Annual Performance Report 2009 Report Performance Annual Energy Integral – 10
energy for life
Annual Performance Report 2009–10 Locations, addresses, Glendenning Central Springhill Field Support Centre phone numbers and Logistics Facility 191–195 Five Island Road hours of operation 49 Glendenning Road Unanderra NSW 2526 Emergencies, streetlights out, Glendenning NSW 2761 Ulladulla Field Support Centre hot water hotline Glendenning Civil Works Centre 18 Deering Street Tel: 131 003 (24 hours) 15 Belfast Place Ulladulla NSW 2539 Customer service Glendenning NSW 2761 Windsor Field Support Centre © Integral Energy 2010 Tel: 131 002 Glendenning Field Corner Ham Street and Fairey Street (8.00am–5.30pm Monday to Friday; This work is copyright. Material contained in this document may be Support Centre South Windsor NSW 2756 8.00am–1.00pm Saturday) reproduced for personal, in-house or non-commercial use without 43 Glendenning Road formal permission or charge provided there is due acknowledgement of Integral Energy as the source. Account enquiries Glendenning NSW 2761 Requests and enquiries concerning reproduction and rights for a Residential customers Hoxton Park Field purpose other than personal, in-house or non-commercial use should Tel: 131 002 Support Centre be addressed to the Manager Corporate and Government Affairs, Integral Energy, PO Box 6366, Blacktown NSW 2148. Business customers 490 Hoxton Park Road ISSN 1834-0733 Tel: 1300 136 335 for the Hoxton Park NSW 2171 INbusiness Solutions team Kandos Field Support Centre About this report (8.00am–6.00pm Monday to Friday) This report provides a candid account of Integral Energy’s performance 16 White Crescent during the fi nancial year 2009–10. It notes Integral Energy’s successes, Credit card payments Kandos NSW 2848 areas for improvement and our future direction and challenges. Energy Tel: 1300 361 104 (24 hours) Australia The theme for this years report is ‘Energy for life’, highlighting Integral Katoomba Field Support Centre Energy’s commitment to provide a safe, reliable and effi cient electricity Head offi ce enquiries 27–29 Whitton Street supply to the communities we serve. Tel: 131 081 or (02) 9853 6666 Katoomba NSW 2780 Kandos This report complies with the requirements of the NSW Annual Reports (8.00am–5:30pm Monday to Friday) legislation and embraces the principles of the Global Reporting Kings Park Field Support Centre Initiative (GRI). Fax: (02) 9853 6000 10 Tasha Place Statutory accounts and fi nancial information are verifi ed by the NSW Email: [email protected] Kings Park NSW 2148 Auditor General. Bowenfels Website: www.integral.com.au We printed 300 copies of the report on 100% recycled paper. The report Moss Vale Field Support Centre was produced at a total cost of $43,400 (GST inclusive). Ethics hotline 8–10 Old Dairy Close Windsor Moss Vale NSW 2577 Further information about Integral Energy is available at our website Tel: 1800 ETHICS (384 427) Northern at www.integral.com.au or email [email protected]. Narellan Field Support Centre Katoomba Glendenning Project management Main offi ce Kings Park Corporate and Government Affairs, Integral Energy 17 McPherson Road Penrith Blacktown 51 Huntingwood Drive Parramatta Smeaton Grange NSW 2567 Huntingwood Design Huntingwood NSW 2148 Impress Design PO Box 6366 Nowra Field Support Centre Photography Blacktown NSW 2148 Narellan Hoxton Park 20 Depot Road Penny Clay West Nowra NSW 2541 Neil Billington Network Project Picton Management Offi ce Editing Parramatta Field Support Centre Central Businesswriters & Design Level 5 Westpoint Tower 84–86 Macarthur Street 17 Patrick Street Moss Vale Printing Parramatta NSW 2150 Coniston STI Lilyfi eld Blacktown NSW 2148 Country Springhill Penrith Field Support Centre Energy Shellharbour Bowenfels Field Support Centre 96–120 Blaikie Road 9-13 Cooerwull Road Jamisontown NSW 2750 Bowenfels NSW 2790 Picton Field Support Centre Nowra Coniston Offi ce 94 Bridge Street Corner of Bridge Street and Southern Picton NSW 2571 Old Springhill Road Coniston NSW 2500 Shellharbour Field Support Centre Pacific Ulladulla Buckleys Road Ocean Shell Cove NSW 2529
2 energy for life Integral Energy Annual Performance Report 2009–10 2 Table of contents
Our organisation About us 2 Year at a glance 3 Our challenges and our successes 4 Chairman’s and CEO’s report 6
Our performance – delivering a safer and more efficient service for our community Improve safety performance 11 Improve customer value 13 Deliver our capital investment plan 17 Manage business risks 19 Leverage technology 22
Our operations – providing energy for life Letter to shareholding Ministers Our network business 25 Our retail business 32 29 October 2010 Strategic leadership for improved performance 35
