﬁ cant of which are listed below:

• Corporations Act 2001 • Government Owned Corporations Act 1993 • Government Owned Corporations Regulation 2004 • Electrical Safety Act 2002 • Electrical Safety Regulation 2002 • Electricity Act 1994 • Electricity Industry Code 4th Edition 2008 • Electricity - National Scheme (Queensland) Act 1997 • Electricity Regulation 2006 • Environmental Protection Act 1994 • Environmental Protection Regulation 2008 • Information Privacy Act 2009 • Integrated Planning Act 1997 • Integrated Planning Regulation 1998 • National Electricity (Queensland) Law as set out in the schedule to the National Electricity (South Australia) Act 1996 • National Electricity (Queensland) Regulations under the National Electricity (South Australia) Act 1996 • National Electricity Rules V27 2009 • Queensland Competition Authority Act 1997 • Queensland Competition Authority Regulation 2007 • Queensland Electricity Code Version 4 2008 • Right to Information Act 2009 • Trade Practices Act 1974 • Workplace Health and Safety Act 1995 • Workplace Health and Safety Regulation 2008. Diagram 1 Electricity Industry Supply Network

We own and operate the electricity distribution network in South East Queensland.

Generation TransmissionDistribution Retail Customers

BULK SUPPLY ZONE SUBSTATIONS SUBSTATIONS

ELECTRICITY ELECTRICITY CUSTOMER ELECTRICITY GENERATOR TRANSMISSION RETAILERS (various power (Powerlink Qld) stations) POWERLINES DISTRIBUTION & CABLES SUBSTATIONS TRANSFORMERS

DISTRIBUTED GENERATION

Photo: Community information days are often undertaken on our major sub transmission projects to ensure stakeholders and the community have an opportunity for feedback.

ENERGEXEENNEERRGEGEX AnnualAAnnuuala ReportRepe oro t 2008-20092000808-2200009 1 OPERATIONAL HIGHLIGHTS

• Our total capital expenditure • We improved our staff • We recorded our company’s best program of $871.0 million (an engagement by four per cent, up ever lost time injury (LTI) record, increase of 20.6 per cent from from 58 per cent in 2007-2008 to decreasing the number of LTIs to 2007-2008) ensures a safe and 62 per cent. We also achieved 16, down from 25 in 2007-2008. reliable electricity supply to the our highest staff participation for We also saw a decline in our growing South East Queensland the Annual Staff Survey with a lost time injury frequency rate to community. response rate of 84 per cent. (LTIFR) 2.34, down from 3.62. While we are pleased with these • We recorded solid fi nancial results • We formalised our employment results, we began the fi rst year of with a net profi t after tax of $128.5 conditions through signing the our fi ve year Health and Safety million. ENERGEX, SEPL and SPARQ Strategic Plan and the roll out of Certifi ed Agreement - ENERGEX our behavioural safety program • We responded to signifi cant Union Collective Agreement which we believe will result in weather related events in (EUCA). further improvements to our safety November 2008 and May 2009. targets. Despite the diffi cult conditions • Our staff development programs there were no lost time injuries expanded as we established the • We reduced our greenhouse gas recorded during these events. Project Management Centre of emissions by 13 per cent from Excellence and a new cadetship 2007-2008. • Our Contact Centre was named for staff with non-technical in the Australian Teleservices backgrounds. • We delivered our Network Vision Association (ATA) Awards for the Outlook to 2025 document second time in three years. outlining our vision to achieve a future ‘participative’ network.

Our operational success requires teamwork from our ofﬁ ce and ﬁ eld staff.

2 E ENERGEXNENERGR EXEX AAnnualnnual ReportReport 2008-20092000 88-220009 FIVE YEAR SUMMARY

Table 1 Proﬁ t and loss ($M)

% change from 2006 As at 30 June 2008 2009 2008 20071 Restated1 2006 2005 Total net profi t Net profi t - continuing operations 128.5 140.8 122.8 96.5 163.4 163.3 Net profi t - discontinued operations 0.0 0.0 1,459.1 66.9 0.0 0.0 Total net profi t (9%) 128.5 140.8 1,581.9 163.4 163.4 163.3 Continuing operations Operating profi t before income tax (12%) 175.7 199.1 185.4 141.9 236.3 233.9 Earnings before interest and tax (EBIT) (2%) 388.2 395.3 354.5 271.4 367.6 353.3 Earnings before interest, tax and depreciation adjusted (EBITDA) (4%) 623.6 651.0 586.7 486.9 594.1 530.4 Total assets 8%) 8,011.0 7,400.5 7,683.72 6,624.02 6,624.0 5,625.6

2006 As at 30 June 2009 2008 20071 Restated1 2006 2005 Return on average shareholders’ equity (%) 5.6 5.3 4.8 4.9 7.4 7.7 Debt/(debt + equity) (%) 62.8 59.1 52.0 57.3 57.3 53.7 Return on average total assets (%) 5.0 5.2 5.0 4.4 6.0 7.0 EBITDA interest cover (times) 2.8 3.2 3.3 3.5 4.2 4.2

We delivered a strong net proﬁ t result of $128.5M, ahead of budget expectations, which enabled the declaration of a dividend of $102.8M to our shareholders. In 2008-2009, we invested $871.0M in total capital expenditure to support demand for expansion and reliability improvement of our electricity network.

3 3 Net proﬁ t Earnings before interest Total revenue 3 and tax

$388.2M $395.3M $163.4M $163.3M $367.6M $2,546.9M $354.5M $353.3M $2,394.9M $140.8M $128.5M $122.8M $271.4M

$96.5M $1,336.2M $1,403.0M $1,261.0M $1,099.8M

2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 restated restated restated

1 The results used in the 2006-2007 and restated 2005-2006 years are for continuing operations. Any results for discontinued operations have been excluded. 2 These amounts include assets applicable to the discontinued operations. 3 Years preceding 2005-2006 reﬂ ect continuing operations and the retail and gas distribution businesses.

ENERGEX Annual Report 2008-2009 3 STATEMENT OF CORPORATE INTENT HIGHLIGHTS At ENERGEX we document our corporate objectives, strategies and targets for each ﬁ nancial year within our Statement of Corporate Intent (SCI). As a GOC, this document is fundamentally a performance agreement with our shareholding Ministers.

Table 2 SCI highlights Key Performance Actual Key Result Measures Performance Target measure Area Objective 2008-2009 2008-2009 2008-2009 Safety We aim to achieve an injury-free workplace by creating a LTIFR 2.34 <1.50 culture where each person (employees, contractors, and suppliers) truly believes that “put safety ﬁ rst” is a core value and that working safely is part of everyone’s day-to-day activities.

Customers We aim to achieve network performance outcomes and Service Performance Index 66.90% >70% customer service improvements to meet or exceed customer Energy Supply Performance 72.60% >70% expectations. A customer driven approach will be coupled Index with strong network performance to deliver high levels of customer satisfaction.

Community We aim to be a good “corporate citizen” by engaging with our Community Regard Index 65.50% >63% customers and the community to understand their needs and expectations.

People We are committed to building an organisation that people Staff Engagement 62% >61% want to be a part of. We aim to develop a culture that is high performing and driven by corporate values. We will ensure we have the appropriate number of skilled and engaged employees to achieve the Program of Work (POW) and other objectives that will deliver operational success.

Program of We will deliver our Network Management Plan (NMP) and Capex Plan (NMP) Key physicals delivered Key physicals delivered Work Summer Preparedness Plan (SPP) commitments to ensure favourable to plan favourable to plan that the continued operation and growth of the distribution Opex Plan (NMP) Key physicals delivered Key physicals delivered network meets stakeholder requirements. favourable to plan favourable to plan Key Projects Delivered to milestones Delivered to milestones

Network We strive to improve network performance and emergency Minimum Service Standards Favourable to target Favourable to target Performance response through improved network reliability, security and SAIDI – CBD 3.1 mins 20 mins safety to ensure that we meet customer expectations for SAIDI – Urban 91.2 mins 122 mins reliability in urban, rural, and CBD areas. We will also meet SAIDI – Rural 228.0 mins 232 mins our Minimum Service Standards (MSS). SAIFI – CBD 0.06 0.33 SAIFI – Urban 1.05 1.43 SAIFI – Rural 2.56 2.56

Business We will deliver strong ﬁ nancial performance through the OPAT ($M) 128.5 >115.3 (Financial) cost effective delivery of electricity to retailers, services ROA 5.0% >5.0% Performance to customers, and improved productivity. We will work proactively with industry regulators to facilitate network funding outcomes that support core business operations.

Environment We will achieve a sustainable environmental position by Environmental Strategic Completion against Completion against delivering environmental compliance and maximising the use Plan milestones milestones of environmentally friendly business processes. Carbon Management Plan Completion against Completion against milestones milestones

Compliance We will foster a culture of compliance to deliver against our Number of High Risk/Major 10 legal, corporate governance, and community obligations. Non-Compliances We have adopted a systematic approach to communicating compliance obligations to ensure that all staff understand their responsibilities in relation to compliance.

4 ENERGEX Annual Report 2008-2009 Performance Review Future Challenges and Targets 2008-2009 2009-2010 Key Result Areas

We recorded our best ever results in the number of LTIs and LTIFR in 2008-2009. Signiﬁ cant We will achieve an injury-free workplace and will develop a workplace focus continued on the path toward zero injuries with the successful deployment of the targeted culture where employees take personal responsibility for their safety. initiatives for 2008-2009 within our Safety Strategic Plan. Safety risk will be reduced through a targeted and structured approach to safety that delivers legislative compliance and best practice business operations.

In 2008-2009 we established our Customer Strategy which outlines a framework for approaching We will maintain our focus on achieving network performance outcomes customer knowledge management and customer interactions across a 15 year timeframe. We and customer service improvements to meet or exceed customer also improved customer and retailer market processes. expectations. Our long term aspiration is to transform into a more customer-centric organisation that provides customers with greater choice in how they participate in managing their energy needs. We will support customers’ increased choice options through operation of an intelligent connective network and constructive relationships with key retailers.

We continued to proactively support the wider community in 2008-2009 through targeted We aim to be recognised by the community as a good corporate citizen and sponsorships of community events that meet our social responsibilities and values. A very a leader in sustainability. We will engage the community in the planning and successful response was provided to the November 2008 storm event through our Contact delivery of our network. Centre.

Following signiﬁ cant workplace negotiation and consultation our ENERGEX Union Collective We are committed to being an organisation that our people want to be Agreement (EUCA) 2008 was registered with the Australian Workplace Authority on 13 October a part of. We will ensure that our workforce possesses the skills and 2008. In addition to achieving this milestone we also commenced the implementation of a capability to deliver our business requirements. Our high performing workforce planning process, leadership development initiatives and embedded a new recruitment and customer focused culture will be driven by corporate values and will model. promote innovation and learning.

A record total capital expenditure program of $871.0M was delivered in 2008-2009 including We will deliver commitments outlined in our Network Management Plan and $810.4M to improve the performance and capacity of the network. Despite this record, capital Summer Preparedness Plan to ensure the continued operation and growth expenditure levels were slightly below target. We experienced delays in some key projects due of our distribution network and the satisfaction of stakeholders. 1 to the impact of supply shortages and storms in the ﬁ rst half of the year. Timeframes for many of these projects were recovered and all network risks were mitigated.

We achieved our reliability targets as stated through our MSS obligations. Signiﬁ cant progress We will continue to improve network performance and emergency response was made in substantial capital and maintenance programs, with network capacity increased by to meet customer expectations for reliability and delivery on MSS. Our long 605 MV.A to cater for future energy demand. We undertook a program of energy conservation term aspiration is to operate an intelligent connective network and provide and demand management activities, including the expansion of our Cool Change trial. best practice energy solutions to customers.

We achieved targeted key fi nancial results including operating profi t after tax (OPAT) in a diffi cult We will deliver our regulated fi nancial targets in a sustainable manner, year. A number of factors impacted our fi nancial position during the period including the costs through improved productivity and the cost effective delivery of electricity associated with the signifi cant volume of repairs carried out on the storm damaged network. to retailers and services to customers. We will work proactively with industry regulators to facilitate network funding outcomes that support core business operations.

We made strong progress towards our corporate environment objectives and maintained our We will deliver commitments within our carbon reduction plan and achieve Environmental Management System certiﬁ cation. We continued to promote energy efﬁ ciency and a sustainable environmental position through implementing compliance reduced the environmental impacts of our operations. Work continued with communities in South activities and business practices that minimise harm to the environment. East Queensland to revegetate areas after building new sections of the electricity network, as well as contributing to the environment in other areas.

We were able to meet stakeholder expectations for compliance in 2008-2009 through We will develop best practice skills, processes and systems to support demonstrated performance in a number of critical areas. Our existing enterprise risk delivery of our strategic vision and associated plans and initiatives. We will management framework and newly introduced compliance management framework continue mature and strengthen our risk and compliance management capability to to facilitate a culture which promotes the identiﬁ cation of risk management and compliance deliver on our legal, compliance and corporate governance obligations. issues early and enables proactive management. We had one instance of a high risk/major non-compliance incident (deﬁ ned as leading to a prosecution) during the year as a result of a prosecution concluded against ENERGEX following a safety incident in 2007. There has been a continually declining number of such severe safety incidents in the past few years.

1 Program of Work and Compliance Key Result Areas (KRA) have been combined to form the Operational Excellence KRA in 2009-2010.

ENERGEX Annual Report 2008-2009 5 CHAIRMAN’S REPORT

At ENERGEX our primary focus is providing a safe, reliable and efﬁ cient electricity supply for South East Queensland, and I’m pleased to say last year we continued to deliver and improve on this commitment.

Our Board, management and staff are continually improving the way we do business at ENERGEX, to meet the evolving needs of our customers and prepare for our future operation in a changing environment. I ﬁ rmly believe that last year we made signiﬁ cant progress on implementing sustainable network solutions and business practices, which will strengthen our position as an industry leader now and into the future.

Safety performance

Safety is our number one value, and our staff should again be congratulated on their safety performance. The implementation of several new safety initiatives and continuing staff vigilance on workplace practices led to a year of signiﬁ cant safety improvement including the best ever lost time injury frequency rate.

Despite the impressive performance, as an organisation we must still strive towards our goal of ‘zero injuries’, so every person in the ENERGEX community can return home safely every day. Achieving this goal will only be possible through the commitment of every member of the ENERGEX team and I encourage everyone to play their part to ensure we continue to build on our ‘safety ﬁ rst’ culture.

Operational responses

Without doubt one of the highlights of the year was the successful operational response to major incidents, with nature throwing South East Queensland the full gamut of severe weather ranging from storms to ﬂ oods, winds and heat. In all instances our performance was outstanding, and my thanks go out to everyone involved in the responses to these incidents.

Our good name in the community and industry is largely due to the efforts of front line staff, who continue to impress our customers with their prompt and professional responses on a day-to-day basis, and particularly during major events. Customer surveys conducted over the years show a very high level of customer satisfaction; a result everyone in the ENERGEX team should be proud of.

Network developments

South East Queensland’s electricity distribution network is quite literally the foundation of our business, and last year we enhanced the network signiﬁ cantly, increasing capacity and reliability throughout the region.

Rapidly increasing demand for electricity at peak times, largely due to population growth and the increasing use of power hungry appliances such as air conditioners, has seen us signiﬁ cantly increase our capital works spend. Just ﬁ ve years ago our annual works program was around $576.6 million – this year we invested $871.0 million.

People I speak with are continually surprised at the level of our investment in the network. Delivery of such a signiﬁ cant capital works program is only possible due to the efforts of staff, suppliers and contractors in all phases from planning through to coordination and construction.

66 ENERGEX ENERGEX AnnualAnnual ReportReport 2008-20092008-2009 While I am always proud of our ability to build and maintain Corporate governance a safe and reliable power network, we must continue to look at improved ways to meet the rapidly increasing demand The global fi nancial crisis has also shown that an enhanced for electricity which deliver better fi nancial, social, and corporate governance framework and an ethical compliance environmental outcomes for both the company and our culture are integral to facing the challenges of uncertain customers. Demand management continues to be a key economic times. challenge for our business and last year we continued our We are well placed to handle these challenges, with all work on developing a range of solutions to help manage the Directors committed to achieving best practice standards increasing demand for electricity. in corporate governance. Accordingly, a priority for the We are of the view that until we are better able to infl uence Board last year was to maintain oversight of our corporate the peak demands on our network, the capital costs of governance framework. The Board welcomes the reissue of the network augmentation will continue to rise signifi cantly Queensland Government’s Corporate Governance Guidelines and the cross subsidisation, by the moderate and low for Government Owned Corporations, including the new Code users of electricity to the high demand sector, will continue of Conduct and Confl ict of Interest Best Practice Guide. The to increase. Contemporary thinking is that time of use existing components of ENERGEX’s corporate governance or demand tarriffs, together with limited control over framework are considered to meet the revised standards, in situ appliances, are the preferred methods of demand which is a strong indication that we continue to do the things management. We look forward to working with our industry that achieve good governance outcomes. partners and customers in coming years to fi nd mutually benefi cial opportunities and balanced outcomes. Government and Board changes

In 2008-2009 there was a change in our shareholding Community support Ministers, with The Honourable Stephen Robertson taking In addition to providing a robust electricity supply, we pride on the role of Energy Minister, replacing The Honourable ourselves on the support we provide to communities, Geoff Wilson. As a major Queensland Government particularly through our $1.6 million sponsorship program. Owned Corporation, last year we worked closely with our Our staff have been heavily involved in sponsorships that shareholding Ministers and Queensland Mines and Energy to support a range of initiatives in the areas of safety, the ensure we continued to meet government expectations. environment, education and communities. In October last year, we welcomed Kerryn Newton to the Last year I had the opportunity to attend several sponsorship ENERGEX Board. Kerryn has extensive experience in events, including the launch of the redeveloped Queensland advising organisations on a range of management, legal, and Museum dinosaur garden, an iconic Brisbane landmark governance issues, and has proven to be an asset to our now known as the “ENERGEX Playasaurus Place”. Several Board. of last year’s environmental sponsorship initiatives were made possible by funds raised through our scrap recycling program. Planning for the future The transition to operation under the Australian Energy Regulator (AER) brings with it a new set of challenges. Financial performance As we go to print with this Annual Report our submission While we continued to invest in the electricity network at record to the AER is being considered. The decisions made by levels, last year we met key fi nancial targets in a challenging the AER in April 2010 in relation to our future funding will environment. Earnings before interest and tax (EBIT) were have a signifi cant impact on our business. I would like to $388.2 million against a target of $382.5 million, and our acknowledge the input from staff, management and the operating profi t after tax (OPAT) was $128.5 million against a Board on our AER submission, which proposes revenue target of $115.5 million. This solid fi nancial performance puts us for the 2010-2015 regulatory control period that will allow in a strong fi nancial position moving forward. us to continue to maintain and enhance safety, service delivery and operations of the electricity network to standards Following the strategic decision to close all non-core expected by South East Queenslanders. businesses to concentrate on electricity distribution in South East Queensland, we exited operations in New Zealand. I Forward thinking and planning is the key to any business’ would like to sincerely thank those involved with the New long term success and a tremendous amount of work was Zealand arm of our business for their contribution to our done last year to ensure we have a robust framework for our company over the years. company moving forward. Our Network Vision Outlook to 2025 document details the strategies in place to ensure we In the current economic climate it is important for us to continue to respond to our customers’ needs in a changing remain fi scally responsible, particularly when some of our environment. I am confi dent we will continue to deliver on our customers and other industries are suffering fi nancially. business objectives into the future. While the economic forecast is improving, we can’t become complacent and we have stringent accounting and auditing processes in place to ensure we continue to perform well fi nancially. John Dempsey ENERGEX Chairman

ENERGEX Annual Report 2008-2009 7 DIRECTORS’ PROFILES

John Dempsey Mary Boydell

Chairman, Director ENERGEX Limited Board BCom, FCA, MAICD ACIS, PNA, Grad Dip Acctg and Fin Mangt, Grad Dip Ag Econ, GAICD

In June 2008, John Dempsey was Mary Boydell was appointed a non- appointed Chairman after acting in the executive Director of the ENERGEX position since January 2007. Limited Board in July 2005. Mary chairs the Remuneration Committee John was ﬁ rst appointed as a and is a member of the Network non-executive Director of the and Technical Committee and the ENERGEX Limited Board in July Corporate Development Committee. 1999. He is a member of the Board’s Audit and Compliance Committee She is a Chartered Accountant with and a member of the Corporate extensive Board experience in the Development Committee. private and public sectors, combined with senior management roles in John is also a Director of Ceramic commerce and the accounting and Fuel Cells Limited and is Chairman legal professions. of their Audit Committee. Formerly Deputy Mayor of the City of Cairns, he Mary is currently Commissioner of contributed to the development of the the Queensland Water Commission, Management of the Wet Tropics World Chair of the Gladstone Area Water Heritage Area listing as Chairman of Board, Chair of the Rural Industries the Community Consultative Group. Research and Development Corporation, a board member He has extensive experience in the of the CSIRO, a member of the Queensland rural industry and was Australian Government Department an inaugural member of the Sugar of Agriculture Fisheries and Forestry Industry Tribunal in 1991, where he Audit Committee, and a Member of remained for six years. Until recently the Queensland Regional Council John conducted a public accountancy of the Institute of the Chartered practice in Brisbane, and has more Accountants. Mary has previously than 30 years’ experience in the ﬁ eld. served as a Director of the Australian He is an Associate of the Institute of Trade Commission (Austrade), Chartered Secretaries and also holds Burnett Water Pty Ltd and BSES postgraduate diplomas in Accounting Limited, Board Member of the and Financial Management and in Queensland Bulk Water Supply Agricultural Economics, and is a Authority and as an external adviser Graduate of the Institute of Company to Board Audit Committees in the Directors. public and private sectors.

8 ENERGEX Annual Report 2008-2009 Maj Gen (Retired) Emeritus Professor John Geldard Peter Arnison AC, Mat Darveniza AO, CVO FTSE

Director Director Director BEc, D Laws UQ, D Univ QUT, BE, PhD, DEng, Hon DSc, FIEAust, BCom, BE, CPA, FAICD D Univ Grifﬁ th, D Letters USQ, FIEEE, LIVA D Univ SCU, FAICD

Peter Arnison was appointed a non- Mat Darveniza was appointed a non- John Geldard was appointed a executive Director of the ENERGEX executive Director of the ENERGEX non-executive Director of the Limited Board in December 2004. Limited Board in December 2004. He is ENERGEX Limited Board in July He chairs the Network and Technical a member of the Network and Technical 2005. He is Chairman of the Audit Committee and is a member of the Committee and the Remuneration and Compliance Committee and Audit and Compliance Committee. Committee. Corporate Development Committee.

Peter served for 37 years in the Mat’s career in electrical engineering John has extensive experience within Australian Army in a variety of Infantry commenced with the Southern the private and public sectors in the command appointments, retiring as Electricity Authority of Queensland. manufacturing, mining and energy Land Commander, Australia, in June He was appointed to the University of industries and has been involved 1996. Following a year as Executive Queensland as an academic in 1959. with electricity industry reform in Director of Allied Rubber Products, He progressed to Professor in Electrical Queensland and Western Australia. he was appointed Queensland’s 23rd Engineering in 1980, and in 1998, was Previously, John has held executive Governor, serving from July 1997 to appointed Professorial Research Fellow positions at ENERGEX, including July 2003. (fractional) and Emeritus Professor. Chief Executive Offi cer between He is Chancellor of Queensland He has been active in professional March and December 2000, and University of Technology; Chairman of committees on power systems, lightning Chief Financial Offi cer from July The Centre for Military and Veterans’ protection and engineering education, 1997 to April 2001. Prior to this, John Health; and a Director of the Australian including the Electricity Supply served as the Chief Financial Offi cer Multicultural Foundation. Association of Australia, Standards for the Queensland Transmission and Australia, International Electrotechnical Supply Corporation. Commission, International Council of John is a Director of Electricity Large Electrical Systems, the Institute Supply Industry Superannuation of Electrical and Electronic Engineers, (Qld), and is a previous Deputy and Engineers Australia. Member of the Queensland Treasury Mat has served on a number of Corporation Board. Boards, including UniQuest Pty Ltd, National Association of Testing Authorities Australia, Australian Academy of Technological Sciences and Engineering, UniSyd Pty Ltd and Rotary Club of Brisbane Inc. He has been Chairman of Lightning and Transient Protection Pty Ltd since 1995.

ENERGEX Annual Report 2008-2009 9 Ron Monaghan Kerryn Newton Terry Effeney

Director Director Chief Executive Ofﬁ cer BA LLM, MBA, MA, Grad Dip (Applied BE (Hons), BEcon, MEng, GAICD, Finance and Investment), GAICD CP Eng

Ron Monaghan was appointed a non- Kerryn Newton was appointed as Terry Effeney was appointed Chief executive Director of the ENERGEX a non-executive Director of the Executive Offi cer (CEO) of ENERGEX Limited Board in May 2008. Ron ENERGEX Limited Board in October in January 2007. Prior to joining is a member of the Remuneration 2008. She is a member of the Audit ENERGEX, Terry held the role of Chief Committee and the Corporate and Compliance Committee and Operating Offi cer of Ergon Energy Development Committee. Network and Technical Committee. for three years and was an Executive Manager of Ergon Energy and its Ron began his career in 1979 as an Kerryn was admitted as a solicitor of predecessor organisations for more Organiser at the New South Wales the Supreme Court of Queensland in than 10 years. Branch of the Liquor Hospitality and 1991 and has worked in various legal Miscellaneous Union (LHMU) before and management roles in the private Throughout his career, Terry has moving to Queensland in 1989. He and public sectors. Her roles have gained extensive experience in was elected Assistant Secretary of the included extensive experience as a senior line management at both LHMU Queensland Branch in 1992 lawyer and advisor for the Queensland operational and strategic levels, and Secretary in 1999. Ron served Parliament and its parliamentary including roles in network and fi eld as Vice President of the Queensland committees. operations management and business Council of Unions until November development. Since commencing his Currently Kerryn is an independent 2007 when he was elected unopposed career with the Capricornia Electricity management consultant and advises as General Secretary. Board, Terry has held numerous organisations on a wide range of engineering and strategic development In 2003, Ron was appointed to the management and governance issues. roles throughout Queensland. WorkCover Board and in 2007 to the Kerryn is Commissioner of the Board of Sunsuper Pty Ltd. Queensland Gaming Commission and sits on the Boards of two community housing organisations. She has also held numerous other positions on non-profi t and community sector management committees, and is a director of a number of private company boards.

10 ENERGEX Annual Report 2008-2009 Michael Russell Marnie White

Executive General Secretariat and Governance Manager, Corporate Manager Governance and Group Company Secretary Company Secretary LLB, BA, Grad Dip LP, Grad Dip App BE, MBA, Grad Dip App Corp Gov, Corp Gov, ACIS GAICD, ACIS, MIEAust, CPEng

Michael Russell has been a company Marnie White has practised as a secretary for the ENERGEX Group solicitor since July 2000 and joined Companies since early 2004, ﬁ rstly ENERGEX as Legal Counsel in the position of Corporate Affairs Network in 2005. She was appointed Manager (Assistant Company as ENERGEX Secretariat and Secretary) and from October 2004 as Governance Manager (Assistant Acting Group Company Secretary. Company Secretary) in December 2007. In 2009, she completed In October 2007 he was appointed the Graduate Diploma in Applied as Executive General Manager Corporate Governance through Corporate Governance. Chartered Secretaries Australia. Michael joined the organisation when it was operating as SEQEB in 1984, and has held various engineering and management positions. In the last 10 years, his expertise in corporate governance has been developed through responsibilities that included the management of a number of ENERGEX investments.

ENERGEX Annual Report 2008-2009 11 CORPORATE GOVERNANCE Our approach to Our robust Our robust corporate governance framework corporate is advocated by the Board and senior governance governance management, who encourage our people ENERGEX Limited is a Government Owned to carry out their duties in an ethical and framework responsible manner, protecting the community Corporation (GOC), established under the is advocated Government Owned Corporations Act 1993 interest and our company’s integrity. (GOC Act). The Corporations Act 2001 by our Board applies to ENERGEX Limited except so far and senior as the GOC Act otherwise provides. management. Corporate governance

As a GOC, we are accountable to our reporting ultimate owners and customers, the people of We report against the Corporate Governance Queensland. Our main governance objective Guidelines for Government Owned is to achieve our business outcomes aligned Corporations (the Guidelines), issued by the with our ethical, social and environmental Queensland Government. The Guidelines responsibilities. In the context of the provide the framework for all GOCs, including challenges to organisations brought by the ENERGEX, to develop, implement, review global fi nancial crisis, it is crucial to maintain and report upon their corporate governance solid governance foundations through a arrangements. In early 2009, the Offi ce of robust corporate governance framework. Government Owned Corporations (OGOC) revised the Guidelines to align with the 2nd Edition of the ASX Corporate Governance Council Principles and Recommendations. The principles contained within the Guidelines remain substantially the same, with principles 8 and 10 being largely absorbed into Principle 2 (Structure the Board to add value) and Principle 3 (Promote ethical and responsible decision making). Signifi cantly, the updated Guidelines now include the “Code of Conduct and Confl icts of Interest Best Practice Guide for Government Owned Corporations” which establishes recommendations for the implementation and continuous monitoring of conduct and confl ict policies.

The Board and senior management continue to support the reﬁ nement of our corporate governance framework in accordance with these standards. During early 2009-2010, we will be adopting a continuous improvement strategy to our governance framework to ensure ongoing compliance with these standards.

Photo: Our corporate governance framework applies to all our 12 ENERGEX Annual Report 2008-2009 staff whether ﬁ eld or ofﬁ ce worker. Our Corporate Governance Framework

Shareholding Ministers Our shareholders ENERGEX has two shareholders who hold the shares on behalf of the State of Queensland. Our shareholding Ministers, as at 30 June 2009, were: • The Honourable Andrew Peter Fraser MP, Treasurer and Minister for Employment and Economic Development, holding 50 per cent of the A class voting shares and 100 per cent of the B class non-voting shares • The Honourable Stephen Robertson MP, Minister for Natural Resources, Mines and Energy and Minister for Trade, holding the remaining 50 per cent of the A class voting shares.

ENERGEX Limited Board Key accountabilities of the Board • Responsibilities under section 88 of the GOC Act • Provision of the overall strategic direction of ENERGEX • Approval of the Statement of Corporate Intent, Statutory Corporate Plan, Network Management Plan and Demand Management Plan • Effective governance, leadership and management oversight • Monitoring of safety, environmental and fi nancial performance • Disclosure to shareholding Ministers of the operations, fi nancial performance and fi nancial position of the corporation and its subsidiaries • Provision of formal delegations of authority to the CEO, management and other specifi ed offi cers.

Membership and meetings • All Directors, including the Chairman, are independent, non-executive Directors appointed by the Governor-in-Council in accordance with the GOC Act. • During the year, ENERGEX Limited held 15 meetings of Directors. The attendance of the Directors at meetings of the Board is presented in the Directors’ report section on page 62.

Audit and Compliance Corporate Development Network and Technical Remuneration Committee Committee Committee Committee

Key accountabilities Key accountabilities Key accountabilities Key accountabilities The Audit and Compliance The Corporate Development The Network and Technical The Remuneration Committee Committee provide assurances to Committee: Committee: provides oversight and the Board that ENERGEX Limited • considers the appropriateness • recommends strategy and recommendations to the Board is properly meeting its obligations of, and makes approaches to the Board on on: in relation to: recommendations in relation network and technical issues • strategic remuneration and • fi nancial integrity to, signifi cant and complex • provides oversight of employment matters including • legal compliance corporate development ENERGEX’s approach to Board approved policies and • business risk management proposals prior to their network standards and remuneration, and workplace • ethics and integrity. presentation to the Board technological innovation agreement frameworks • considers and advises on the • provides oversight of • ENERGEX’s obligations in Membership (as at 30 June 2009) prioritisation and cost control ENERGEX’s fulfi lment of its relation to remuneration, • Mr John Geldard of corporate development commitments under the Network superannuation and (Committee Chair) initiatives Management Plan to provide a employment matters under law • Mr John Dempsey • reviews unregulated business reliable, safe and cost effective and government policy • Maj. Gen. Peter Arnison ventures of ENERGEX and its electricity supply. • the senior executive succession • Ms Kerryn Newton. subsidiaries. planning framework Membership (as at 30 June 2009) • Directors’ skills, induction Key decisions Membership (as at 30 June 2009) • Maj. Gen. Peter Arnison program and performance • consideration of our long term • Mr John Geldard (Committee Chair) reviews. debt management strategies (Committee Chair) • Emeritus Prof. Mat Darveniza • endorsement of new risk • Mr John Dempsey • Ms Mary Boydell Membership (as at 30 June 2009) management and compliance • Ms Mary Boydell • Ms Kerryn Newton. • Ms Mary Boydell policy. • Mr Ron Monaghan. (Committee Chair) Key decisions • Emeritus Prof. Mat Darveniza Key decisions • oversight of the development of • Mr Ron Monaghan. • oversight of the sale of the New the network vision and strategy Zealand business • oversight of the preparation of Key decisions • strategic review of remaining the Network Management and • oversight of changes to the unregulated business, including Summer Preparedness Plans. CEO and senior executive divestments template contracts to align with • oversight of the preparation of GOC expectations our regulatory proposal to the • oversight of the changes to the Australian Energy Regulator Executive Management Team (AER). structure.

Committee Governance: • Each Committee has a Charter (reviewed annually), which is available on our website. Charters set out the specifi c duties (to provide oversight on behalf of, and recommendations to, the Board, in relation to specifi c matters) and governance arrangements. • Membership comprises a number of Directors appointed by the Board. • The CEO and senior executives are invited to Committee meetings at the discretion of the Committee. • The internal and external auditors also attend the Audit and Compliance Committee meetings by way of standing invitation. • Committees may seek assistance in carrying out their duties by engaging suitably qualifi ed external advisers. • The composition of each Committee and attendance at the meetings are shown in the Directors’ report section on page 62. • The qualifi cations of each Committee member are shown in the Directors’ profi les on page 8-11.

ENERGEX Annual Report 2008-2009 13 CORPORATE GOVERNANCE continued from Page 12

Principle 1 – Foundations of Principle 2 – Structure the Board to management and oversight add value Highlights Highlights • Our Board Charter was updated to include a new • The ENERGEX Limited Constitution was revised Directors’ Code of Conduct. during 2008-2009 to introduce a more contemporary format. Board Charter Our Board Charter, available on our website, provides a Our Directors clear delineation between the roles and responsibilities of Our Board of Directors, including the Chairman, are the Board and individual Directors, and the matters which independent, non executive Directors. Our Directors are are delegated to management. Our Board holds monthly appointed by the Governor-in-Council in accordance with meetings which focus on matters of strategic guidance the GOC Act. As such, the Board does not play a formal for the company and effective oversight of management. role in selecting directors or the size of the Board. Management’s responsibilities are well defi ned through job Our Board continually assesses the ongoing profi les, performance agreements and the Board-approved independence of each Director, with reference to Delegation of Authority framework. the materiality thresholds (relationships affecting Board Committees independence status) in the ASX Corporate Governance The register of Board Committees, including a summary Principles and Recommendations (2nd edition). of their roles and memberships, is set out on page 13. Where a Director has a related party or personal Management has also established a number of interest in a matter being considered by the Board, the committees to support the governance of ENERGEX Director will declare that interest. An annual review of (each committee’s role is defi ned in a Charter). Directors’ personal interests is also undertaken. The new Constitution of ENERGEX Limited provides that a Director Board Handbook must absent themselves from a meeting, including all Our Corporate Governance Manual (Board handbook) is deliberations and voting on a matter, where they have distributed to new Directors and is used as an integral part declared a material personal interest in the matter (the of the Directors’ induction process. The Manual defi nes exclusions in section 195(2) of the Corporations Act 2001 the Board governance systems and supports Directors do not apply). and senior managers in their governance responsibilities. It also facilitates Board operations and self-evaluation Details of Directors’ skills, experience and expertise processes. The Manual will be completely revised and relevant to their position are set out on pages 8-10. The re-issued during 2009-2010 as the “Directors’ and Offi cers’ terms of offi ce held by each Director at the date of this Handbook”. report, including the date each Director’s appointment expires are set out on page 110. Their attendances at Directors’ induction Board and Committee meetings are set out on page 62. New Directors attend an induction day to provide them with an overview of our operations and information on the Directors’ access to advice and training Board and Committee functions. The induction assists the Our Board Charter provides that Directors may seek Directors to understand their roles and responsibilities as independent professional advice, at our expense, to assist an ENERGEX Director and our business and corporate them to carry out their duties as a Director. Our Board expectations. From 2009-2010, the induction process will also has access to continuing education and training, to be extended to new senior executives to allow them, at maintain, update and enhance their skills, knowledge and the earliest opportunity, to participate fully and actively in experience. management decision making. Assessing Board performance Assessing senior management We conduct Board performance evaluation on a biennial performance basis. The next evaluation is due in late 2009. As part of A comprehensive and formal management performance this process, we will provide a written report to shareholding evaluation regime for the CEO and senior management Ministers outlining the results of the evaluation, including an was conducted during 2008-2009. The regime includes assessment of how compliance has rated within the broader individual executive performance agreements based on GOC policy framework. the achievement of well-defi ned Key Result Areas and Key Performance Indicators, involving corporate, commercial and personal goals.