The Hon. Eric Roozendaal, MLC The Hon. Michael Daley, MP Our community – progress in partnership Treasurer Minister for Police, and Our stakeholders 37 Minister for State and Minister for Finance Regional Development, and Governor Macquarie Tower Public consultation on key projects 38 Special Minister of State 1 Farrer Place Community partnerships 39 Level 36, SYDNEY NSW 2000 Governor Macquarie Tower 1 Farrer Place Our people – our most important energy source SYDNEY NSW 2000 Delivering performance through people 43 Employee relations 44 Dear Ministers Award winning apprentices 45 Report on performance for the year ended 30 June 2010 This report details Integral Energy’s performance, operations and statement of accounts for the year ended 30 June 2010, in accordance Environment – defending the needs with the provisions of the Annual Reports (Statutory Bodies) Act 1984 of future generations and the principles of the Global Reporting Initiative. Environmental policy 47 It is submitted on behalf of the Board of Integral Energy for tabling in Progress towards carbon neutrality 48 Parliament. Waste management 50 Copies are being sent to the Auditor-General, the Minister for Energy and key customer and stakeholder groups. The report is available on our website at www.integral.com.au/annual Governance – leading by example report. Governance and organisational structure 53 Sincerely Board of Directors 54 Executive Group 55 Ethics and conduct 55 Michael McLeod Vince Graham Board committees 58 Chairman Chief Executive Officer
Management discussion and analysis 61
Financials 64 Appendices 106
energy for life Integral Energy Annual Performance Report 2009–10 1 2 1 | Our organisation the ability to live to our communities Purpose statement Integral Energy Annual Performance Report 2009–10 direct emissions by 2020. is why we are working towards achieving carbon neutrality for our reducing the impact of our operations on the environment, which financial results to our shareholder. We are also committed to efficient electricity supply to our customers while delivering strong The focus of our 2,888 people is to deliver a safe, reliable and Market, with services focused in NSW and South-East Queensland. Our retail business successfully operates in the National Electricity behalf of our shareholder, the New South Wales Government. and operates within the terms of the Integral Energy is incorporated under the and the Southern Highlands. kilometres in Sydney’s Greater West, the Illawarra, Blue Mountains and businesses across a network franchise spanning 24,500 square network for 866,767 customers or 2.1 million people, in households Integral Energy manages a $3.3 billion electricity distribution economies. regional and urban growing fastest and largest corporation with a proud 50-year history serving some of Australia’s energy state-owned Wales South New a is Energy Integral and the energy to grow Every day we deliver Electricity Supply Act 1995 Energy Services Act 1995 on Bella Vista Zone Substation Zone Vista Bella million $37 Energy’s Integral inside Technologist, Amery, Stephen Values Integrity improvement Contin communities customers and Commitment to Respect for people Safety excellence uous 1
“The prosperity of Sydney’s Greater West, Southern Highlands and the South Coast depends heavily on the quality of the regions’ infrastructure. In particular, a safe and reliable electricity supply underpins successful businesses, creates jobs and keeps communities safe.”
Year at a glance Items 2009–10 2008–09 % change Our shareholder EBITDA (including capital contributions) $'000 588,980 492,817 19.5 Operating profit after tax $'000 178,979 142,190 25.9 Returns to NSW Government $'000 215,277 167,064 28.9 Dividend $'000 142,610 103,619 37.6 Income tax equivalents $'000 72,667 63,445 14.5 Credit ratinga Aa3 AA Net assets $'000 1,153,849 910,980 26.7 Return on assets % 9.5 8.7 9.8 Return on equity % 17.3 14.6 18.8 Our operations Reliability (unplanned interruptions to supply) Min/lost/cust 79.4 89.3 11.1 Capital expenditure $'000 417,421 442,876 (5.7) Total retail sales of electricity GWh 11,076 12,099 (8.5) Sales revenue (excluding CSOs) $'000 2,133,865 1,852,002 15.2 Our customers Total network customer connections 866,767 859,519 0.8 Customer Service Indicator % 80 83 (3.6) Social programs $'000 30,427 23,962 27.0 Pensioner Rebates $'000 29,700 23,324 27.3 Life Support Equipment Rebate $'000 727 638 14.0 Energy Accounts Payment Assistance (EAPA) $'000 2,467 2,092 17.9 Environment Energy purchased from alternative sources % 14.0 12.0 16.7 Transformer oil recycled litres 433,091 302,866 43.0
Greenhouse gas emissions – direct emissions t CO2e 27,229 29,889 (8.9) Reportable environmental incidents No. 1 2 (50.0) Our people Total employeesb 2,888 2,871 0.6 Lost time injuriesc 17 21 19.0
a – Credit rating in 2009–10 undertaken by Moody’s Investor Services, 2008–09 by Fitch Ratings b – Full time equivalent staff as at 30 June c – As at 30 June 2010, 15 LTIs had been recorded; two additional lost time shifts occurred during July that related to 2009–10 events taking the total to 17. To ensure consistency on an annual basis, prior year statistics may have changed in line with amendments to comparative financial statement disclosures and amended definitions.
1 | Our organisation 3 4 1 | Our organisation Integral Energy Annual Performance Report 2009–10 Our successes and our challenges 2009–10. This included: electricity network in $369.0 million in its Integral Energy invested plan through to 2014, part of itsfiveAs year • • • • • • • • • • • • successes Our We reducing on focused CO 2010, June at 30 As we had 251 apprentices –arecord in for number our employment our organisation. strategic objectives. of our and refreshed our values cornerstones as statement purpose anew We developed charities. donated to participating donations figure and This employee company-matchingincludes funds 2004. 1July on started We $1 the reached program, giving workplace in million our employee milestone which donation customers. aroundsupplying 10% of electricity Queensland, and is now successfulin retailer South-East new most the became organisation Our minutes, aresult with of90 79.4 minutes, i of target reliability network Average Duration Interruption (System Index) our SAIDI We bettered fault and emergency reading, defects, We invested arecord $211.2 maintenance, million in network management,meter including vegetation and improved initiatives. reliability meters lines, transmission new new and distribution connections, We invested $369.0 customer new including substations, million and upgraded new in our network equivalents. in tax Returns to our shareholder, included Government, $142.6 NSW the million and $72.7 in dividends million byincreased 19.5% to $589.0 million, $492.8 compared with million in 2008–09. contributions) (including capital and amortisation depreciation earnings Our before interest, tax, involved that in motor major had been vehicle undergrounding incidents. or poles relocating power either program we invested of $1. our public safety part As to 17 in 2009–10.from 21 in 2008–09 continued injuries totime performance reducing improve of number the lost with safety Our centres and IT initiatives.centres and IT 2 e emissions by improving fleet decisions, energy efficiency in field support field support in efficiency energy decisions, bye emissions improving fleet • • • • • and improve the quality of the low voltage network. voltage low the of quality the improve and 213 of substations $13.7 overloaded capacity the millionto increase network; to the customers industrial and residential of capacity the millionto connect $22.9 improved. also was substations on mounted pad 17 safety fire the and refurbished; were transformers top pole 772 and switches air-break 260 Afurther connections. to underground 92 overhead and 1298 poles 316 transformers, switchboards, voltage low and high 112 mains, steel 21.5 overhead of km cable, Consac of km 16.3 We replaced network. distribution the $41.6 millionto refurbish infrastructure. substations transmission and zone ageing renew or millionto replace $49.3 substations. transmission $115.1 and zone major upgrade and millionto establish , and inspections. n part due to due weatherpatterns. milder n part 3 million accident to sites remediate by 8blackspot • $12.0 million to upgrade and install new power lines on the distribution 1 network to address load demand. • $9.6 million to improve reliability of the network. • $6.1 million on metering including installing over 36,000 new meters, replacing over 15,000 existing meters and investing $2.9m on a smart metering trial program. • $4.9 million to upgrade communication, automation and protection of zone and transmission substations. • $4.3 million to renew high voltage transmission lines. • $3.9 million to install new or refurbish existing street lighting. • $0.4 million to address power quality and environmental enhancement. • $85.2 million on engineering, training and support activities, network switching, and the purchase of emergency spares to support the capital works program.
Our challenges
• Despite achieving a 19% reduction in lost time injuries, we did not meet our target of 14. The safety of our staff and the public is our first priority, and we continue to improve our processes, systems, leadership and education to reach industry best practice and achieve our objective of zero harm. • We fell short of investing our first year capital budget total of $509 million approved by the AER, as part of a five year target. However, we delivered a significant capital expenditure spend of $417.4 million and created a solid platform from which we will deliver our capital program over the remaining four years of the regulatory period. • As a result of damage caused by a third party, one environmental incident was reported during 2009–10 to the NSW Department of Climate Change, Environment and Water. • We achieved a customer satisfaction rating of 80%, just short of our target of 82-84%. • In September 2009, the spread of the W32/Virut computer virus impacted our IT systems, servers and personal computers. Our incident management plan was enacted over a two week period. The incident did not affect electricity supplies to our customers, nor did it impact the power grid.
1 | Our organisation 5 6 1 | Our organisation Integral Energy Annual Performance Report 2009–10 on 1 July 2010. opening of the data room for bidders retail sale process, culminating in the all necessary preparations for the Treasury requirements, we undertook East Queensland. In line with NSW key markets of NSW and South- remains a top three retailer in its all its sales targets for the year. It South-East Queensland and achieved growth in key markets, particularly Electricity Market, delivered excellent the intensely competitive National Our Retail business, operating in 25 years. next overthe people 500,000 to additional an home become they centres as growth largest Sydney’sto power two ‘backbones’ electricity building vital of challenge facing significant the in areas Australia.Wegrowing are fastest of the some includes It regions. Illawarra the and Mountains Sydney, in Western Blue people the 2.1 serves $3.3 which billion million at valued base asset an services and maintains business network Our communities. and of staff our safety the protect and improve efficiency for value customers, our deliver to employees and management Board, of the commitment the reflects and year previous in the achieved results solid the on builds Financial Crisis. performance This Global by the presented challenges the despite objectives economic and key service safety, customer against in 2009–10 performance astrong delivered Energy Integral Chairman’s and Chief Executive Officer’s report
Michael McLeod – Chairman audits and welfare assistance in welfare and assistance audits tailored payment plans, energy our program, INpower which offers 7,411 customers were enrolled in customers in hardship. By year’s end, designed to expand our assistance to pricing and affordability strategy Integral Energy put in place a customers in our franchise area. affordability challenges for many priceThese increases realpose approved. also was expenditure $1.5A further in operating billion reliability. for network improved requirements regulatory meet and assets ageing replace for growth, cater will investment This period. year overafive network Energy Integral in the invested be that will of $2.7 expenditure billion capital included AER’s determination The TribunalRegulatory (IPART). and Pricing Independent NSW the and (AER) Regulator Energy Australian Federal by the in 2009 earlier made determinations of the aconsequence as 2009 1July from of 21% increases tariff experienced Energy’sIntegral customers forecast. budget our control to protect cost effective required revenue–and therefore –and consumption energy affected year the half of first in the activity business Reduced exception. no was Integral financialand year Energy duringthe businesses Australian most for challenges significant Financial Crisis Global posed The A challenging year in 2010–11. workplaces safer to deliver designed are System Management Safety our to improvements further and value organisational remains leading our excellence safety. public Safety and to improve employee resources and of time continued investment the reflects improvement This network. our near or on working when injury risk or hurt be should one no believe to 21 year. previous in the We compared in 2009–10 (LTIs) injuries 17 Integral recorded Energy time lost Safety is priority our through workplace reform. workplace through increases cost to labour contain Policy Wages Government’s NSW to the by adhering customers commercial and of residential our interest control in the cost strong focusin maintaining sharpened its demonstrated also Energy Integral period. year regulatory five by 2% annum overthe per costs operating to projected our reduce to AER the commitment voluntary our exceeded This inmillion savings. $9.5 delivered had Energy Integral At of 2009–10, end the years. three next overthe savings inmillion cost $35 deliver that will initiatives efficiency identified employees To value, our improve customer years. five past the over in disconnections reduction a79% has delivered program This connected. to keep customers order
Vince Graham – Chief Executive Officer 1 “To improve customer value, our employees identified efficiency initiatives that will deliver $35 million in cost savings over the next three years.”