14 ENERGEX Annual Report 2008-2009 Principle 3 – Promote ethical and Trading policy responsible decision-making As our company is government owned, no Director or employee holds or trades securities in any ENERGEX Highlights Group Company. Our Confl ict of Interest Policy includes a • We were a private participant in the Corporate Restricted Trading Register, which supplements the legal Responsibility Index for the 2007-2008 reporting period, duties which apply to Directors, offi cers and employees coordinated by the St James Ethics Centre. During 2009- relating to the misuse of information or position and insider 2010, our results for the 2008-2009 reporting period will trading laws. A summary of this policy is available on our be published for the fi rst time. website. • The Legal Compliance Charter was completely reviewed and reissued as our Compliance Policy. Principle 4 – Safeguard integrity in Key governance policies fi nancial reporting We are committed to ethical and responsible decision- making and have in place a suite of governance policies to Audit and Compliance Committee establish this framework. These include the Compliance, Our Board has in place the independent Audit and Fraud Control, Delegation of Authority, Confl ict of Interest, Compliance Committee which operates to oversee matters Reportable Gifts and Purchasing Policies and the ENERGEX of fi nancial integrity. Its duties and responsibilities are set Purchasing Manual. These policies apply to our Board out in its Charter which is available on our website. and all personnel and are advocated through a top down The role of Chairman of the Committee is not held by the approach by our Board and senior management. Additional Chairman of the Board. Membership of the Committee is obligations of Directors are set out in the ENERGEX Board disclosed on page 13. Details of members’ qualifi cations Charter and the Corporate Governance Manual. are included in profi les on pages 8-10. Attendance at Code of Conduct meetings is disclosed on page 62. Our Code of Conduct sets the standard for how we Internal Audit operate in accordance with business ethics, social Our Internal Audit Group provides independent, objective objectives, corporate values and associated policies. assurance and advisory support, which is designed to Our Code of Conduct and Confl ict of Interest policy align add value and improve our operations. Internal Audit with Managing Confl icts of Interest in the Public Sector assists the CEO and members of the Board to accomplish – Guidelines and Toolkit, jointly issued by the Crime their objectives by bringing a systematic, disciplined and Misconduct Commission (Qld) and Independent approach to evaluation of the effectiveness of risk Commission Against Corruption (NSW). Our Code management, control and governance processes and includes examples and scenarios to assist in ethical supports management’s improvement of these processes. decision making. Our Group Manager Internal Audit attends the Audit and A copy of the Code of Conduct is provided to all existing Compliance Committee meetings to report on the status of and new employees upon their commencement in new the Internal Audit Plan. roles. Our Code of Conduct is readily available on the During 2008-2009, Deloitte was contracted to support our staff intranet. New employees receive induction training Internal Audit Group in carrying out the ENERGEX Internal on ethical business practices, including the Code of Audit Plan. During the year, a range of reviews were Conduct. carried out in conjunction with our Internal Audit Group, Our Board also has a Directors’ Code of Conduct in our with the reports ultimately submitted to the Audit and Charter to assist in its decision making process. Compliance Committee.

ENERGEX’s advisers, consultants and contractors are In accordance with the provisions of the GOC Act, the expected to comply with high ethical standards aligned Queensland Auditor-General is the external auditor for with the Code of Conduct. During 2009-2010 this ENERGEX Limited and its subsidiaries. The Audit and expectation will be reinforced as our tender packs and Compliance Committee reviews the performance of the contracts with suppliers will be updated to include a copy external auditors on an annual basis. of, and a reference to, the Code of Conduct. Financial statements A summary of the main provisions of the Code of Conduct Our CEO and Chief Financial Offi cer (CFO) annually is available on our website. certify to the Board that the fi nancial statements represent a true and fair view and are in compliance with accounting Reporting breaches of governance policy standards. We have established processes for the reporting of breaches of governance policy and investigating reports of unethical practices. Employees have the option to report breaches anonymously via the 24 hour Disclosure Line, which is facilitated by an external provider. ENERGEX Annual Report 2008-2009 15 Principle 5 – Make timely and Our dividend policy balanced disclosure Between 1 and 16 May each fi nancial year, our Board makes a dividend recommendation to our shareholding We adopt a broad approach to disclosure, with obligations Ministers in accordance with section 131 of the GOC Act. set out in the GOC Act, relevant policies and other The 2008-2009 dividend recommendation was 80 per legislation, to ensure accountability to the shareholding cent of OPAT (operating profi t after tax) and is payable by Ministers, who are in turn accountable to Parliament. Our 31 December 2009. shareholding Ministers have access to material information concerning our company, including our operations, Principle 7 – Recognise and manage fi nancial performance, fi nancial position and governance of our company and its subsidiaries. This requirement risk is similar to the continuous disclosure obligations which Highlights apply to listed companies under the ASX Listing Rules. • Our Corporate Risk and Compliance Group was In addition to submissions on specifi c matters, including enhanced through new staff appointments, to manage regular briefi ng notes, we provide a quarterly report to the Business Continuity Management and Enterprise shareholding Ministers. Risk Management frameworks. • A corporate-wide scenario testing workshop was To support compliance with the revised Guidelines, the held to test our business continuity plans against a Code of Conduct and other governance policies will hypothetical disruption event. be updated in 2009-2010 to confi rm that shareholding • We conducted an extensive in-house legal training Ministers will receive timely and complete advice of any program, covering topics such as Trade Practices potential and actual breaches of the Code or Restricted legislation, contract law and industrial relations Trading Register by ENERGEX directors, the CEO or (including an overview of the new Fair Work Act 2009 senior executives and where material, by our employees. (Cth)). • Our contract management and compliance framework was enhanced through the expansion of our suite of Principle 6 – Respect the rights of legal precedents and the completion of compliance Shareholders audits. Highlights Risk management systems • Our shareholders approved a new Constitution for We are required to manage a diverse and complex ENERGEX Limited to introduce a contemporary range of signifi cant risks and an enterprise-based risk format, aligned with shareholder and ENERGEX management framework, established in accordance with requirements. AS/NZS ISO4360: 2004 ‘Risk Management’, which has • Our Functions and Entertainment policy was updated been implemented throughout the organisation to ensure to align with revised shareholder standards for material risks are identifi ed and appropriately managed. corporate entertainment and hospitality. The universe of risks we manage includes fi nancial, Reporting to our shareholders operational, strategic and reputational risks. Details of We report in a timely manner on all issues likely to have those risks and the type of controls in place are set out in a signifi cant fi nancial, operating, social or environmental Risk Registers managed by each division. impact, in accordance with our obligations under legislation Accountabilities within the Enterprise Risk Management and government guidelines. We work cooperatively with the (ERM) Framework are explained below: shareholding Ministers on these issues. (a) Our Board maintains oversight of the ERM Our Chairman is the principal liaison offi cer with the Framework’s effectiveness through its Audit and shareholding Ministers, both on a formal and informal Compliance Committee, which provides assurance basis, and meets regularly with the Portfolio Minister. that the corporation is properly meeting its obligations Our CEO and certain managers and employees liaise with in relation to: representatives of shareholder departments on a regular • fi nancial integrity basis. • legal compliance Management seeks the approval of our shareholding • business risk management Ministers for projects in accordance with the GOC Act and • ethics and integrity. GOC policy guidelines. (b) Our Executive Management Team and its Risk Management and Compliance Committee, have active risk management responsibilities. Material business risks, and the effectiveness of their management, are continuously monitored and reported to the Board monthly through these channels. 16 ENERGEX Annual Report 2008-2009 (c) Our Corporate Risk and Compliance Group, within the Principle 8 – Remunerate fairly and Corporate Governance Division, supports the Audit responsibly and Compliance Committee in the discharge of its governance responsibilities through the maintenance Highlights of the Enterprise Risk Management Framework • Our Remuneration Policy was updated to align with the and implementation of a Corporate Compliance GOC Governance Arrangements for Chief and Senior Framework. Executives (reissued in February 2009). Internal control framework Remuneration Committee Our Board is responsible for the overall internal control The Remuneration Committee of the Board oversees framework, which is designed to provide reasonable employee remuneration and performance policy. assurance regarding the achievement of the organisation’s Membership of the Committee is set out on pages 13 and objectives in the following categories: 62. The Charter sets out the roles and responsibilities of • effectiveness and effi ciency of operations committee members and is available on our website. • risk management systems • governance processes. Remuneration Policy Our remuneration strategy and practices are aimed at The internal control framework is comprised of: ensuring we attract, retain and motivate high calibre employees at all levels by providing an appropriate • our Internal Audit Group, which provides an combination of competitive, fi xed and variable independent, systematic and disciplined approach to remuneration components. We comply with the support improved risk management, fi nancial control Remuneration Guidelines for Chief and Senior Executives and governance procedures. Our internal auditors in Government Owned Corporations to achieve a work with the Queensland Audit Offi ce to ensure balance between public accountability and transparency that procedures are effectively implemented and to and our need to attract and retain high calibre staff guarantee the quality of information we disclose from competitive labour markets. Our senior executive • policies and procedures including legal compliance remuneration arrangements are subject to approval or training and auditing processes to ensure the affairs of endorsement by the shareholding Ministers, complying the organisation are being conducted in accordance with specifi c key criteria. with relevant legislation, regulations and codes of practice. These procedures also ensure that Executive We also have a comprehensive suite of procedures and Management and the Board are made aware, in a policies to govern remuneration practices in accordance timely manner, of any material matters affecting our with GOC guidelines. Senior executive remuneration operations and the effectiveness of management of is disclosed in the Annual Report (in accordance with those risks. accounting rules and government guidelines) on page 113. Fraud control Directors’ remuneration is established independently We are committed to the prevention of fraud (including by the shareholding Ministers and is approved by the corruption) and have established the following integrated company in general meeting in accordance with the suite of strategies and initiatives to provide an effective Constitution. Directors’ remuneration is disclosed on fraud control framework that is closely integrated with the page 112. broader ERM Framework: Assessing performance • Code of Conduct which establishes our obligations in To reinforce our performance-based culture, we offer a six- relation to ethical behaviour monthly performance pay scheme which is linked to our • Fraud Control Policy and Fraud Control Standard Key Result Areas (KRAs) and Key Performance Indicators which establish obligations for fraud identifi cation (KPIs). During 2008-2009, we measured progress towards and prevention as well as setting out the processes the achievement of our Vision and Purpose through for ongoing monitoring and coordination of fraud success against nine KRAs and KPIs. It is important that control activities, including the processes for reporting, we continue to deliver balanced performance results. recording and investigating allegations of fraud • An independently operated 24 hour Disclosure Hotline. Our hotline is a means by which employees can report any concerns regarding unethical conduct, breaches of the Code of Conduct (and its supporting corporate policies) or breaches of the law (such as suspected fraud).

ENERGEX Annual Report 2008-2009 17 CEO’S REPORT

The theme of our Annual Report – we’re working for you – epitomises the 2008-2009 ﬁ nancial year. Despite the challenges brought by extreme weather, a changing industry, evolving customer expectations and wide-spread issues such as the global ﬁ nancial crisis, our staff have continued to improve our electricity network and capabilities in the areas of safety, service delivery, environment and customer service. Our staff’s commitment to the people of South East Queensland has again been exemplary, and a key to many of the year’s corporate achievements. I would like to thank all staff for their dedication and commitment over the last year.

Operational response 2008-2009 saw some of the most signifi cant severe weather events experienced in South East Queensland in the past 25 years. Our staff mobilised swiftly and safely to restore power to nearly one third of our customer base in response to severe storms, torrential rain and fl oods. Staff from all aspects of the business – whether from fi eld services, support areas or offi ce based professions – combined to work around the clock ensuring that all members of the community affected by the storms or other events had power connected as quickly as possible. Thousands of storm-related tasks were carried out by our staff. I am proud that no lost time injuries occurred and no member of the community was injured as a result of our network operations or response. Ultimately the community determines whether our operational responses to these severe events were a success. Judging by the hundreds of positive mentions in the media and personal thanks afforded to staff in the fi eld, I think we can safely say the community were appreciative of our efforts. This appreciation was also refl ected in our customer satisfaction rates throughout the year, particularly just after the November 2008 storms that affected the north west of Brisbane.

18 ENERGEX Annual Report 2008-2009 Safety Furthermore, for the fi rst time in the company’s history more than 30 per cent of our electricity network is underground. Safety continues to be the number one corporate value and This percentage compares favourably with other urban last year’s safety performance demonstrates the increasing distributors in Australia. We will continue to work with commitment to personal wellbeing. While our ultimate goal communities and stakeholders throughout the region to will always be no injuries or incidents, our people should be improve aesthetics and address safety issues by installing congratulated on achieving the best LTIFR safety results in power underground where practical, in line with our the company’s history. undergrounding policy. In 2008-2009, our LTIFR fell 30 per cent on 2007-2008’s result which I attribute to staff commitment to their personal safety. This result occurred during a year of severe weather Environment and an unprecedented program of works and maintenance. We remain focused on further improving our safety results As a responsible corporate citizen we are very aware of our and rolled out our fi ve year Health and Safety Strategic Plan environmental obligations and continually strive to reduce including the Zero Incident Process (ZIP) Program, which is any impact our operations may have on the environment. being implemented across the company as we continue to In addition to the ongoing environmental initiatives such as strive towards zero injuries. reducing power and water use throughout corporate sites, and lowering and offsetting vehicle fl eet emissions, last year we developed several new environment specifi c strategies. Customer service Our carbon footprint was assessed for the fi rst time last year, measuring our carbon footprint for 2006-2007. The results Last year was also largely about business consolidation of this report showed areas for improvement, which have following the fi nal transition to Full Retail Competition been captured in our carbon management plan. In addition (FRC). Bedding down the processes needed to service our to managing our day-to-day carbon impact, last year we also customers and operate as a distribution only business has implemented an Environmental Offsets Policy – a guideline been a major task and one that I am happy to say is now for replacing signifi cant vegetation cleared for capital works, complete. and offsetting our carbon emissions. As our staff worked hard to implement the fi nal stages of Since 1996, almost 300,000 native shrubs and seedlings our new structure, the community displayed exceptional have been planted as part of our carbon offset planting understanding as we realigned many aspects of the business program, with the most recent planting of around 27,000 so we could better service their needs. plants at South Ripley near Ipswich fully offsetting the carbon emissions created by our vehicle fl eet use, air travel, electricity switchgear gases and air conditioner refrigerant Program of Work emissions for the 2007-2008 fi nancial year. We are currently undertaking the largest capital works program in our company’s history as we keep in step with South East Queensland’s growth in demand, driven by Key priorities moving forward increasing commercial and domestic power consumption and In 2009-2010 we will continue to focus on a range of initiatives rapid regional expansion. to maintain and improve our core business of delivering a With this growth in consumer consumption comes the need safe and reliable electricity supply to homes and businesses to continually upgrade and expand the network, which comes in South East Queensland, and tackle some of the challenges at a signifi cant fi nancial cost. Last year we spent around $3 facing our industry. million every day, weekends included, upgrading, maintaining Delivering balanced network solutions, sustainability and and expanding the network throughout the region’s 25,000 operating in a new regulatory operating environment are key square kilometre distribution area. challenges for us moving forward, and we will continue to In fact, since June 2004 there has been an additional work closely with our stakeholders to fi nd outcomes that are 4400MV.A of network capacity built into the South East fi nancially and environmentally responsible, and meet our Queensland power grid, which has resulted in a near customers’ needs. doubling of available capacity. This additional capacity in Our commitment to these areas will ensure we keep the the network has meant the community has enjoyed a more power on in South East Queensland. After all, we’re working reliable and resilient power supply while also ensuring we for you. have met our urban and rural network reliability targets. The network is in good shape.

Terry Effeney ENERGEX Chief Executive Ofﬁ cer

ENERGEX Annual Report 2008-2009 19 EXECUTIVES The executive team behind ENERGEX Our Commercial Developments division ceased operations on 30 June 2009 as a consequence of our strategic decision to focus on our ENERGEX Chief Executive Ofﬁ cer core business rather than focusing on Terry Effeney growth in external business ventures.

As a result, Acting General Manager Commercial Developments, Darryl Rowell returned to his substantive role, and all staff within Commercial Developments have been integrated into other divisions.

We gained approval from our shareholding Ministers for a new division - Strategy and Regulation. This division will incorporate the functions of strategic development and planning, market development, and regulatory strategy and management including pricing and reporting. Recruiting and establishment of the division will occur in 2009-2010. Terry Effeney

Holding company

Chief Financial Ofﬁ cer Corporate Governance Human Resources Darren Busine Michael Russell Susan Kehoe Commercial and Finance, Legal, Internal Audit, Secretariat and Industrial Relations, Staff Financial Control, Performance Governance, Corporate Risk and Communications, Human Resources Management, Strategic Change Compliance. Consultants, Human Resources and Program Management, Planning and Coordination, Taxation and Treasury, Strategy Organisational Development, Human and Development, Regulatory Resources Services. Affairs.

Darren Busine Michael Russell Susan Kehoe

20 ENERGEX Annual Report 2008-2009 Regulated Network Performance Network Programming and Energy Delivery Chris Arnold Procurement Bill Lyon Corporate Occupational Health and Peter Price Design, Construction, Maintenance Safety, Network Capital Planning, Field Support, Joint Workings, and Operation of Distribution and Network Reliability and Maintenance, Network Program, Commercial and Transmission Electricity Networks. Systems Engineering, Environmental Compliance, Business Performance, Management, Network Property Data Revenue Strategy, Procurement. and Coordination, Demand and Risk Management.

Chris Arnold Peter Price Bill Lyon

Non-regulated Customer services Commercial Developments Customer Services Darryl Rowell Peter Weaver Generation Projects, Energy Services, Business Support Services, Energy Metering Dynamics, ENERGEX Market Services, Property Services, New Zealand Operations, Corporate Customer Contact Centre, Corporate Development, Growth and Strategic Communication, Customer Advocacy, Relationships. Government Relations.

Darryl Rowell Peter Weaver

ENERGEXENERGEX AnnualAnnual ReportReport 2008-20092008-2009 21 Bruce Forsyth Group Manager Network Program

Our network is always evolving – new equipment is needed to meet the growing demand for electricity as more people move to South East Queensland and the average household’s electricity use continues to rise, particularly during peak periods such as hot summer days. Powering the lifestyles of our customers is important and the way our network operates is a key priority for our team.

To maintain network reliability our capital works program was particularly aggressive last year with a $810.4 million spend.

Bruce Forsyth knows the importance of our Program of Work (POW) and has spent the year ensuring designs and programming of network projects are adequately resourced, delivered on time and within budget to keep the lights on in South East Queensland.

“I was in a unique position last year, being involved in the end-to-end network building process, from the Network Project Engineering team where we design the network through to Network Project Delivery where we program the works and project manage jobs to completion,” Bruce said.

“My team designs where the underground cables, poles and powerlines are going to be located throughout South East Queensland and provides the speciﬁ cations for each individual project right down to the ﬁ ner details.

“We used 2007-2008 as a planning phase, then ramped up our external consultant capacity to meet last year’s requirements, and we also looked to Human Resources to assist with sourcing experienced applicants. There is a skills shortage for our level of expertise and the new recruitment model allowed me to focus on key deliverables while recruitment short listing and interviews were taking place.”

Another important addition to the Network Projects Engineering area is that of community liaison. “We are becoming proactive in our approach to designs, and community liaison will often assess designs on high risk projects and determine if mitigations for community issues might be needed.

“We need to produce a schedule of programs that fulﬁ l network capacity and network security requirements including our maintenance program to renew older assets.

“The goal is to prepare a schedule that will meet our requirements months in advance. Last year we were able to program four months in advance – our ultimate goal is to be able to program six to seven months in advance of network requirement dates.

“We found three ways to address the shortfall and to put us on track for next year: increased Project Management staffi ng, improved recruitment and value proposition strategies, and implementation of the POW Improvement Program which will fi ne tune the delivery of projects. I am confi dent these strategies will improve our output in the coming years.”

22 ENERGEX Annual Report 2008-2009 NETWORK Highlights A growing network • Development of a $8.4 billion fi ve year Network Last year we invested more than $1.1 billion to build and Management Plan maintain the electricity network, with the ultimate aim of • Delivery of a $453 million Summer Preparedness Plan providing a safe and reliable electricity supply to South • For the fi rst time in our history 30 per cent of our East Queenslanders. network is underground $810.4 million was invested in the network system Capital • Invested $1.1 billion in building and maintaining our Program, resulting in signifi cant network improvements network. and increased capacity throughout the region. During the At ENERGEX, our business is about providing energy year we: services to support people in their daily lives as well as • commissioned six new zone substations and upgraded helping businesses and industries to build and expand. capacity at 19 zone substations, resulting in a 605 As a customer-centric organisation we are committed to MV.A net increase in capacity developing infrastructure that supports our customers’ • constructed or augmented 16 x 33,000 volt powerlines lifestyle aspirations and partnering with the community and 176 x 11,000 volt powerlines to improve reliability to build sustainable economic growth in South East • installed or replaced 487 new distribution transformers Queensland. via the maximum demand program We own and operate one of the fastest growing electricity • replaced 361 ring main units (11,000 volt) to improve networks in Australia, providing supply to a population of safety and network reliability. 2.8 million, including 1.16 million residences. We manage electricity assets valued at $7.1 billion and have more Similarly, $314 million was invested in the network than 3,700 employees with a commitment to providing a maintenance program to improve reliability. safe and reliable electricity network that is economically, Last year we: socially and environmentally sustainable. • trimmed vegetation along 14,387 kilometres of electricity network to maintain established clearance zones • inspected 129,409 poles to ensure ongoing serviceability of the network • installed 15,140 spacers on low voltage open mains and replaced 9,978 cross arms to improve safety and reduce interruptions • replaced neutral clamps on 7,564 low voltage services Photo: Last year we spent $3 million every day to build and maintain the electricity network in South East Queensland. to improve safety and reliability.

ENERGEX Annual Report 2008-2009 23 Graph 1 Zone substation capacity MV.A 9,275 10,000 8,670 MV.A 8,155 MV.A 7,307 MV.A 8,000 6,544 MV.A MV.A 6,000

4,000

2,000

0 June June June June June 2005 2006 2007 2008 2009

Table 3 ENERGEX electrical assets

Assets 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Total Overhead and Underground (km) 47,607 48,688 50,044 51,176 52,361

Lines - Length of Overhead (km) Total 35,666 35,897 36,200 36,349 36,490 LV1 14,669 14,702 14,720 14,732 14,736 11 kV 17,344 17,504 17,709 17,843 17,953 33 kV 2,034 2,059 2,091 2,136 2,161 132/110 kV2 1,619 1,632 1,680 1,638 1,640

Cables - Length of Underground (km) Total 11,941 12,791 13,844 14,827 15,871 LV 7,595 8,135 8,592 9,083 9,612 11 kV 3,402 3,666 4,207 4,657 5,099 33 kV 867 905 942 981 1,053 132/110 kV 77 85 103 106 107

Other Equipment (Qty) Bulk Supply Substations 33 34 36 37 37 Zone Substations 195 200 207 213 219 Poles 595,928 596,770 612,638 622,064 630,259 Distribution Transformers 39,572 40,826 42,261 43,420 44,613 Street Lights 251,282 260,605 296,849 306,892 314,008

Customers Residential 1,077,850 1,101,455 1,126,875 1,148,270 1,167,885 Other 111,705 115,005 117,685 110,670 110,315 Total 1,189,555 1,216,460 1,244,560 1,258,940 1,278,200

1 LV overhead line lengths between 2004-2005 and 2007-2008 have been reduced by 173 kilometres from previously reported values, following data validation improvements. 2 The increase in 132/110 kV line length in 2006-2007 over previous reports is due to a data redeﬁ nition.

24 ENERGEX Annual Report 2008-2009 Table 4 Improving our program of works Top 20 Projects During 2008-2009 a Program of Works Improvement Project name Spend Program was initiated to address the increasing ($ million) demand for electricity and strengthen our ability to meet Myrtletown to Nudgee - 110/33kV substation and 30.0 supply requirements in the future through effi cient use 110kV feeder of existing resources. This cross divisional initiative captures several key elements of the POW operations Browns Plains - 120 MV.A 110/33kV transformer and 12.0 including performance alignment, scheduling, design 110kV feeder and estimation, works delivery and data systems and Southport - third 60 MV.A 110/11kV transformer 10.3 processes. When recommendations from the review are Wacol South - 33/11kV substation 10.3 implemented, we will be better placed to deliver increased Currimundi - 132/11kV zone substation 9.4 operational effi ciencies, improve responsiveness to Merrimac - 2 x 30 MV.A transformers 8.9 changing customer requirements and ultimately deliver savings to the business. With full implementation of the Cades County - replace 2 x 30 MV.A 110/11kV 8.3 program, we will more effectively manage work across the transformers with 60 MV.A delivery chain whilst increasing throughput with greater Annerley to Tennyson - replace 33kV cables 7.9 control and visibility to realise optimal network outcomes. Indooroopilly - 2 x 15/25 MV.A transformers and 7.7 uprate substation Amberley - 2 x 25 MV.A transformers and 2 x 33kV 7.7 A reliable network feeders to RAAF Overall, the electricity network continued to perform Beenleigh - uprate 2 x 60 MV.A transformers to 80 6.8 well, particularly when results are normalised to exclude MVA and replace 33kV busbars extreme weather events. Last year we met or exceeded North McLean to Jimboomba - upgrade 33/11kV 6.6 all reliability Minimum Service Standards, as set out in zone substation, 2nd module & 33kV feeder Table 5. Replace Currumbin substation components 5.8 Lockrose - 33/11kV zone substation 5.7 Vegetation management Replace 11kV conductor at various locations 5.5 Caboolture - 33/11kV zone substation 5.5 Our planned vegetation program continued last year with total expenditure of $56.1 million. Trees were trimmed Fortitude Valley - supply to Green Square 4.7 along more than 14,000 kilometres of powerlines to Airport Link Northern Busway - service relocations 4.2 improve network reliability, particularly during severe South Pine to Palmwoods - upgrade communications 4.0 weather events such as storms and strong winds. systems A trial with the Brisbane City Council to combine planned Morayfi eld - replace 1 x 15 MV.A transformer and 3.5 trimming from the electricity network with routine street second module tree pruning, using the one contractor at the same time, Note: Project selection based on total spend. has identifi ed multiple benefi ts for customers and both organisations and will be further explored.

Through the ongoing implementation of our vegetation plan, there will be a continued focus to ensure this vital activity provides a safe and reliable electricity network for Table 5 years to come. Reliability performance 2008-2009 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Minimum Service Actual1 Actual Actual Actual Actual Standard SAIDI (mins) CBD 2.20 4.10 0.00 4.00 3.10 20.00 Urban 121.00 104.00 80.00 84.70 91.20 122.00 Short rural 235.00 306.00 203.00 242.10 228.00 232.00 SAIFI CDB 0.02 0.02 0.00 0.04 0.06 0.33 Urban 1.33 1.41 1.00 1.05 1.05 1.43 Short rural 2.47 3.29 2.33 2.71 2.56 2.56 1 Figures for 2004-2005 have been revised following data validation improvements.

ENERGEX Annual Report 2008-2009 25 Other programs such as the installation of More than 70 We aim for a holistic approach to new photoelectric cells has enabled a balanced per cent of infrastructure development and during approach to vegetation management to be houses, units the year we formalised a decision making applied in sensitive areas by reducing the tool called the Sustainable Assessment amount of clearing required and therefore and apartments Framework (SAF). This tool is based on: providing greater aesthetic value. More than in South East • our corporate objectives 500 kilometres of overhead street light main Queensland now • international sustainability was replaced in 2008-2009 and the program is have at least one • sustainability frameworks planned to continue into 2009-2010. air conditioner • international reporting frameworks (Global Reporting Index) • triple bottom line methodologies A customer focused Our electricity • ENERGEX’s ISO 140001-certifi ed network network endured Environmental Management System. its highest ever The SAF is used to carry out an initial broad Long term planning demand this comparative assessment of possible routes summer with for proposed powerline corridors. This tool Our long term strategic planning is conducted over a 4,593 MW examines the balance of social, environmental and economic issues. It uses a combination of a 25 year horizon utilising demand forecasting and load on 9 up-to-date local and state government planning quantitative and qualitative criteria to compare February 2009 schemes. Our Strategic Network Plan is used each proposed corridor and identifi es the one with to identify and acquire property and easements - an increase of the best balance against all competing criteria. for future major substations and transmission lines 11 per cent on necessary to keep ahead of a rapidly growing 2007-2008 South East Queensland. Underground focus We reached a major milestone during the year, with 30 per cent of our electricity network being underground for the fi rst time Photo: We undertake regular tree trimming programs across our network to achieve our in our company’s history. On an average goal of a safe and reliable electricity supply to South East Queensland. month, between 70 to 90 kilometres of new underground power cable is being installed into the South East Queensland electricity grid.

During 2008-2009, an additional 1,044 kilometres of underground cable was added to the network compared to 141 kilometres of overhead powerline.

There are currently more than 15,800 kilometres of underground electricity cables in South East Queensland, enough that if lined up end to end would stretch from Brisbane to New York. By the end of 2010, our underground network will be long enough to reach from Brisbane to London. For the past ﬁ ve years we have installed approximately six kilometres of underground cable for every one kilometre of overhead powerline.

Summer preparedness

Severe weather events including storms, ﬂ oods, heat and high winds can cause signiﬁ cant damage to any power network. Each year we invest heavily in preparation for severe weather events through the implementation of our Summer Preparedness Plan.

2626 E ENERGEXNNEERRGGEXEX AAnnualnnnnuaual ReportRReeppoortrt 2008-200920088-2009 Last year the plan had four areas of focus: While forecasts for growth in electricity consumption and peak demand have been scaled back as a result • increasing capacity and security of the electricity of current global economic conditions, managing network to meet summer energy demands our customer peak demand remains one of our key • continuing to improve resilience of the network in times challenges. of severe weather • further improving operational response to network As part of our vision for a smarter, more effi cient electricity emergencies network by 2025, last year we continued to investigate • providing timely and accurate communication with demand management opportunities, and requested customers and media during times of network government assistance for the implementation of demand emergencies. management programs across South East Queensland. Last year’s storm season brought some of the most signifi cant weather events seen in South East Queensland International operations for many years. There were 18 major weather events where more than 5,000 customers were affected. ENERGEX New Zealand Branch On 8 August 2008 we were notifi ed that we were not one of the successful bidders in the request for proposal Demand management process with Vector Limited in New Zealand. We had In this changing world, we are becoming increasingly two long-term contracts with Vector Limited and the reliant on energy to power our daily activities. On average, profi tability of our New Zealand operation was dependent each household in South East Queensland now uses upon the continuation of these contracts. As such, this between 50 to 70 per cent more electricity than just 10 notifi cation had a material impact on the viability of years ago. Changing lifestyles and increasing reliance on that branch, and on 29 August 2008 we executed an energy coupled with substantial population growth has agreement to sell our New Zealand branch business sharply increased the demand for electricity in South East assets to Northpower Limited. The sale completion Queensland, particularly during peak times of the day. date was 1 October 2008 and the branch effectively wound down by 31 October 2008. Northpower Limited invited employees of the New Zealand branch to make applications for employment and, under the sale agreement, was required to make offers of employment to no less than 220 employees.

Graph 2 Energy and demand growth % 6060

5050

4040

3030

2020

1010

00 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Energy growth Demand growth This reflects an increase in overall energy This reflects an increase in energy consumption across our network demand at peak times on our network

ENERGEX Annual Report 2008-2009 27 Looking into the future The proposed revenue allows for continued construction of capital projects to meet electricity demand, as well A fi ve year capital works program has been developed as provision for investment in accepted technologies to improve network security, electrical supply quality, to modernise the existing infrastructure to a “smart reliability, and capacity. The program is designed to: network” and to establish capability for effective demand management solutions, including connection of energy • provide for forecast demand growth of about four per from alternative sources, such as solar power. cent compounded over the next fi ve years • improve network security and work towards best The four major drivers for our capital and operating practice utilisation for all substations and reduce the expenditure for the 2010-2015 regulatory control period amount of load at risk are: • improve overall reliability over the next fi ve years • renew older assets to maintain network reliability and • meeting growth improve network security • progressing toward our reliability and security • improve community amenities and the safety of the obligations according to Government Guidelines network by working with local and State Governments • renewing and replacing assets to underground key parts of the network. • addressing the changing operating environment of South East Queensland. Last year, we focused on future sustainability of the South East Queensland network with the preparation of a funding The AER is expected to publish a draft decision towards proposal to the AER for a fi ve year period from 2010-2015. the end of 2009, with a Final Determination with respect to our revenue to be made on or before 1 May 2010. Our AER proposal represents a balanced approach to meeting the needs of customers, managing network risk, and ensuring fi nancial and environmental sustainability into the future.

Photo: Our AER submission aims to ensure we continue to power the lifestyles of our customers into the future.

28 ENERGEX Annual Report 2008-2009 Jacinta Dorahy Senior Customer Service Representative Our Contact Centre is always a hive of activity but never more so than on Sunday 16 November 2008, the day a major storm hit Brisbane’s north west suburbs. Jacinta Dorahy was one of the many Contact Centre staff called in to respond to the wave of customer calls following the storm.

“Our Contact Centre works on a roster system and I was not on standby that weekend, but looking at the clouds and as the storm passed over my balcony I knew that I would be called to give assistance,” Jacinta said.

When Jacinta arrived the Contact Centre was at full capacity and she was assigned the role of ﬂ oor support.

In the following days more than 160 staff from the Contact Centre and the greater ENERGEX business produced extraordinary support to our customers by responding to more than 100,000 calls.

Following a reduction in Contact Centre staff after the sale of the retail business in 2007, we rely on staff from across ENERGEX to help respond to major incidents. This assistance is known as the MATEs program.

“As Floor Support I act as a ‘buddy’ for the MATEs, making sure they have support to answer customer enquiries. The process is streamlined and after a quick run through with a few enquiries most people can manage themselves. Our MATEs only answer customers’ loss of supply enquiries to provide the community with up-to-date information. Our more experienced Contact Centre staff respond to all types of emergency and loss of supply enquiries.”

Wednesday 19 November 2008 saw Jacinta start work at 1am as a second wave of storms caused ﬂ ood damage to the Ipswich and western Brisbane areas and hit some communities for the second time.

“I really did not expect anyone to call at that time, but the teams were kept very busy with customer enquiries. At 4am and 6am we brought more staff in as call volumes increased. Again the Contact Centre was assisted by our ENERGEX MATEs.”

The November storms were the ﬁ rst “live” demonstration of the Contact Centre emergency response functions with the reduced stafﬁ ng levels.

“We frequently carry out simulated exercises to make sure we are prepared for the real thing. During last year’s major events everything seemed to run like clock work: Contact Centre staff were assigned roles, MATEs were called in, and ultimately our customers got the service they needed.”

ENERGEX Annual Report 2008-2009 29 Peter Golik Construction Coordinator

When Peter Golik looked out the front of his house on Sunday 16 November 2008 and saw a tangled mess of powerlines, trees and general debris near the Arana Hills Substation, he knew the storm that had just passed through Brisbane’s north west suburbs had been ferocious. While he spent most of Sunday night clearing damage at his house and assisting neighbours, on Monday he started the challenging task of coordinating ENERGEX repair works in the area.

With more than 650 powerlines (equivalent to 33 kilometres of overhead line) ripped from poles during the storm, the task wasn’t an easy one.

“When we arrived in The Gap, what struck us was the intensity of the damage in that area. Some of our international and newer recruits had not experienced a storm of this intensity and were in awe at the scale of damage.”

Peter was responsible for supervising teams of ENERGEX and external workers to restore power supply as quickly and safely as possible.

“The powerlines in some sections were completely destroyed so we had to isolate, sectionalise and rebuild poles and wires. The constant rain, access issues and trouble with communication systems made the work difﬁ cult,” Peter said.

The restoration work was made possible by the number of different work groups involved. “We had people from different depots across the ENERGEX network, external contractors, Brisbane City Council and Country Energy crews from New South Wales to assist with the restoration.

“The work was quite physical and exhausting and a lot of the crews worked hard to restore the power.

“From my previous experience in other storms of similar intensity, everything is usually ﬂ attened and I was surprised to see some of the network still standing.

“It was a good learning opportunity, especially for the newer recruits. Some had not experienced this before.”

The November 2008 storms showed our summer preparedness plans and maintenance programs were paying dividends for South East Queensland.

30 ENERGEX Annual Report 2008-2009 Severe weather November 2008 While our response was widely regarded as storm stats: a success, restoration efforts were reviewed to determine opportunities for improvement in November 2008 the future.