“This is the eighth year of continuous improvement in our safety performance, representing a significant achievement in our journey towards our target of zero harm.”
Integral Energy initiated a blackspot networks throughout Australia. design and/or construction phases power pole program to reduce, over Over a three year period our of our program. time, the incidence of road fatalities unplanned SAIDI has reduced caused by motor vehicle collisions from 97.8 minutes in 2007–08 with power poles. Blackspot to 79.4 minutes against a target Delivering strong remediation options include replacing of 90 minutes in 2009–10. While financial returns power poles with underground favourable weather conditions in As a state-owned corporation, cable; repositioning poles to a safer 2009–10 contributed to this decade- Integral Energy’s commercial location and protecting poles with low SAIDI result, we would expect obligations include operating barriers. Integral Energy plans to long-term improvement to continue efficiently, as with any comparable invest around $2 million per annum as a result of our structured business, and maximising the net on this public safety initiative. Reliability Improvement Program. worth of the state’s investment. We are also working closely with local government and the RTA to Integral Energy’s earnings before implement improved road design Investing for income tax, depreciation and criteria which will avoid the creation economic growth amortisation (EBITDA) of $589 million were $79.7 million of future blackspots. Integral Energy has embarked on a above target. This year’s total five year, $2.7 billion capital program Our public safety program also distributions to the NSW to provide the energy to sustain targeted improvements to aircraft Government were $215.3 million. safety by undergrounding major economic growth in our franchise power lines near two hospital area and maintain a safe and reliable helicopter sites. network for our residential and Delivering commercial customers. performance Customer network While the start of this program has through people reliability challenged our management and internal resources, a total of $369 We repeated our record intake of We achieved excellent network million was invested on our network apprentices by recruiting 60 new reliability results. Delivering a safe this year. This was a 3% decrease on apprentices in the year and taking and reliable electricity supply is the figure for the previous year of the total to 251. We are immensely a fundamental objective of our $381 million. We invested in a total proud of their achievements in network business. Targeted asset of 39 major capital projects, valued scooping the prize pool at the investment, effective maintenance at $314.9 million by the end of the recent Electricity Industry Field Days and the weather all contribute to financial year. competitions and in winning the top the reliability outcomes for any apprenticeship awards in the region. To ensure we deliver the substantial network business. Special congratulations are extended increase in necessary network to Ben Dawson, Western Sydney In the 2009–10 financial year investment over the next four Apprentice of the Year and a finalist Integral Energy continued to reduce years that has been promised to in the NSW Apprentice of the Year the average number of minutes a our customers, our shareholder Awards in September. customer is without supply due to and our regulator, Integral Energy unplanned events. This measure is implementing a peak resourcing Our full time equivalent workforce is called unplanned SAIDI (System strategy that will supplement grew by 0.6% in 2009–10 to 2,888, Average Interruption Duration Index) our expanding workforce with up from 2,871 in 2008–09, mostly and is used as a reliability measure external service providers. The peak to support the delivery of the by most electrical distribution resources are being engaged in the network strategy.
1 | Our organisation 7 8 1 | Our organisation Integral Energy Annual Performance Report 2009–10 new technologies Climate and change incentive programs. and planning succession improved and competencies; and architecture Energy’sIntegral leadership of development the values; corporate and purpose business at our look afresh included They in future years. people our through performance to deliver programs of people for anumber foundations the laid we 2009–10 In sources over the next ten years. ten years. next overthe sources energy in alternative innovations We’re likely more also to see consumption. energy their manage to better customers our climate helping and change of impacts for the assets network to zero our by 2020; preparing footprint carbon direct our reducing we’re key three focusing on areas: response, in thisarea. In leadership to demonstrate companies energy expect that customers recognise We also emissions. gas greenhouse indirect and in direct reduction to asustained achieve obligations we’re of environmental mindful our business, responsible asocially As our business in 2010–11. business our and customers for potential benefits the to us assess help meters smart and automation ofpilot feeder We’re meters. scale planning alarge of smart rollout including the networks, distribution electricity way manage we the that support technologies network and business convergenceof is the example One network. existing our sure they’re integrated within safely in making to take lead the need will we develop, technologies these As smart grid communications. grid smart for backbone a communications to and provide Network Broadband National of the cost the to lower potential has the infrastructure electricity Using existing rollout. the company overseeing the with synergies infrastructure on We’re by collaborating responding technology. home fibre the to using network broadband national a to operate and build eight years over billion intention $43 to invest its announced Government Federal the 2009, April In Network National Broadband “ in 2009–10.” for our customers and improving value a safer workplace progress in creating We made good and communities. and of customers our interests the serve to best in order is expected what beyond and above have delivered who Energy at Integral to people the appreciation and convey thanks our team, like would we executive to the and Board of the behalf On community. our and shareholder our of us by customers, our expected is what us achieve help will ahead year in the objectives strategic our focuson aclear Maintaining in 2009–10. forvalue customers our improving and workplace a safer in creating progress good We made Thank you Chief Executive Officer Chief Executive Graham Vince Chairman McLeod Michael 1
Technologists, Stephen Amery, Warwick Price and Romeo Ubaldo outside Integral Energy’s $37 million Bella Vista ZS – the first of Integral Energy’s new substations to be constructed using 132kV indoor gas insulated switchgear.
Integral Energy 2009–10 scorecard (as at 30 June 2010)
Target Key result areas Measures 09/10 Actual Safety LTI – pathway to zero 14 15a Safe, capable, Reportable incidents SENI 7 13 motivated employees (employee/contractor-related/ASP where Integral Energy has contracted that ASP directly) – pathway to zero Customer/community Valued by our community Customer satisfaction 82–84% 80% Reliable & sustainable Network reliability (unplanned SAIDI) mins 90 mins 79 mins network Reportable environmental incidents (controlled) 1 0 Protect public safety & Reportable incidents SENI (ASP, member of public/general 19 40 environment public workers) – pathway to zero – uncontrolled Financial NPAT (Net Profit After Tax inc. Capital Contributions) $122.0m $179.0m Financial sustainability EBITDA (Inc. Capital Contributions) $509.3m $589.0m Effective investment CAPEX $508.8m $417.4m OPEX $433.3m $389.0m Efficient operations Overtime expenditure – planned $19m $14.7m Business process SAMP delivery % of milestones met/complete 95% 89%
Governance control No. of recommendations overdue 0 7 & risk management (>_ 90 days) each quarter
Culture Employee engagement Not Not Safe, capable, measured measured motivated employees in 09–10 in 09–10 Absenteeism 2.5% 3.4% Organisational alignment Compliance to Workforce Plan 97% 97.1%
Note: a – As at 30 June 2010, 15 LTIs had been recorded; two additional lost time shifts occurred during July that related to 2009–10 events taking the total to 17.
1 | Our organisation 9 2 | Our performance – delivering a safer and more efficient service for our community
Over the past year Integral Energy has made significant progress in all key performance areas within our five strategic objectives. We have created a safer workplace, improved value for our customers, invested in our network to meet projected demand growth, put in place new systems to manage risk and are implementing state-of-the-art technologies to make our organisation more efficient. Maintaining a clear focus on our strategic objectives in the years ahead will help us achieve what is expected of us by our customers and community. In particular, community concern over rising electricity prices means we must improve productivity and efficiency. Above all, we will continue to strive for our most important priority objective – improving safety performance to achieve and sustain zero harm for our employees and our community.
Jason Coulter, Electrical Technologist, working on an isolated circuit as part of the electrical fit out of our $19.1 million North Eastern Creek Zone Substation. This substation is due to become fully operational in early 2012 and will service the expanding Western Sydney Employment Area.
10 energy for life Integral Energy Annual Performance Report 2009–10 2 1. Improve safety performance
2009–10 Objective 2009–10 Target 2009–10 Result
To continue to reduce the number To reduce employee lost-time Actual LTIs were reduced from of employee, contractor and public injuries (LTIs) by 20% compared 21 in 2008–09 to 17 2009–10. safety incidents and injuries on our with last year. However the target of 14 for the network to achieve zero harm. year was not achieved.
Performance indicator: lost time injuries • Achieved an LTI reduction of 19%. As at 30 June 2010, 15 LTIs had been recorded; two additional lost time shifts occurred during July that related to 2009–10 events, taking the total to 17. 49 48 43 32 32 28 26 24 22 21 17 2007–08 2008–09 2009–10 1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07
Health & Safety policy journey towards our target of human factors to enable supervisors zero harm for all employees. to better manage safety in the and performance workplace. The course content and To support this endeavour we The Integral Energy Health and target group were identified from undertook a restructure of Safety Policy Statement commits benchmarking work completed the Health and Safety Branch, us to providing a safe workplace last year against best-practice establishing it as a division with and network for our employees organisations and industries. direct accountability to the CEO. and the public. Safety excellence A broader scope for the new is our leading organisational value. Promoting public safety division and an increase in the We integrate safety policies and number of safety professionals The 2009–10 Public Electrical Safety procedures into all our business will help line managers and their Awareness Plan (PESAP) outlined and management processes. staff work more safely and with strategies to raise public electrical Our commitment is to achieve zero more confidence. safety awareness. The year’s incidents, injuries and occupational initiatives included a radio and print The new structure aligns with our illnesses. Our safety principles campaign focused on preventing strategic priorities for improving involve making safety our first conductor strikes by high load safety performance, as follows: priority – a belief that all incidents vehicle drivers, crane and excavator are preventable, ensuring that operators and recreational boaters, Delivering safety management employees understand that working and an awareness program training to supervisors safely is a condition of employment, for plumbers. During the year the Health and that we take no shortcuts, accept As part of our public safety Safety Division developed and no unsafe behaviour and expect commitment, we implemented our delivered a two-day training course personal accountability for safety innovative power pole blackspot for frontline supervisors. The course from everyone. program, remediating eight priority content included responsibilities for sites at a cost of $1.3 million. This is the eighth year of managers under the Occupational This program seeks to improve continuous improvement in our Health & Safety Act 2000, risk community safety by remediating safety performance, representing management and an introduction to a significant achievement in our sites where major accidents have
2 | Our performance 11 12 2 | Our performance Integral Energy Annual Performance Report 2009–10 Arevised workplace. in the Safety & Health manage systematically to procedures and actions plans, of is aset SMS the organisation, by the endorsed Actively (SMS) System Management Safety the to Improvement part. taking schools primary 400 with 2009 in September Week Safety EnergyAustralia in Electricity with partnered Energy Integral $1.3of approximately million. Westmead and Lithgow, an investment adjacent to two major hospital sites at undergrounding of major power lines Some safety controls included the common use aviation activity sites. conducting risk assessments of 63 improvements to aircraft safety by Integral Energy also targeted new blackspots will be cut. that, over time, the creation of of the impact of road changes so the program by increasing awareness local councils and the RTA to expand In addition, we will work closely with for 2010–11. prioritised have been 10 Another sites poles. power with colliding motorvehicles involved “ The year ahead year The Improve our safety performance safety our Improve 2010–11 Strategic objective over the past five years.” performance of the NSW distributors the best –or equal best –reliability Integral Energy’s network delivered assists Peter George, Customer Service Representative, Representative, Service Customer George, Peter assists as he trials the alcohol impairment goggles as part part as goggles impairment alcohol the trials he as