November 2008 brought with it some of the 90 per cent Outcomes of the review include: most severe storms South East Queensland of customers • construction of a new purpose-built has seen in the past 25 years. It caused had supply response Forward Command Mobile signifi cant damage to parts of our network, restored within Communication Centre affecting more than 166,000 homes and • enhancement of Field Force Automation businesses in our distribution area. 24 hours; 95 per cent within capabilities • earlier notifi cation of impending events to The most severe of the storms, on Sunday 48 hours; and 16 November, caused signifi cant damage enable more crews to be deployed earlier the remainder primarily across numerous suburbs in the • fi ne tuning the MATEs system to call in north west of Brisbane. Our crews and that could be additional Contact Centre staff not on contractors were quick to mobilise, with more connected offi cial standby than 300 fi eld workers providing vital support within 72 hours • formalising links with external agencies for restoration activities. such as Ergon Energy and private electricians to ensure safety issues remain During the week following the storm, there at the top of the agenda were more than 2.2 million hits on our Maximum wind • creating quick reference cards to help website as the community checked on the speeds reached customers arrange for an electrical storm-related power interruptions. up to 176 contractor to make their premises safe before power is reconnected. Three days later another line of storms kilometres per brought fl ooding rains to widespread areas of hour South East Queensland, hitting areas around Ipswich and Brisbane western suburbs especially hard. On Thursday 20 November the region was hit by another series of storms, which included more than 6,000 lightning strikes, large hail, strong winds and heavy rains. Local fl ooding and fallen trees blocked roads and impeded restoration. Almost 63,000 customers were affected and more than 400 jobs were raised to repair the storm damaged network.

Photo: Our ﬁ eld crews worked around the clock to restore power to homes and businesses affected by severe weather events.

ENERGEXENENERERGGEEX AnnualAnAnnunualal ReportRepporort 2008-200920200808-2200009 313 May 2009 May 2009 fl ood We have a range of systems in place to allow stats: a rapid response to most contingencies. In May our customers found themselves When hot weather of at least 37°C is mopping up from the worst fl oods to hit forecast, we have procedures in place that Queensland in 30 years. The region received instigate response planning in advance. The one third of its annual rainfall in 24 hours on Power was procedures are designed to ensure that 20 May 2009 as more than 300 millimetres fell restored to operational staff are mobilised quickly in over some parts of the region, causing fl ash customers in the fi eld and that an appropriate structure fl ooding. just over 48 is in place to manage any emergency. These procedures include management of Gale force winds hit houses and infrastructure hours communication with customers, executive from the Sunshine Coast to the Gold Coast, management and stakeholders. tearing down nearly 200 powerlines and causing widespread power interruptions. In No lost time As part of the response process, our Control total around 75,000 homes and businesses Centre has demand management support injuries were were left without power. Hundreds of our strategies for areas at risk of exceeding staff worked through the night in atrocious recorded for our maximum load. At locations with limited conditions to restore power to the majority of staff network capacity, generators are deployed or homes and businesses by the following day. arrangements are made with suitable large Crews had to rebuild parts of the network from customers that can provide support generation scratch in some areas and fl ooding hindered More than 300 or shed discretionary load during periods progress in others. of high demand. A separate dispatch and millimetres of operating protocol has been developed and A week later, our crews then headed south rain fell over tested for the Control Centre to initiate these to lend a helping hand to New South Wales South East arrangements. electricity network owner Country Energy. A team of 32 of our fi eld workers and Queensland coordinators from the Gold Coast, Stapylton causing fl ash Helping others recover from and Boonah were deployed to work alongside fl ooding Country Energy fi eld workers to repair the severe weather events overhead power network between Byron Bay A Fire and Flood Appeal was held for the fi re and Ballina. and fl ood ravaged communities in Victoria and North Queensland. Staff donated more than $66,000 with ENERGEX matching the Planning amount bringing the total raised to more than To ensure organisational readiness for a $132,000. range of network emergencies, we review and exercise our emergency response procedures on an annual basis. In addition to storm emergencies, the procedures cover responses to major network failures, generation and transmission defi ciencies and unusual events such as extreme hot weather or fi res.

Photo: Our Control Centre is the coordination point for power interruptions that occur across our network.

32 ENERGEXENERGR EX AnnualAnnuaal ReportReepop rtt 2008-20092000088-2020099 Paula Latch Community Liaison Being a good neighbour often means considering the impacts on others. Since 2007, Paula Latch has worked hard to ensure we are a good neighbour in the South East Queensland community.

Paula said much of her work involves working with communities to ﬁ nd win-win solutions.

“Like any service provider, at ENERGEX we don’t want to cause disruptions to our customers, but by the same token we need to construct and maintain our assets to power people’s businesses and lifestyles. My job is largely about establishing relationships with the community to minimise as much as possible the inconvenience these works might create,” Paula said.

The Community Liaison team are the public point of contact through network projects, ensuring continuity of service for residents in close proximity to works, and they often give consideration to the differing needs of residents or businesses in the streets where works take place.

“We communicate with residents and businesses early in the project planning phase to minimise the inconvenience as much as we can.”

The Community Liaison team works hard to show that we are part of the community.

Paula said the team’s role in working closely with stakeholders has evolved recently.

“Community Liaison has been working earlier in the life cycle of projects. We’re now providing input to designers and engineers at concept stage so the community perspective is taken into account in the planning stages of network projects. This means we can resolve issues earlier, which has a ﬂ ow on beneﬁ t for the smoother operation of our construction and maintenance program.”

By becoming involved early, Community Liaison act as a conduit between the community and ENERGEX, helping to facilitate agreement on issues to produce a mutually beneﬁ cial outcome.

ENERGEX Annual Report 2008-2009 33 CUSTOMER AND COMMUNITY Highlights 740 contractors More than 260 staff and contractors received and apprentices a customercare award for their capable, • Formalised Community Consultation attended progressive and caring commitment to Manual, a best practice framework for our customer service and were invited to the consultation customercare annual awards event to celebrate with the ‘best • Improved our customer connections training of the best’ in customercare. process • Entered fi ve year partnership with Queensland Museum Customer satisfaction • Our Contact Centre achieved Major Call Each year we commission an independent Centre of the Year Award. research company to survey customer At ENERGEX we position ourselves as satisfaction. The research assists us to a customer-centric organisation, which understand and improve customer perceptions requires us to understand and respond to of our performance, service delivery and brand our customers and the community whilst value. Graph 3 demonstrates our customer undertaking our work. satisfaction levels over the past three years. While results have dropped slightly this year, satisfaction levels remain very high, particularly Building customercare in summer months when we are very visible within the community. Our customercare program continued to promote and expand our premium customer service brand by delivering improved customer services. This included the Queensland’s best expansion of the customercare training contact centre for our staff and contractors to include In July 2008, our Contact Centre was named apprentices. The aim of the training is to Queensland’s major call centre of the year reduce complaints, increase compliments in the Australian Teleservices Association and fi nd ways to impress our customers (ATA) Awards. Following this achievement, while working in their community. in September 2008 our Contact Centre was awarded one of the top fi ve Contact Centres in Australia. Graph 3 Customer satisfaction During the year we responded to 390,000 100 customer enquiries via telephone, email, letter 90 and fax. We answered almost 80 per cent of 80 70 calls to our General Enquiries number within 20 66 67 65 seconds. In addition, our Contact Centre and 70 59 60 60 63 - top 10% utilities Control Centre received more than 500,000 50 54 - top 33% utilities loss of supply calls and more than 38,000 emergency calls. 40 44 - mean utilities 30 20 10 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 source: Taylor Nelson Sofres (TNS) research company

Photo: Our commitment to customer service delivery has resulted in many accolades for our Contact Centre.

3434 ENERGEXENERGEXEX AnnualAnnn uaual ReportRReepoporrt 2008-20092000 8-8 2000099 Last year, the fi nal handover of customer data to the new A guarantee of good service retailers took place, completing the transition to Full Retail The Electricity Industry Code specifi es Guaranteed Competition for electricity in Queensland. As this occurred, Service Levels (GSLs) that we must provide to customers. the interrelationships and dependency between retail We are required to pay a fi nancial rebate (detailed in customer data and the information required to effectively Table 6) to the customer if the following service standards provide connection services to our customers came into are not met: sharp focus.

• keeping an appointment with a customer In the context of the continued high growth rate of • not connecting or reconnecting electricity on time new subdivisions and population growth in South East • wrongfully disconnecting a customer Queensland, a number of issues in the adequacy, • failing to reconnect hot water supply within one completeness and timeliness of customer work requests business day (unless otherwise agreed) and customer information arose. These diffi culties led • failing to give at least two business days notice of a to delays in the connection of new premises and the planned power interruption provision of some other connection services to our • interruption to electricity of more than 18 hours for customers and the new retailers. This also led to an urban or rural customers, or eight hours for central increase in our GSL claims. business district (CBD) customers We directed signifi cant effort into identifying the • More than 10 interruptions for CBD or urban underlying causes of these new market complexities and customers, or more than 16 interruptions for rural implemented new work practices, updated our information customers in one fi nancial year. systems and improved our customer and retailer Electricity distributors are accountable for the administration communications. Now, more than 99 per cent of all fi eld of the GSL program regardless of whether the error was service operations are completed within the necessary caused by the distributor or an independent retailer. Last code requirements. The majority of those actions outside year a total of 3,843 GSL claims were paid as displayed the code timing are subject to occurrences outside our in Table 6. Customer service related issues generated control, and in most cases are renegotiated with the 3,819 GSL claims and reliability matters initiated the customer to a mutually agreeable target. remaining 24. All claims have been apportioned between the relevant stakeholders with 3,745 attributed to us and 98 to Queensland’s electricity retailers.

Table 6 - GSL Claims Paid by Category and Entity Source

GSL Event Total GSL Claims Paid in ENERGEX Related Retailer Related 2008-2009 2007-2008 2008-2009 2007-2008 2008-2009 2007-2008 2008-2009 Reliability Planned interruption - Business 0 2 0 2 0 0 Planned interruption - Residential 0 21 0 21 0 0 Reliability - interruption duration 1 0 1 0 0 0 Reliability - interruption frequency 0 0 0 0 0 0 Total Reliability 1 23 1 23 0 0

Customer Service New connection 2,005 1,440 2,001 1,414 4 26 Wrongful disconnection 14 167 13 126 1 41 Failure to reconnect 2 172 2 146 0 26 Hot water complaint - failure to attend 0 0 0 0 0 0 Missed scheduled appointment 4 15 4 15 0 0

Total Customer Service 2,025 1,794 2,020 1,701 5 93 GSL Total 2,026 1,817 2,021 1,724 5 93

Note: A signiﬁ cant number of claims paid in 2008-2009 related to events occurring in 2007-2008. Separate columns distinguish the event year to allow comparison. The 2007-2008 GSLs paid do not represent all GSLs that occurred in the 2007-2008 ﬁ nancial year.

ENERGEX Annual Report 2008-2009 35 Electrical contractor stakeholder During the year our public communications continued to increase to complement the expanding program of work. management Distribution of program of work ﬂ yers increased by almost Last year a new Electrical Contractor Stakeholder 30 per cent. Management team was established to build and maintain We also formalised our Community Consultation Manual, a strong working relationship with electrical contractors. which provides a best practice framework for consultation The role of the team is to ensure two way feedback with with the community. This document is provided to key electrical contractors that is timely, useful and consistent. internal stakeholders, and reviewed bi-annually.

One of the primary projects of the team will be the new Electrical Work Request (EWR) Web Portal to address delays with processing new customer Form 2 connections. Community sponsorships The new portal will automatically upload the data directly into We continue to support community groups through our our systems, eliminating the need for any manual handling. $1.6 million community sponsorship program, particularly One of the key functions of the new Web Portal includes in the areas of safety, education, environment and energy the provision of a unique reference number to the electrical effi ciency, and community welfare programs and initiatives. contractor at the time a form is submitted. This reference Major benefi ciaries of our sponsorship program included: number can then be used to track the progress of the request with contractors choosing to receive status updates • Sunshine Coast Helicopter Rescue Service (SCHRS) for individual requests via email and/or SMS. This new • Royal Queensland Show (Ekka) technology will assist in minimising the need to contact us for • Starlight Foundation updates and will also improve time effi ciency. • Ipswich Festival • Queensland Museum (three year partnership) Six electrical contractors were selected to create awareness • SEQ Catchments (three year partnership) of the coming EWR Web Portal. A positive response • Landcare Queensland (three year partnership) to the concept of the EWR was received from all the pilot • Voluntary Marine Rescue Service contractors and the portal is scheduled to be launched to all • Queensland’s Rural Fire Service. South East Queensland electrical contractors in late 2009. A key focus of our sponsorship policy is to ensure grassroots community support, with each of our hubs Customer communication receiving their own sponsorship budget designed to assist local groups and initiatives. Some of these sponsorships We understand that our program of works can impact have included the Sunshine Coast Health Foundation, communities, particularly those residents and businesses St Johns Ambulance and the Ipswich Hospital Foundation. in close proximity to construction. Last year we stepped- up our communication and consultation with customers and stakeholders with three major network projects for the A changing focus Gold Coast, Logan and Moreton Bay council areas. For more than 15 years, we have been a proud supporter of the Sunshine Coast Helicopter Rescue Service (SCHRS) with combined customer and corporate funding of more than $10 million assisting operations since 1994. Last year we made a strategic decision to withdraw as naming rights sponsor of the helicopter rescue service following the sale of our retail business. However we remain a major sponsor of the service and it continues to be our single largest corporate sponsorship.

By removing our naming rights, we now have the opportunity to extend our support to other initiatives focused on building sustainable futures for the community.

A highlight for 2008-2009 was the initiation of a three year partnership with the Queensland Museum, which involved redeveloping the Museum’s Dinosaur Garden, now known as ENERGEX Playasaurus Place, with new exhibits exploring how humans can make smart energy choices to ensure a sustainable future. Photo: Students from Mitchelton State School participate in the inaugural ENERGEX Junior Landcare Activity Day as part of our sponsorship program.

36 ENERGEX Annual Report 2008-2009 Serving our customers and the community into the future

Last year we formalised our customer strategy framework to outline how we could meet our objective of becoming customer-centric and using customer information to provide sustainable energy solutions. The framework acknowledges how our relationship with and the knowledge of our customers has changed since selling our retail business in 2007, especially around key community issues such as climate change and energy pricing. Our customer strategy Customer strategy objectives

We will transform into a customer-centric organisation providing sustainable energy solutions. We will use customer information to improve business decisions.

Customer strategy target outcomes

Promote community, Enhance customer Understand and inﬂ uence Achieve customer service Differentiate services and environment, knowledge regional policies and and delivery standards price offerings available education and safety trends

To ENGAGE our customer To KNOW our customer To ENHANCE our role as To MAINTAIN our service To OFFER customer a customer advocate excellence choice

Stakeholder management and engagement

We will: We will: We will: We will: We will: • continue community • implement our customer • strengthen relationships • improve services and • partner with retailers public safety campaigns strategy with retailers customer interfaces to maximise choice • balance social • develop customer • engage business, • use immediate, granular and value of service sustainability projects segmentation and data local, state and federal intelligence to provide offerings to customers and traditional network tools leaders to inﬂ uence targeted services • contribute customer outcomes • conduct targeted plans, policies and • implement strategies intelligence to network • continue energy customer surveys initiatives to report, monitor tariff formulation efﬁ ciency and peak • proactively respond • anticipate the changing and ensure service • ensure price and service electricity demand to changing customer energy and social obligations are achieved offerings are well education requirements and environment and • ensure corporate received and accepted. • conduct education expectations proactively respond. customer initiatives campaigns on targeted • inform future service inform the long-term initiatives eg. non standards and targets. customer-centric vision. technical solutions.

Photo: Our ﬁ eld crews undertaking power upgrades for the Impressing our customers – a Fernvale case study Fernvale community in August 2008. Fernvale, a small town along the Brisbane Valley Highway, had never seen the likes of it: a cavalcade of 30 ENERGEX vehicles including 20 Elevated Work Platforms (EWPs) converged upon the town on a September morning in 2008 to carry out a major job.

More than 50 of our employees from the Esk, Boonah, Gatton, and Raceview depots joined forces to complete work required to upgrade the power network in Fernvale.

It took 120 man hours of preparation and 450 man hours of work, but through teamwork we successfully upgraded 17 spans of 11,000 volt power lines, replaced six crossarms, relocated ﬁ ve power poles, recovered one transformer, commissioned one transformer and one new estate, and completed various service line and street light alterations. Eight mobile generators kept the power on for businesses in the town while normal supply of electricity was interrupted.

To thank the local community for their patience, we hosted a barbeque breakfast attended by more than 800 members of the public.

“ENERGEX can interrupt the Fernvale power supply anytime!” said an impressed business owner.

ENERGEXEENNERERGEGEX AnnualAnAnnnuuaall ReportReeppoorrt 2008-2009220080 -2-2000 9 3737 Sarah O’Brien Cadet Design Ofﬁ cer Circuitry Going from answering customer billing inquiries to learning engineering mathematics is all part of how we are working for Sarah O’Brien and her career.

Sarah started in our Contact Centre in 2006. Sarah says, “The Contact Centre opened my eyes to what ENERGEX does. It is a great foundation for a career with ENERGEX because it exposes you to the variety of different things we do for our customers.”

Increasingly, Sarah found she was drawn to the network or technically based customer queries. “I found that I enjoyed the challenge and the problem solving required and felt that this was the area within ENERGEX I would like to progress my career.”

We strive to provide our people with leadership and technical skills to further develop their career.

The development and training avenues open to employees include the following:

• on-the-job coaching and training • job rotation and experience programs • staff training and development activities • transfers • acting in positions of higher duties • secondment to special duties • study assistance • attendance at development programs.

Despite enjoying her role in the Contact Centre, Sarah found herself grappling with career development opportunities. At the same time our Resource Development area identiﬁ ed specialist resourcing needs within some parts of the business where functions are niche based (technical positions that do not require a trade but do require a technical aptitude and understanding). Cadetship opportunities were established to best ﬁ ll the needs of these areas, and Sarah soon became one of our 13 cadets.

“I saw the internal advertisement for a non trade based cadetship program and realised this was a perfect ﬁ t for my career development goals,” she said.

Sarah is now a Substation Circuitry Design Cadet and completing the newly created four year cadetship but continues to participate on the Storm MATEs standby roster at our Contact Centre.

“As part of the cadetship, I work four days a week and I am paired with mentors and undertake on-the-job training learning substation designs and concepts. We usually rotate through different mentors or trainers and it’s been great to absorb all their skills and knowledge and ask a million questions.”

Cadets then spend one day a week at TAFE where they complete an Advanced Diploma in Electricity Supply – Power Systems. The cadets will also be placed in ﬁ eld based rotations such as substation services and ﬁ eld testing.

“I love the challenge of learning all about design. Going out on- site would have to be the best part of the cadetship. Being able to see the designs that you work on daily transform into physical form is very exciting,” she said.

38 ENERGEX Annual Report 2008-2009 PEOPLE Highlights 51 employees Creating positive studying their employee relations • Recruited almost 450 new staff Advanced • Signed ENERGEX, SEPL and SPARQ Diplomas on The signing of a new certifi ed agreement Certifi ed Agreement - ENERGEX Union (EUCA) 2008 was a major achievement last structured Collective Agreement (EUCA) 2008 year. • Four per cent improvement on staff programs engagement scores in our annual staff Highlights included an ongoing commitment survey to employment security, increase in wages and allowances, and support for productivity • New leadership capability framework Established implemented. improvement. the Project Although there were signifi cant and lengthy At ENERGEX, our people strategy focuses Management negotiations accompanied by work bans, it was on building a capable, committed workforce Centre of an outstanding achievement that there was no and creating a workplace that our 3,700 Excellence loss of electricity supply to customers during people want to be a part of. Program this period.

A diverse workforce Staff development Our workforce is diverse, providing our Last year we continued to offer a suite of people with a range of opportunities in cadetship, apprentice and graduate programs. positions spanning from technical and These programs assist with developing the trades to offi ce, clerical and management skills and experience needed to keep building positions. and maintaining South East Queensland’s Last year we formalised employment electricity network. conditions, continued to improve programs Cadetships combine study and on the job for staff and leadership development, training. Last year 13 non-trade based and 15 increased staff engagement, improved trade based staff commenced the four year recruitment practises and we commenced cadetship program. a new process to improve workforce planning. 101 apprentices started their qualifi cations as either an electrical fi tter mechanic, linesperson Table 7 or cable jointer. In the same period 42 Staff numbers by employment apprentices graduated and were subsequently category employed. The graduate program is designed to attract Employment Category Employees recent university graduates of Engineering, Business and Accounting. All program Administrative Clerical 714 disciplines include rotations through Apprentices 325 departments applying studies and also learning Electrical Systems Design Advisors 91 about different facets of our business. All Executive Contract 130 participants receive personal development and Other Contract Employees 5 mentoring from our senior employees. Last Paraprofessionals 333 year, 10 staff commenced in the engineering Power Workers 192 program, fi ve in the business program, and two Professional/Managerial 556 in the accounting program. Supervisors 317 System Operators 67 Technical Servicepersons 1,002 Trainees/Cadets 11 Casual 1 TOTAL 3,744

Note: Includes all permanent, part-time, and casual ENERGEX staff as at 30 June 2009.

ENERGEX Annual Report 2008-2009 39 The Project Management Centre of Staff have their say

Excellence Program The 2009 ENERGEX staff survey showed the level of staff To help ensure capital works projects are managed engagement improved by four per cent from the previous effectively we established the Project Management year, increasing from 58 per cent to 62 per cent. This is Centre of Excellence Program, an initiative to improve a statistically signiﬁ cant improvement and places us just Program of Work (POW) project delivery by using a outside the high performance zone (over 65 per cent) as project management framework comprising best practice deﬁ ned by Hewitt Associates, the company conducting the methodology, procedures, processes and policies. survey.

The program has helped us develop conﬁ dent and More than 3,100 staff took the opportunity to be heard capable staff to ensure the reliable delivery of projects to and have their say in the survey. This number of staff scope, time and cost. represents a response rate of 84 per cent, the highest ever achieved. In addition, a project management career pathway and Capability Framework was developed in April 2009. The program aims to develop the skills of project management Communicating with our staff staff and improve operational effectiveness. We use a comprehensive range of activities, communication tools and resources to assist our Building effective leaders employees to perform productively in their jobs and keep up-to-date with what is happening in the company. Building strong and effective leadership across our Last year staff received regular information through the company is paramount to helping achieve our business monthly staff magazine Connections and a daily electronic objectives and meeting our future challenges. bulletin board. Our intranet, which contains over 100,000 ﬁ les, continued to be an important source of information, During the year we introduced a new leadership capability receiving 160,000 ‘hits’ each month. framework to provide greater clarity about what we expect of our leaders, and guidance to both current and aspiring Our leaders came together in Group Manager Forums leaders to help develop and improve these skills. and Leaders Forums several times during the year to hear directly from our CEO and other managers about the A suite of short courses and learning e-bytes to support organisation’s progress and key strategic projects. Our skills development and awareness of the leadership staff also heard directly from the CEO via fortnightly email capabilities was rolled out in March 2009. updates.

Last year almost 80 people participated in the Frontline Leadership Program and almost 550 attended Leadership short courses. Building workforce capacity Last year we recruited almost 450 new staff to our team. People sourcing continues to be a key challenge Recognition for quality trainers particularly in technical areas. Projects such as developing a rolling fi ve year workforce plan, and creating We were recognised for our quality apprenticeship and implementing an ENERGEX employment brand will training at the 2008 Minister’s Award for Excellence for be fi nalised next year. Employers of Australian Apprentices at Parliament House, Canberra. Energy Delivery’s Apprentices Management Based on feedback, we also refi ned our recruitment Group received the Runner’s Up Award for the Brisbane processes with dedicated recruitment specialists to region for their planned approach in supporting Australian manage the whole recruitment process. Benefi ts delivered apprentices in the workplace, the fl exibility they include reducing the amount of time managers spend demonstrated in delivering training, the success they have on recruitment, reducing the time to fi ll vacancy from 43 achieved in implementing Australian Apprenticeships, and to 30 days, and reducing the costs of appointing a new for the excellent quality of training they provide. employee.

Last year our staff spent 167,160 hours training to ensure they maintain and improve their work practices. That represents a 300 per cent increase from 2003-2004 training levels.

40 ENERGEX Annual Report 2008-2009 Kevin Kehl Director Revenue Strategy During Kevin Kehl’s more than 20 years with the electricity supply industry, safety has always been important, but last year it became even more relevant when he attended the Zero Incident Process (ZIP) Program.

ZIP is a process that gives a workplace the genuine opportunity to reach the goal of Zero Incidents. It does this by focusing on the “person” component of the Safety Culture Model. ZIP is not a program about “what” is safe, nor is it instructions on “how” to follow procedures. Instead, ZIP focuses on providing people with information about the “why” of safety and the skills to make safe choices in the workplace and at home.

“Safety and wellbeing underpin every part of your life. ZIP and the strategies it teaches make it more relevant to you as an individual and makes you more responsible and accountable for your own safety,” Kevin said.

With safety being a key corporate value, Kevin believes ZIP allowed the message to refresh people’s commitment to safety and allowed staff to make it applicable to their work and life.

In fact, it was as part of our Corporate HealthCheck program a couple of years ago that Kevin renewed his own commitment to health and ﬁ tness.

Kevin is an active user of our health and wellbeing program, often utilising annual ﬂ u vaccinations and participating in the Energising ENERGEX exercise program.

“Our busy jobs and lifestyles mean that we don’t engage in physical activity as much as we should. With this program you really don’t have an excuse. I often encourage my team to attend the Energising ENERGEX program, because it provides an opportunity to meet other staff including senior leaders in a social forum, all with a common purpose of getting healthier. ”

Kevin found exercise provided a stress release and improved concentration during a year of tight deadlines.

The Energising ENERGEX program also includes community and charity events such as the Cool Night Classic and the Bridge to Brisbane annual run/walk.

“These events are a great way to support charities, and you can participate to the extent that you are able. ENERGEX teams participate in a way that shows the community we are contributing and are a part of the community.”

ENERGEX Annual Report 2008-2009 41 SAFETY

A contemporary process for risk management was Highlights adopted during the year to refl ect the requirements of • A formal Health and Safety Strategic Plan has been AS/NZS4360 and provide a standard approach across set in place for the next fi ve years our company. Processes were also developed to ensure • Development of a Community Safety Plan, which continuity of electricity supply to customers during a emphasises how we work with the community to keep pandemic event. them safe • Implementation of a systematic approach to risk management to ensure that risks are controlled for all Staff commitment to safety activities Last year we continued to use the safety management • Lowest ever lost time injury (LTI) and lost time injury system to ensure we had a systematic approach to frequency rate (LTIFR) on record. meeting our legal requirements. This led to a sustained improvement in occupational health and safety (OHS) At ENERGEX we are committed to putting safety fi rst for performance. our staff and the community. For our staff and contractors who represent us, the ultimate goal is “no injuries”. For the fi rst time in August 2008 we conducted an internal Achieving this means every single person at ENERGEX Safety Culture Survey. The results of the survey indicated returns home safely to their family and friends each day. that employees generally feel they have the equipment For the community, we strive to provide information and an and resources to be able to perform their job safely and understanding of electrical safety to control, reduce and that the systems and procedures in place are up-to-date eliminate risks. and followed by work teams. It has also highlighted opportunities for improvements which are being addressed by the Health and Safety Strategic Plan and Safety Measuring our safety Communications Strategy. performance During 2008-2009 we continued to improve on our Health and Safety Strategic safety performance, with staff commitment to safety and improved work practices leading to the lowest ever LTI Plan and LTIFR on record. There was also a marked decrease Our safety initiatives are linked to the Health and Safety in the severity of injuries. These achievements are an Strategic Plan 2008-2013 which commenced in July 2008. important signal that we are making headway as we We are taking a structured approach to reducing the level continue on our path to no injuries in the workplace. of risk associated with our operational activities. The strategic plan covers four key areas: External accreditation and • high risk activities • moderate risk activities compliance • systems and processes Our Safety Management System retained its accreditation • behavioural safety. to AS/NZS 4801 and the Electrical Safety Offi ce Last year we established 17 projects that addressed the requirements set out in the Electrical Safety Act 2002 four key areas under the strategic plan. (QLD). Furthermore, to ensure that the requirements of the legislation and safety management system are adhered to, a risk based internal auditing process has been established.

Table 8 Workplace key safety indicators Key safety performance indicators 2006-2007 2007-2008 2008-2009 Lost time injury frequency rate (LTIFR) (total number of lost time injuries per million hours 2.70 3.62 2.34 worked during the year) Lost time injury severity rate (LTISR) (days lost per million hours worked in the year) 42.50 139.12 58.20 Compensible claims frequency rate (percentage of full-time employees with accepted 5.70 4.70 5.15 WorkCover claims in the year) Lost time injuries (LTIs) (number of work-related injuries with: deﬁ ned onset, a medical 21.00 25.00 16.00 certiﬁ cate of incapacity, one or more whole days lost and an accepted WorkCover claim, in the year) Days lost due to LTIs 325.00 961.00 398.00

42 ENERGEX Annual Report 2008-2009 Safety communications 98 per cent of Manual tasks our staff believe Data analysis revealed manual tasks as a A key fi nding of the 2008 Safety Culture if there is an Survey was a need for consistent safety major contributor to more than 36 per cent of incident on site communication messaging. Workshops were all injuries across our company. As a result, held with representatives from each business the goal is to a Manual Tasks Discomfort Survey was division to determine the best methods learn from it distributed across the business to ascertain of communication in relation to safety to stop it from the tasks which may be associated with the messaging. Two Safety Consultancy Groups, happening development of musculoskeletal disorders. The results identifi ed 10 high risk tasks consisting of Group Managers and safety again specialists, were established to develop a which were assessed by an ergonomist, safety communications activity plan and assist and recommendations were made to reduce in developing a consistent communications the risk. These have been incorporated into strategy. an action plan, whereby systems and work practices are reviewed to implement the The Management Safety Accountability and recommendations. Obligations Program has been rolled out to raise the awareness of all line management employees across our company of their Improving health and responsibilities under the Workplace Health and Safety Act and Electrical Safety Act 2002. wellbeing It does this by providing an overview of four Last year we continued to assist employees key principles that focus on the protection through our workplace rehabilitation program, of workers’ safety and health. More than which covers both work-related and non-work- 400 line managers have participated in the related injuries and illnesses. program. Through the year, staff were also able to participate in employee wellness initiatives Behavioural safety offered through the Energising ENERGEX program. Initiatives included subsidised A highlight of our safety approach last year exercise classes and sponsorship for was introducing behavioural management into employees taking part in a wide range of our safety management framework. sporting events, and a fl u vaccination program which was used by 757 employees. The Zero Incident Process (ZIP), which commenced in August 2008, is designed to empower people to take control of their personal safety by becoming more effective within the systems and environments in which they work. Last year more than 1,000 staff attended the program, which will be rolled out over the next three years to all staff.

ZIP focuses on providing people with information about the “why” of safety and the skills to make safe choices in the workplace and at home.

Photo: We rolled out our Zero Incident Process (ZIP) Program, a behavioural program to provide all staff with the tools to make safe choices at work and home. ENERGEXENENERERGGEEX AnnualAnAnnnuuaall ReportRepepoorrt 2008-20092020080 -22000 9 4343 In response to the outbreak of Pandemic H1N1 2009 We also developed a community safety framework (swine fl u), we worked closely with Queensland Health, compromising of fi ve key focus areas: Ergon Energy, Powerlink and the Energy Infrastructure Assurance Advisory Group to monitor the situation and 1. Community awareness – education regarding electrical develop standard response plans, including industrial safety relations and leave policies, in preparation for more 2. Business community awareness – promoting safe serious outbreaks. While some staff were affected by the work practices and regulations about electrical works virus, early precautions including communications and 3. A workforce committed to safety – embedding a safety- encouraging hygiene and social distancing measures fi rst culture ensured the spread of the virus was minimal. 4. A safe and reliable electricity network – managing and minimising equipment risks, and analysing and monitoring trends to eliminate and minimise incident Community Safety Plan recurrence 5. Collaboration and partnership – infl uencing key 2008-2009 stakeholders such as recent partnerships with As a member of the South East Queensland community Queensland Fire and Rescue Service and community we developed the ENERGEX Community Safety Plan to groups to consider electrical safety in their activities. ensure community safety issues are continually monitored Our community education program addresses electrical and proactively managed. The key objectives of the plan safety risks and opportunities for everyone, through the are: following education campaigns: • increasing electrical awareness and understanding in • storm safety the community through education • look up and live • continually monitoring community safety issues and • fallen powerlines targeted programs to reduce inherent safety risks • safetree • encouraging the community to regard ENERGEX as • home electrical safety. an expert on electrical safety. The results of last year’s community safety public Copies of the plan were distributed to 1,500 community awareness campaign were excellent, with independent groups, stakeholders, industry and our staff. The plan is research showing campaign awareness of 96.7 per cent. also available on our website. People are more likely to stay away from fallen powerlines (95 per cent compared with 66 per cent in 2008) and tell others to stay away from fallen powerlines (94 per cent compared with 71 per cent in 2008).

Photo: As part of our commitment to safety, staff are supplied with appropriate safety clothes and equipment to be used when carrying out works in the community.

4444 E ENERGEXNNEERRGGEEXX AAnnualnnnnuaual ReportReR poport 2008-2009200008-8 2200099 Russell Ryan Network Procurement Trades Assistant We have long been a recycler of waste products and now use the money raised through the recyling program for environmental partnerships in South East Queensland.

For more than 10 years, Russell Ryan has been involved in the recycling of old ENERGEX assets.

“Our team is responsible for the safe and environmentally friendly recycling or repair of equipment we no longer use. Some of these products include oil in transformers, scrap metal or cable and the recycling of old timber poles. By not just throwing something away, but actively looking at reusing older equipment, we are able to generate a proﬁ t.”

Last year the recycling of metal/cable, oil and timber program raised more than $4.9 million.

During the year we recycled around 3,300 tonnes of metal, 630,000 litres of oil and 14,500 metres of timber.

The hard work performed by Russell and the recycling team allows us to sponsor sustainable projects across South East Queensland, including establishing partnerships with SEQ Catchments and Landcare Queensland.

We have signed an agreement with SEQ Catchments, valued at almost $200,000, to fund sustainable projects across the region for the next three years. More than $25,000 was invested with SEQ Catchments and Gold Coast environmental group, Gecko, to propagate more habitats for an endangered butterﬂ y species. We are also working with SEQ Catchment on tree planting along the North Pine River corridor in the Moreton Bay Regional Council area, helping to increase koala food trees and the creation of a fenced conservation zone for koalas.

In partnership with Landcare Queensland, the ENERGEX Junior Landcare activity program has been established and will see 10 South East Queensland schools participate in revegetation activity days each year.

“Its great to see that what we do goes to a great green cause,” Russell said.

ENERGEX Annual Report 2008-2009 45 ENVIRONMENT

• strategies to minimise the environmental impacts of Highlights the goods and services through improved design or • Continued to plant trees to offset our fl eet emissions manufacturing • Reduced our greenhouse gas emissions by almost • the supplier’s socially responsible practices including 13 per cent compliance with legislative obligations to employees • Implemented the Environmental Offsets Policy • value for money over the whole-of-life of the goods for replacing signifi cant vegetation cleared for and services including end of use management, rather infrastructure programs and offsetting carbon dioxide than just the initial cost. emissions We collaborate proactively with our industry partners and • Initiated development of our Corporate Sustainability our suppliers to develop business management decisions Strategy Framework and carbon management plan. and initiatives that will result in sustainable business At ENERGEX, we promote energy effi ciency and aim to benefi ts to us and the supplier. reduce the environmental impact of our operations. We are also a member of the Sustainable Procurement Last year we continued to improve our environmental Energy Committee, an industry group examining how policies, and actively participated in initiatives to improve sustainable procurement can be better aligned with local environments throughout South East Queensland. corporate strategy.