Deborah Weait, Health and Wellness Coordinator, Coordinator, Wellness and Health Weait, Deborah simulate various alcohol levels to help employees employees help to levels alcohol various simulate of the Lifeguard awareness program. The glasses glasses The program. awareness Lifeguard the of understand the different impacts alcohol has on on has alcohol impacts different the understand Implement our Lifeguard program Lifeguard our Implement Breakthrough priority action priority Breakthrough years. They support a necessary anecessary support They years. five past for the days safety employee has held Energy Integral days Safety risks. those manage best we organisation, how, an as and individuals as and abuse fatigue substance and with associated potential risks the understand to better experts industry and unions employees, with We consultations have begun have commenced. workplace the fatigue and in alcohol and drugs addressing programs education and abuse. Awareness substance fatigue and with associated risks impairment the prevent manage and to how predict, understand better to developed is being program Energy’sIntegral Lifeguard program Lifeguard of the Introduction system. this key support of effectiveness and integration better to year during the deliver approved was plan implementation and SMS new for the architecture coordination and decision making. making. decision and coordination were placed in four placed were others. and competitions six teams won in 11competed Our competitions. including 21employees apprentices Energy Integral Fifty-two industry. electricity the across from workers attracting Homebush, Showground, by EnergyAustralia at Sydney 2010The hosted were days field fireand management. jointing,manual handling cable assessment, risk and aid, hazard first around providers energy between competitions and seminars displays, trade include They experience. and practice best to share knowledge, industry in the for people opportunity an provide days field Electricity-industry days field at Performance days. of these effectiveness and development the relating to of aresult nominations as in a row two years Awards finals for WorkCover the reached Work Safe We have issues. safety industry and of organisational awareness employee raise and educate help as well as compliance element alcohol abuse alcohol and by drug fatigue or caused To of risk accidents the reduce Reason Performance indicator: supply reliability – normalised unplanned SAIDI 2 • For 2009–10 the average unplanned supply interruption was 79 minutes. This is a very pleasing result, which was helped by mild weather patterns. 98 94 89 87 86 84 80 79 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14
2. Improve customer value
2009–10 Objective 2009–10 Target 2009–10 Result
In an environment of increasing Limit unplanned supply interruptions Unplanned supply interruptions electricity prices and rising for our average customer to less for our average customer were unemployment, we aimed than 90 minutes for the year, and 79 minutes. to improve efficiency, to provide this reliable supply in a reliability and support for cost-efficient manner. all our network customers. Implement productivity Introduced a 15% efficiency target improvements to improve over the next three years. efficiency across the organisation. Adherence to the NSW Government’s 2.5% Wages Policy.
Reliability • 21 interruptions to zone and to achieve a stretch target of less sub-transmission substations than 70 minutes of unplanned improvements – throughout the year contributed SAIDI by 2013–14. a pleasing result approximately 7.5 minutes to SAIDI. The reliability of electricity supply This included the loss of Canley Cost-efficient is an important measure by which Vale Zone Substation as a result of we can demonstrate our network an aircraft crash on 15 June 2010, operations performance for our customers. We which contributed 2.3 minutes While investment in our network measure reliability of our network to SAIDI. has seen increasing prices for with the System Average Interruption • 33 sub-transmission feeder customers, we have focused Duration Index (SAIDI). SAIDI interruptions contributed attention on operating our network measures the number of unplanned 5 minutes to SAIDI. as efficiently as possible. minutes that customers, on average, In the 2009–10 year this manifested are without electricity each year. • Approximately 857 distribution feeder interruptions contributed itself in the following ways: Typically, unplanned outages peak in approximately 50 minutes to SAIDI. • By identifying opportunities to September and October because of reduce operating expenditure strong winds. In January and February Notwithstanding the unpredictability by $35 million over a three they also peak, mostly as a result of weather, Integral Energy year period. of very hot days and thunderstorm continues to strive to reduce impacts, combined with peak unplanned outages year-on-year • Through market testing of internal demand on the network. In the past through our integrated Strategic functions, such as the meter year conditions in these periods Asset Management Plan. This reading and street light bulk lamp were mild compared with those in plan aims to optimise the balance change programs, to ensure that previous years, so there were fewer between maintaining existing Integral Energy is getting best outages in our franchise area. Events assets and replacing those at the value for customers. that had a significant impact on the end of their life before failure. overall reliability result included: We are now developing a strategy
2 | Our performance 13 14 2 | Our performance Integral Energy Annual Performance Report 2009–10 • • • in progress: still initiatives six with three initiatives had been completed, 2010,At June 30 following the stage. implementation during the Commission Relations Industrial NSW of the support the required projects savings of the Some initiated. was phase implementation an before sought employees from input and discussed was change of process the where consultation, of employee subject the were initiatives savings of the Each positions. in administrative areduction and management leave improved functions, ancillary some of contestability arrangements, alternate shift included savings The business. the throughout efficiency drive and payincreases employee to offset implemented are being savings Award. of the These years 2.5%above two of for the each to fund payincreases savings related employee specific outlined 2008 AwardConditions of Employment Energy Integral Policy,Wages the Government Wales (NSW) South New accordance with In Policy Wages Government NSW •
to ensure best practice. to ensure best tasks of administrative Review accrualsleave of excess Management and meter reading functions Contesting bulk street lamp change response and efficient operations. directly links to improved customer By investing in technology that call answer time was 61 was time answer call seconds year. previous the average The with compared volume call total a14% in represents increase This 110,210and calls. related network 1,036,379managed calls retail centre call employees our year This enquiries. web and faxes emails, calls, customer related network and retail centres manage The Coniston. and Huntingwood centres at interaction customer two operates Energy Integral satisfied customers responses, Quick of $3.1 for million 2009–10. year. previous savings delivered This the with financial year compared 2009–10 duringthe operations to related network allowances 11%an and in overtime reduction in controls resulted overtime on focus value, increased an customer to improve of efforts our part As improve local processes and outputs. well as consider opportunities to including labour requirements, as inputs, to required were review units review, the operating undertaking In value. customer enhanced deliver to as so productivity operational our improving focuson organisational is tothis initiative ensure astrong intent of The years. three next the of 15% savings cumulative cost over implement and to identify units of operating our each requiring initiative anefficiency introduced Energy 2009–10,Integral During efficiency Improving registering complaints about high about complaints registering bills or disputing customers from were complaints billing-related to related mainly marketing. Most they marketingand in Qld while billing were in NSW issues top The 10 within days. resolved complaints 73% had of their (Qld) Queensland and in NSW Customers 2009. 1July on tariffs electricity in to due increases primarily was year. previous over the increase The of 2% increase an complaints, and 16,560 compliments comments, received we year past the Over issuescustomer Resolving more effectively. more network the affecting issues about information with calling customers for centre times wait call to manage the allows area. This their affecting times) restoration predicted (including outages network about messages automatedphone via information detailed with customers continuesto provide (OMS) system management outage The financial year. coming for the target service call resolution is introducing afirst centre call the experience customer enhance the to further effort an customer. for the In experience abetter delivering times, wait call in2010 May have reduced (IVR) response voice centrecall interactive to the Technology improvements calls. related network 14 and calls for retail for seconds Performance indicator: helping 2 NSW customers in hardship Customers 6,611 • INpower, our customer hardship program, assists customers across NSW and Qld who are in long-term financial hardship by offering them affordable long-term 4,379 payment plans and individual case
3,682 3,552 management. Customers with high usage
3,196 in NSW may also have a free home energy audit to help them reduce consumption.
QLD • There were 7,411 NSW and Qld customers 1,095 Customers enrolled in the program as at 30 June 2010. The increase in enrolments reflects a greater focus by Integral Energy on the 800 early identification of customers who
2005 2006 2007 2008 2009 2010 might be experiencing hardship.
consumption. In response, our Integral Energy also offered Campbelltown and Wollongong. Customer Care group conducted flexible payment arrangements for The workshops were designed to 1,731 home energy audits and customers struggling to pay their increase community understanding 140 phone audits. These included bills so they can stay connected. This for the reasons behind the price rise, 454 audits to help customers approach has helped Integral Energy educate community workers on the experiencing financial hardship reduce its disconnection rate by assistance available to customers reduce their electricity use. The 79% over the past five years. in financial hardship, and raise number of home energy audits awareness of contributing factors As at 30 June 2010, 7,411 customers conducted increased by 53% to high bills and how these factors were enrolled in our customer compared with 2008–09. may be better managed. These support program targeting people forums were rated by attendees The company received 245 in financial hardship. The program as very positive. compliments, mostly about the is open to any residential customer activities of our field and customer who is unable to pay their bill within In June 2010 Integral Energy started service representatives across our a six month period and agrees to a a trial of 50 home energy monitors two call centres. regular payment plan. (inhome display unit) with a segment of customers enrolled with During the year our Customer Integral Energy’s customer service INpower. The trial aims to determine Care group managed 812 matters staff are specially trained to identify whether the display units can help received from the Energy and Water customers in hardship and proactively customers reduce consumption. Ombudsman NSW and 493 received refer them to the program. from the Energy Ombudsman Qld. Since 1 July 2009, Integral Energy Integral Energy also assisted (The Ombudsman’s offices provide has assisted 189,798 customers with customers by: independent advice to resolve payment arrangements, deferring customers’ concerns.) • extending time to pay and collection of $108.8 million, and in waiving late payment fees the previous financial year 2008–09, entered into payments with 258,763 • arranging tailored and affordable Managing hardship customers, deferring collection of instalment plans In response to 1 July 2009 price rises $128 million. approved by Independent Pricing and • conducting free energy This year we assisted 235,000 Regulatory Tribunal (IPART), Integral audits to help pinpoint ways customers with $32.9 million in Energy developed a comprehensive to reduce energy rebates and payment assistance pricing and affordability strategy. • referring them to an emergency under the Energy Rebate, Life This strategy recognises some people relief agency or charity to Support and Energy Accounts need help to pay their electricity access Energy Account Payment Payment Assistance Schemes, a bill from time to time. The strategy Assistance vouchers 26% increase over the previous year. included improved information The NSW and Qld Governments for customers to manage their • referring them to a financial reimburse this cost. energy use efficiently and improved counsellor. information on assistance programs Integral Energy’s Customer Care for welfare groups assisting team conducted four half-day customers in hardship. workshops with community organisations in Parramatta, Penrith,
2 | Our performance 15 16 2 | Our performance Integral Energy Annual Performance Report 2009–10 2010–11In areas: following the focuson will value for customer improving priority our The year ahead year The Improve customer value. customer Improve 2010–11 Strategic objective
2004–05 13,066
2005–06 11,401 • disconnections indicator: Performance a result of improved customer hardship programs hardship customer improved of a result as 5years past the over dramatically decreased have Disconnections resort. last of act an as only customers disconnects Energy Integral Breakthrough priority action priority Breakthrough in the core network by April 2011. by April corein network the teams To rapid-response implement 2011.by April study of afeasibility completion through outcome reliability for asub-70-minute acourse Set
2006–07 5,568
2007–08 3,794 Reason improve efficiency. and for customers our duration incident reduce safely risks, To eliminate current fatigue customers. our for outcomes reliability improved To ensure continue we to deliver improve emergency response awareness awareness response emergency improve Left: Upgrading our transmission line in in line transmission our Upgrading Left: and safety when attending accidents. attending when safety and Below: Integral Energy facilitated an an facilitated Energy Integral Below: Australia’s largest botanic garden at at garden botanic largest Australia’s emergency services pole crash wires wires crash pole services emergency down workshop with the SES to to SES the with workshop down Mt Annan near Campbelltown. near Annan Mt 2008–09 2,778
2009–10 2,922
2
Richard Fenech, Technologist, working on the construction of the North Eastern Creek Zone Substation
3. Deliver our capital investment plan
2009–10 Objective 2009–10 Target 2009–10 Result
To deliver the five year AER approved Deliver the $509 million Despite falling short of our year one target plan safely, on time and within budget capital program. we delivered a significant investment of to provide our customers with a safe, $417 million and laid a strong foundation to reliable and sustainable network. deliver the five year plan.