Our Supplier Awards recognised Fuji Xerox Australia in the inaugural ENERGEX ‘Innovations in Sustainability’ Environmental initiatives Supplier Award. As an organisation, we are proud to Planting to offset emissions partner with Fuji Xerox Australia, a printing supplier who embeds sustainability as a serious part of their business Since joining the Australian Government’s Greenhouse framework, and partners with us to achieve sustainable Challenge in 1996, we have planted around 300,000 outcomes and reduce our carbon footprint. native shrubs and trees to offset our carbon emissions. As part of this program, our fl eet emissions are offset through Greening Australia’s planting program, which currently Supporting embedded renewable offsets about 22,000 tonnes per year of carbon dioxide energy sources equivalent. Greening Australia planted over 27,000 trees in South East Queensland last year on our behalf. We continue to strongly encourage and facilitate the use of small-scale renewable energy sources distributed across the electricity network. Taking a key role in the Sustainable streetlighting working group to establish the Queensland Government Solar Bonus Scheme feed-in tariff, we have developed Last year we worked with South East Queensland councils customer-focused connection agreements to ensure and the State Government to trial the replacement of safe and effi cient connection of small solar photovoltaic mercury vapour streetlights with more energy-effi cient lights. and similar inverter energy systems to residences and The two year trial is the fi rst of its kind regarding streetlighting commercial applications. in Australia and involves the use of sophisticated measuring devices to monitor the performance of the lights. The trial will Graph 4 collect data which will be used to determine purchasing of ENERGEX Photovoltaic Network future energy effi cient streetlights. Agreements

Sustainability in procurement 5,000 4,500 In line with the Queensland State Procurement Policy, 4,000 each year we are working to progressively integrate the 3,500 practice of sustainability into the procurement of goods, 3,000 2,500 services and construction. To achieve this, procurement 2,000 decisions encompass the consideration of goods and annum Number per 1,500 services which have a lower impact on the environment 1,000 and human health than competing goods and services, 500 0 and which are ethically and socially responsible, including: Pre July 2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

• strategies to avoid unnecessary consumption and Note 1: Figures for 2008-2009 are for 10 months ending April 2009. manage demand. Consideration is given to the potential for reduced waste through less packaging, provision of a packaging take-back, and products made from recycled resources

46 ENERGEX Annual Report 2008-2009 Driven by government rebates, we saw the numbers of Fleet small grid-connected renewable energy systems increase ten-fold last year. Around 4,500 new small embedded We are committed to a sustainable fl eet and over the solar photovoltaic installations were connected in the years we have improved the effi ciency of our fl eet through period. More than one million kilowatt-hours of energy was weight distribution management, introducing more diesel returned to the grid, yielding payments to customers of vehicles and harnessing the innovations of heavy vehicle almost $500,000. design. Included in our recent focus has been improving the greenhouse rating of our fl eet to support the delivery of With the growth in the number and types of small grid- reduced carbon emissions. connected renewable generation continuing at an unprecedented rate, we continued to work actively with To continue to support the delivery of our program of work, government, solar photovoltaic installer groups and clean our fl eet consists of: energy organisations to ensure the growth in small-scale Vehicle type 2007-2008 2008-2009 grid-connected renewable energy systems can continue with benefi cial outcomes to all involved. Light vehicles 970 1,009 Special fi tout 406 434 Heavy vehicles (including plant) 674 701 Environmental initiatives at workplaces Case study We continued to implement several water effi ciency Working with councils and community initiatives in accordance with our Level 6 Water Effi ciency We continued to work with communities in South East Management Plan (WEMP), which was approved by the Queensland to revegetate areas after building new Queensland Water Commission including: parts of the electricity network, and contributed to the • installing water wise taps, showers and urinals as environment in other areas. well as staff education programs on methods of water Last year we: conservation, contributing to water reductions across the portfolio • partnered with Maroochy Catchment Centre and • utilising our water monitoring system across 12 of our Sunshine Coast Regional Council to revegetate the major corporate sites, which consume over 90 per cent area around the Peregian substation with native of water across the portfolio, to identify further water indigenous species near this sensitive endangered effi ciencies bushland and ‘of-concern’ wetlands • continued an electricity monitoring system across all • worked with Gold Coast City Council at Currumbin 40 sites and installed sub-meters at 16 of our major to revegetate the Tugun Conservation Park with corporate sites which consume around 92 per cent over 400 native shrubs that were planted after of electricity across the portfolio, to identify further a 33,000 volt underground feeder was installed electricity effi ciencies. through the park • planted more than 2,000 native plants in specifi c areas along the Wulkuraka 110,000 volt easement Last year’s results showed signifi cant water effi ciency with a combination of native bushes reductions of up to 12 per cent across our facilities. • partnered with Noosa Landcare to reinstate We also initiated several energy effi ciency initiatives easement vegetation after maintenance work through our Strategic Energy Management Plan (SEMP) required some clearing. as part of the Queensland Government ClimateSmart strategy. The initiatives are: • purchasing 40 per cent Green Power for 11 of our Working with industry and largest corporate sites government • continuing an electricity monitoring system across 16 of our major corporate sites which consume 95 per Last year we assisted Building Codes Queensland to cent of electricity across the portfolio, to identify further enhance their related Guidelines document to help electricity effi ciencies homeowners and builders improve the total system • ongoing energy effi ciency at our Charlotte Street Head effi ciency of both new and existing air conditioning Offi ce by using economy cycles with fresh air intakes systems. (saving 250 kW/hr per day in winter), and variable speed motors on fans (saving 150 kW/hr per day) and We continue to work with the Department of Environment on cooling towers (saving 80 kW/hr per day). and Resource Management to revise the Memorandums of Understanding for vegetation and koala habitat.

ENERGEX Annual Report 2008-2009 47 Last year we implemented our Environmental Offsets Policy for replacing signiﬁ cant vegetation cleared for Education about energy infrastructure programs. efﬁ ciency

Central to our responsibility to future generations is our As a leading organisation in the electrical industry, we vision to work in partnership with the community towards acknowledge our responsibility to raise awareness in sustainable behavioural change. Moving forward, our customers about the role they can play in reducing community groups will be involved in the implementation their energy consumption. Energy efﬁ ciency campaigns of revegetation and/or offset programs where possible. throughout the year aimed to help reduce greenhouse gas emissions and reduce demand on the electricity network at peak times.

Our environmental A new advertising campaign had excellent results responsibilities and with almost 80 per cent of people participating in an compliance independent survey recalling the advertising. Last year, our Environmental Management System We played a major role in the 2009 Earth Hour campaign. remained certifi ed against the 2004 version of the Our support of the World Wildlife Foundation (WWF), Australian New Zealand Standard Environmental Systems including promoting energy effi ciency messages and - Requirements with Guidance for Use (ISO 14001). Last providing detailed energy consumption data, contributed year, we: to the event’s success, with our customers cutting their power consumption by around eight per cent during Earth • recycled 7,262 cubic metres of recyclable waste Hour. Across our network area customers saved around • decreased potable water consumption by around 195 megawatt hours of electricity, the equivalent of turning 12 per cent when compared with 2007-2008 off more than 300,000 plasma televisions for the hour. • installed water tanks at several of our major facilities for use in wash bays, toilets and general purpose Our Metering Dynamics department also provide commercial hoses customers with energy and utility measurement and information • reduced electricity consumption despite an increase in solutions. These solutions provide our customers with a detailed staff numbers understanding of electricity, gas and water consumption. • committed to purchasing approximately 40 per cent Green Power across our 11 major sites • provided four environmental training courses which New CBD Headquarters – in combination were delivered to 2,139 internal staff current status and 3,166 contractors. Within the corporate induction Construction continues on our new campus-style offi ce program environment issues were presented to 189 building located at the 17 hectare Newstead Riverpark new staff. development which has been designed to a 6 Green Star We have operations in Queensland and Victoria and Rating. Relocation to this innovative building is expected to as such for environmental matters we are principally occur during mid 2010. Rated by the Green Building Council regulated by the following government bodies: of Australia as one of the state’s most environmentally friendly commercial premises, the building will boast cutting • Queensland Department of Environment and Resource edge green technology aimed at slashing carbon emissions. Management • Victorian Environment Protection Authority. Active chilled beam air conditioning technology, waste management systems, automatic water harvesting and See Appendix 2 for a full list of environmental approvals. recycling and electricity producing photovoltaic cells are We also continued the deployment and monitoring of the being employed to reduce waste by up to 55 per cent in Environment Compliance Plan. This plan has identifi ed some areas. An innovative air conditioning system will the environmental risks associated with our operations provide fresh air rates 150 per cent above the Australian and has initiated strategies to control these risks through Standards. Natural light will predominantly be used for site specifi c environmental management plans. This internal illumination, with wall to ceiling windows giving work will continue as plans are developed for individual 80 per cent of staff an outdoor or internal atrium view and premises and risk mitigation strategies are implemented vastly improved lighting. and evaluated. Compared to existing buildings of its size, our six storey, 28,600 square metres headquarters will cut carbon dioxide emissions by more than 2,100 tonnes each year, which is equivalent to removing 520 cars from the road annually.

A rain water tank will provide water to supply toilets and landscape irrigation. This is expected to decrease water usage by 38,000 litres annually.

48 ENERGEX Annual Report 2008-2009 Table 9 ENERGEX’s greenhouse gas emissions summary

Consumption Consumption CO2-e (tonnes) % of total Energy Carbon Footprint Summary Table Emissions Sources (2007-2008) Units emissions SCOPE 1 - DIRECT EMISSIONS 108,537 7.474% Mobile Combustion - Heavy Load Transport Fleet (>4.5t) 3,318 kL 8,941 0.616% Mobile Combustion - ‘On Road’ Transport Fleet 4,013 kL 9,579 0.660% Natural Gas and Landfi ll Gas* - production of electricity and steam 1,669,728 GJ 85,701 5.902% Diesel - production of electricity 965 kL 2,588 0.178% Air conditioner refrigerants 449 kg 822 0.057% SF6 from Switchgear 38 kg 906 0.062% SCOPE 2 - EMISSIONS ASSOCIATED WITH THE USE OF ELECTRICITY 1,292,161 88.986% Electricity used by ENERGEX 17,629,646 kWh 16,043 1.105% Electricity to compress natural gas for Garden City bus fl eet 694,420 kWh 632 0.044% SPARQ Solutions Electricity** 333,388 kWh 303 0.021% Network losses 1,262 GWh 1,148,693 79.106% Street lighting 138 GWh 126,490 8.711% SCOPE 3 - INDIRECT EMISSIONS 51,403 3.540% Employee Air Travel 2,392,576 km 291 0.020% Employee Taxi Travel 139,874 km 39 0.003% SPARQ Solutions Air Travel** 955,259 km 117 0.008% SPARQ Taxi Travel** 85,367 km 24 0.002% Waste 23,700 tonnes 40,290 2.775% Full fuel cycle for stationary and transport fuels 1,976,430 GJ 10,642 0.733% SCOPE 1+2+3 1,452,101 100% REDUCTION MEASURES 25,994 Green Power Purchased 4,388,641 kWh 3,994 Greening Australia Forestation Program 22,000 NET CARBON FOOTPRINT 1,426,107 *According to the National Greenhouse Accountings (NGA) factors 2008, landfi ll biogas that is captured for combustion is carbon neutral, only trace emissions of CH4 and N20 are calculated.

**50 per cent of SPARQ Solutions’ emissions are included as SPARQ Solutions is jointly owned by Ergon Energy.

Our environmental performance We have a long-term management plan to reduce the risk of environmental incidents caused by us or any of our service providers. Managing and reducing our greenhouse emissions is a task we take very seriously and as a result of our commitment, last year there were again no legal proceedings or infringement notices issued against us in this regard.

Last year we measured our carbon footprint and implemented a Carbon Management Plan. The Carbon Footprint Report calculates our carbon dioxide emissions to establish a base line of current environmental performance and guide appropriate targets and strategies for the future.

Our carbon management plan outlines strategies to reduce our carbon emissions. Since 2007-2008 we have reduced our total emissions by 13 per cent.

Our new Environmental Strategy has recently been ratiﬁ ed by the Board and is embedded in the Business Plan.

ENERGEX Annual Report 2008-2009 49 Peter Newland Group Manager Network Information and Customer Strategy Peter Newland and his team are focused on ENERGEX customers, trying to proﬁ le and research consumer patterns and behaviours in order to make informed decisions about how we operate and maintain the South East Queensland electricity network.

“The long term goal for ENERGEX is to be able to provide a network or service that suits customer needs. To do this we need to build a proﬁ le of different regions, different customer types and how they use energy,” he said.

To enable ENERGEX to become the customer- centric organisation it is striving to be, staff like Peter provide valuable insight and research.

“As the Customer Strategy Manager, my team and I develop customer insight models around three key ENERGEX service challenges: reliability, demand and growth.”

1. Reliability – understanding of our customers’ expectations of supply reliability and the impacts on their lifestyle should they lose supply. 2. Demand – analysis of how customers use energy and their load proﬁ les to assist in better planning our network as well as understanding capacity to move or decrease load and to inform our demand management strategies. 3. Growth - be able to forecast how customers, reliability and demand needs will change in the future, as well as conducting a population study on where customers are moving to within our region.

Another aspect of Peter’s role will be leveraging customer insight and knowledge in future network visions including the use of smart grids and smart meters, designing these initiatives with the customer in mind.

“We need to make investment decisions that provide value to customers and are in the long term interest of the people of South East Queensland.” Peter and the Customer Strategy team will continue to build a customer database with the aim that this information and research will assist decision making on network planning and investment decisions, demand management, interruption management and price tipping points.

50 ENERGEX Annual Report 2008-2009 RESEARCH AND DEVELOPMENT Highlights New Government regulation • Around 2,000 customers participated in the second We welcome the introduction of a new electricity year of our Cool Change trial regulation that came into force on 1 July 2009. The • Established joint working group with Ergon Energy to Electricity Amendment Regulation requires us to report develop smart meter pilot and trials our long-term strategy for demand management and use • Delivered our Network Vision Outlook to 2025, of ‘non-network’ solutions, that is, effective alternatives outlining our aims for the network into the future. to building new infrastructure to meet the community’s growing power needs. The evolving needs and choices of our customers are of critical importance to our long term success. As such, signifi cant resources have been put in place to position our Cool Change: Energy Smart Suburbs business for the future, particularly in a time of regulatory - air conditioning load control trial changes and changing community expectations regarding Last year we rolled out the second phase of the Cool energy needs. Change Energy Smart Suburbs air conditioning direct load A number of external infl uences stemming from technology trial. advancements and environmental issues are driving us Cool Change is a voluntary trial that involves ‘cycling’ towards building a smarter, more adaptive and connective of air conditioners – that is, managing the compressor network for the future. These infl uences include the load remotely for short periods of time while the fan introduction of controllable devices on the network, smart continues to circulate – and aims to investigate how this meter technology, the increasing emergence of distributed technology might reduce residential peak demand on the generation and a need to reduce peak demand to optimise network without impacting on customer comfort levels. network utilisation and reduce future infrastructure The second year of the trial received a strong response requirements. from customers in the trial region of selected suburbs in We have developed a Network Vision Outlook to 2025. Brisbane’s northside. Around 2,000 customers are now The vision aims to achieve a future ‘participative’ network participating in the trial, making it the largest trial of its kind which delivers the most commercial outcome for the in Australia. business while meeting increasing customer, community Peak demand for electricity occurs on a few hours of a few and environmental requirements. The drivers for the hot days a year. Graph 5 shows a 20 per cent reduction in network vision are predominantly technology, social values peak use by customers trialling the technology. and environmental sustainability. The trial aims to measure customer response to the technology over a period of three summers.

The Cool Change Energy Smart Suburbs trial is a signiﬁ cant step towards our vision of a smarter, more sustainable network by 2025.

Graph 5 Cool Change electricity savings 8 Cycling air conditioners 7 Electricity demand - 9 Feb 09 (max 36.1c) Electricity demand - 13 Feb 09 (max 23.5c) 6 Peak demand reduction of 20% Predicted demand without cycling 5

0 2:00 AM 6:00 AM12:00 PM 6:00 PM

ENERGEX Annual Report 2008-2009 51 Smart meter trials: participation in the national smart metering program

Smart meters will form a key part of an ‘intelligent’ digital power grid that will help customers manage energy consumption, regulate the two-way ﬂ ow of power and improve fault detection on the network.

Last year we established a joint working group with Ergon Energy to develop an integrated suite of smart meter pilots and trials that will enable an informed decision on the roll out of smart meters in Queensland. These activities are being undertaken in parallel to the National Smart Meter Program.

This technology will ultimately make energy consumption information available in a greater level of detail than has been possible previously to customers and the electricity distributor. This will enable us to monitor and manage power usage at all points on the system, and provide customers with up-to-date information on their energy consumption habits, allowing them to manage their consumption to the times of day when energy is cheaper.

The pilots and trials will include a variety of technologies and communications methods to ensure geographical coverage as well as integration with other smart grid initiatives. The project will enable a detailed assessment of costs and beneﬁ ts of a smart meter rollout for Queensland.

Our customers’ energy needs and choices impact the development of our electricity network.

52 ENERGEX Annual Report 2008-2009 ADDITIONAL CORPORATE REPORTING

Table 10 International travel expenditure

International travel is undertaken for approved business purposes in accordance with the Government Owned Corporations Air Travel Policy. ENERGEX also has a Travel Policy for overseas and domestic travel, consistent with public expectations of accountability. The Travel Policy is approved by the Board.

Summarised below is the international travel expenditure costs incurred by the ENERGEX Group of Companies for 2008- 2009.

REGION Country Purpose No of Expenditure Subtotal visits ($) ($) PACIFIC RIM New Zealand Network servicing contracts business 10 39,175 Training 3 6,265 To recruit skilled people in order to maintain ENERGEX’s 2 4,241 49,681 network Australia Network servicing contracts business 5 9,845 (Brisbane) from Staff and family relocating 5 3,150 New Zealand To attend interviews and trade tests for possible transfer 18 20,960 33,955 from ENERGEX New Zealand AFRICA South Africa To recruit skilled people in order to maintain ENERGEX’s 1 9,310 9,310 network EUROPE Ireland and To recruit skilled people in order to maintain ENERGEX’s 2 33,584 England network France and UK To attend a course and conduct a study tour on latest 1 23,640 57,224 reliability investment planning and analysis techniques CANADA USA UK, Canada To attend conference and visit utilities to review alternative 2 44,116 AND EUROPE and USA business structures and accountabilities

Canada and USA To attend conference and visit utilities for investment 1 20,450 planning and analysis techniques USA To attend conference and visit utilities for investment 2 25,705 90,271 planning and analysis techniques

TOTAL 240,441

Table 11 Corporate entertainment and hospitality

Events over $5,000 Date TOTAL COST ($) ENERGEX Family Fun Day 13 Sept 2008 170,210 ENERGEX Apprentice of the Year Awards function 5 Sept 2008 32,920 ENERGEX Customerccareare Awards function 24 Apr 2009 114,000 Supplier Quality Awards function 19 May 2009 9,797 25 Year Service function 24 June 2009 6,774 TOTAL 333,701 At the request of our shareholding Ministers the Statement of Corporate Intent was modiﬁ ed to include additional information on corporate entertainment and hospitality.

Ministerial directions We received no ministerial directions under relevant legislation in 2008-2009.

ENERGEX Annual Report 2008-2009 53 FINANCIAL HIGHLIGHTS

Over the last two ﬁ nancial years we have transitioned our activities to that of a regulated distributor of electricity following the divestment of our retail and gas businesses, ENERGEX New Zealand and a number of other non-core assets.

Our fi nancial performance last year refl ects for the fi rst time our new look regulated business. Our previous year’s results, shown in the graphs below, incorporate the returns from the retail, gas and other non-core assets.

Last year we delivered a strong net proﬁ t result of $128.5 million. Our performance was above budget expectations and enabled us to declare a dividend to our shareholders of $102.8 million.

Net proﬁ t1 Earnings before interest and tax1

$163.4M $163.3M $388.2M $395.3M $367.6M $354.5M $353.3M $140.8M $128.5M $122.8M $271.4M Net proﬁ t $96.5M of $128.5 million in an increasingly demanding economic environment 2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 restated restated

Following the sale of our retail business in 2007, our revenue is derived from returns on the regulated asset base, in accordance with the regulatory determination governed by the Queensland Competition Authority.

The reduction in revenue last year is reﬂ ective of the lower cash holdings and lower interest rates experienced during the previous year.

The signiﬁ cant investment in growing our network, coupled with the change in revenue streams following the sale of the retail and gas businesses, has had a marginal impact on the return on average total assets with a slight decline from 5.2 per cent to 5.0 per cent.

Total revenue1 Return on average total assets

7.0% $2,546.9M $2,394.9M 6.0%

5.2% 5.0% 5.0% 4.4%

$1,336.2M $1,403.0M $1,261.0M $1,099.8M

2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 restated restated

1 Years preceding 2005-2006 reﬂ ect continuing operations and the retail and gas distribution businesses.

54 ENERGEX Annual Report 2008-2009 Last year we invested a record amount of $871.0 million in capital expenditure, including $810.4 million in developing, extending and refurbishing the network assets across South East Queensland.

Our capital expenditure has been invested to service the increasing electricity demands of a growing population, with a focus on network reliability and increased capacity. Our investment has resulted in total assets now exceeding $8.0 billion.

Total assets Capital expenditure

$8,011.0M $7,683.7M $7,400.5M $871.0M $820.4M $820.4M $6,624.0M $6,624.0M $771.2M $722.3M $5,625.6M $576.6M A record level of capital expenditure was invested in 2008-2009 to support 2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 restated restated a rapidly increasing demand for The large annual increase in our capital expenditure since 2005 has been funded by both equity and a secure debt capital. In recent years the proportion of debt has increased, resulting in an increase in the debt to and reliable debt plus equity ratio and a decrease in the interest cover ratio. supply of We continue to maintain an investment grade credit rating and will seek to do so throughout the next electricity planning horizon.

Debt-to-debt plus equity Interest cover

62.8% 4.2 4.2 59.1% 57.3% 57.3% 53.7% 52.0% 3.5 3.2 3.3 2.8

2009 2008 2007 2006 2006 2005 2009 2008 2007 2006 2006 2005 restated restated

ENERGEX Annual Report 2008-2009 55 FIVE YEAR SUMMARY

As at 30 June 2006 2009 2008 200711 Restated12 2006 2005 Profi t and loss ($M) Total revenue 1,336.2 1,403.0 1,261.0 1,099.8 2,546.9 2,394.9 Cost of sales1 (306.9) (303.6) (255.8) (248.8) (1,511.7) (1,484.1) Employee expenses (208.1) (232.5) (212.6) (175.3) (196.3) (159.8) Depreciation (232.2) (220.6) (200.0) (190.5) (198.2) (152.6) Amortisation (4.5) (20.9) (23.2) (21.0) (21.1) (24.2) Impairment 1.3 (14.2) (9.0) (4.0) (7.2) (0.3) Borrowing costs (212.5) (196.2) (169.1) (129.5) (131.3) (119.4) Other operating expenses (197.6) (215.9) (205.9) (188.8) (244.8) (220.7) Operating profi t before income tax 175.7 199.1 185.4 141.9 236.3 233.9 Income tax equivalent (47.2) (58.3) (62.6) (45.4) (72.9) (70.6) Net profi t 128.5 140.8 122.8 96.5 163.4 163.3 Earnings before interest and tax (EBIT) 388.2 395.3 354.5 271.4 367.6 353.3 Earnings before interest, tax and depreciation adjusted (EBITDA)2 623.6 651.0 586.7 486.9 594.1 530.4 Capitalised interest 12.1 6.6 9.7 10.1 10.1 5.5 Balance sheet ($M) Total assets 8,011.0 7,400.5 7,683.7 6,624.0 6,624.0 5,625.6 Total debt3 3,872.5 3,344.9 3,268.5 2,762.9 2,762.9 2,182.7 Total shareholders’ equity 2,293.1 2,315.1 3,016.0 2,060.1 2,060.1 1,885.5 Capital expenditure ($M) Property, plant and equipment and intangibles 871.0 722.3 771.2 820.4 820.4 576.6 Share information Number of shares on issue at year end 875,532,773.0 875,532,773.0 875,532,773.0 921,000,000.0 921,000,000.0 921,000,000.0 Dividends per share (¢) 11.7 108.2 57.1 13.3 13.3 12.6 Dividends ($M)4 102.8 946.9 500.0 122.6 122.6 115.6 Dividends/net profi t (%) 80.0 672.5 407.2 127.1 75.0 70.8 Ratios Earnings per share (¢) 14.7 16.1 12.8 10.5 17.7 17.7 Weighted average shares on issue 875,532,773.0 875,532,773.0 960,348,120.0 921,000,000.0 921,000,000.0 921,000,000.0 Return on total operating revenue (%)5 9.6 10.0 9.7 8.8 6.4 6.8 Return on average shareholders’ equity (%)6 5.6 5.3 4.8 4.9 7.4 7.7 Debt/equity (%) 168.9 144.5 108.4 134.1 134.1 115.8 Debt/(debt + equity) (%) 62.8 59.1 52.0 57.3 57.3 53.7 Return on average total assets (%)7 5.0 5.2 5.0 4.4 6.0 7.0 Current ratio (%)8 183.4 155.2 655.6 237.4 237.4 140.0 EBITDA interest cover (times)9 2.8 3.2 3.3 3.5 4.2 4.2 Statistical information Maximum demand (MW) 4,499.0 4,142.0 4,289.0 4,131.0 4,131.0 4,008.0 Number of employees at year end10 3,733.0 3,794.0 3,863.0 3,798.0 3,798.0 3,370.0

1 Cost of sales refers to transmission use of system charges and materials and consumables. 2 Adjusted for total depreciation, amortisation and impairment. 3 Debt consists of long-term borrowings and the QTC working capital facility. 4 Dividends shown represent amounts provided for in the year and also include dividends that have been provided and paid in the same year. 5 Net profi t / total revenue. 6 Net profi t / average of opening and closing shareholders’ equity. 7 EBIT / average of opening and closing total assets. 8 Current assets / current liabilities. 9 EBITDA / (borrowing costs + capitalised interest). 10 Full time equivalents. 11 2007 amounts include continuing operations results only. 12 2006 fi gures have been restated to exclude discontinued operations to provide a comparison.

56 ENERGEX Annual Report 2008-2009 APPENDIX 1 Glossary of terms

Australian Energy Market Operator (AEMO): From 1 July National Electricity Market Management Company 2009, AEMO replaces NEMMCO with a broader national focus (NEMMCO): The company which operates and administers the on delivering an array of electricity and gas market, operational, National Electricity Market (NEM) in accordance with the National development and planning functions. These functions incorporate Electricity Rules (NER). As of 1 July 2009, NEMMCO was management of the National Electricity Market (NEM) electricity replaced by Australian Energy Market Operator (AEMO). grid system. Network Management Plan (NMP): The plan is prepared annually Australian Energy Regulator (AER): From 1 July 2010, the to explain how ENERGEX is managing the network to meet AER will be responsible for our economic regulation under the customer and shareholder aspirations. The NMP is a requirement provisions of the National Electricity Rules (NER). of the state government’s Electricity Industry Code (EIC or the Code). Capital Program of Work (Capital POW): Investment in new network infrastructure or improving existing network infrastructure. Operating proﬁ t after tax (OPAT)

Capital Expenditure (CAPEX) Plan: A measure of how Operational Expenditure (OPEX) Plan: A measure of how effectively ENERGEX is completing the program that is identiﬁ ed effectively ENERGEX is completing its maintenance program as in the Network Management Plan. identiﬁ ed within the Network Management Plan.

Customer: A party who consumes services or electricity and has Program of Work (POW): Taking plans for new network a retail contract with a retailer and a connection contract with investments and plans for ongoing network maintenance from the concept stage (design) through to delivery. Ensuring the projects a distributor. A customer can be categorised in the market as are delivered on-time and on-budget by achieving best practice in follows: the project management. Large Customer > 100MWh consumption per annum Small Customer < 100MWh consumption per annum. Queensland Competition Authority (QCA): An independent statutory authority charged with implementing competition policy Demand (side) management: Activities which seek to infl uence and funding approval for electricity companies in Queensland. the patterns of energy consumption, including the amount and Funding approval from 1 July 2010 will be via the AER. rate of energy used, the timing of energy use and the source and location of energy supply. Retailer: The party from which a consumer has contracted to purchase electricity. Distributor: A party who manages an electricity distribution network (e.g. ENERGEX). Regulations defi ne a distribution System Average Interruption Duration Index (SAIDI): The entity as the party who provides customer connection services average duration (in minutes) of the long duration (more than one to a customer at an electrical installation or premise. The term minute) outages. Distributor may also be used interchangeably with the term Network. A Distributor is also known as a ‘Network Service System Average Interruption Frequency Index (SAIFI): The Provider’. average number of long duration (more than one minute) outages experienced by a customer over a period of time. Electricity Industry Code (EIC or the Code): Under the authority of the Electricity Act 2004, the Regulator issued the Statement of Corporate Intent (SCI): ENERGEX’s annual Code to prescribe requirements relating to industry planning, strategic planning document. reporting and service standards. Sectionalising: Restoring power to one section of a feeder Earnings Before Interest and Tax (EBIT) (powerline) at a time after an interruption to isolate the cause of a fault. Guaranteed Service Level (GSL): Defi ned by the Code, distributors and retailers must adhere to stipulations regarding the Smart Meter: A general class of meter which will not only timing of reconnecting and disconnecting supply to the electricity measure kilowatt hours but also ‘quality of supply’ functions. It is network. capable of being read remotely.

Government Owned Corporation (GOC): An entity created by Zero Incident Process (ZIP): ENERGEX’s workplace safety a government to undertake commercial activities on behalf of an awareness program that focuses on the ‘person’ component of owner government. the Safety Culture Model. It gives participants an insight into the way their brain works, their thinking, their attitudes and how this Lost Time Injury (LTI): Instances where permanent staff suffered drives their behaviour. It is designed to empower people to take a physical injury as a result of a safety incident, which resulted in control of their personal safety by becoming more effective within those staff taking time off work. the systems in which they work. Lost Time Injury Frequency Rate (LTIFR): Calculated as the number of lost time occurrences of injury or disease for every one million hours worked over a 12 month progressive period.

Megavolt amperes (MV.A): The product of voltage and current multiplied by one million.

ENERGEX Annual ReportReport 2008-2009 57 APPENDIX 2 Environmental approvals

We hold numerous environmental approvals including: • Development Approval IPCE00332805V11 for ERA 17 - the use of fuel burning equipment (including for • Development Approval IPDE00850408 Blinzinger example, a standby power generator) that is capable Road, Banyo, Queensland of burning (whether alone or in total) 500 kg or more of • Development Approval IPDE00835608 ERA 11(a) Oil fuel an hour, at the Suntown Landfi ll Plant, Gold Coast, storage at Blinzinger Road, Banyo, Queensland Queensland • Development Approval IPDE00850408 ERA 84(b) • Development Approval IPDE00280405B11 and Regulated waste storage operating a facility for Registration Certifi cate ENRE00446305 for ERA 18 for receiving and storing other regulated waste Blinzinger Power Station generating power by consuming fuel at Road, Banyo, Queensland a rated capacity of 10MW or more (b) for any other fuel • Development Approval IPDE00850308 Thornton Bromelton, Queensland Street, Raceview, Queensland • Development Approval IPCE00351606W11 for ERA • Development Approval IPDE00850508 Hinde Street, 17 -the use of fuel burning equipment (including for Southport, Queensland example, a standby power generator) that is capable • Development Approval IPDE00850608 Progress Road, of burning (whether alone or in total) 500 kg or more of Maroochydore, Queensland fuel an hour, at the Stapylton Landfi ll Plant, Stapylton, • Registration Certifi cate ENRE00738108 for ERA Queensland 11(a) Oil storage, ERA 28-Motor vehicle workshop • Registration Certifi cate ENRE00441705 for ERA operating a workshop or mobile workshop and ERA 17 - the use of fuel burning equipment (including for 84(b) Regulated waste storage, with associated example, a standby power generator) that is capable development approvals, Blinzinger Road, Banyo, of burning (whether alone or in total) 500 kg or more of Thornton Street, Raceview, Hinde Street, Southport fuel an hour, Chandler, Queensland. and Progress Road, Maroochydore, Queensland • Development Approval SR0427DA Stapylton, The following environment protection licence is held in Queensland Victoria: • EPA Registration Certifi cate SR2592 for ERA 28 - Motor vehicle workshop operating a workshop or • LICENCE EA 5614: Sunshine Power Station for mobile workshop, Stapylton, Queensland operation of a small generation facility (Victoria). • Registration Certifi cate ENRE0078808 for ERA 28 - Mobile and temporary motor vehicle workshop at various locations

58 ENERGEX Annual ReReportport 2008-2009 ANNUAL FINANCIAL REPORT for the year ended 30 June 2009

Contents Page

Directors’ report ...... 60 Auditor’s independence declaration ...... 63 Income statements ...... 64 Balance sheets ...... 65 Statements of recognised income and expense ...... 66 Cash ﬂ ow statements ...... 67

Notes to and forming part of the fi nancial statements 1 Summary of signifi cant accounting policies ...... 68 2 Profi t from operations ...... 79 3 Income tax ...... 80 4 Discontinued operations and assets held for sale ...... 83 5 Earnings per share (EPS) ...... 83 6 Cash and cash equivalents ...... 84 7 Trade and other receivables ...... 85 8 Inventories ...... 86 9 Other fi nancial assets ...... 86 10 Property, plant and equipment ...... 87 11 Intangible assets ...... 91 12 Other assets ...... 92 13 Trade and other payables ...... 93 14 Long-term borrowings ...... 93 15 Provisions ...... 93 16 Other liabilities ...... 94 17 Contributed equity ...... 95 18 Reserves ...... 95 19 Retained earnings ...... 96 20 Dividends ...... 97 21 Minority interests ...... 97 22 Financial risk management objectives and policies ...... 97 23 Financial instruments ...... 99 24 Commitments for expenditure...... 104 25 Defi ned benefi t obligations ...... 104 26 Investments in associates ...... 107 27 Investment in controlled entities ...... 108 28 Key management personnel ...... 109 29 Related parties ...... 115 30 Contingent assets and liabilities ...... 116 31 Auditors’ remuneration ...... 116 32 Events after the balance sheet date ...... 116

Directors’ declaration ...... 117 Independent auditor’s report ...... 118

ENERGEX Annual Report 2008-2009 59 Directors’ report

The Board of Directors of ENERGEX Review of operations Events after the balance Limited (ENERGEX or the Company sheet date - ABN 40 078 849 055) has the A review of the consolidated entity’s pleasure to submit herewith the annual operations during the fi nancial year Beak Industries Pty Ltd (Beak fi nancial report of the Company and and the results of those operations are Industries), a subsidiary of ENERGEX, the consolidated entity (the Group) for contained in the annual report. executed an asset sale agreement the fi nancial year ended 30 June 2009. (ASA) with a prospective purchaser In order to comply with the provisions in June 2009. As at 30 June 2009, of the Corporations Act 2001, the Changes in state of the agreement was not legally Directors report as follows: affairs binding as a condition precedent to the ASA was outstanding. The ASA In 2008/09 ENERGEX sold its New became legally binding when the fi nal Zealand business to Northpower Directors condition precedent was completed Limited, a distribution entity in the on 24 July 2009. The completion The names of the Directors in offi ce at northern part of New Zealand. The of this asset sale resulted in Beak any time during, or since the end of, business sale agreement was signed Industries’ main operating assets the year are: by ENERGEX on 29 August 2008 and and the legal obligation for the site the completion of the sale occurred on • John Patrick Dempsey – Chairman restoration located at Sunshine Energy 1 October 2008 pursuant to the sale • Peter Maurice Arnison Park, Victoria, being transferred to agreement. For further details, refer to • Mary Stuart Boydell the purchaser. This has resulted in a Note 4.1 of the fi nancial statements. • Mat Darveniza gain on disposal before income tax • John Geldard ENERGEX’s subsidiary, Varnsdorf equivalent of $1.2 million. For further • Ronald William Monaghan Pty Ltd (Varnsdorf), holds contracts details refer to Note 32 of the fi nancial • Kerryn Lee Newton (appointed associated with cogeneration statements. 1 October 2008) activities undertaken with certain ENERGEX has commenced a process Victorian hospitals that expired in The Directors have been in offi ce for the sale of the landfi ll gas assets December 2008. An Extension Deed since the start of the fi nancial year to owned by its subsidiary, Energy Impact was signed by the Victorian Minister the date of this report unless otherwise Pty Ltd, by issuing an expression of for Health and ENERGEX in 2008/09, stated. interest in July 2009 seeking potential agreeing to extend the contracts for a offers. The outcomes of this sale have Please refer to the Board of Directors’ further 18 months until 30 June 2010. not been determined. biographies section of the annual This Deed evidences the agreement report for details regarding Directors’ between the parties to extend Other than those events discussed qualifi cations, experience and special operation of the Energy Services above in changes in state of affairs, no responsibilities. Agreement (ESA) and each of the other matters or circumstances have Hospital Cogeneration Site Leases for arisen since the end of the fi nancial a further period from 1 January 2009 year which signifi cantly affected or Principal activities to 30 June 2010. Under this may signifi cantly affect the operations arrangement, Varnsdorf is required of the Group, the results of those The principal activities of the Group to leave the cogeneration plant in operations or the state of affairs of the during the fi nancial year were the situ at the end of the extended term Group in future fi nancial years. design, construction, operation, (30 June 2010) and sell the facility maintenance and management of the works assets to the relevant hospitals South-East Queensland electricity for $1, thereby removing the obligation Future developments distribution network. for Varnsdorf to restore the sites. During 2008/09 ENERGEX prepared No other signifi cant changes in the its fi rst regulatory proposal for funding Operating results Group’s state of affairs occurred during to the Australian Energy Regulator the fi nancial year. (AER) under the National Electricity The consolidated profi t of the Rules. In compliance with the Group after providing for income tax national cost allocation guidelines, amounted to $128.5 million (2008: ENERGEX published a revised cost $140.8 million). allocation methodology to be applied from 1 July 2010. ENERGEX is also preparing for the introduction of national schemes that will impact future revenue, including the service target performance incentive scheme and the effi ciency benefi t sharing

60 ENERGEX Annual Report 2008-2009 scheme. ENERGEX’s regulatory For further environmental performance proposal for the 2010-15 regulatory information, refer to the ‘Environment’ control period was submitted on section of the annual report. 30 June 2009. A draft determination in relation to future revenue is expected in November 2009, with a fi nal Dividends decision from the AER to be published Dividends paid or declared by the on 30 April 2010. Company since the end of the The Federal Government previous fi nancial year were: announcement that an emissions trading scheme would be implemented Type of Cents per Total amount Franked/ Date of payment in the future may have an impact on shares share $ M unfranked 1 the consolidated entity. The details of Final 2007 dividend – continuing Ordinary 11.22 98.2 Unfranked 31 December 2008 operations profi ts how this scheme will operate and the Final 2008 dividend – continuing Ordinary 12.86 112.6 Unfranked 31 December 20081 fi nancial impact on the consolidated operations profi ts entity cannot be quantifi ed at this time. Final 2009 dividend – operating Ordinary 11.74 102.8 Unfranked Declared and unpaid profi ts Disclosure of other information 1 Refer to Note 20 of the fi nancial statements for details of dividends paid. regarding likely developments in the operations of the consolidated entity in future fi nancial years and the expected Share options position as Directors of the Company results of those operations is likely to and its controlled entities, except result in unreasonable prejudice to the There are no share options in where the liability arises out of conduct consolidated entity. Accordingly, this existence at this time. involving a lack of good faith or liability against which the Company information has not been included in is not permitted by law to exempt or this report. Directors’ shareholdings indemnify the Director in accordance with the Constitution of the Company. At the time of publication, no The deed of indemnity stipulates that, Directors held any benefi cial interest Environmental subject to its terms and the exceptions regulations in the shares of the Company. The above, the Company will meet the shareholding Ministers on behalf of full amount of any such liabilities, The Group’s operations are subject to the Queensland Government hold all including costs and expenses. environmental regulations under both issued shares. Commonwealth and State legislation. INDEMNIFICATION OF DIRECTORS OF THE The Group is committed to achieving Directors’ benefi ts and COMPANY’S CONTROLLED a high standard of environmental interests in contracts ENTITIES performance. The Group’s The Company has agreed to indemnify Since the end of the previous fi nancial environment council focuses on Thomas Bloxsom, Darren Busine, year and up to 30 June 2009, no this area of operating performance Terence Effeney, Susan Kehoe and Director has received or become and governs environmental Peter Weaver, being current Directors entitled to receive a benefi t, other than performance. It is responsible for the of the Company’s controlled entities, those benefi ts disclosed in Note 28 of regular monitoring of environmental and other former Directors of the the fi nancial statements. Company’s controlled entities, for all exposures, review of incident trends, liabilities to another person (other environmental initiatives, endorsement Indemnifi cation of than the Company or a related body of recommendations for environmental corporate) that may arise from their improvement policies, programs and Directors and offi cers position as Directors of the Company’s investments as well as compliance INDEMNIFICATION OF controlled entities, except where the with environmental regulations. DIRECTORS OF THE COMPANY liability arises out of conduct involving a lack of good faith or liability against The Company has agreed to indemnify To enable it to meet its responsibilities which the Company is not permitted John Dempsey, Peter Arnison, Mary the environment council meets by law to exempt or indemnify the Boydell, Mat Darveniza, John Geldard, monthly to receive progress reports on Director. The deed of indemnity Ronald Monaghan and Kerryn approved environmental action plans stipulates that, subject to its terms and Newton, being current Directors and environmental status reports. the exceptions above, the Company of the Company, and other former will meet the full amount of any Based on the results of enquiries Directors of the Company, against such liabilities, including costs and made, the Board is not aware of any all liabilities to another person (other expenses. signifi cant breaches during the period than the Company or a related body covered by this report. corporate) that may arise from their

ENERGEX Annual Report 2008-2009 61 INDEMNIFICATION OF ENERGEX DIRECTORS AND OFFICERS APPOINTED TO EXTERNAL BOARD AND COMMITTEES The Company has agreed to indemnify any Directors or ofﬁ cers who are nominated by the ENERGEX Board to represent the Company on external boards and committees to the extent as follows:

A deed of indemnity has been provided to John Dempsey for his role as an ENERGEX representative Director on the Board of Ceramic Fuel Cells Limited (as he no longer holds this position as the representative Director, the continuing indemnities under the deed will cease on 28 August 2009).

Indemnities provided to former ENERGEX representative Directors continue for a period of seven years following their resignation from that position.

Other offi cers appointed to external boards and committees are indemnifi ed in accordance with the terms of the ENERGEX Directors’ and offi cers’ insurance policy.

INSURANCE PREMIUMS Premiums have been paid in respect of policies of insurance for former and current Directors and ofﬁ cers. Disclosure of the nature of the liability covered by and the premiums paid under these contracts of insurance is prohibited by the terms of the contracts.

Directors’ meetings The numbers of meetings of the Company’s Board of Directors and of each Board Committee held and attended by each Director during the year ended 30 June 2009 were:

Board Committee meetings ENERGEX Limited Audit and Corporate Network and meetings Remuneration compliance development technical Directors Attended Held Attended Held Attended Held Attended Held Attended Held John Dempsey (Chairman) 15 15 6 6 5 5 - - - - Peter Arnison 14 15 6 6 - - 4 4 - - Mary Boydell 15 15 - - 5 5 4 4 9 9 Mat Darveniza 15 15 - - - - 4 4 9 9 John Geldard 15 15 6 6 5 5 - - - - Ronald Monaghan1 13 15 - - 3 3 - - 6 8 Kerryn Newton2 12 12 5 5 - - 2 3 - - 1 Mr Ronald Monaghan was appointed to the Remuneration Committee and to the Corporate Development Committee at the Board meeting held on 28 July 2008. 2 Ms Kerryn Newton was appointed as an ENERGEX Director on 1 October 2008. She was appointed to the Audit and Compliance Committee and the Network and Technical Committee at the Board meeting held on 27 October 2008.

Remuneration of Directors and executives

Refer to Note 28 of the ﬁ nancial statements for details of Directors’ and executives’ remuneration.

Rounding of amounts

The parent entity is a company of the kind speciﬁ ed in Class Order 98/100 dated 10 July 1998, issued by the Australian Securities & Investments Commission (ASIC). In accordance with that class order, amounts in the ﬁ nancial report and Directors’ report have been rounded to the nearest hundred thousand dollars, unless otherwise stated.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 63. This report is made in accordance with a resolution of the Directors.

John Dempsey Chairman 24 August 2009 Brisbane, Queensland

62 ENERGEX Annual Report 2008-2009 Auditor’s independence declaration To the Directors of ENERGEX Limited

This auditor’s independence declaration has been provided pursuant to section 307C of the Corporations Act 2001.

INDEPENDENCE DECLARATION As lead auditor for the audit of ENERGEX Limited for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been - a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit.

G G POOLE FCPA Queensland Audit Ofﬁ ce Auditor-General of Queensland Brisbane

ENERGEX Annual Report 2008-2009 63 Income statements for the year ended 30 June 2009

Consolidated Parent Entity

2009 2008 2009 2008 Note $ M $ M $ M $ M

Revenue from rendering of services 2.1 1,154.0 1,179.8 1,134.5 1,159.9 Revenue from sale of goods 2.1 48.0 56.4 33.1 35.1 Government grant revenue 2.1 33.3 38.8 29.1 38.8 Other revenue 2.1 100.9 128.0 92.8 138.3 Total operating revenue 1,336.2 1,403.0 1,289.5 1,372.1 Materials and consumables (60.3) (73.0) (47.4) (55.4) Transmission use of system charges (246.6) (230.6) (246.7) (230.6) Employee benefi ts expense (208.1) (232.5) (203.0) (218.6) Depreciation, amortisation and impairment expense 2.2 (235.4) (255.7) (235.2) (232.4) Contractors and consultants (144.1) (154.4) (140.1) (142.1) Finance costs 2.2 (212.5) (196.2) (213.5) (197.2) Forgiveness of related party receivable - - - (48.1) Other operating expenses (53.5) (61.5) (46.5) (77.0) Total operating expenses (1,160.5) (1,203.9) (1,132.4) (1,201.4) Profi t before income tax equivalent 175.7 199.1 157.1 170.7 Income tax equivalent 3.1 (47.2) (58.3) (42.5) (60.9) Profi t for the year 128.5 140.8 114.6 109.8 Profi t attributable to minority equity interest - - - - Profi t attributable to members of the parent entity 128.5 140.8 114.6 109.8

The accompanying notes form part of these ﬁ nancial statements.

64 ENERGEX Annual Report 2008-2009 Balance sheets as at 30 June 2009

Consolidated Parent Entity

2009 2008 2009 2008 Note $ M $ M $ M $ M ASSETS Current assets Cash and cash equivalents 6 304.3 359.0 301.7 358.8 Trade and other receivables 7 262.2 235.9 253.3 227.8 Inventories 8 106.5 82.9 105.7 81.2 Derivative fi nancial instruments 23.2 0.3 0.4 0.3 0.4 Assets classifi ed as held for sale 4.2 14.8 - 14.8 - Other current assets 12 29.9 31.5 29.8 31.5 Total current assets 718.0 709.7 705.6 699.7 Non-current assets Trade and other receivables 7 89.3 129.4 89.3 128.0 Other fi nancial assets 9 6.3 14.2 6.4 14.5 Property, plant and equipment 10 7,054.0 6,446.4 7,037.9 6,430.6 Defi ned benefi t fund 25.3 - 6.0 - 6.0 Deferred tax assets 3.4 135.6 80.4 134.2 77.3 Intangible assets 11 7.8 14.4 7.8 14.1 Total non-current assets 7,293.0 6,690.8 7,275.6 6,670.5 TOTAL ASSETS 8,011.0 7,400.5 7,981.2 7,370.2 LIABILITIES Current liabilities Trade and other payables 13 182.6 167.3 178.5 174.3 Current tax payable 3.2 (3.6) (8.9) (3.6) (8.4) Provisions 15 136.8 244.1 133.3 241.3 Derivative fi nancial instruments 23.2 0.3 0.6 0.3 0.6 Other current liabilities 16 75.5 54.3 75.5 55.2 Total current liabilities 391.6 457.4 384.0 463.0 Non-current liabilities Trade and other payables 13 - - 19.8 - Long-term borrowings 14 3,843.1 3,344.9 3,843.1 3,344.9 Defi ned benefi t fund 25.3 73.1 - 73.1 - Deferred tax liabilities 3.5 1,255.4 1,167.0 1,258.2 1,170.8 Provisions 15 151.2 115.1 151.2 106.2 Other non-current liabilities 16 3.5 1.0 3.4 1.0 Total non-current liabilities 5,326.3 4,628.0 5,348.8 4,622.9 TOTAL LIABILITIES 5,717.9 5,085.4 5,732.8 5,085.9 NET ASSETS 2,293.1 2,315.1 2,248.4 2,284.3

EQUITY Contributed equity 17 643.6 643.6 643.6 643.6 Reserves 18 1,194.5 1,220.4 1,194.5 1,220.4 Retained earnings 19 455.0 451.1 410.3 420.3 Parent interest 2,293.1 2,315.1 2,248.4 2,284.3 Minority interest 21 - - - - TOTAL EQUITY 2,293.1 2,315.1 2,248.4 2,284.3

The accompanying notes form part of these ﬁ nancial statements.

ENERGEX Annual Report 2008-2009 65 Statements of recognised income and expense for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M

Gain on revaluation of property, plant and equipment, net of tax 18.1 21.9 175.8 21.9 175.8 Changes in the fair value of cash fl ow hedges, net of tax 18.3 (0.2) 0.2 (0.2) 0.2 Changes in the fair value of available-for-sale investments, net of tax 18.4 (5.5) (14.7) (5.5) (14.7) Exchange differences on translation of foreign operations 18.2 (0.4) (0.3) (0.4) (0.3) Actuarial gains/(losses) on defi ned benefi t plans, net of tax 19 (63.5) (55.7) (63.5) (55.7) Net income recognised directly in equity (47.7) 105.3 (47.7) 105.3 Profi t for the year 19 128.5 140.8 114.6 109.8

Total recognised income and expense for the year 80.8 246.1 66.9 215.1

The accompanying notes form part of these ﬁ nancial statements.

66 ENERGEX Annual Report 2008-2009 Cash ﬂ ow statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M

Cash ﬂ ows from operating activities: Receipts from customers (GST inclusive) 1,282.8 1,272.5 1,263.0 1,284.4 Payments to suppliers and employees (GST inclusive) (699.0) (813.1) (680.1) (831.1) 583.8 459.4 582.9 453.3 Finance costs paid (212.2) (180.2) (213.2) (181.5) Income taxes (paid)/received 9.8 (13.4) 10.3 (12.0) Government grant received 45.0 80.0 45.0 80.0

Net cash provided by/(used in) operating activities 6.2 426.4 345.8 425.0 339.8 Cash fl ows from investing activities: Payment for property, plant and equipment and intangibles (835.6) (690.5) (835.1) (688.5) Payments for capitalised interest (12.1) (6.6) (12.1) (6.6) Loan to related parties - (59.6) - (59.6) Proceeds from sale of property, plant and equipment 13.2 12.6 13.2 12.6 Proceeds from sale of business operation 6.2 5.0 - 5.0 - Interest received 6.2 33.2 60.6 33.1 65.6 Net cash provided by/(used in) investing activities (796.3) (683.5) (795.9) (676.5) Cash fl ows from fi nancing activities: Proceeds from borrowings 498.2 63.7 498.2 64.3 Repayable deposits received/(paid) (1.2) (0.5) (1.2) (0.5) Dividends paid to the Company’s shareholders 20 (210.8) (736.1) (210.8) (736.1) Net cash provided by/(used in) fi nancing activities 286.2 (672.9) 286.2 (672.3) Net increase/(decrease) in cash and cash equivalents (83.7) (1,010.6) (84.7) (1,009.0) Cash and cash equivalents at start of year 359.0 1,369.9 357.4 1,366.7 QTC working capital facility 29.4 - 29.4 - Effect of exchange rate changes on cash and cash equivalents (0.4) (0.3) (0.4) (0.3)

Cash and cash equivalents at end of year 6.1 304.3 359.0 301.7 357.4

The accompanying notes form part of these ﬁ nancial statements.

ENERGEX Annual Report 2008-2009 67 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.1 GENERAL INFORMATION 1.2 STATEMENT OF The accounting policies have been consistently applied, unless otherwise COMPLIANCE ENERGEX Limited (ENERGEX or the stated. Company) is a company domiciled The fi nancial report is a general in Australia. The consolidated Early adoption of standards purpose fi nancial report that has fi nancial report of the Company The Directors have elected under been prepared in accordance with for the year ended 30 June 2009 section 334(5) of the Corporations Australian Accounting Standards, comprises the Company and its Act 2001 to early adopt the following Urgent Issues Group (UIG) subsidiaries (together referred to as Australian Accounting Standards that Interpretations, other authoritative the consolidated entity or the Group) have been issued or amended but pronouncements of the Australian and the consolidated entity’s interest are not yet effective for the annual Accounting Standards Board, the in associates and jointly controlled reporting period ended 30 June 2009: Corporations Act 2001 and the entities. provisions of the Government Owned Corporations Act 1993 (GOC Act). The fi nancial statements were authorised for issue by the Directors The consolidated fi nancial report of the on 24 August 2009. Group and the Company complies with all applicable Australian equivalents to International Financial Reporting Standards (A-IFRS).

Reference Title Issued Summary Application Impact on the Group’s Application date of ﬁ nancial report date for Group standard1 AASB 8 Operating Segments February New standard replacing AASB 114 1 January 2009 Note disclosure of operating segment 1 July 2007 2007 Segment Reporting, which adopts a information is no longer required for management approach to segment the Group as the Group is outside the reporting. application scope of AASB 8. AASB 2007-3 Amendments to Australian Accounting February Amending standard issued as a 1 January 2009 Note disclosure of operating segment 1 July 2007 Standards arising from AASB 8 2007 consequence of AASB 8 Operating information is no longer required for [AASB 5, AASB 6, AASB 102, AASB 107, Segments. the Group as the Group is outside the AASB 119, AASB 127, AASB 134, AASB application scope of AASB 8. 136, AASB 1023 & AASB 1038] AASB 123 Borrowing Costs June 2007 The amendments to AASB 123 1 January 2009 No impact as the Group has previously 1 July 2007 (revised) require that all borrowing costs adopted the option of capitalising associated with a qualifying asset borrowing costs of qualifying assets. must be capitalised. Previous standard allowed either expensing or capitalisation. 1 Applicable to reporting periods beginning on or after the given date unless stated otherwise.

Standards not yet applicable and not early adopted Certain Australian Accounting Standards issued or amended that are not yet effective have not been elected to be early adopted for the year ended 30 June 2009. They are not expected to result in signiﬁ cant accounting policy or disclosure changes and are shown below (those standards that have been assessed to result in no impact or minimum impact are not included in the table):

Reference Title Issued Summary Application Impact on the Group’s Application date of fi nancial report date for Group standard1 AASB 101 Presentation of Financial Statements September This revised standard introduces a 1 January 2009 The amendments are expected to only 1 July 2009 (revised) 2007 statement of comprehensive income. affect the presentation of the Group’s Other revisions include impacts on the fi nancial report and will not have a presentation of items in the statement direct impact on the measurement and of changes in equity, new presentation recognition of amounts under the current requirements for restatements or AASB 101. The Group has not determined reclassifi cations of items in the at this stage whether to present the new fi nancial statements, changes in statement of comprehensive income as a the presentation requirements for single or two statements. dividends and changes to the titles of the fi nancial statements.

68 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Reference Title Issued Summary Application Impact on the Group’s Application date of fi nancial report date for Group standard1 AASB 2007-8 Amendments to Australian Accounting September Amending standard issued as 1 January 2009 The amendments are expected to affect 1 July 2009 Standards arising from AASB 101 2007 a consequence of revisions to only the presentation of the Group’s Presentation of Financial Statements AASB 101 fi nancial report and will not have a Presentation of Financial direct impact on the measurement and Statements. recognition of amounts under the current AASB 101. The Group has not determined at this stage whether to present the new statement of comprehensive income as a single or two statements. AASB 2009-2 Amendments to Australian Accounting April 2009 Amendments to AASB 7 requiring 1 January 2009 Additional disclosure requirements in 1 July 2009 Standards – Improving Disclosures about enhanced disclosures about fair relation to fair value measurements and Financial Instruments value measurements and liquidity liquidity risk in the fi nancial statements [AASB 4, AASB 7, AASB 1023 & AASB risk and consequential editorial for the Group. Overall the impact is not 1038] amendments to AASB 4 Insurance signifi cant as the Group has already made Contracts, AASB 1023 General extensive disclosures about fi nancial Insurance Contracts, and instruments in the fi nancial statements. AASB 1038 Life Insurance Contracts. AASB 2009-5 Further Amendments to Australian May 2009 The amendments to some standards 1 January 2010 Some impact from accounting changes 1 July 2010 Accounting Standards arising from the result in accounting changes for presentation, recognition or Annual Improvements Project for presentation, recognition or measurement purposes when the Group [AASB 5, AASB 8, AASB 101, AASB measurement purposes, while some has expenditures on unrecognised assets, 107, AASB 117, AASB 118, AASB 136 & amendments relate to terminology leases of land and cash fl ow hedges that AASB 139] and editorial changes. result in recognition of a fi nancial asset or a fi nancial liability. Overall the impact is not signifi cant. 1 Applicable to reporting periods beginning on or after the given date unless stated otherwise.

1.3 BASIS OF PREPARATION

Historical cost convention Critical accounting estimates and Regulated revenue The consolidated fi nancial statements judgements Various assumptions are utilised in the have been prepared on the basis of The preparation of consolidated recognition of the Group’s regulated historical cost except the following fi nancial statements requires revenue and associated assets and assets and liabilities, which are stated management to make judgements, obligations. These assumptions are at their fair value: available-for-sale estimates and assumptions that described in Notes 1.6, 1.13, 1.23 and fi nancial assets; fi nancial assets affect the application of policies and 1.26. and liabilities (including derivative reported amounts of assets, liabilities, instruments); and the supply system income and expenses. The estimates Impairment of property, plant and and land and buildings asset classes. and associated assumptions are equipment and intangibles based on historical experience and The Group assesses impairment at Functional and presentation other factors that are considered each reporting date by evaluating currency relevant. Actual results may differ conditions specifi c to the Group that These consolidated fi nancial from these estimates. Estimates and may lead to indicators of impairment statements are presented in Australian underlying assumptions are revised of assets. For the purposes of dollars, which is the Company’s on an ongoing basis. Revisions to assessing impairment, assets are functional currency and the functional accounting estimates are recognised grouped at the lowest levels for which currency of the Group. in the period in which the estimate is there are separately identifi able cash revised and in relevant future periods fl ows which are largely independent affected. of the cash infl ows from other assets or groups of assets (cash-generating The estimates and assumptions that units). In determining the recoverable have a potential signifi cant effect are amount of assets, in the absence of discussed below. quoted market prices, a number of key estimates and assumptions are made and are discussed in Notes 10 and 11.

ENERGEX Annual Report 2008-2009 69 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Supply system asset valuation Subsidiaries Jointly controlled entities Supply system assets are carried Subsidiaries are those entities The Group has a 50% interest in at fair value. In determining the fair controlled by the Company. Control the jointly controlled entity, SPARQ value, in the absence of a binding exists when the Company has the Solutions Pty Ltd. This investment sale agreement or active market for power, directly or indirectly, to govern is accounted for in the fi nancial these assets, fair value is estimated the fi nancial and operating policies of statements using the equity method. using an income based approach. an entity so as to obtain benefi ts from Quest Asset Holdings Pty Ltd, of In assessing fair value on this its activities. which ENERGEX held a 50% interest basis, a number of key estimates in, was deregistered on 24 February and assumptions are made and are The balances and effects of 2009. Refer to Note 26 for further discussed in Note 10. transactions between entities details. are eliminated in preparing the Defi ned benefi t superannuation fund consolidated fi nancial statements. 1.5 FOREIGN CURRENCY obligations Minority interests in the results and TRANSLATION Various actuarial assumptions equity of controlled entities are Foreign currency transactions are are utilised in the calculation shown separately in the consolidated initially translated to Australian of the Group’s defi ned benefi t income statements and balance currency at the rates of exchange superannuation fund obligations. sheets respectively. prevailing at the dates of the These assumptions are described in transactions. Amounts receivable Note 25. Where control of an entity commences or ceases during a and payable in foreign currencies at balance date are converted to Employee entitlements fi nancial year, the profi ts or losses Australian dollars at the rates of The Group recognises a long service are included in the consolidated exchange prevailing at that date. leave liability based on accrued income statements from the date Exchange differences relating to employment benefi ts. The liability control commenced up to the date amounts payable and receivable in recognised in respect of employee control ceased. Investments in foreign currencies are brought to benefi ts is based on various controlled entities are carried in the account as exchange gains or losses assumptions which are described in fi nancial statements at the lower of in the fi nancial year in which the Note 1.22. cost or recoverable amount. exchange rates change.

Global fi nancial crisis Associates The Group reviewed provisioning Associates are those entities over 1.6 REVENUE for impairment and funding, liquidity which the Group has signifi cant Revenue is measured at the fair value and credit risks in light of the global infl uence, but not control over the of the consideration received and fi nancial crisis as part of its balance fi nancial and operating policies. receivable net of the amount of goods sheet management. Refer to Note Investments in associates are and services tax (GST). Revenue is 1.20 for impairment assessment accounted for in the consolidated recognised when the amount can be and Note 22 for strategies on the fi nancial statements using the equity reliably measured and it is probable management of fi nancial risks. method. Under this method, the consolidated entity’s share of the that future economic benefi ts will fl ow post-acquisition profi ts or losses to the entity. 1.4 PRINCIPLES OF of associates is recognised in the CONSOLIDATION consolidated income statements, Revenue is recognised for the major and its share of post-acquisition business activities as follows: The consolidated fi nancial movements in reserves is recognised statements of the Group include the in consolidated reserves. The fi nancial statements of ENERGEX cumulative post-acquisition and all entities in which it had a movements are adjusted against the controlling interest during the year cost of the investment. ended 30 June 2009.

70 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Rendering of services of these services is capped under 1.7 GOODS AND SERVICES schedule 8 of the Electricity Regulation TAX (GST) Regulated revenue 2006 (Qld). Revenue is recognised ENERGEX is subject to regulation when the service is provided. Revenues, expenses and assets under the National Electricity Law are recognised net of the amount of (NEL) and the National Electricity Non-refundable capital GST, except where the amount of Rules (NER) and is currently regulated contributions GST incurred is not recoverable from by the Queensland Competition The Group fi nances part of its capital the Australian Taxation Offi ce (ATO). Authority (QCA) under a revenue works program by way of non- In these circumstances, the GST cap form of regulation. The revenue refundable capital contributions which is recognised as part of the cost of cap is comprised of an allowance for are applied towards the cost of these acquisition of the asset or as part of distribution use of system (DUOS) works. Capital contributions form an item of expense. Receivables and charges and capital contributions. part of the regulated revenue for the payables in the balance sheet are ENERGEX will be subject to economic electricity network. Non-repayable shown inclusive of GST. regulation under the Australian Energy capital contributions, in-kind capital Regulator (AER) effective from contributions and in-cash capital Cash fl ows are presented in the cash 1 July 2010. contributions are initially recognised fl ow statements on a gross basis as unearned revenue in the balance whereby major classes of gross cash Regulated network use of system sheet and subsequently recognised as receipts and gross cash payments (NUOS) prices are determined based revenue from ordinary activities when are disclosed inclusive of GST. The on the allowed revenue cap plus a the associated assets are brought into GST component of cash fl ows arising passthrough of regulated transmission commercial operation. from investing and fi nancing activities use of system (TUOS) charges levied which is recoverable from, or payable by transmission network service Sale of goods to, the taxation authority is classifi ed providers. Revenue from the sale of goods is as operating cash fl ows on the basis recognised when the signifi cant risks that the GST receivable/payable is Regulated revenue is comprised of and rewards of ownership of the operating in nature. actual billed energy consumption, goods have been passed to the buyer, estimated unbilled energy effective control over the goods has 1.8 FINANCE COSTS consumption, capital contributions and been passed to the buyer and the a provision for under- or over-recovery amount can be measured reliably. Borrowings are initially recognised of regulated network prices and other at fair value, net of transaction Revenue from billed recoverable allowances. costs incurred. Borrowings are works subsequently stated at amortised cost Recoverable works represent Any current period under- or over- on an effective interest basis (refer customer requested works and work recovery results in an adjustment Note 1.24). The effective interest on resulting from damage to ENERGEX which may increase or decrease borrowings from Queensland Treasury property. Revenue is recognised when prices in the succeeding periods. Corporation (QTC) is comprised the work has been completed. Where over-recoveries result in an of book rate interest, competitive obligation, they are brought to account neutrality fee (CNF), administration fee Interest revenue as a liability in the period in which and capital market fee. Interest revenue is recognised as it is they are over-recovered. Where there earned. is suffi cient certainty regarding the Finance costs directly attributable recoverability of under-recoveries, they Government grants to the acquisition, construction or are brought to account as an asset When there is reasonable assurance production of qualifying assets that in the period in which they are under- that the Group will comply with all take more than 12 months to prepare recovered. conditions attached to the government for their intended use or sale are grants and those grants are received, added to the cost of those assets, Service charges they are recognised in the balance until such time as the assets are Revenue is received for the provision sheet as unearned revenue. Grants substantially ready for their intended of other electricity related services that compensate the consolidated use or sale. such as additions and alterations entity for expenses incurred are to meters and service connections, recognised as revenue in the income All other fi nance costs are recognised ancillary metering services and statements on a systematic basis as an expense in the period in which temporary supply services. These as the conditions of the grants are they are incurred. services are regulated by the QCA. fulfi lled. Refer to Note 2.1 for further However, the price charged for some details.

ENERGEX Annual Report 2008-2009 71 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

1.9 INCOME TAX directly to equity, in which case the each of the subsidiary entities in the deferred tax is adjusted directly tax-consolidated group have agreed Income tax equivalents against equity. Deferred tax assets to pay or receive a tax equivalent The Group is required to make are recognised to the extent that it is payment to or from the head entity, income tax equivalent payments to probable that future tax profi ts will be based on the current tax liability or the Queensland Government pursuant available against which deductible current tax receivable asset of the to subsection 129(4) of the GOC Act. temporary differences can be utilised. subsidiary entity. Such amounts are These payments are administered refl ected in amounts receivable from by the ATO under the National Tax Deferred tax assets and liabilities or payable to the head company Equivalent Regime (NTER). are offset when there is a legally in the tax-consolidated group. enforceable right to offset deferred ENERGEX has elected the ‘stand- The NTER broadly utilises the tax balances, those balances relate alone taxpayer approach’ under UIG provisions of the Income Tax to the same taxation authority and the Interpretation 1052 in accounting for Assessment Act 1936, the Income Tax intention is to either settle on a net the tax effect balances of reporting Assessment Act 1997 and associated basis or to realise the asset and settle entities within the ENERGEX Group. legislation, as well as rulings and other the liability simultaneously. pronouncements by the ATO, in order 1.10 EARNINGS PER SHARE to determine the tax payable by the The amount of benefi ts brought to Group (refer Note 3.2). The entities account or which may be realised in Basic earnings per share is are not required to maintain a franking the future is based on the assumption determined by dividing profi t after tax account. that no adverse change will occur in attributable to members of the parent income taxation legislation and the entity by the weighted average number Income tax equivalent accounting anticipation that the Group will derive of ordinary shares on issue during the The charge for current income tax suffi cient future assessable income fi nancial year. expense is based on the profi t for the to enable the benefi t to be realised year adjusted for any items that are and comply with the conditions of The weighted average number of non-assessable or non-deductible deductibility imposed by the law. shares on issue (also referred to in relation to the current tax year. It as shares outstanding) during the is calculated using the tax rates that Income tax consolidation fi nancial year is calculated by applying have been enacted or are substantially The Group implemented the tax a time weighting factor to shares enacted at the reporting date. consolidation legislation as of issued or redeemed throughout the 1 December 2002 and is therefore year. Current tax payable is the expected taxed as a single entity from that date. tax payable on the taxable profi t for ENERGEX is the ‘head-entity’ in the 1.11 DIVIDENDS the year, at tax rates applicable to the tax-consolidated group and makes income tax year, less any instalments income tax payments on behalf of A provision is made for the amount of paid. wholly-owned subsidiaries. However, any dividend declared by the Board in accordance with UIG Interpretation on or before the end of the fi nancial Deferred tax assets and liabilities are 1052 Tax Consolidation Accounting, year but not distributed at the reporting calculated by comparing the carrying wholly-owned Australian subsidiaries date. A liability for dividends payable amounts of assets and liabilities in in the tax-consolidated group continue is recognised in the reporting period in the balance sheets with the tax bases to account for their own current and which the dividends are declared for of assets and liabilities determined in deferred tax amounts. These amounts the entire undistributed amount. accordance with the relevant taxation are measured as if the subsidiary legislation. continued to be a stand-alone taxpayer in its own right. 1.12 CASH AND CASH Deferred tax is calculated at the tax EQUIVALENTS rates that are applicable to the period Tax funding agreement Cash and cash equivalents include when the asset is realised or liability is Entities within the ENERGEX tax- cash on hand, cash at bank, call settled. consolidated group existing at deposits and other short-term highly 30 June 2009 have signed a tax liquid investments with original Deferred tax is recognised as funding agreement designed to bind maturities of three months or less. income or an expense in the income all entities within the tax-consolidated Bank overdrafts are shown within statements except where it relates to group. The tax funding agreement items that may be credited/(charged) applies from 1 July 2005. Under the terms of the tax funding agreement,

72 ENERGEX Annual Report 2008-2009 Notes to and forming part of the fi nancial statements for the year ended 30 June 2009 short-term borrowings in current 1.14 FINANCIAL Derivative fi nancial instruments liabilities on the balance sheets and INSTRUMENTS AND A derivative fi nancial instrument is a included as a component of cash and HEDGE ACCOUNTING fi nancial asset (when its fair value is cash equivalents for the purpose of positive) or a fi nancial liability (when the cash fl ow statements. Comparative Initial recognition and its fair value is negative) at fair value information has been restated for measurement through profi t and loss. The Group consistency to include unpresented Financial instruments are initially uses derivative instruments for cheques balances as part of cash at measured at fair value when the hedging purposes only. bank rather than current liabilities. related contractual rights or obligations Refer to Notes 6.1 and 16 for further exist. Subsequent to initial recognition, Hedge accounting details. these instruments are measured as For the purposes of hedge accounting, set out below. hedges are classifi ed as either fair value hedges, cash fl ow hedges or 1.13 TRADE AND OTHER Subsequent measurement RECEIVABLES hedges of a net investment in a foreign Financial assets or fi nancial liabilities operation. The Group currently has a at fair value through profi t and loss Trade and other receivables are cash fl ow hedge relating to a forward are measured at fair value at each recognised at nominal amounts foreign currency exchange contract reporting date subsequent to their due at the time of sale or service (refer Note 23.2). initial recognition. Realised and delivery. Trade receivables are due unrealised gains and losses arising for settlement within 10 to 30 days At inception of a hedge relationship, from changes in the fair value of of the customer being billed. Other the Group formally designates and these assets are included in the profi t receivables are due in accordance documents the hedge relationship or loss when incurred unless hedge with their contractual terms. to which the Group decides to apply accounting is applied. hedge accounting and the risk Collectibility of trade receivables is management objective and strategy Loans and receivables are stated at reviewed on an ongoing basis. A for undertaking the hedge. The amortised cost subsequent to their provision for impairment of receivables documentation includes identifi cation initial recognition using the effective is raised when the collection of the of the hedging instrument, the hedged interest method less provision for full amount of the debt is no longer item or transaction, the nature of the impairment. The effective interest rate probable. Bad debts are written off risk being hedged and how the Group is the rate that discounts estimated when identifi ed. An assessment of will assess the hedging instrument’s future cash fl ows over the life of the the provision is outlined in Note 7. effectiveness in offsetting the exposure asset. Movements in the provision are to changes in the hedged item’s recognised in the income statement. cash fl ows attributable to the hedged Available-for-sale fi nancial assets risk. Such hedges are expected Regulated revenue under- are measured at fair value at to be highly effective in achieving recoveries each reporting time subsequent to offsetting changes in cash fl ows and A separate current asset is recognised their initial recognition. Fair value are assessed on an ongoing basis for the net balance of regulated movements are recognised in a to determine that they have actually revenue under-recoveries to be reserve account and are transferred been highly effective throughout the released over the next 12 months to the income statement upon sale fi nancial reporting periods for which where the net balance is an asset. A or derecognition, where the fi nancial they were designated. separate non-current asset is provided asset is not held for trading purposes. for any current year under-recovery of regulated revenue on the basis Other non-derivative fi nancial liabilities that there is suffi cient certainty over are recognised at amortised cost its recoverability in future years but subsequent to their initial recognition, the timing of the release is yet to comprising original debt less principal be approved by the regulator (refer payments and amortisation. Note 7).

ENERGEX Annual Report 2008-2009 73 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

The effective portion of the gain or 1.16 OTHER FINANCIAL Other property, plant and equipment loss on the hedging instrument is ASSETS and work in progress are carried at recognised in a hedge reserve in cost. The carrying amounts for plant equity, while the ineffective portion Interests in listed and unlisted and equipment at cost should not is recognised directly in the income securities, other than controlled materially differ from their fair value. statement. Amounts taken to a hedge entities in the consolidated accounts, reserve in equity are transferred are classed as available-for-sale Acquisition of assets to the income statement when the fi nancial assets where the interests All assets acquired, other than hedged transaction affects the income are not held for trading purposes. Fair goodwill, are recorded at their cost statement, such as when hedged value movements are recognised in a of acquisition plus incidental costs income or expenses are recognised reserve account and are transferred directly attributable to the acquisition. or when a forecast sale or purchase to the income statement upon sale or occurs. The gain or loss relating to the derecognition (refer Note 1.14). Asset recognition threshold effective portion of cash fl ow hedges Individual items with a purchase price is recognised in the income statement 1.17 PROPERTY, PLANT AND of $1,000 or greater are recorded in within cost of sales. EQUIPMENT the fi nancial statements as property, plant and equipment. Items between Hedge accounting is discontinued Each class of property, plant and $100 and $999 in value which have when the hedging instrument expires, equipment is carried at fair value a life greater than 12 months are is sold, terminated, exercised, or no or cost, less where applicable, recorded as pooled assets. All other longer qualifi es for hedge accounting. any accumulated depreciation and items are expensed. At that time, any cumulative gain or impairment losses. Fair value is loss deferred in equity at that time defi ned as the amount for which an Non-current assets constructed by the Group remains in equity and is recognised asset could be exchanged between The cost of non-current assets in the income statement when the knowledgeable, willing parties in an constructed by the Group includes forecast transaction is ultimately arm’s length transaction. the cost of materials, direct labour, realised. When a forecast transaction other costs directly attributable to is no longer expected to occur, the Supply system assets are carried the assets and where appropriate, cumulative gain or loss that was at fair value using an income based borrowing costs. deferred in equity is recognised approach. Valuations are undertaken immediately in the income statement. annually to ensure that the carrying Repairs and maintenance value of the asset does not differ Items of property, plant and Embedded derivatives materially from that which would be equipment are maintained on a Derivatives embedded in other determined using fair value at the regular basis. The costs of such fi nancial instruments or other host reporting date. maintenance are expensed as contracts are treated as separate incurred. Where the costs extend the derivatives when their risks and Commercial land and building assets useful life of the asset or upgrade the characteristics are not closely related are carried at fair value. Fair value for asset beyond its originally designed to those of the host contracts and the land and buildings is determined by function or capacity, such costs are host contracts are not measured at reference to market based evidence capitalised. fair value, with changes in fair value and are valued having regard to their recognised in profi t or loss. highest and best use. Valuations Gains and losses on disposal are obtained every three to fi ve A gain or loss on disposal is All embedded derivatives held by years dependent on changes in recognised in the income statement the Group as at 30 June 2009 were the commercial property market in and is the difference between the considered to be closely related. South-East Queensland to ensure net sale proceeds and the carrying that the carrying amount of the asset amount of the asset at the time of at the reporting date does not differ 1.15 INVENTORIES disposal. materially from the fair value. Inventories are not for resale, but are used in maintenance and construction of electricity supply system assets and are measured at the lower of cost and net realisable value.

74 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Depreciation Revaluation increments, net of tax, are 1.19 INTANGIBLE ASSETS Depreciation is calculated on a recognised in the asset revaluation straight-line basis by reference to the reserve, except for amounts reversing Goodwill estimated useful life of each item of a decrement previously recognised Goodwill represents the amount property, plant and equipment within as an expense, which are recognised by which the cost of acquisition the same asset class. Depreciation in the income statement. Revaluation exceeds the fair value attributed is provided for from the time units decrements are only offset against to the net assets at the date of of property, plant and equipment revaluation increments applying to the acquisition. Goodwill on acquisition of commence operation. Estimates of particular asset class, and any excess subsidiaries is included in intangible remaining useful lives of property, is recognised as an expense. assets. Goodwill on acquisition of plant and equipment are reviewed associates is included in investment in associates. Goodwill is tested annually. When changes are Where an asset is sold, dismantled or annually for impairment and carried made, adjustments are refl ected scrapped, any remaining revaluation at cost less accumulated impairment prospectively in current and future amount held in the asset revaluation losses (refer Note 1.20). Gains and periods only. reserve is transferred directly to losses on the disposal of an entity retained earnings. The electricity supply system is include the carrying amount of treated as a complex asset. A goodwill relating to the entity sold. complex asset is a physical asset 1.18 NON-CURRENT ASSETS capable of disaggregation into HELD FOR SALE AND Contractual rights identifi able components that are DISPOSAL GROUPS Contractual rights represent the subject to regular replacement. Group’s right to future economic These components are assigned Non-current assets and disposal benefi ts and are initially recorded at useful lives distinct from the asset groups classifi ed as held for sale are net realisable value using discounted to which they relate and are measured at the lower of carrying cash fl ow analysis undertaken at the depreciated accordingly. amount and fair value less costs to time of purchase. Contractual rights sell. are amortised on a straight-line basis The estimated useful lives used for over the life of the contract. each class of depreciable assets Non-current assets and disposal Computer software are: groups are classifi ed as held for sale if their carrying amount will be The cost of internally generated Supply system 12 – 70 years recovered through a sale transaction computer software includes the cost Buildings 40 years rather than through continuing use. of all materials and direct labour Other property, plant This condition is regarded as being used during development of the and equipment 1.5 – 35 years met only when the sale is highly software and other costs that are Dismantling, removal and probable, the asset or disposal group directly attributable to the asset. rehabilitation costs is available for immediate sale in Capitalisation commences from the The costs associated with future its present condition and the sale is point of Board approval and ceases obligations to dismantle, remove and expected to be completed within one when the software is available for rehabilitate the site upon which an year from the date of classifi cation. use. Other computer software is asset owned by the entity is located carried at cost. are recognised as part of the initial Non-current assets classifi ed as held cost of the asset and depreciated for sale and the assets/liabilities of a Research and development over the asset’s useful life. disposal group classifi ed as held for Expenditure during the research sale are presented separately from phase of a project is recognised Asset revaluation reserve other assets/liabilities in the balance as an expense when incurred. If an item of property, plant and sheet and comparatives are not Development costs are capitalised equipment is revalued, the entire restated. only when technical feasibility studies class to which that asset belongs is identify that the project will deliver revalued on a consistent basis. The future economic benefi ts and these electricity supply system is treated benefi ts can be measured reliably. as a complex asset for the purposes of revaluation increments and Development costs have a fi nite decrements. life and are amortised on a straight- line basis over the useful life of the project.

ENERGEX Annual Report 2008-2009 75 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Amortisation Fair value less costs to sell is best 1.21 TRADE AND OTHER Intangible assets are amortised on a determined by reference to a price in PAYABLES straight-line basis over the estimated a binding sales agreement. However, useful lives of intangible assets. where there is no binding sales Trade and other payables represent Goodwill is not amortised but is agreement and the asset is traded liabilities for goods and services assessed for impairment on an annual in an active market, fair value is the provided to the Group prior to the end basis. asset’s market price. Where neither of the fi nancial year and for which of these valuations exists, then the payment has not been made. Trade The estimated useful lives for net selling price is based on the best and other payables are recognised intangible assets with defi nite lives are information available to refl ect the when the Group has a legal or as follows: amount that an enterprise could obtain constructive obligation to pay. Trade Computer software 2.5 – 7 years in an arm’s length transaction. and other payables are recognised Contractual rights 1 – 9 years at cost, which approximates their fair Value-in-use is the present value value. Trade payables are unsecured The useful lives of intangible assets of future cash fl ows expected to be and payment is normally made by are reviewed on an annual basis and derived from an asset or CGU. the end of the next month after the are altered if estimates have changed date the supplier’s invoice is received signifi cantly. The residual value is Impairment losses are recognised by ENERGEX. Other payables are assumed to be zero unless there in the income statement, unless the payable in accordance with contractual is a commitment by a third party to asset has previously been revalued, terms. purchase the asset at the end of its in which case the impairment loss is useful life, or there is an active market treated as an adjustment to the asset 1.22 EMPLOYEE BENEFITS for the asset in which its residual value revaluation reserve (refer Note 10.1). can be determined and it is probable A liability is recognised for benefi ts that such a market will exist at the end Impairment testing is performed accruing to employees in respect of of the asset’s useful life. annually for goodwill, irrespective of wages and salaries, annual leave, long whether any indicators of impairment service leave and vesting sick leave Derecognising intangible assets exist. Goodwill is allocated to the when it is probable that settlement will Intangible assets are derecognised CGUs to which it relates and any be required and they are capable of upon disposal or when no future impairment loss is fi rst allocated being measured reliably. economic benefi ts are expected against goodwill before it is allocated to arise from continued use of the against other assets comprising the Liabilities recognised in respect assets. Gains and losses on the CGUs. of employee benefi ts expected to disposal of intangible assets are be settled within 12 months are determined as the difference between Impairment losses, other than in measured at their nominal value using the net disposal proceeds and the respect of goodwill, are reversed remuneration rates expected to apply carrying amount of the asset, and are when there is an indication that the at the time of settlement and include recognised in the income statement. impairment loss may no longer exist related on-costs. and there has been a change in 1.20 IMPAIRMENT the estimate used to determine the Liabilities recognised in respect recoverable amount. of employee benefi ts which are At each reporting date, the Group not expected to be settled within reviews the carrying value of the An impairment loss in respect of 12 months are measured at the assets of its cash-generating units goodwill is not reversed. present value of the estimated future (CGUs) to determine whether there is cash fl ows to be made by the Group any indication of impairment. An impairment loss is reversed in respect of services provided by only to the extent that the asset’s employees up to the reporting date. An impairment loss is recognised carrying amount does not exceed the These cash fl ows are discounted using whenever the carrying amount of carrying amount that would have been the rates attaching to government an asset or a CGU exceeds its determined, net of depreciation or bonds at the reporting date which most recoverable amount. The recoverable amortisation, if no impairment loss had closely match the terms of maturity of amount is the higher of the asset’s fair been recognised. the related liabilities. value less costs to sell and value-in- use.

76 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Superannuation plans Past service cost is recognised Provision for site restoration/ immediately in the income statement rehabilitation Defi ned contribution plans to the extent that the benefi ts are A provision is raised for the obligation Contributions to defi ned contribution already vested, and otherwise to restore sites in the future upon superannuation plans are expensed amortised on a straight-line basis over expiration of the associated contracts when incurred. the average period until the benefi ts or when the obligation arises in the become vested. course of business. The provision Defi ned benefi t plans is determined with reference to an In respect of defi ned benefi t plans, 1.23 PROVISIONS independent estimate of the cost the cost of providing the benefi ts is to restore, repair, dismantle or determined using the projected unit Provisions are recognised when the rehabilitate the site. credit method. Defi ned lump sum Group has a legal or constructive benefi ts based on years of service and present obligation, as a result of past A provision which is not expected to be fi nal average salary are provided in events, for which it is probable that settled within 12 months is discounted Note 25. an outfl ow of economic benefi ts will to present value. The discount rate result and that outfl ow can be reliably used refl ects the major component of Post-employment benefi t obligations measured. Refer to Note 15 for further the underlying cost of site restoration, are discounted using market yields details. being a labour price index. at the reporting date on government bonds with terms to maturity and The amount recognised as a Provision for public liability insurance currency of the bonds that match, as provision is the best estimate of the A non-current provision is raised to closely as possible, to the estimated consideration required to settle the cover the Group’s excess on any term of the benefi t obligations. present obligation at the reporting public liability insurance claim where date, taking into account risks and the cumulative claim value per incident Any defi ned benefi t obligation uncertainties. Where a provision is above $0.05 million and below recognised in the balance sheet is measured using the cash fl ows $1 million. The provision is maintained represents the present value of the estimated to settle the present for up to six years as public liability defi ned benefi t obligation, net of the obligation, the carrying amount is the claims have a statutory limit of fair value of the plan assets. Any present value of those cash fl ows six years for property claims, and asset resulting from this calculation (where present value is materially three years for personal injury claims. is limited to past service costs, plus different to nominal value). the present value of available refunds This provision is based on a biennial independent actuarial valuation, and and reductions in future contributions Where some or all of the present is also internally assessed annually at to the plan. The present value of the obligation is expected to be recovered each reporting date for suffi ciency and defi ned benefi t obligation is based from a third party, the receivable appropriateness. Due to the inability on expected future payments which is recognised as an asset if it is to obtain a reliable estimate of the arise from membership of the fund to virtually certain that the recovery will appropriate split between the current the reporting date, calculated by an be received and the amount can be and non-current portions, the entire independent actuary. measured reliably. Any expensed provision is classifi ed as non-current. amount relating to the provision is Actuarial valuations are carried out presented net of the reimbursement. at each reporting period. Actuarial gains and losses are recognised in Provisions are reviewed on an annual full, directly in retained earnings, in basis and adjustments made where the period in which they occur and appropriate. Where the adjustment are presented in the statement of relates to a change in an estimate recognised income and expense. the amount is taken to the income Consideration is given to future wage statement prospectively. Write-backs and salary levels, experience of against the provision are allowed only employee departures and periods of when the expenditure relates to the service. purpose of the provision.

ENERGEX Annual Report 2008-2009 77 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Provision for regulated revenue 1.25 LEASES 1.27 SHARE CAPITAL over-recoveries A separate non-current provision is Lease payments for operating leases, Ordinary shares recognised for the over-recovery of where substantially all of the risks and Ordinary shares are classifi ed as regulated revenue where there is benefi ts remain with the lessor, are equity. suffi cient certainty over its release charged as expenses in the periods in in future years but the timing of the which they are incurred. Repurchase of share capital release is yet to be approved by the When share capital recognised as regulator or the release will occur in a Lease incentives under operating equity is repurchased, the amount of period beyond 12 months. leases are recognised as a liability and the consideration paid is recognised amortised on a straight-line basis over as a deduction from equity. The non-current provision is escalated the life of the lease term. by the weighted average cost of 1.28 ROUNDING OF capital (WACC) as determined by the The Group is not subject to any AMOUNTS regulator and discounted to refl ect the fi nance lease payment obligations present value of the amount required but is entitled to receive amounts The parent entity has applied the relief to settle the obligation at the reporting under fi nance lease receivable available to it under the Australian date (refer Note 15). arrangements. Securities & Investments Commission (ASIC) Class Order 98/100 dated 1.24 BORROWINGS Finance lease receivables are 10 July 1998 and accordingly, recognised as receivables at the amounts in the fi nancial report and Borrowings are initially recognised present value of minimum lease Directors’ report have been rounded to at fair value, net of transaction costs payments receivable plus the present the nearest hundred thousand dollars, incurred. Borrowings are subsequently value of any unguaranteed residual unless otherwise stated. stated at amortised cost with any expected to accrue to the benefi t of difference between cost and the the Group at the end of the lease term. 1.29 COMPARATIVES redemption amount recognised in the The asset is reduced by the principal income statements over the period of component of lease receipts. The When required by Australian the borrowings on an effective interest interest component is credited to profi t Accounting Standards, comparative basis. from operations. fi gures have been adjusted to conform to changes in presentation for the Principal repayments are not required 1.26 OTHER LIABILITIES current fi nancial year. for the long-term debt funding with QTC under the terms and conditions Regulated revenue over-recoveries of the loans. The working capital A separate current liability is facility is short-term in nature with recognised where the net balance of the outstanding balance paid down regulated revenue over-recoveries to regularly. be released over the next 12 months is a liability. Where the timing of the Forward start loans release is yet to be approved by the The Group enters into forward start regulator or the release will occur in loans with QTC from time to time a period beyond 12 months, a non- whereby it agrees to borrow specifi ed current provision is recognised (refer amounts in the future at a pre- Notes 15 and 16). determined interest rate. The forward start loans are entered into with the objective of minimising interest rate volatility.

It is the Group’s policy to recognise forward start loans at historical cost when the loan is drawn. Net receipts and payments are recognised as an adjustment to interest expense. No forward start loans existed at 30 June 2009.

78 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

2. Proﬁ t from operations

2.1 REVENUE Consolidated Parent Entity

2009 2008 2009 2008 Note $ M $ M $ M $ M Revenue from operations consisted of the following items:

Revenue from rendering of services Network use of systems (NUOS) 1,094.9 1,024.7 1,094.9 1,024.7 Corporate service charges - - 0.1 14.8 Service charges – other parties 59.1 155.1 39.5 120.4 1,154.0 1,179.8 1,134.5 1,159.9 Sale of goods revenue from operating activities Sale of goods 26.1 36.0 11.2 14.7 Billed recoverable works 21.9 20.4 21.9 20.4 48.0 56.4 33.1 35.1 Government grant revenue1 33.3 38.8 29.1 38.8 Other revenue Non-refundable capital contributions 45.5 54.5 45.5 54.5 Interest revenue – related parties - - 0.1 5.2 Interest revenue – other parties 33.3 60.6 33.1 60.5 Sundry revenue 22.1 12.9 14.1 18.1 100.9 128.0 92.8 138.3 Total operating revenue 1,336.2 1,403.0 1,289.5 1,372.1 1 State government grant of $33.3 million (2008: $38.8 million) was recognised as income by the Group during the year. The nature of the grant represents funds for the purposes of meeting legacy expenses incurred by ENERGEX that relate to the sale of the retail businesses during 2006/07 and other expenses associated with approved energy market reform initiatives.

2.2 EXPENSES

Expenses consisted of the following signiﬁ cant items:

Finance costs: Related parties - - 1.0 1.4 Other parties – QTC 206.9 186.6 206.9 186.2 Competitive neutrality fee 17.7 16.2 17.7 16.2 Less: capitalised borrowing costs 10.2 (12.1) (6.6) (12.1) (6.6) Total ﬁ nance costs 212.5 196.2 213.5 197.2 Depreciation, amortisation and impairment expense: Depreciation Supply system assets 10.1 215.8 200.2 215.8 200.2 Buildings 10.1 0.9 1.6 0.9 1.6 Other property, plant and equipment 10.1 38.8 44.1 37.3 37.7 Less: capitalised depreciation expense 10.1 (23.3) (25.3) (23.3) (25.3) Total depreciation expense 232.2 220.6 230.7 214.2 Amortisation Computer software 11.1 4.3 18.3 4.3 14.7 Contractual rights 11.1 0.2 2.6 - 0.2 Total amortisation expense 4.5 20.9 4.3 14.9

ENERGEX Annual Report 2008-2009 79 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M Impairment loss/(reversal) Plant and equipment1 10.1 (1.3) 10.7 - 0.4 Goodwill 11.1 - 0.8 - 0.8 Computer software 11.1 - 1.7 - 1.7 Contractual rights 11.1 - 1.0 - 0.1 Other ﬁ nancial assets 9 - - 0.2 0.3 Total impairment loss/(reversal) (1.3) 14.2 0.2 3.3 Total depreciation, amortisation and impairment 6.2 235.4 255.7 235.2 232.4 1 2008/09 plant and equipment impairment expense includes a reversal of prior year impairment of $4.0 million. Refer to Note 10.1 for further details.

Net expense including: Loss/(gain) on sale of property, plant and equipment 6.2 8.4 7.9 8.4 7.7 Write-down of property, plant and equipment 6.2,10.1 0.5 - 0.5 - Provision for impairment of receivables 6.2 (0.2) 1.2 0.2 1.2 Provision for impairment of related party receivables 6.2 - - (0.5) (13.8) Provision for inventory obsolescence 6.2 1.5 (0.3) 0.7 (0.3) Operating lease rental expense 12.5 13.7 10.2 12.3 Deﬁ ned contribution plan expense 16.1 11.5 16.1 11.1

3. Income tax

3.1 INCOME TAX REPORTED IN THE INCOME STATEMENTS

Current income tax: Current income tax charge (14.8) (49.3) (16.2) (49.5) Adjustments in respect of current income tax of previous years (0.7) (3.6) (1.3) (4.1) Movement in capital loss previously unbooked (1.3) - (1.3) - Deferred income tax: Relating to origination and reversal of temporary differences 68.9 112.6 65.5 115.3 Adjustments in respect of deferred income tax of previous years (4.9) (1.4) (4.2) (0.8) Income tax equivalent reported in the income statements 47.2 58.3 42.5 60.9

80 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M

The aggregate amount of income tax equivalent attributable to the ﬁ nancial year differs from the amount calculated on the operating proﬁ t. The differences are reconciled as follows:

Proﬁ t before income tax equivalent 175.7 199.1 157.1 170.7

Income tax equivalent calculated at 30% (2008: 30%) 52.759.7 47.1 51.2 Equivalent tax effect on non-temporary differences: Non-deductible amortisation of intangible contractual rights - 0.3 - - Bad debts 3.3 - 3.4 12.9 Impairment loss 0.1 0.7 0.1 0.1 Other non-deductible expenses (2.3) 1.7 (1.3) 1.6 Income tax equivalent adjusted for non- temporary differences: 53.8 62.4 49.3 65.8 Under/(over) provision of prior year (5.6) (5.0) (5.5) (4.9) Current year losses for which no deferred tax asset was recognised 0.3 0.9 - - Current year capital losses for which no deferred tax asset was recognised (1.3) - (1.3) - Income tax equivalent reported in the income statements 47.2 58.3 42.5 60.9

3.2 CURRENT TAX BALANCES

Current tax payable (8.6) (33.5) (8.3) (32.6) Less: tax instalments (3.6) (8.0) (3.6) (7.5) Less: unused tax losses for which deferred tax asset has been recognised 8.3 31.7 8.3 31.7 Less: unused tax losses for which no deferred tax asset has been recognised 0.3 0.9 - - Total current tax payable/(receivable) (3.6) (8.9) (3.6) (8.4)

Income tax equivalent attributable to: Parent entity (3.6) (7.5) (3.6) (7.5) Other - (1.4) - (0.9) (3.6) (8.9) (3.6) (8.4)

3.3 INCOME TAX EQUIVALENT REPORTED IN THE STATEMENT OF RECOGNISED INCOME AND EXPENSE

Deferred income tax related to items charged or credited directly to equity: Property, plant and equipment revaluations 18.1 9.8 75.3 9.8 75.3 Available-for-sale investment reserve 18.4 (2.4) (6.3) (2.4) (6.3) Actuarial movements on deﬁ ned beneﬁ t plans 19 (27.2) (23.9) (27.2) (23.9) Hedge reserve (0.1) - (0.1) - Income tax equivalent reported directly in equity (19.9) 45.1 (19.9) 45.1

ENERGEX Annual Report 2008-2009 81 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 3.4 DEFERRED TAX ASSETS

The balance comprises temporary differences attributable to: Amounts recognised in the income statement: Provisions and accrued expenditure not currently deductible 64.3 36.1 62.9 32.3 Unearned revenue in relation to government grant 13.3 12.4 13.3 12.4 Unused tax losses for which deferred tax asset has been recognised 36.0 31.7 36.0 31.7 Other - - - 0.7 Amounts recognised directly in equity: Financial liabilities – cash fl ow hedges 0.1 0.2 0.1 0.2 Defi ned benefi t fund defi cit 21.9 - 21.9 - Gross deferred income tax assets 135.6 80.4 134.2 77.3

Movements in deferred tax assets: Balance at start of year 80.4 55.8 77.3 51.2 Credited/(charged) to the income statement 17.7 (8.5) 20.0 (6.9) Credited/(charged) to equity 27.2 - 27.2 - Under/(over) provision of prior year - 1.4 (0.6) 1.3 Unused tax losses for which deferred tax asset has been recognised 10.3 31.7 10.3 31.7 Balance at end of year 135.6 80.4 134.2 77.3

3.5 DEFERRED TAX LIABILITIES

The balance comprises temporary differences attributable to: Amounts recognised in the income statement: Difference in depreciation and amortisation of property, plant and equipment for accounting and tax purposes 1,238.1 1,083.1 1,241.1 1,087.1 Expenditure currently deductible for tax but deferred and amortised for accounting purposes 14.2 11.1 14.0 10.9 Amounts recognised directly in equity: Financial assets – cash fl ow hedges 0.1 0.1 0.1 0.1 Revaluation of property, plant and equipment 18.1 9.8 75.3 9.8 75.3 Defi ned benefi t fund surplus - 1.8 - 1.8 Investment – Ceramic Fuel Cells Limited (CFCL) (6.8) (4.4) (6.8) (4.4) Gross deferred income tax liabilities 1,255.4 1,167.0 1,258.2 1,170.8

Movements in deferred tax liabilities: Balance at start of year 1,167.0 1,035.1 1,170.8 1,034.1 (Credited)/charged to the income statement 80.0 86.3 78.9 90.7 (Credited)/charged to equity 7.3 45.2 7.3 45.2 Under/(over) provision of prior year 1.1 0.4 1.2 0.8 Balance at end of year 1,255.4 1,167.0 1,258.2 1,170.8

82 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

4. Discontinued On 8 August 2008 the ENERGEX its New Zealand branch business operations and non- New Zealand branch was notifi ed assets to Northpower Limited. The in writing that it was not one of the sale completion date was 1 October current assets held successful bidders in the request 2008 and the branch effectively wound for sale for proposal process with Vector down by 31 October 2008. Northpower Limited. ENERGEX had two long- Limited invited employees of the New 4.1 DISCONTINUED term contracts with Vector Limited. Zealand branch to make applications OPERATIONS The profi tability of the New Zealand for employment and, under the sale operation was dependent upon agreement, was required to make Qualitative disclosure is provided for the continuation of these contracts offers of employment to no less than the ENERGEX New Zealand branch and, as such, this notifi cation had 220 employees. The New Zealand sale in 2008/09 on the basis that the a material impact on the viability of branch does not have a material fi nancial impact is not material to the that branch. ENERGEX executed an impact on the Group’s overall result Group’s operations. agreement on 29 August 2008 to sell and this information is voluntarily disclosed.

4.2 NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M

Land1 14.8 - 14.8 - 1 Land is disclosed at its carrying value based on a valuation conducted by independent external valuers in May 2007.

In 2008/09 the Directors of ENERGEX approved the sale of vacant land which is surplus to operational requirements and settlement of the sale contract is expected within the next 12 months.

5. Earnings per share (EPS)

5.1 OPERATIONS Consolidated Note 2009 2008 Total basic earnings per share (cents) 14.67 16.08

$ M $ M The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Proﬁ t attributable to members of the parent entity 19 128.5 140.8

Number Number Weighted average number of ordinary shares used in the calculation of basic earnings per share 5.2 875,532,773 875,532,773

5.2 CALCULATION OF WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN THE CALCULATION OF BASIC EARNINGS PER SHARE

Weighted Number of Number of average shares on days shares Number of number of Note issue issued days in year shares

2009: 1 July 2008 – 30 June 2009 17 875,532,773 365 365 875,532,773 2008: 1 July 2007 – 30 June 2008 17 875,532,773 365 365 875,532,773

ENERGEX Annual Report 2008-2009 83 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 6. Cash and cash equivalents

Cash on hand and at bank 8.2 0.2 5.6 - Short-term deposits 296.1 358.8 296.1 358.8

Total cash and cash equivalents 304.3 359.0 301.7 358.8

Cash at bank earns interest at ﬂ oating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group. The average effective interest rate on short-term bank deposits was 5.4% (2008: 7.4%) inclusive of fees charged. These deposits have an average maturity of 20 days.

6.1 RECONCILIATION OF CASH

Cash at the end of the ﬁ nancial year as shown in the cash ﬂ ow statement is reconciled to items in the balance sheet as follows: Cash and cash equivalents 304.3 359.0 301.7 358.8 Less: bank overdraft - - - (1.4) Cash and cash equivalents 304.3 359.0 301.7 357.4

6.2 RECONCILIATION OF NET PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATIONS

Profi t after income tax 128.5 140.8 114.6 109.8 Adjustments for non-cash and other income and expense items: Depreciation, amortisation and impairment 2.2 235.4 255.7 235.2 232.4 Write down of non-current assets 2.2 0.5 - 0.5 - Loss/(gain) on sale of property, plant and equipment 2.2 8.4 7.9 8.4 7.7 Provision for impairment of receivables 2.2 (0.2) 1.2 0.2 1.2 Provision for impairment of related party receivables 2.2 - - (0.5) (13.8) Provision for inventory obsolescence 2.2 1.5 (0.3) 0.7 (0.3) Interest revenue classifi ed as investing activities (33.2) (60.6) (33.1) (65.5) Unwinding discount of restoration provision - 0.3 - - Net change in derivative fi nancial instruments (0.4) (0.1) (0.4) (0.1) Forgiveness of related party receivable - - - 48.1 Sale of business operation proceeds recognised in investing activities (5.0) - (5.0) - Capitalised interest recognised in fi nancing activities - 12.6 - 12.6

Movements in working capital: (Increase)/decrease in trade and other receivables 8.5 (35.5) (3.4) (23.4) (Increase)/decrease in inventories (25.2) (6.4) (25.1) (5.8) (Increase)/decrease in other current assets 7.5 3.5 7.7 3.5 (Increase)/decrease in deferred tax assets (55.2) (24.6) (57.0) (26.0) (Decrease)/increase in trade and other payables 1.5 (16.4) 21.1 (17.2) (Decrease)/increase in current tax payable 5.3 (14.0) 4.9 (12.7) (Decrease)/increase in provisions 36.8 (20.5) 44.9 (17.3) (Decrease)/increase in deferred tax liabilities 78.5 56.6 77.6 61.2 (Decrease)/increase in other liabilities 33.2 45.6 33.7 45.4 Net cash provided by/(used in) operating activities 426.4 345.8 425.0 339.8

84 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 7. Trade and other receivables

Current Trade receivables 198.9 182.6 194.1 177.5 Provision for impairment of receivables (1.2) (2.9) (1.2) (2.9) Finance lease receivables 7.2 1.9 0.2 1.9 0.2 Other receivables 37.0 41.0 32.9 36.6 Regulated revenue recoveries - 1.5 - 1.5 Amounts receivable from: - provision for impairment of related party receivables1 29.1 - - (1.1) - - related parties 29.1 - - 1.1 1.4 - associates 25.6 13.5 25.6 13.5 Total current trade and other receivables 262.2 235.9 253.3 227.8

Non-current Finance lease receivables 7.2 3.8 2.1 3.8 2.1 Other receivables – other parties 1.5 1.9 1.5 1.9 Regulated revenue recoveries - 23.6 - 23.6 Amounts receivable from: - provision for impairment of related party receivables1 29.1 - - (0.8) (1.4) - related parties 29.1 - - 0.8 - - associates 84.0 101.8 84.0 101.8 Total non-current trade and other receivables 89.3 129.4 89.3 128.0

1 In 2008/09 the parent reduced the provision against its non-current related-party receivable from Beak Industries Pty Ltd (Beak Industries) to $0.8 million (2008: $1.4 million) and increased the provision against its current related-party receivable from Service Essentials Pty Ltd (Service Essentials) to $1.1 million (2008: nil). These provisions are shown in other expenses in the income statement of the parent.

7.1 FINANCE LEASE RECEIVABLES ARE RECONCILED TO THE INVESTMENT IN FINANCE LEASES AS FOLLOWS:

Aggregate of minimum lease payments and unguaranteed residual values Not later than one year 2.2 0.4 2.2 0.4 Later than one year and not later than ﬁ ve years 4.0 2.4 4.0 2.4 6.2 2.8 6.2 2.8

7.2 FUTURE FINANCE REVENUE

Not later than one year (0.3) (0.2) (0.3) (0.2) Later than one year and not later than ﬁ ve years (0.2) (0.3) (0.2) (0.3) (0.5) (0.5) (0.5) (0.5)

Net ﬁ nance lease receivable1 5.7 2.3 5.7 2.3 Reconciled to: Current receivable 1.9 0.2 1.9 0.2 Non-current receivable 3.8 2.1 3.8 2.1 5.7 2.3 5.7 2.3

1 Includes unguaranteed residual amounts. 1.8 1.8 1.8 1.8

The Group has entered into various ﬁ nance lease arrangements as lessor as part of its commercial activities. In 2008/09 a ﬁ nance lease receivable arrangement was entered into with Ergon Energy Corporation Limited (Ergon Energy).

ENERGEX Annual Report 2008-2009 85 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M

7.3 PAST DUE BUT NOT IMPAIRED

As at 30 June 2009, trade and other receivables of $7.1 million (2008: $9.7 million) were past due but not impaired. The ageing analysis of these trade and other receivables is as follows:

Up to 30 days 2.8 2.9 2.3 2.1 31 to 60 days 0.4 1.2 0.3 1.0 Later than 60 days 3.9 5.6 3.9 5.1 Total past due but not impaired 7.1 9.7 6.5 8.2

The method of calculating any provisional impairment for risk is based on past experience, current and expected changes in economic conditions and changes in client ratings. 8. Inventories

Maintenance and construction stocks – at net realisable value 102.2 77.6 102.2 76.7 Work in progress – at cost 4.3 5.3 3.5 4.5

Total inventories 106.5 82.9 105.7 81.2

9. Other ﬁ nancial assets

Non-current Shares in controlled entities1 - - 0.1 0.3 Shares in other corporations – available-for-sale ﬁ nancial assets2 6.3 14.2 6.3 14.2

Total other ﬁ nancial assets 6.3 14.2 6.4 14.5 1 The carrying amount of the parent’s investment in its subsidiary, Beak Industries, was impaired by $0.2 million (2008: $0.3 million) to reﬂ ect its fair value less costs to sell. 2 Included in both the consolidated and parent entity are 36,800,783 shares in Ceramic Fuel Cells Limited (CFCL) at a fair value of $0.17 per share (2008: $0.385).

86 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M

10. Property, plant and equipment

Supply system At directors’ valuation 9,913.4 9,612.3 9,913.4 9,612.3 Less: accumulated depreciation (3,613.6) (3,810.6) (3,613.6) (3,810.6) 6,299.8 5,801.7 6,299.8 5,801.7 Land and buildings At directors’ valuation 150.0 123.1 150.0 123.1 Less: accumulated depreciation (13.3) (13.8) (13.3) (13.8) 136.7 109.3 136.7 109.3 Other property, plant and equipment At cost 386.6 406.4 329.4 342.0 Less: accumulated depreciation (159.3) (182.5) (140.8) (157.8) Less: accumulated impairment losses (22.7) (24.4) - (0.4) 204.6 199.5 188.6 183.8 Work in progress At cost 412.9 335.9 412.8 335.8 Total property, plant and equipment 7,054.0 6,446.4 7,037.9 6,430.6

Supply system valuation - The methodology outlined in between the assumed rate of ENERGEX’s supply system assets are the NER; and return and the actual return set in carried at fair value. An income based - The AER’s statement of the AER regulatory determination approach to valuation was undertaken regulatory intent on the in April 2010 will be mitigated by by ENERGEX as at 30 June 2009 revised WACC parameters an offsetting shift in the applicable using the following key assumptions (distribution) for the regulatory discount rate used to determine and approach: period July 2010 to June 2015. fair value. • Revenue cash fl ows for the 2010- • Future capital expenditure and • ENERGEX’s supply system assets 15 regulatory period assume a related revenues have been are subject to regulation in the rate of return of 9.71% which excluded from the cash fl ows form of a revenue cap and it is represents the AER’s WACC and it is assumed that the assumed that they will continue decision benchmarked to market regulatory allowance for the to be subject to regulation in the rates at 30 June 2009. ENERGEX maintenance component of future. has submitted a number of operating expenditure is suffi cient • Cash fl ows have been projected departures to the AER’s decision to maintain and operate the supply based on forecasts of prudent in its 1 July 2009 regulatory system assets through to the end and effi cient operating costs and proposal, the outcome of which of their useful lives. revenue consistent with: will be subject to review by the • Post-tax cash fl ows have been - ENERGEX’s statutory AER. The assumed return is projected over a six year term corporate plan for the applied to a regulatory asset value and on a basis consistent with the remainder of the regulatory consistent with the roll forward AER’s approach, whereby the tax period covered by the QCA’s methodology adopted for the deductibility of debt, capital raising 2005 Final Determination QCA’s 2005 Final Determination costs and imputation credits are on Electricity Distribution to throughout the life of the supply refl ected in the projected cash June 2010; system assets. It is expected fl ows, rather than the discount - ENERGEX’s proposal to the that the AER will publish a rate. The projected cash fl ows AER for the regulatory period fi nal decision on ENERGEX’s have been discounted at a rate of July 2010 to June 2015; regulatory determination in 9.33%. April 2010. Variations that arise

ENERGEX Annual Report 2008-2009 87 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

• The residual value at 30 June Sinclair Knight Merz via a physical Asset retirements 2015 has been determined using valuation as at 31 December 2003. ENERGEX has plant and the best information available to The valuation methodology was equipment with a gross carrying estimate future cash fl ows, and based upon depreciated optimised amount of $422.3 million (2008: assumes, that throughout the replacement cost, then rolled forward $322.8 million) and a written down remaining useful life of the supply in each successive period based on value of nil. ENERGEX has confi rmed system assets, the regulator will capital expenditure, depreciation and $336.7 million of these assets are be in alignment with the market infl ation. still in use at 30 June 2009. During view as to both the required rate of the period, ENERGEX undertook an return and the costs of operating Land and buildings extensive assessment of assets in the supply system. It has also Land and buildings were formally use and retired assets with a gross been assumed that any form of valued as at 30 June 2009 by carrying amount of $540.9 million future regulation will ensure an independent expert valuers, Taylor (2008: $15.7 million) that were no owner of these assets will receive Byrne Valuers, McGees Property longer in use and have since been a suffi cient return on equity after and Herron Todd White. A number replaced or retired. The impact repayment of debt. of smaller value properties were not of these retirements has been a subject to an independent valuation as transfer of $41.7 million from the This valuation confi rms that the at 30 June 2009. As these properties asset revaluation reserve to retained carrying amount of supply system are of a similar age, location and earnings (refer Note 18.1). assets is not materially different from condition to those properties subject to the fair value at 30 June 2009. independent valuation, they have been If property, plant and equipment were valued by management based on stated on a historical cost basis, the In prior years, the supply system the results of the independent expert carrying amount at the reporting date valuation was based on an valuers’ reports. would have been: independent valuation undertaken by

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M

Supply system 4,497.2 3,952.2 4,497.2 3,952.2 Land and buildings 95.2 91.6 95.2 91.6

10.1 MOVEMENTS IN CARRYING AMOUNTS

Other Capital Supply Land and plant and works in system buildings equipment progress Total $ M $ M $ M $ M $ M Consolidated Year ended 30 June 2009 Carrying amount at start of year 5,801.7 109.3 199.5 335.9 6,446.4 Additions - - - 835.7 835.7 Capitalised depreciation - - - 23.3 23.3 Capitalised interest - - - 12.1 12.1 Disposals1 (12.0) - (10.1) - (22.1) Depreciation (215.8) (0.9) (38.8) - (255.5) Revaluation increment/(decrement) - 31.7 - - 31.7 Transfer between classes (1.4) (4.2) 5.3 - (0.3) Transfer from work in progress 727.3 16.1 50.7 (794.1) - Write-down of assets - (0.5) - - (0.5) Impairment losses for year - - (2.7) - (2.7) Reversal of impairment loss - - 4.0 - 4.0 Transfer to trade and other receivables2 - - (3.3) - (3.3) Assets classiﬁ ed as held for sale - (14.8) - - (14.8) Carrying amount at 30 June 2009 6,299.8 136.7 204.6 412.9 7,054.0

88 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Other Capital Supply Land and plant and works in system buildings equipment progress Total $ M $ M $ M $ M $ M Consolidated Year ended 30 June 2008 Carrying amount at start of year 5,211.9 98.0 203.7 212.8 5,726.4 Additions - - - 707.2 707.2 Capitalised depreciation - - - 25.3 25.3 Capitalised interest - - - 6.6 6.6 Disposals (6.0) (0.1) (8.5) - (14.6) Depreciation (200.2) (1.6) (44.1) - (245.9) Revaluation increment/(decrement) 246.8 4.3 - - 251.1 Transfer between classes - 0.3 0.7 - 1.0 Transfer from work in progress 549.2 8.4 58.4 (616.0) - Impairment losses for year - - (10.7) - (10.7) Carrying amount at 30 June 2008 5,801.7 109.3 199.5 335.9 6,446.4

Parent Entity Year ended 30 June 2009 Carrying amount at start of year 5,801.7 109.3 183.8 335.8 6,430.6 Additions - - - 835.1 835.1 Capitalised depreciation - - - 23.3 23.3 Capitalised interest - - - 12.1 12.1 Disposals (12.0) - (10.0) - (22.0) Depreciation (215.8) (0.9) (37.3) - (254.0) Revaluation increment/(decrement) - 31.7 - - 31.7 Transfer between classes (1.4) (4.2) 5.3 - (0.3) Transfer from work in progress 727.3 16.1 50.1 (793.5) - Write-down of assets - (0.5) - - (0.5) Transfer to trade and other receivables2 - - (3.3) - (3.3) Assets classiﬁ ed as held for sale - (14.8) - - (14.8) Carrying amount at 30 June 2009 6,299.8 136.7 188.6 412.8 7,037.9

Year ended 30 June 2008 Carrying amount at start of year 5,211.9 98.0 175.0 208.5 5,693.4 Additions - - - 707.5 707.5 Capitalised depreciation - - - 25.3 25.3 Capitalised interest - - - 6.6 6.6 Disposals (6.0) (0.1) (7.9) - (14.0) Depreciation (200.2) (1.6) (37.7) - (239.5) Revaluation increment/(decrement) 246.8 4.3 - - 251.1 Transfer between classes - 0.3 0.3 - 0.6 Transfer from work in progress 549.2 8.4 54.5 (612.1) - Impairment losses for year - - (0.4) - (0.4) Carrying amount at 30 June 2008 5,801.7 109.3 183.8 335.8 6,430.6 1 Varnsdorf Pty Ltd (Varnsdorf) received updated information during the year to enable it to reverse the provision for site rehabilitation. The dismantling cost of the respective asset has been disclosed as a disposal in Note 10 above whilst the reversal of the restoration provision is disclosed in Note 15. 2 In 2008/09 a ﬁ nance lease receivable arrangement was entered into with Ergon Energy.

ENERGEX Annual Report 2008-2009 89 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Property, plant and equipment and impairment An impairment review across all of ENERGEX’s CGUs has resulted in the following property, plant and equipment impairment losses: $2.7 million (2008: $10.7 million) for the Group; and nil (2008: $0.4 million) for the parent. The review also resulted in the reversal of prior year impairment losses: $4.0 million (2008: nil) for the Group; and nil (2008: nil) for the parent.

These impairment losses and reversals are included within the depreciation, amortisation and impairment expense item in the income statement, which are detailed as follows:

Beak Industries Beak Industries CGU operates singular natural gas ﬁ red electric generators in Victoria. The residual values of the assets of the CGU were reviewed in light of the probability that the assets would be sold at scrap value. This resulted in an impairment loss on plant and equipment of $0.5 million (2008: $0.2 million). Fair value less costs to sell, based on an estimate provided by an independent qualiﬁ ed quantity surveyor, was used to calculate the recoverable amount.

Landfi ll gas generation The landfi ll gas generation CGU operates landfi ll gas sites in Queensland and Victoria. A review of the value-in-use assessment of this operation resulted in an impairment loss on plant and equipment of $2.2 million (2008: $5.0 million). The value-in-use assessment was based on forecast cash fl ows and a discount rate of 12.65% (2008: 13.42%) was used to calculate the recoverable amount.

Varnsdorf There were no impairment triggers identiﬁ ed for the business operation of the Varnsdorf group CGU that operates generators located in a number of Victorian hospitals (2008: impaired $1.4 million, discount rate 13.42%). Prior year impairment losses were assessed and were unable to be reversed.

New Zealand The New Zealand operation was disposed of during the 2008/09 ﬁ nancial year. An impairment loss on property, plant and equipment of $0.4 million was recognised in the 2007/08 ﬁ nancial year based on a discount rate of 13.42% following a review of the operation.

Embedded generation The embedded generation CGU operates generation capacity that is installed to provide demand side management for the network and capacity to third parties. A review of the value-in-use assessment of this operation was undertaken and resulted in the reversal of prior year impairment losses on plant and equipment of $4.0 million (2008: $3.7 million). The value-in-use assessment was based on forecast cash ﬂ ows and a discount rate of 12.65% (2008: 13.42%) was used to calculate the recoverable amount.

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M

10.2 CAPITALISED BORROWING COSTS

Borrowing costs capitalised during the ﬁ nancial year 2.2 12.1 6.6 12.1 6.6 Weighted average interest rate on funds borrowed generally 6.20% 6.18% 6.20% 6.18%

90 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M 11. Intangible assets

Goodwill At cost - 1.1 - 1.1 Less: accumulated amortisation - (0.3) - (0.3) Less: accumulated impairment loss - (0.8) - (0.8) - - - - Computer software At cost 51.9 154.4 51.9 154.3 Less: accumulated amortisation (44.5) (143.7) (44.5) (143.7) Less: accumulated impairment loss - (1.7) - (1.7) Software work in progress 0.4 4.9 0.4 4.9 7.8 13.9 7.8 13.8 Contractual rights At cost 13.1 14.7 - 1.6 Less: accumulated amortisation (12.2) (13.2) - (1.2) Less: accumulated impairment loss (0.9) (1.0) - (0.1) - 0.5 - 0.3 Total intangible assets 7.8 14.4 7.8 14.1

11.1 MOVEMENTS IN CARRYING AMOUNTS

Computer Contractual Goodwill software rights Total $ M $ M $ M $ M Consolidated Year ended 30 June 2009 Carrying amount at start of year - 13.9 0.5 14.4 Amortisation - (4.3) (0.2) (4.5) Additions/disposals - (0.1) (0.3) (0.4) Transfer between classes - 0.3 - 0.3 Transfer to trade and other receivables1 - (2.0) - (2.0) Carrying amount at 30 June 2009 - 7.8 - 7.8

Year ended 30 June 2008 Carrying amount at start of year 1.0 55.9 4.2 61.1 Amortisation - (18.3) (2.6) (20.9) Additions/disposals - (21.0) - (21.0) Transfer between classes - (1.0) - (1.0) Foreign currency translation movement (0.2) - (0.1) (0.3) Impairment losses (0.8) (1.7) (1.0) (3.5) Carrying amount at 30 June 2008 - 13.9 0.5 14.4 1 In 2008/09 a ﬁ nance lease receivable arrangement was entered into with Ergon Energy.

ENERGEX Annual Report 2008-2009 91 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Computer Contractual Goodwill software rights Total $ M $ M $ M $ M

Parent Entity Year ended 30 June 2009 Carrying amount at start of year - 13.8 0.3 14.1 Amortisation - (4.3) - (4.3) Additions/disposals - - (0.3) (0.3) Transfer between classes - 0.3 - 0.3 Transfer to trade and other receivables1 - (2.0) - (2.0) Carrying amount at 30 June 2009 - 7.8 - 7.8

Year ended 30 June 2008 Carrying amount at start of year 1.0 50.2 0.7 51.9 Amortisation - (14.7) (0.2) (14.9) Additions/disposals - (19.4) - (19.4) Transfer between classes - (0.6) - (0.6) Foreign currency translation movement (0.2) - (0.1) (0.3) Impairment losses (0.8) (1.7) (0.1) (2.6) Carrying amount at 30 June 2008 - 13.8 0.3 14.1 1 In 2008/09 a ﬁ nance lease receivable arrangement was entered into with Ergon Energy.

Intangible assets and impairment Intangible assets, other than goodwill, have ﬁ nite useful lives. The current amortisation charges in respect of intangible assets are included within depreciation, amortisation and impairment expense per Note 2.2. Goodwill has an inﬁ nite life.

An impairment review across all of ENERGEX’s CGUs has resulted in there being no intangible asset impairment losses recognised in the 2008/09 ﬁ nancial year for both the Group (2008: $3.5 million) and the parent entity (2008: $2.6 million).

Energy Impact Group For the 2007/08 fi nancial year, an impairment loss on contractual rights of $0.9 million was recorded based on the value- in-use assessment. The recoverable amount was based on forecast cash fl ows and a discount rate of 13.42% refl ecting current market rates and the risks specifi c to the asset. Refer to Note 10.1 for information relating to 2008/09 impairments.

New Zealand The New Zealand operation was sold during the 2008/09 ﬁ nancial year. In the 2007/08 ﬁ nancial year, impairment losses on computer software ($1.7 million), contractual rights ($0.1 million), and goodwill ($0.8 million) were recognised, and were based on a discount rate of 13.42% following a review of the operation.

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M 12. Other assets

Current prepayments 29.9 31.5 29.8 31.5

92 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 13. Trade and other payables

Current Trade payables 115.8 142.6 111.7 137.4 QTC working capital facility 29.4 - 29.4 - Accrued wages and salaries 20.6 6.5 20.6 6.5 Refundable deposits 3.5 4.7 3.5 4.7 Amount payable to: - associates 13.3 13.5 13.3 13.5 - related parties 29.1 - - - 12.2 Total current trade and other payables 182.6 167.3 178.5 174.3

Non-current Amount payable to: - related parties 29.1 - - 19.8 - Total non-current trade and other payables - - 19.8 -

14. Long-term borrowings

Non-current QTC loans – unsecured 3,843.1 3,344.9 3,843.1 3,344.9 Total non-current borrowings 3,843.1 3,344.9 3,843.1 3,344.9

15. Provisions

Current Dividends 20 102.8 210.8 102.8 210.8 Employee beneﬁ ts 30.8 30.4 29.9 29.4 Site restoration/rehabilitation 2.7 1.4 - - Other provisions 0.5 1.5 0.6 1.1 Total current provisions 136.8 244.1 133.3 241.3

Non-current Site restoration/rehabilitation 0.6 8.9 0.6 0.6 Public liability insurance 2.6 3.6 2.6 3.6 Employee beneﬁ ts 69.7 67.5 69.7 66.9 Regulated revenue recoveries 78.3 35.1 78.3 35.1 Total non-current provisions 151.2 115.1 151.2 106.2

ENERGEX Annual Report 2008-2009 93 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

15.1 MOVEMENTS IN CARRYING AMOUNTS

Regulated Public revenue Site liability Employee Dividends recoveries restoration insurance beneﬁ ts Other Total $ M $ M $ M $ M $ M $ M $ M Consolidated Carrying amount at start of year 210.8 35.1 10.3 3.6 97.9 1.5 359.2 Additions 102.8 79.0 0.8 0.8 49.2 - 232.6 Utilised (210.8) - - (1.0) (41.0) (1.0) (253.8) Reversal1 - - (7.8) (0.8) (5.6) - (14.2) Transfer to other liabilities - (35.8) - - - - (35.8) Carrying amount at 30 June 2009 102.8 78.3 3.3 2.6 100.5 0.5 288.0

Parent Entity Carrying amount at start of year 210.8 35.1 0.6 3.6 96.3 1.1 347.5 Additions 102.8 79.0 - 0.8 48.4 - 231.0 Utilised (210.8) - - (1.0) (39.5) (0.5) (251.8) Reversal1 - - - (0.8) (5.6) - (6.4) Transfer to other liabilities - (35.8) - - - - (35.8) Carrying amount at 30 June 2009 102.8 78.3 0.6 2.6 99.6 0.6 284.5 1 During the 2008/09 ﬁ nancial year, ENERGEX became aware of new information regarding back-pay estimates which resulted in the 30 June 2008 pay parity provision total within employee beneﬁ ts being revised downwards from $6.1 million to $0.5 million. Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 15.2 ANALYSIS OF TOTAL PROVISIONS

Current 15 136.8 244.1 133.3 241.3 Non-current 15 151.2 115.1 151.2 106.2 Total provisions 288.0 359.2 284.5 347.5

16. Other liabilities Current Bank overdraft1 6.1 - - - 1.4 Regulated revenue recoveries – net 7.3 - 7.3 - Unearned revenue – government grant2 44.4 41.2 44.4 41.2 Unearned revenue – other 23.8 13.1 23.8 12.6

Total current other liabilities 75.5 54.3 75.5 55.2

Non-current Unearned revenue 3.5 1.0 3.4 1.0

Total non-current other liabilities 3.5 1.0 3.4 1.0 1 Bank overdraft comprises cash at bank which includes unpresented cheques. 2 ENERGEX received a $45 million government grant from the Department of Mines and Energy in 2008/09 (2008: $80 million) initially to cover legacy costs associated with the 2006/07 sale of Sun Retail Pty Ltd (Sun Retail), Sun Gas Retail Pty Ltd (Sun Gas) and Allgas Pty Ltd (Allgas). With approval, the grant has also been used to cover costs associated with certain energy market reform initiatives. The grant is initially recorded as unearned revenue and is recognised as revenue when the conditions of the grant have been met (refer Note 2.1).

94 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated and Parent Entity 2009 2008 2009 2008 Note Number Number $ M $ M 17. Contributed equity

A Class ordinary shares – voting 17.1 122,600,006 122,600,006 122.6 122.6 B Class ordinary shares – non-voting 17.2 752,932,767 752,932,767 521.0 521.0 Total contributed equity 875,532,773 875,532,773 643.6 643.6

17.1 A CLASS ORDINARY SHARES

Movements: Beginning of ﬁ nancial year 122,600,006 122,600,006 122.6 122.6 Share movement - - - -

End of the ﬁ nancial year 17 122,600,006 122,600,006 122.6 122.6

17.1 B CLASS ORDINARY SHARES

Movements: Beginning of ﬁ nancial year 752,932,767 752,932,767 521.0 521.0 Share movement - - - -

End of the ﬁ nancial year 17 752,932,767 752,932,767 521.0 521.0

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 18. Reserves

Asset revaluation reserve 18.1 1,181.7 1,201.5 1,181.7 1,201.5 Foreign currency translation reserve 18.2 - 0.4 - 0.4 Hedge reserve 18.3 (0.3) (0.1) (0.3) (0.1) Available-for-sale investment reserve 18.4 13.1 18.6 13.1 18.6 Total reserves 1,194.5 1,220.4 1,194.5 1,220.4

18.1 ASSET REVALUATION RESERVE (ARR)

Balance at start of year 1,201.5 1,029.6 1,201.5 1,029.6 Revaluation increment – gross - supply system 10.1 - 246.8 - 246.8 - land and buildings 10.1 31.7 4.3 31.7 4.3 Deferred tax effect on revaluations 3.3 (9.8) (75.3) (9.8) (75.3) Transfer ARR to retained earnings for disposed assets 19 (41.7) (3.9) (41.7) (3.9) Balance at end of year 1,181.7 1,201.5 1,181.7 1,201.5

18.2 FOREIGN CURRENCY TRANSLATION RESERVE

Balance at start of year 0.4 0.7 0.4 0.7 Net exchange differences on translation of foreign-controlled operations (0.4) (0.3) (0.4) (0.3) Balance at end of year - 0.4 - 0.4

ENERGEX Annual Report 2008-2009 95 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M 18.3 HEDGE RESERVE

Balance at start of year (0.1) (0.2) (0.1) (0.2) Movement for the year (0.3) 0.2 (0.3) 0.2 Deferred tax effect on amortisation 0.1 (0.1) 0.1 (0.1) Balance at end of year (0.3) (0.1) (0.3) (0.1)

18.4 AVAILABLE-FOR-SALE INVESTMENT RESERVE

Balance at start of year 18.6 33.3 18.6 33.3 Revaluation – gross (7.9) (21.0) (7.9) (21.0) Deferred tax effect on revaluations 3.3 2.4 6.3 2.4 6.3 Balance at end of year 13.1 18.6 13.1 18.6

18.5 NATURE AND PURPOSE OF RESERVES

Asset revaluation reserve The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets, as described in Note 1.17.

Foreign currency translation reserve Exchange differences arising on translation of the ENERGEX New Zealand branch operations are taken to the foreign currency translation reserve (FCTR) (refer Note 1.5). In 2008/09 the FCTR balance was transferred from equity to the income statement (miscellaneous expense) upon the sale and wind-down of the ENERGEX New Zealand branch operations (refer also Note 4).

Hedge reserve The hedge reserve records the portion of the gain or loss on a hedging instrument in a cash ﬂ ow hedge that is determined to be an effective hedge, as described in Notes 1.14 and 23.2.

Available-for-sale investment reserve Changes in the fair value and exchange differences arising on translation of investments, such as equities, classiﬁ ed as available-for-sale ﬁ nancial assets, are taken to the available-for-sale investments revaluation reserve, as described in Note 1.16. 19. Retained earnings

Retained earnings at start of year 451.1 1,309.0 420.3 1,309.2 Gross actuarial gains/(losses) on defi ned benefi t plans (90.7) (79.6) (90.7) (79.6) Deferred tax on actuarial gains/(losses) on defi ned benefi t plans 3.3 27.2 23.9 27.2 23.9 Transfer from asset revaluation reserve – net of tax 18.1 41.7 3.9 41.7 3.9 Net profi t attributable to members of the parent entity 6.2 128.5 140.8 114.6 109.8 Total available for appropriation 557.8 1,398.0 513.1 1,367.2 Dividends declared and paid during year 20 - (736.1) - (736.1) Dividends provided at 30 June 2008 20 - (210.8) - (210.8) Dividends provided at 30 June 2009 20 (102.8) - (102.8) - Retained earnings at end of year 455.0 451.1 410.3 420.3

96 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M 20. Dividends

Dividends on ordinary shares Dividends declared during the year: Final unfranked dividend (2009: 11.74 cents per share, 2008: 12.86 cents per share) 102.8 112.6 102.8 112.6 Final unfranked dividend declared in respect of the 2006/07 continuing operations profi t (2009: nil, 2008: 11.22 cents per share) - 98.2 - 98.2 Total dividends declared during the year 102.8 210.8 102.8 210.8 Dividends paid during the year: Final unfranked dividend declared and paid in respect of 2007 trade sale (2009: nil, 2008: 84.08 cents per share) - 736.1 - 736.1 Final unfranked dividend declared in prior fi nancial year and paid in current fi nancial year (2009: 12.86 cents per share, 2008: nil) 112.6 - 112.6 - Final unfranked dividend declared in prior fi nancial year relating to 2007 continuing operations profi t and paid in current fi nancial year (2009: 11.22 cents per share, 2008: nil) 98.2 - 98.2 - Total dividends paid during the year 210.8 736.1 210.8 736.1

A fi nal dividend of $102.8 million dividend amounting to $98.2 million 22. Financial risk for the 2008/09 year (2008: $112.6 was in relation to continuing management million) was declared and provided operations profi ts from the 2006/07 for on the basis of 80% of net profi t year. This component was declared in objectives and after income tax equivalent, adjusted 2007/08 and paid in 2008/09. policies for unrealised gains, in consultation with the shareholding Ministers. The ENERGEX operates under the Financial risk management is 2007/08 dividend of $112.6 million was NTER whereby payments are made carried out by ENERGEX’s Treasury paid in the 2008/09 year. to the Queensland Government. Department (ENERGEX Treasury) As ENERGEX is a Queensland under policies approved by the Board Final dividends for the 2006/07 year government owned corporation, with of Directors. ENERGEX Treasury were declared and partly paid in the all shares owned by the shareholding manages the cash fl ow needs of the 2007/08 fi nancial year in accordance Ministers on behalf of the Queensland Group on a net basis and ensures with: Government, dividend payments are a consistent approach to managing unfranked. the fi nancial arrangements and their 1) the project direction under section associated risk across the business. 11 of the Energy Assets (Restructuring 21. Minority interests The ENERGEX Treasury Risk Policy and Disposal) Act 2006; and Manual applies to all of the entities 2) calculated on the basis of 80% of Ergon Energy has a 10% shareholding within the Group and its intention is net profi t after income tax equivalent, interest in Service Essentials to the to ensure compliance with the Code adjusted for unrealised gains. value of 11 cents (refer Note 27). of Practice for Government-Owned Corporations’ Financial Arrangements. The fi rst component of the 2006/07 fi nal dividend was in relation to the trade sale and confi rmation of the fi nal fi gure in relation to the proceeds from the sale of Allgas, Sun Retail and Sun Gas in the 2006/07 year amounting to $736.1 million. This component was declared and paid in 2007/08. The second component of the 2006/07 fi nal

ENERGEX Annual Report 2008-2009 97 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

The Group’s principal fi nancial • operational risk: the risk resulting Interest rate risk instruments, other than derivatives, from inadequate internal The cost of ENERGEX’s debt is comprise QTC loans. The main processes, people and systems or comprised of a competitive neutrality purpose of these fi nancial instruments from external events. fee (CNF), administration fee, capital is to raise fi nance for the Group’s • capital risk: the risk of the Group market fee and a book interest rate operations. It is the Group’s policy losing value on its capital, on the debt portfolio calculated that fi nancial instruments are not to be including equipment, fi xed assets periodically by QTC. used for speculative purposes. and securities. The CNF is charged by the State of The Group has entered into foreign Credit risk Queensland to ensure that ENERGEX exchange derivatives to hedge USD The Group minimises concentrations does not obtain an economic benefi t currency exposures arising in the of credit risk with its network from funding at a lower cost through normal course of its operations. customers and counterparties by QTC than could be achieved by a ensuring, as far as possible, suffi cient private sector operator. The repricing Other fi nancial assets and liabilities letters of credit or bank guarantees are of the CNF will coincide with the include trade receivables, trade in place. refi nancing of the Group’s debt payables, provisions, short-term portfolio in 2009/10. deposits and unearned revenue Commodity and foreign currency which arise directly from the Group’s risk The Group’s borrowings are subject to operations. The Group is also exposed to annual repricing following a book rate commodity price risk and foreign review of the debt portfolio undertaken Details of the signifi cant accounting currency risk in the normal course of by QTC. The Group is exposed to policies and methods adopted, its operations. The Group minimises book interest rate movements when including criteria for recognition, the foreign currency risks by entering into it refi nances its existing debt or when basis of measurement and the basis foreign currency forward contracts new debt is drawn. The book interest on which income and expenses are where the quantum and timing of the rate for ENERGEX’s debt portfolio will recognised, in respect of each class exposure can be accurately measured. be dependent on the market interest of fi nancial asset, fi nancial liability Commodity price risk movements are rates at the time the debt portfolio is and equity instrument are disclosed in managed where possible through refi nanced. Note 1.14. contractual arrangements with suppliers. Consideration may be given Liquidity risk The Group is exposed to the following in the future to alternative strategies to To manage the Group’s liquidity risk, fi nancial risks: manage exposure to commodity price the Group has a $150 million working • credit risk: the risk of a fi nancial volatility if appropriate. capital facility with QTC. This facility loss if a counterparty to a operates as an overdraft arrangement transaction does not fulfi l its Funding risk which is used to cover temporary fi nancial obligations (also called ENERGEX’s debt, provided funding defi cits. Any outstanding default risk). exclusively by QTC, is interest only balance is repaid at the earliest • commodity risk: the risk that in perpetuity with no set repayment opportunity. The facility is repayable contract prices will move as a date. This debt portfolio is structured on demand. result of adverse movements in to refl ect a fi xed-term loan to correlate Operational risk market prices. with the regulatory period and, as The Group recognises operational • funding risk: the risk that the such, is due to be refi nanced in risk, inclusive of information risk and Group will be unable to refi nance 2009/10. QTC is responsible for business continuity, as a signifi cant existing debt or raise additional refi nancing the Group’s debt when risk category and manages it within debt. it becomes due. QTC borrows in acceptable levels. The Group • liquidity risk: the risk of insuffi cient advance of requirements to ensure continues to develop and expand its funds to fulfi l the Group’s cash the Queensland public sector entities guidelines, standards, methodologies fl ow obligations on a timely basis. are able to meet their debt funding and systems in order to enhance the • interest rate risk: the risk that a obligations as and when they fall due. management of operational risk. fi nancial instrument’s value will fl uctuate as a result of changes in market interest rates.

98 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Capital risk 23. Financial The fair value of derivative fi nancial The Board’s policy is to maintain a instruments instruments represents the value strong capital base so as to preserve of the cash fl ow (either negative or investor, creditor and market positive) which would have occurred if confi dence and to sustain future 23.1 FAIR VALUE OF the rights and obligations arising from development of the business. Part of FINANCIAL ASSETS AND that instrument were closed out in the this process is ensuring that the right market place at the reporting date. quantitative and qualitative factors LIABILITIES exist to support at a minimum an Any gains or losses arising from The fair values of fi nancial assets investment grade credit rating. The changes in the fair value of and fi nancial liabilities, other than Group monitors the return on capital, derivatives, except for those that derivative fi nancial instruments, are which is defi ned as net operating qualify for hedge accounting as cash determined as follows: income divided by total shareholders’ fl ow hedges, are taken directly to the equity. The Group also monitors • the fair value of fi nancial assets income statement for the year. the level of dividends to ordinary and fi nancial liabilities with shareholders. standard terms and conditions The Group considers that the carrying and traded on active liquid amount of fi nancial assets and The Group seeks to maintain a markets is determined with fi nancial liabilities recorded in the balance between the higher return reference to quoted market fi nancial statements approximates on equity that might be possible with prices; and their fair value, excluding borrowings. higher levels of borrowings and the • the fair value of other fi nancial Borrowings are initially recognised advantages and security offered assets and fi nancial liabilities is at fair value, net of transaction costs by a sound capital position through determined in accordance with incurred. Borrowings are subsequently appropriate injections of equity from generally accepted pricing models stated at amortised cost with any time to time to balance the funding based on discounted cash fl ow difference between cost and the sources of the Group. The weighted analysis. redemption amount being recognised average interest expense on interest- in the income statement over the bearing borrowings in 2008/09 was period of the borrowings on an 6.18% (2008: 6.18%). effective interest basis.

ENERGEX Annual Report 2008-2009 99 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

23.2 DERIVATIVE FINANCIAL INSTRUMENTS

As at 30 June 2009, the hedged transactions in place included cash ﬂ ow hedges as detailed below:

Fair value 1 year 1 to 5 More than or less years 5 years Total $ M $ M $ M $ M Consolidated Derivatives held for hedging Asset Derivatives designated as cash fl ow hedges - - - - Derivatives not designated as cash fl ow hedges 0.3 - - 0.3 0.3 - - 0.3 Liability Derivatives designated as cash fl ow hedges 0.3 - - 0.3 Derivatives not designated as cash fl ow hedges - - - - 0.3 - - 0.3 Total asset/(liability) - - - -

Parent Entity Derivatives held for hedging Asset Derivatives designated as cash fl ow hedges - - - - Derivatives not designated as cash fl ow hedges 0.3 - - 0.3 0.3 - - 0.3 Liability Derivatives designated as cash fl ow hedges 0.3 - - 0.3 Derivatives not designated as cash fl ow hedges - - - - 0.3 - - 0.3 Total asset/(liability) - - - -

Varnsdorf has an agreement for the receiving of maintenance services payable in US dollars. In order to protect against exchange rate variations in the AUD/USD spot rate, the Group entered into a forward exchange contract (FEC). Under the FEC, the Group is required to pay a ﬁ xed AUD amount and receive a ﬁ xed USD amount per month until 31 July 2010.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. The ineffective portion is recognised in the income statement immediately. The FEC was determined to be effective for the year ended 30 June 2009 and resulted in no net loss (2008: net loss of $0.2 million).

As at 30 June 2008, the hedged transactions in place included cash ﬂ ow hedges as detailed below:

Consolidated Derivatives held for hedging Asset Derivatives designated as cash fl ow hedges 0.4 - - 0.4 Derivatives not designated as cash fl ow hedges - - - - 0.4 - - 0.4 Liability Derivatives designated as cash fl ow hedges 0.6 - - 0.6 Derivatives not designated as cash fl ow hedges - - - - 0.6 - - 0.6 Total asset/(liability) (0.2) - - (0.2)

100 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Fair value 1 year 1 to 5 More than or less years 5 years Total $ M $ M $ M $ M

Parent Entity Derivatives held for hedging Asset Derivatives designated as cash fl ow hedges 0.4 - - 0.4 Derivatives not designated as cash fl ow hedges - - - - 0.4 - - 0.4 Liability Derivatives designated as cash fl ow hedges 0.6 - - 0.6 Derivatives not designated as cash fl ow hedges - - - - 0.6 - - 0.6 Total asset/(liability) (0.2) - - (0.2)

23.3 CREDIT RISK EXPOSURE

The credit risk on ﬁ nancial assets of the Group which have been recognised on the balance sheet is generally equal to the carrying amount net of any provisions for impairment of receivables. Refer to Note 22 for related risk management policies and procedures that are in place to minimise credit risk.

With the introduction of full retail contestability (FRC) on 1 July 2007, ENERGEX is exposed to the credit quality of licensed retailers in regards to NUOS payments. The standard co-ordination agreement that exists between ENERGEX and every retailer operating in ENERGEX’s distribution area allows ENERGEX to request a retailer to provide an unconditional bank guarantee if it does not have a BBB- or better credit rating, or have its payment obligations guaranteed by another party that has at least this credit rating. ENERGEX actively manages the provision of credit support in accordance with the provisions of the standard co-ordination agreement.

23.4 LIQUIDITY RISK EXPOSURE

The Group’s exposure to liquidity risk for each class of fi nancial assets and fi nancial liabilities excluding derivative fi nancial instruments is set out in the following table:

Carrying Contractual 1 year 1 to 5 More than amount cash ﬂ ows or less years 5 years Note $ M $ M $ M $ M $ M Consolidated As at 30 June 2009 Financial liabilities Trade and other payables 13 149.7 (149.7) (149.7) - - QTC working capital facility 13 29.4 (29.4) (29.4) - - Refundable deposits 13 3.5 (3.5) (3.5) - - Borrowings – QTC unsecured1 14 3,843.1 (5,118.3) (221.6) (887.8) (4,008.9) Total ﬁ nancial liabilities 4,025.7 (5,300.9) (404.2) (887.8) (4,008.9) 1 Market value of the borrowings as at 30 June 2009 as advised by QTC was $3,889.3 million.

As at 30 June 2008 Financial liabilities Trade and other payables 13 162.6 (162.6) (162.6) - - QTC working capital facility 13 - - - - - Refundable deposits 13 4.7 (4.7) (4.7) - - Borrowings – QTC unsecured1 14 3,344.9 (4,374.3) (205.7) (822.3) (3,346.3) Total ﬁ nancial liabilities 3,512.2 (4,541.6) (373.0) (822.3) (3,346.3) 1 Market value of the borrowings as at 30 June 2008 as advised by QTC was $3,255.6 million.

ENERGEX Annual Report 2008-2009 101 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Carrying Contractual 1 year 1 to 5 More than amount cash ﬂ ows or less years 5 years Note $ M $ M $ M $ M $ M Parent Entity As at 30 June 2009 Financial liabilities Trade and other payables 13 145.6 (145.6) (145.6) - - QTC working capital facility 13 29.4 (29.4) (29.4) - - Trade and other payables – related parties 13 19.8 (19.8) - (19.8) - Refundable deposits 13 3.5 (3.5) (3.5) - - Borrowings – QTC unsecured1 14 3,843.1 (5,118.3) (221.6) (887.8) (4,008.9) Total ﬁ nancial liabilities 4,041.4 (5,316.6) (400.1) (907.6) (4,008.9)

1 Market value of the borrowings as at 30 June 2009 as advised by QTC was $3,889.3 million.

As at 30 June 2008 Financial liabilities Bank overdraft 16 1.4 (1.4) (1.4) - - Trade and other payables 13 157.4 (157.4) (157.4) - - QTC working capital facility 13 ---- - Trade and other payables – related parties 13 12.2 (12.2) (12.2) - - Refundable deposits 13 4.7 (4.7) (4.7) - - Borrowings – QTC unsecured1 14 3,344.9 (4,374.3) (205.7) (822.3) (3,346.3) Total ﬁ nancial liabilities 3,520.6 (4,550.0) (381.4) (822.3) (3,346.3)

1 Market value of the borrowings as at 30 June 2008 as advised by QTC was $3,255.6 million.

23.5 INTEREST RATE RISK EXPOSURE

Sensitivity analysis The following interest rate sensitivity analysis depicts the outcome to proﬁ t and loss if interest rates change by +/- 1.00% for cash funds (2008: +/-1.00%) from the year-end rates. With all other variables held constant, the Group would have a surplus/(deﬁ cit) and equity increase/(decrease) of $2.7 million (2008: $3.6 million).

$ M $ M $ M $ M $ M Carrying (1.00)% (1.00)% 1.00% 1.00% Note amount Proﬁ t Equity Proﬁ t Equity 2009 interest rate risk Short-term deposits 6 296.1 (3.0) (3.0) 3.0 3.0 QTC working capital 29.4 0.3 0.3 (0.3) (0.3)

2008 interest rate risk Short-term deposits 6 358.8 (3.6) (3.6) 3.6 3.6 QTC working capital - - - - -

The above sensitivity percentages were based on ofﬁ cial cash rate movements.

102 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M 23.6 FINANCING ARRANGEMENTS

The Group has access to the following lines of credit: Total facilities available – unsecured loans 3,993.1 3,494.9 3,993.1 3,494.9 Facilities utilised at balance date – unsecured loans 3,872.5 3,344.9 3,872.5 3,344.9 Facilities not utilised at balance date – unsecured loans 120.6 150.0 120.6 150.0

Approved borrowings under the state borrowing program (SBP) for 2008/09 were $499.5 million (2008: $88.2 million), of which $496.4 million was drawn during the year (2008: $61.4 million). The unused funds of $3.1 million (2008: $26.8 million) expired on 30 June 2009. The 2008/09 borrowings drawn under the SBP were funded through forward start loans.

The Group has interim approval under the SBP for the 2009/10 year of $366.9 million.

The Group had future loan commitments represented by undrawn forward start loans of $496.4 million with QTC as at 30 June 2008. At the time of settlement the future loan commitment was classiﬁ ed as a borrowing and measured at book value.

Future loan commitments with QTC are set out in the following table:

1 year 1 to 5 More than Contractual undiscounted cash ﬂ ows as at Book value or less years 5 years Total 30 June 2008 $ M $ M $ M $ M $ M Future loan commitments 496.4 16.1 130.0 499.1 645.2

The forward start loans were The benefi t of the forward start loans Guarantees issued fully drawn as at 30 June 2009. was that the Group had been able to The parent entity has provided Therefore, there were no future effectively lock-in the interest rate on guarantees via its banker in respect loan commitments with QTC as at all or part of a known future borrowing of its trading activities. The amount 30 June 2009. requirement. This provided greater of these guarantees is $8.4 million certainty of the borrowing costs on (2008: $9.4 million). The above table represents the future known future borrowing requirements. undiscounted cash fl ows relating to ENERGEX warrants that unlimited future loan commitments. For 2007/08 These loans have been effective in suffi cient fi nancial support will the future loan commitment book minimising the risk of rising interest be provided to Beak Industries, value of $496.4 million represented rates. As at 30 June 2008, this Queensland Energy Services Team total undrawn forward start loans difference was favourable to the Group Pty Ltd (QEST) and Service Essentials as at 30 June 2008 and the total by $5.5 million (these loans were fully to ensure that the companies are of $645.2 million represented total drawn down as at 30 June 2009). able to pay their debts as and when undiscounted interest and principal they fall due. ENERGEX warrants cash fl ows. The actual repayment 23.7 GUARANTEES that suffi cient fi nancial support up to profi le of long-term debt is interest a limit of $10,000 will be provided to only with no fi xed repayment date for Guarantees held Metering Dynamics Pty Ltd to ensure the principal component. However The Group holds bank guarantees that Metering Dynamics Pty Ltd is able the above simulation assumes that from customers and suppliers totalling to pay its debts as and when they fall the debt is repaid in the ‘more than $45.6 million (2008: $40.2 million), due. 5 years’ period with the amount shown relating to subdivision works and being equal to the principal and one construction of capital assets month of interest. for customers and procurement guarantees from suppliers.

ENERGEX Annual Report 2008-2009 103 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009 Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M 24. Commitments for expenditure

24.1 CAPITAL AND OTHER EXPENDITURE COMMITMENTS

Commitments for capital and other expenditure contracted for at the reporting date but not recognised as liabilities payable: Not later than one year 448.0 257.1 444.9 253.9 Later than one year and not later than ﬁ ve years 950.4 1,655.6 950.4 1,655.6 Later than ﬁ ve years - - - - Total capital and other expenditure commitments 1,398.4 1,912.7 1,395.3 1,909.5

These commitments are valued at price levels and foreign currency exchange rates as at balance date.

24.2 OPERATING LEASE COMMITMENTS

Commitments in relation to operating leases contracted for at the reporting date but not recognised as liabilities payable: Not later than one year 17.5 13.4 17.3 13.1 Later than one year and not later than ﬁ ve years 76.5 44.1 76.5 43.8 Later than ﬁ ve years - 6.9 - 6.9 Representing: non-cancellable operating leases 94.0 64.4 93.8 63.8

25. Deﬁ ned beneﬁ t obligations

The Group contributes to an industry multiple employer superannuation plan, the Electricity Supply Industry (ESI) Superannuation Fund (Qld). Members, after serving a qualifying period, are entitled to benefi ts from this fund on retirement, resignation, retrenchment, disability or death. The defi ned benefi t account of this fund is a funded plan which provides defi ned lump sum benefi ts based on years of service and fi nal average salary. Employee contributions to the fund are based on various percentages of their gross salaries.

25.1 KEY ASSUMPTIONS USED

Consolidated Parent Entity 2009 2008 2009 2008 %%%% Discount rate 4.7 5.4 4.7 5.4 Expected return on plan assets 6.0 6.5 6.0 6.5 Future salary increases Salary increase rate year one 4.5 5.5 4.5 5.5 Salary increase rate year two 4.5 5.5 4.5 5.5 Salary increase rate year three 4.5 5.5 4.5 5.5 Salary increase rate thereafter 4.5 4.5 4.5 4.5

The expected return on plan assets has been calculated based on the current asset allocation to each of the major asset classes and the expected future investment return for each of the asset classes.

104 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

25.2 RECONCILIATION OF AMOUNTS RECOGNISED IN THE INCOME STATEMENT

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M

Current service cost 16.2 16.0 16.2 16.0 Interest cost 18.3 17.3 18.3 17.3 Expected return on plan assets (22.8) (26.0) (22.8) (26.0) Net actuarial losses/(gains) recognised in year 11.7 7.3 11.7 7.3 Past service cost - - - - Total included in employee beneﬁ ts expense 11.7 7.3 11.7 7.3

25.3 RECONCILIATION OF AMOUNTS RECOGNISED IN THE BALANCE SHEET

Present value of funded obligations (394.4) (351.9) (394.4) (351.9) Fair value of plan assets 332.3 357.1 332.3 357.1 Surplus/(deﬁ cit) (62.1) 5.2 (62.1) 5.2 Provision for contributions tax (11.0) 0.8 (11.0) 0.8

Net (liability)/asset in the balance sheet 25.4 (73.1) 6.0 (73.1) 6.0

25.4 HISTORICAL ANALYSIS OF DEFINED BENEFIT OBLIGATIONS OF THE CONSOLIDATED AND PARENT ENTITY

2009 2008 2007 2006 2005 Note $ M $ M $ M $ M $ M

Present value of deﬁ ned beneﬁ t obligation 25.5 (405.4) (351.1) (326.5) (319.7) (294.7) Fair value of plan assets 25.6 332.3 357.1 404.3 348.5 291.8

Surplus/(deﬁ cit) of the plan 25.3 (73.1) 6.0 77.8 28.8 (2.9)

Experience adjustments arising on plan assets (46.9) (69.5) 29.4 29.4 11.9 Experience adjustments arising on plan liabilities (20.3) (4.9) 21.3 (29.1) 6.4

25.5 RECONCILIATION OF MOVEMENTS IN THE DEFINED BENEFIT OBLIGATION

Consolidated Parent Entity 2009 2008 2009 2008 Note $ M $ M $ M $ M Opening defi ned benefi t obligation 351.1 326.5 351.1 326.5 Current service cost 16.2 16.0 16.2 16.0 Interest cost 18.3 17.3 18.3 17.3 Contributions by fund participants 4.8 4.8 4.8 4.8 Actuarial (gains)/losses 38.1 4.4 38.1 4.4 Benefi ts payments and tax (23.1) (17.9) (23.1) (17.9) Closing defi ned benefi t obligation 25.4 405.4 351.1 405.4 351.1

25.6 RECONCILIATION OF MOVEMENTS IN THE FAIR VALUE OF PLAN ASSETS

Opening fair value of plan assets 357.1 404.3 357.1 404.3 Expected return on plan assets 22.8 26.0 22.8 26.0 Actuarial gains/(losses) (46.9) (69.5) (46.9) (69.5) Contributions by the employer 17.6 9.4 17.6 9.4 Contributions by fund participants 4.8 4.8 4.8 4.8 Beneﬁ ts payments and tax (23.1) (17.9) (23.1) (17.9) Closing fair value of plan assets 25.4 332.3 357.1 332.3 357.1

ENERGEX Annual Report 2008-2009 105 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

25.7 CUMULATIVE AMOUNT RECOGNISED IN THE STATEMENT OF RECOGNISED INCOME AND EXPENSE Consolidated Parent Entity 2009 2008 2009 2008 $ M $ M $ M $ M Cumulative amount of actuarial (gains)/losses at beginning of year (3.1) (77.0) (3.1) (77.0) Loss/(gain) in year 84.9 73.9 84.9 73.9 Cumulative amount of actuarial (gains)/losses at end of year 81.8 (3.1) 81.8 (3.1)

25.8 THE MAJOR CATEGORIES OF PLAN ASSETS AS A PERCENTAGE OF TOTAL PLAN ASSETS ARE AS FOLLOWS:

Cash 7% 7% 7% 7% Fixed interest 16% 20% 16% 20% Australian shares 21% 23% 21% 23% Alternatives 20% 9% 20% 9% International shares 21% 29% 21% 29% Property 15% 12% 15% 12% Total 100% 100% 100% 100%

The actual return on plan assets for 2008/09 was a loss of $24.1 million (2008: $43.5 million loss).

25.9 NET FINANCIAL POSITION OF PLAN

The superannuation plans compute their obligations in accordance with AAS 25 Financial Reporting by Superannuation Plans which prescribes a different measurement basis to that applied in this ﬁ nancial report, pursuant to AASB 119 Employee Entitlements. Under AAS 25, and in accordance with the Occupational Superannuation Standards Regulation, the ESI Superannuation Fund is required to undertake actuarial investigations at least every three years.

Surplus/(defi cit) The following is a summary of the most recent fi nancial position of the ESI Superannuation Fund (with respect to both defi ned benefi t and accumulation members for the Group’s participation in the Fund) calculated in accordance with AAS 25:

Last reporting date $M Accrued beneﬁ ts 30/06/2008 (569.0) Net market value of plan assets 30/06/2008 552.1 Net surplus/(deﬁ cit) 30/06/2008 (16.9)

Contribution recommendations For the fi nancial year ended 30 June 2009, the Group paid 10% (2008: 10%) of defi ned benefi t members’ salaries. The plan actuaries recommended that an additional contribution of $7.9 million beyond the current contribution level be made, which was paid in June 2009 (2008: nil). Funding recommendations are made by the actuaries based on their forecast of various matters, including future plan assets performance, interest rates, and salary increases.

The Group expects to make a contribution rate of 32% (2008: 10%) to the defi ned benefi t plan during the next fi nancial year. Accordingly, the Group expects to contribute $32.1 million to its defi ned benefi t plan in 2009/10.

Funding method The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate method. The method adopted affects the timing of the cost to the employer. Under the aggregate method, the future contribution rates are determined, and are expected to be suffi cient to fund the difference between the value of the future benefi ts for existing defi ned benefi t members and the value of plan assets attributable to defi ned benefi t members, over the future working lifetime of existing defi ned benefi t members.

106 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

An aggregate fi nancing method can be expected to produce a higher level of volatility in recommending employer contribution rates, particularly as the defi ned benefi t membership ages and reduces in size. Variations between actual and expected experience have a greater fi nancial effect on future employer contribution rates as the future working lifetime of the existing defi ned benefi t members reduces.

Principal economic assumptions adopted for the last actuarial review (as at 30/06/2008) of the fund include:

% Expected rate of return on plan assets in year one (13.0) Expected rate of return on plan assets thereafter 7.0 Expected salary increase rate 5.0

Nature of asset/liability The ESI Superannuation Fund does not impose a legal liability on the Group to cover any deﬁ cit that exists in the Fund. If the Fund were wound up, there would be no legal obligation on the Group to make good any shortfall. The Trust Deed of the Fund states that if the Fund winds up, after the payment of all costs and member beneﬁ ts in respect of the period up to the date of termination, any remaining assets are to be distributed by the Trustee of the Fund, acting on the advice of the actuary, to participating employers.

The Group may at any time by notice to the Trustee terminate its contributions. The employer has a liability to pay the monthly contributions due prior to the effective date of the notice, but there is no requirement for an employer to pay any further contributions, irrespective of the ﬁ nancial condition of the Fund.

The Group may beneﬁ t from any surplus in the Fund in the form of a contribution reduction or contribution holiday. Any reduction in contributions would normally be implemented only after advice from the Fund’s actuary. 26. Investments in associates

Investments in associates are accounted for in the consolidated ﬁ nancial statements using the equity method of accounting and are carried at the lower of cost or recoverable amount by the parent entity. Information relating to the associates is set out below:

Carrying amount of Name of entity Principal activities Ownership interest investment 2009 2008 2009 2008 % % $ M $ M SPARQ Solutions Pty Ltd Information technology services provider 50.0 50.0 (2.1) (0.6) Quest Asset Holdings Pty Ltd1 Deregistered - 50.0 - - 1 Quest Asset Holdings Pty Ltd (QAH) was deregistered on 24 February 2009. The process for the voluntary deregistration of QAH commenced in December 2008 following a joint decision by Ergon Energy and ENERGEX to deregister this company. As part of the deregistration, ENERGEX derecognised its share capital of $500 in QAH, which represented 50% of QAH’s contributed equity balance at the date of deregistration.

2009 2008 $ M $ M Movements in carrying amounts of investments in associates Beginning of the ﬁ nancial year (0.6) 0.2 Share of losses from ordinary activities after tax - - Net expense directly recognised in equity (1.5) (0.8) End of the ﬁ nancial year (2.1) (0.6)

ENERGEX Annual Report 2008-2009 107 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

2009 2008 $ M $ M Summarised presentation of share of aggregate assets, liabilities and performance of associates Assets 111.2 113.8 Liabilities 113.3 114.4 Revenues 58.2 54.7 Proﬁ t/(losses) from ordinary activities after tax - -

Share of associates’ expenditure commitments Operating lease commitments Within one year 0.6 0.9 Later than one year and not later than fi ve years 5.0 1.3 Later than fi ve years 2.1 0.2 Capital commitments Within one year 0.3 0.6 Later than one year and not later than fi ve years 0.1 - Other commitments Within one year 7.4 9.5 Later than one year and not later than fi ve years 0.2 9.4 Total 15.7 21.9

No contingent liabilities or accumulated unrecognised losses exist in relation to the entities disclosed as associates at 30 June 2009 (2008: nil). 27. Investment in controlled entities

Interests are held in the following controlled companies:

Country of Name Note incorporation Shares Ownership interest 2009 2008 %% Queensland Energy Services Team Pty Ltd Australia Ordinary 100 100 Metering Dynamics Pty Ltd 27.3 Australia Ordinary 100 100 Energy Impact Pty Ltd 27.1 Australia Ordinary 100 100 Varnsdorf Pty Ltd 27.1 Australia Ordinary 100 100 VH Energy Holdings Pty Ltd 27.1, 27.2 Australia Ordinary 100 100 VH Operations Pty Ltd 27.1, 27.2 Australia Ordinary 100 100 VH Finance Pty Ltd 27.1, 27.2 Australia Ordinary 100 100 Beak Industries Pty Ltd Australia Ordinary 100 100 Service Essentials Pty Ltd 21 Australia Ordinary 90 90

27.1 These companies entered into a deed of cross guarantee (DOCG) dated 13 March 2003 with QEST. The DOCG provides that QEST will guarantee the payment in full to each creditor, of any debt of these companies, on the winding up of any company within the DOCG. As a result of Class Order 98/1418, ASIC granted approval on 24 April 2003 for these companies to be relieved from the Corporations Act 2001 requirement for preparation, audit and lodgement of fi nancial statements for fi nancial years ending on or after this date. 27.2 These companies are also parties to the DOCG as detailed in Note 27.1 above. They are relieved from the requirements for preparation, audit and lodgement of annual fi nancial statements with ASIC as they are small proprietary companies. 27.3 Metering Dynamics Pty Ltd is a small proprietary company and is therefore relieved from the requirement for preparation, audit and lodgement of annual fi nancial statements with ASIC.

108 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Total Total Total Proﬁ t/(loss) Subsidiary name Purpose of entity assets liabilities revenue before tax $’000 $’000 $’000 $’000 30 June 2009 Queensland Energy Services Parent entity of QEST Consolidated 51,688 6,323 51,614 18,393 Team Pty Ltd (Consolidated) Group Queensland Energy Services Parent entity of Energy Impact Pty Ltd 3,493 1,762 - - Team Pty Ltd1 and Metering Dynamics Pty Ltd Beak Industries Pty Ltd Operates natural gas energy peaking 840 2,147 1,202 (454) plant Service Essentials Pty Ltd Billing, meter reading, credit and 1 1,063 (317) - payment management services Energy Impact Pty Ltd1 Provides metering services and systems 26,358 19,326 20,269 (7,872) to retail customers Metering Dynamics Pty Ltd1 Dormant entity - - - - Varnsdorf Pty Ltd1 Holds contracts for cogeneration 32,189 3,898 29,245 9,024 activities with Victorian hospitals VH Energy Holdings Pty Ltd1 Holding company 22 - - VH Operations Pty Ltd1 Holds employees associated with the 2,500 1,138 7,350 (542) Varnsdorf Group VH Finance Pty Ltd1 Financing vehicle for the Varnsdorf 19,372 14,523 258 201 Group 1 These entities form the QEST Consolidated Group.

30 June 2008 Queensland Energy Services Parent entity of QEST Consolidated 46,357 14,852 103,918 42,335 Team Pty Ltd (Consolidated) Group Queensland Energy Services Parent entity of Energy Impact Pty Ltd 6,296 - 16,395 (89) Team Pty Ltd1 and Metering Dynamics Pty Ltd Beak Industries Pty Ltd Operates natural gas energy peaking 1,032 2,021 34 (597) plant Service Essentials Pty Ltd Billing, meter reading, credit and 550 1,358 51,460 - payment management services Energy Impact Pty Ltd1 Provides metering services and systems 37,369 22,464 69,799 40,713 to retail customers Metering Dynamics Pty Ltd1 Dormant entity - - - - Varnsdorf Pty Ltd1 Holds contracts for cogeneration 30,675 11,441 27,776 2,887 activities with Victorian hospitals VH Energy Holdings Pty Ltd1 Holding company 2 2 - - VH Operations Pty Ltd1 Holds employees associated with the 2,899 994 6,143 530 Varnsdorf Group VH Finance Pty Ltd1 Financing vehicle for the Varnsdorf 19,321 14,673 1,601 1,517 Group 1 These entities form the QEST Consolidated Group. 28. Key management personnel

28.1 COMPENSATION PRINCIPLES

Directors All remuneration of Directors, including Directors’ fees and Board committee fees, is established by the shareholding Ministers. Directors do not receive any performance-related remuneration. The remuneration policy is to ensure that the remuneration package properly reﬂ ects the Directors’ duties and responsibilities, taking into account the nature and complexity of the business.

ENERGEX Annual Report 2008-2009 109 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Director Term of appointment Appointment expiry date John Dempsey 3 years 4 months 30 September 2011 Peter Arnison 2 years 30 September 2010 Mary Boydell 3 years 30 September 2011 Mat Darveniza 2 years 30 September 2010 John Geldard 2 years 30 September 2010 Ronald Monaghan 3 years 4 months 30 September 2011 Kerryn Newton (appointed 1 October 2008) 3 years 30 September 2011

Senior executives The following are Directors of controlled entities and received no remuneration from their role as an executive Director: • Terence Effeney • Darren Busine • Peter Weaver • Tom Bloxsom • Susan Kehoe

The senior executive remuneration strategy and practices of the Group are designed to assist the organisation to attract, retain and motivate high calibre individuals in senior executive positions. This is achieved by providing an appropriate combination of competitive ﬁ xed and variable remuneration components. Shareholder guidelines and policies in relation to executive remuneration are followed.

The fi xed component of remuneration is linked to an assessment of the job size and value based on independent market evaluation. The fi xed remuneration on appointment is up to market median for the position size in accordance with Offi ce of Government Owned Corporations (OGOC) guidelines. Annual increases are in accordance with recommendations approved by the Board in line with the governance arrangements for chief and senior executives provided by the government. A variable component of remuneration is provided to members of the senior executive as described in Note 28.5.

Senior executive employment contracts Remuneration and other terms of employment for each senior executive are formalised in executive employment contracts. Each of these contracts makes a provision for ﬁ xed remuneration and performance pay.

Applies to General Manager Customer Services Where employment is terminated due to the employer’s operational requirement, a severance payment is payable based on the total ﬁ xed remuneration for the greater of 26 weeks or three weeks per year of service, together with a proportionate amount for an incomplete year of service. The minimum and maximum payment will be three weeks and 75 weeks respectively. An early separation incentive payment of 13 weeks may be paid where applicable, as well as 20% of the contract’s residual total ﬁ xed remuneration or such higher percentage as is agreed between the parties.

The General Manager Customer Services is on a tenured agreement.

Applies to Acting General Manager Commercial Developments An executive whose position becomes redundant and whose employment is terminated by the employer on the basis of the employer’s operational requirements, and no other suitable position for redeployment of the executive is able to be identifi ed, is entitled to a severance payment of: • the total fi xed remuneration for the greater of 26 weeks or three weeks pay per year of service, together with a proportionate amount for an incomplete year of service. The minimum and maximum payment will be 26 weeks and 75 weeks respectively; • an early separation incentive payment of 13 weeks may be paid at the absolute discretion of the Chief Executive Offi cer (CEO); • accumulated annual leave as well as any pro-rata balance of annual leave to the date of termination; • long service leave payment of 1.3 weeks for each completed year of service and pro-rata long service leave for an incomplete year of service up to the date of termination; and • 20% of the total fi xed remuneration of the balance of contract, if any, or such higher percentage as is agreed between the parties.

The Acting General Manager Commercial Developments is on a tenured agreement and ceased acting in the role on 30 June 2009.

110 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

Applies to General Manager Network Performance, General Manager Network Programming and Procurement, General Manager Human Resources and General Manager Energy Delivery Where employment is terminated by the employer on the basis of the employer’s operational, technological or economical requirements, and no other suitable position for redeployment of the senior executive is able to be identiﬁ ed and offered, the senior executive is entitled to: a service payment based on two weeks salary per year of continuous service with a minimum of four weeks and a maximum of 52 weeks; and a separation payment of 20% of the residual of the contract, that is between the termination date and the completion date of the initial three years or of the subsequent two years of the contract as the case may be.

These General Managers have ﬁ xed term contracts that provide for four weeks notice or equivalent payment on termination.

Applies to Chief Financial Ofﬁ cer and General Manager Corporate Governance and Company Secretary Where ENERGEX terminates the executive’s employment prior to the termination date otherwise than pursuant to clause 10.3 (termination by ENERGEX without notice) or for unsatisfactory performance or incapacity, ENERGEX will pay to the executive upon termination: a service payment, equal to the greater of four weeks salary or two weeks salary per year of continuous service up to a maximum 52 weeks salary; and a separation payment, equal to 20% of the salary that the executive would have earned had the employment continued from the day after the notice period ceased until the termination date.

These General Managers have ﬁ xed term contracts that provide for three months notice or equivalent payment on termination.

Applies to the Chief Executive Offi cer (CEO) Where employment is terminated immediately upon notice in writing prior to the completion date in circumstances not otherwise provided for in the agreement or based on the employer’s operational requirements, the CEO is entitled to: a service payment based on two weeks pro-rata of the total fi xed remuneration package per year of continuous service subject to a minimum payment equivalent to 13 weeks and a maximum payment equivalent to 52 weeks; and a separation payment of the greater of an amount equivalent to 13 weeks pro-rata amount of the total fi xed remuneration package or 20% of the balance of the total fi xed remuneration package in this agreement up to the completion date.

The CEO has a ﬁ xed term contract that provides for six months notice or equivalent payment on termination.

All remuneration component amounts are reviewed annually by the Remuneration Committee and the Board. All amendments to the remuneration policy for senior executives are reviewed by the Remuneration Committee for endorsement prior to submission to the Board and shareholding Ministers.

Other major provisions of the agreements relating to remuneration are set out as follows:

Position Term of contract Contract expiry date Chief Executive Offi cer 3 years fi xed term 8 January 2010 General Manager Network Performance 3 years fi xed term 1 March 2010 General Manager Energy Delivery 3 years fi xed term 1 March 2010 General Manager Network Programming and Procurement 3 years fi xed term 1 March 2010 General Manager Corporate Governance and Company Secretary 3 years fi xed term 3 October 2010 Chief Financial Offi cer 3 years fi xed term 29 October 2010 General Manager Human Resources 3 years fi xed term 1 March 2010 General Manager Customer Services Tenured Acting General Manager Commercial Developments Tenured

ENERGEX Annual Report 2008-2009 111 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

28.2 COMPENSATION DISCLOSURES BY CATEGORY

2009 2008 $$ Short-term employee benefi ts 3,240,808 2,906,205 Non-monetary benefi ts 26,100 26,113 Post-employment benefi ts 235,396 216,874 Other long-term benefi ts 63,609 70,106 Termination benefi ts - -

Total compensation 3,565,913 3,219,298

28.3 COMPENSATION – DIRECTORS Non- Short-term monetary Post Name beneﬁ ts beneﬁ ts employment Total $$$$

2009 John Dempsey 79,007 2,610 7,111 88,728 Peter Arnison 36,870 - 3,318 40,188 Mary Boydell 40,820 - 3,674 44,494 Mat Darveniza 35,553 - - 35,553 John Geldard 38,187 - 3,437 41,624 Ronald Monaghan 37,924 - 3,413 41,337 Kerryn Newton (appointed 1 October 2008) 26,150 - 2,353 28,503 294,511 2,610 23,306 320,427

2008 John Dempsey 75,823 2,607 6,824 85,254 Peter Arnison 35,384 - 3,185 38,569 Mary Boydell 36,723 - 3,305 40,028 Mat Darveniza 34,120 - 1,024 35,144 John Geldard 35,830 - 3,225 39,055 Grace Grace (resigned 21 September 2007) 8,846 - 796 9,642 Ronald Monaghan (appointed 22 May 2008)1 ---- 226,726 2,607 18,359 247,692 1 Payment made in 2008/09 for attendance of meetings in 2007/08.

The service and performance criteria set to determine remuneration are included in Note 28.1.

112 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

28.4 COMPENSATION – EXECUTIVES

Short-term Non-monetary Post Other long- Termination Name benefi ts benefi ts employment term benefi ts benefi ts Total $$$$$$ 2009 Chief Executive Offi cer 477,348 2,610 47,172 12,992 - 540,122 General Manager Network Performance 312,803 2,610 31,118 1,979 - 348,510 General Manager Energy Delivery 347,339 2,610 13,731 8,574 - 372,254 General Manager Network 316,773 2,610 31,118 1,979 - 352,480 Programming and Procurement General Manager Corporate 234,085 2,610 14,210 6,173 - 257,078 Governance and Company Secretary Chief Financial Offi cer 349,545 2,610 13,731 8,916 - 374,802 General Manager Human Resources 281,133 2,610 14,063 6,859 - 304,665 General Manager Customer Services 335,633 2,610 32,737 9,012 - 379,992 Acting General Manager Commercial 291,637 2,610 14,210 7,125 - 315,582 Developments Total 2,946,296 23,490 212,090 63,609 - 3,245,485

2008 Chief Executive Offi cer 450,153 2,607 44,116 12,142 - 509,018 General Manager Network Performance 287,027 2,607 28,477 7,837 - 325,948 General Manager Energy Delivery 300,420 2,607 13,121 7,837 - 323,985 General Manager Network 289,439 2,607 28,477 7,837 - 328,360 Programming and Procurement General Manager Corporate 229,474 2,607 13,010 5,875 - 250,966 Governance and Company Secretary Chief Financial Offi cer 210,651 1,750 8,584 5,645 - 226,630 (appointed 29 October 2007) Acting Chief Financial Offi cer 82,913 850 4,702 1,659 - 90,124 (until 28 October 2007) General Manager Human Resources 248,213 2,607 13,121 6,531 - 270,472 General Manager Customer Services 315,709 2,607 31,216 8,591 - 358,123 Acting General Manager Commercial 133,559 1,500 7,589 2,987 - 145,635 Developments (from 3 December 2007) Former General Manager Commercial 131,921 1,157 6,102 3,165 - 142,345 Developments (until 10 December 2007) Total 2,679,479 23,506 198,515 70,106 - 2,971,606

The service and performance criteria set to determine remuneration are included in Note 28.1.

ENERGEX Annual Report 2008-2009 113 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

28.5 AT-RISK PERFORMANCE COMPENSATION

Performance payments to employees Aggregate at- Total ﬁ xed salaries and Number of employees risk performance wages payments1 receiving performance Financial year remuneration payments $$ 2009 12,605,456 339,784,660 3,490 2008 13,568,952 319,057,520 3,369 1 Amounts shown above include capitalised employee beneﬁ ts not shown in the income statement.

Key management personnel and managers for a performance pay of those entities. The terms and other executives period (normally six or 12 months), conditions of the transactions with A variable component of remuneration with assessments for performance management persons and their related is provided to members of the payments being conducted upon parties were no more favourable executive team through an annual completion of the assessment period. than those available, or which performance payment scheme. might reasonably be expected to be This scheme is designed to All employees are eligible to available, on similar transactions to effectively reward a combination participate in the scheme (including non-related entities on an arm’s length of key behaviours, capability and casuals, temporary staff, apprentices basis. performance aligned with business and trainees). Participation in the goals and targets of the Group. The scheme is voluntary. Transactions with related parties maximum funds made available for of key management personnel that such payments are 15% of total fi xed To be eligible for payment, the occurred during the fi nancial year remuneration. Actual performance employee and the manager have are noted below. The related party payments are based on performance a discussion to develop agreed disclosures are those in connection measured against predetermined key targets which must be documented with ENERGEX and the related parties performance indicators as detailed within the performance agreement. of ENERGEX Directors. in the annual statement of corporate This agreement must be signed by intent (which is approved by the both parties. The employee must The related party disclosures shareholding Ministers) and the senior also be employed at the end of the are those in connection with ESI executive’s performance agreement. performance pay period to be eligible. Superannuation Fund and WorkCover Senior executive performance Queensland. John Geldard is a agreements comply with the format The size of the pool at the end of Director of ESI Superannuation approved by the shareholding each period to enable payment of Fund. ENERGEX contributed to the Ministers. The performance payments performance pays is at the discretion fund based on actuarial advice and recommended by the CEO are of the CEO. There will be a maximum the total payments for the year were submitted to the Board for approval. pool of 6% for award employees. $55,288,645 (2008: $42,903,364). The shareholding Ministers are Ronald Monaghan is a Director of advised of the actual performance The grant dates for the 2008/09 WorkCover Queensland. During the payment within one month of payment. performance pay were 25 February year, premiums paid by ENERGEX The grant date for both senior 2009 and 24 September 2008 to WorkCover Queensland were executives and executives’ 2008/09 (2008: 25 February 2008 and $2,452,298 (2008: $2,089,799). performance pay was 24 September 21 August 2007). 2008 (2008: 1 October 2007 and Related party transactions between 14 August 2007 respectively). 28.6 TRANSACTIONS WITH ENERGEX and its wholly-owned RELATED PARTIES OF entities and associates are disclosed Non-executive contract employees KEY MANAGEMENT in Notes 29.1 and 29.2. and employees covered by awards PERSONNEL The Group’s performance pay scheme provides for the establishment A number of key management persons of action plans and performance (i.e. Directors and senior executives), indicators against which performance or their related parties, hold positions is assessed for performance pay in other entities that may result in them purposes. Employees develop having control or signifi cant infl uence performance agreements with their over the fi nancial or operating policies

114 ENERGEX Annual Report 2008-2009 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

29. Related parties (c) IT service fee receivable from The following relates to transactions Service Essentials; with state-owned entities: 29.1 WHOLLY-OWNED GROUP (d) Corporate service charge 2009 2008 receivable from Service $ M $ M Revenues and The wholly-owned Group consists Essentials; expenses of ENERGEX and its wholly-owned (e) Interest on working capital facility TUOS expense 246.7 230.6 controlled entities as set out in (interest charged monthly at an Interest expense – QTC 204.8 182.4 Other expenses 71.8 62.6 Note 27. Transactions between average rate of 7.3% (2008: Government grant revenue 33.3 38.8 ENERGEX and other entities in the 7.3%) on daily balances); Other revenue 32.4 49.2 wholly-owned Group include: (f) Interest on long-term loan; Aggregate amounts receivable from/payable to state- (a) Services provided to (expenses) (g) Working capital facility between the parent entity and Service owned entities at the reporting date: and provided by (revenue) Short term deposits 296.1 358.8 ENERGEX. During the year Essentials; and Other assets 11.4 13.4 transactions were undertaken (h) IT services and communication Current trade payables 58.8 36.5 services from SPARQ Solutions Current tax payable/ between the Company and a (receivable) (3.6) (8.9) number of its related parties. Pty Ltd. Other liabilities 11.0 9.8 (b) Intragroup loans and interest Government grant unearned Revenues/(expenses) revenue liability 44.4 41.2 charges. 2009 2008 Dividend provision 102.8 210.8 $ M $ M Long-term borrowings – QTC 3,843.1 3,344.9 Aggregate amounts included in the determination Tolling charges 0.3 (50.9) No provision for impairment of of the parent entity’s operating proﬁ t before IT licence revenue - 8.5 receivables was raised in relation income tax equivalent that resulted from IT service revenue - 5.5 transactions with entities in the wholly-owned to any outstanding balances and no Corporate services revenue - 0.7 Group: expense was recognised in respect of Interest revenue - 0.6 2009 2008 bad or impaired debts due from state- Contractor charges 37.9 44.2 Note $ M $ M owned entities.

Corporate services 2.1 0.1 14.8 Aggregate amounts receivable from/payable to charge 29.5 GUARANTEES Interest revenue 2.1 0.1 5.2 related entities at the reporting date: Assets/(liabilities) Interest expense 2.2 1.0 1.4 Other than the fi nancial support Current receivables 26.7 13.5 provided to Beak Industries, QEST, Non-current receivables 83.9 101.8 Metering Dynamics Pty Ltd and Service Aggregate amounts of the parent entity Current trade payables (7.5) (13.6) receivable/payable from other entities in the Essentials (refer Note 23.7), there are wholly-owned Group at the reporting date: no other guarantees with other related 29.3 KEY MANAGEMENT parties at the reporting date. Current trade receivables, net of PERSONNEL Terms and conditions provision 7 - 1.4 Intragroup loans are available from Non-current trade Disclosures relating to key receivables, net of the parent entity in the form of a management personnel are set out in provision 7 - - rolling facility and reviewed on a Current trade Note 28. payables 13 - 12.2 regular basis. The loans are interest- Non-current trade bearing at the 30 day bank bill swap payables 13 19.8 - 29.4 STATE-OWNED PARTIES rate (BBSW) plus 2%. There are no fi xed terms for the repayment of ENERGEX is a Queensland loans between the parties. 29.2 OTHER RELATED government owned corporation, with PARTIES shares held by the shareholding The terms of the tax funding Ministers on behalf of the State of agreement are set out in Note 1.9. Transactions between the Company Queensland. All State of Queensland and other related entities (non- controlled entities meet the defi nition Transactions with other State- wholly-owned entities and associates) of a related party of ENERGEX. owned electricity entities were made consisted of: on normal commercial terms and (a) Tolling service fee payable to conditions and at market rates. Service Essentials; (b) IT licence fee receivable from Outstanding balances are unsecured Service Essentials; and are repayable in cash.

ENERGEX Annual Report 2008-2009 115 Notes to and forming part of the ﬁ nancial statements for the year ended 30 June 2009

30. Contingent assets and liabilities

30.1 LEGAL PROCEEDINGS

A number of common law claims are pending against the consolidated entity. In each case a writ has been served and the consolidated entity is at various stages of defending the actions. Liability is not admitted and all claims will be defended. The known amount claimable due to litigation and associated legal fees is $0.3 million (2008: $1.2 million).

30.2 ENVIRONMENTAL REMEDIATION

The Group provides for all known environmental liabilities. While the Directors believe that, based upon current information, its current provisions for environmental remediation are adequate, there can be no assurance that new material provisions will not be required as a result of new information or regulatory requirements with respect to known sites or identiﬁ cation of new remedial obligations at other sites.

30.3 NEWSTEAD OFFICE PARK

ENERGEX has entered into an agreement to lease ofﬁ ce premises at the Newstead ofﬁ ce park. The development is due to be completed in July 2010. An estimate of the total lease payments over the lease period is $228.8 million.

Consolidated Parent Entity 2009 2008 2009 2008 $$$$ 31. Auditors’ remuneration

Remuneration for audit of the fi nancial statements of the parent entity or any entity in the Group: Audit by the Auditor-General of Queensland: Annual fi nancial statements 478,350 552,600 435,200 456,900 QCA regulatory fi nancial statements 60,300 50,000 60,300 50,000 538,650 602,600 495,500 506,900 Other auditors – KPMG (Auckland) - 57,102 - 57,102 Total auditors’ remuneration 538,650 659,702 495,500 564,002

The 2007/08 ﬁ gures have been updated for actual audit costs incurred. 32. Events after the balance sheet date

Beak Industries, a subsidiary of ENERGEX, executed an asset sale agreement (ASA) with a prospective purchaser in June 2009. As at 30 June 2009, the agreement was not legally binding as a condition precedent to the ASA was outstanding. The ASA became legally binding when the ﬁ nal condition precedent was completed on 24 July 2009. The completion of this asset sale resulted in Beak Industries’ main operating assets and the legal obligation for the site restoration located at Sunshine Energy Park, Victoria, being transferred to the purchaser. This has resulted in a gain on disposal before income tax equivalent of $1.2 million.

ENERGEX has commenced a process for the sale of the landﬁ ll gas assets owned by its subsidiary, Energy Impact Pty Ltd, by issuing an expression of interest in July 2009 seeking potential offers. The outcomes of this sale have not been determined.

There are no other matters or occurrences that have come to our attention up to the present time which would materially affect the ﬁ nancial report therein, or which are likely to materially affect the future results or operations of the Group.

116 ENERGEX Annual Report 2008-2009 Directors’ declaration for the year ended 30 June 2009

The Directors declare that the ﬁ nancial statements and notes:

(a) comply with Australian Accounting Standards, the Corporations Regulations 2001, the Government Owned Corporations Act 1993, other mandatory professional reporting requirements; and

(b) give a true and fair view of the Company’s and consolidated entity’s fi nancial position as at 30 June 2009 and of their performance, as represented by the results of their operations and their cash fl ows, for the fi nancial year ended on that date.

In the Directors’ opinion:

(a) the ﬁ nancial statements and notes are in accordance with the Corporations Act 2001;

(b) there are reasonable grounds to believe that the Company and its controlled entities will be able to pay their debts as and when they become due and payable; and

(c) as at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Groups identiﬁ ed in Note 27 will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the Deed of Cross Guarantee as described in Note 27.

The declaration is made in accordance with a resolution of the Directors.

JOHN DEMPSEY Chairman 24 August 2009 Brisbane, Queensland

ENERGEX Annual Report 2008-2009 117 Independent auditor’s report

To the Members of ENERGEX Limited

Matters relating to the Electronic Presentation of the Audited Financial Report The audit report relates to the financial report of ENERGEX Limited for the financial year ended 30 June 2009 included on ENERGEX Limited’s web site. The Directors of ENERGEX Limited are responsible for the integrity of the company’s web site. We have not been engaged to report on the integrity of ENERGEX Limited’s web site. The audit report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report, available from ENERGEX Limited, to confirm the information included in the audited financial report presented on this web site. These matters also relate to the presentation of the audited financial report in other electronic media including CD Rom.

Report on the Financial Report I have audited the accompanying financial report of ENERGEX Limited, which comprises the balance sheets as at 30 June 2009, and the income statements, statements of recognised income and expense and cash flow statements for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with theAustralian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility My responsibility to express an opinion on the financial report based on the audit is prescribed in the Auditor-General Act 2009. This Act, including transitional provisions, came into operation on 1 July 2009 and replaces the previous requirements contained in the Financial Administration and Audit Act 1977.

The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.The procedures selected depend on the auditor’s judgement, including the assessment of risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence The Auditor-General Act 2009 promotes the independence of the Auditor‑General and QAO authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can only be removed by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor‑General’s opinion are significant.

In conducting the audit, the independence requirements of the Corporations Act 2001 have been complied with. I confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of ENERGEX Limited on 19 August 2009, would be in the same terms if provided to the directors, as at the date of this auditor’s report.

Auditor’s Opinion In my opinion the financial report of ENERGEX Limited is in accordance with the Corporations Act 2001, including –

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

G G POOLE FCPA Queensland Audit Office Auditor-General of Queensland Brisbane

118 ENERGEX Annual Report 2008-2009 PDF!-

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