Performance indicator: capital investment • While we did not meet our 2009–10 capital program target of $509 million we delivered significant capital programs with a total investment of $417 million during the year. The shortfall was driven by delays in supply of materials and equipment from a stretched supply chain, as well as the difficulty in sourcing employees in the competitive labour market. Capital expenditure is made up of system expenditure on the network and non-system expenditure such as fleet, facilities and IT. 804 80 656
75 585 Forecast non-system
518 77 total
443 76 417 Forecast system total 382 373 62 48 336 65 77 Total non-system 257 87 actual 54 Total system actual
203 249 317 296 381 369 442 724 581 508 2010–11 2007–08 2006–07 2013–14 2004–05 2011–12 2008–09 2009–10 2005–06 2012–13
Integral Energy’s network franchise Regulator (AER) every five years. With this in mind, one of our prime is a publicly owned monopoly. To The AER reviews Integral Energy’s objectives is to deliver the AER- ensure customers get a fair deal plans for capital investment and approved network program safely, and a safe and reliable network, maintenance, and determines the efficiently, on time and within capital investment and maintenance prices allowed to be charged to budget. Of special importance for programs are independently Integral Energy’s network customer. our network strategy (see page 25) regulated by the Australian Energy and associated Strategic Asset
2 | Our performance 17 18 2 | Our performance Integral Energy Annual Performance Report 2009–10 Division. into Network asingle – Operations Asset Network and Control and Development Network – businesses network two merging structure, network our consolidated year, 2009–10 of the we At start the network the Reorganising included: changes These period. regulatory of remainingthe over the four years program capital our us to deliver to allow business in network our initiatives and of changes a number implemented we 2009–10 During forreliability. improved requirements licence Government’s NSW the meet and for electricity demand in peak growth meet assets, boomer baby to ageing replace is intended non-system, and system both investment, This program. AER-approved ofyear five-year our first in million the $509 investing of atarget set we 2009–10 In customers. franchise new and existing for both targets reliability supply electricity are our (SAMP), Plan Management The year ahead year The sustainable network. sustainable asafe, and reliable with customers our to provide budget safely, within and time on To plan approved the deliver 2010–11 Strategic objective “This investment is intended to replace ageing baby electricity and meet the NSW Government’s licence boomer assets, meet growth in peak demand for and is based on the principles of: principles the on is based and program entire the capital deliver to us flexibility gives strategy The for 2. tranche progressed planswell with out, rolled is being strategy of thisresourcing tranche first volume. of The work periods in peak program the to deliver providers by external supplemented Energy’sof Integral workforce, use the includes This program. investment capital our deliver us to sustainably to assist developed has been strategy resourcing A peak strategy resourcing peak our Implementing 3. 2. 1. to: was aim of thisrestructure The Breakthrough priority action priority Breakthrough projects thanin 2009–10. projects sourced externally more including 200 for program 2010–11, investment capital $518 the by delivering SAMP million of our Accelerate implementation requirements for improved reliability.” now complete.now is strategy sourcing five-year of the stage early An projects. of major works construction physical front and end the both for strategy asourcing develop for projects. accountability end-to-end enshrine programs. for network accountability of point asingle establish five years. five next overthe apprentices) be will join the organisation (300 of whom years. In all, new600 employees will vacancies400 over the next five will retire or resign creating a further around eighty employees per annum workforce, Integral Energy expects program. Given the age profile of our capital investment and maintenance 200 positions to deliver its record will grow its workforce by a net of the next five yearsIntegral Energy of the network investment plan. Over electricians, to support the delivery and qualified tradespeople, such as will continue recruiting graduates of apprentices of 60 per year and We are continuing our record intake • • • •
program peak. peak. program remaining the to deliver assistance external seeking reasonable overtime. new employees, including allocation to current and giving first priority of work level. a sustainable to workforce increasing our budget. within and time on safely, plan efficiently, network AER-approved the delivering a safe and reliable network. reliable and a safe continue to can we provide So Reason
2
Replacing open wires with new covered conductors at Gullies Road, Bundanoon, as part of our reliability improvement project.
4. Manage business risks
2009–10 Objective 2009–10 Target 2009–10 Result
To identify, control and To have in place, across the A number of business risk mitigate business risks in business, risk management priorities were managed during eight categories – Safety, plans to manage safety, network the year including: Network, Financial, Compliance, and other risks that could affect • Maintaining the value of the Reputation, Environment, our performance and reputation. retail business while working on Retail, Business Strategy. the NSW Government approved sale process. • Successfully mitigating the financial impact of the Global Financial Crisis on the business.
Risk management Business risk category Generic risk description We have implemented a framework that helps us to identify and manage Fatality/serious injury of employee Safety risks that could affect our people, or member of public our reputation, the community, the environment, our customers, assets Network Significant customer service supply failure and financial and legal status. Our Financial Significant unbudgeted loss of value risk management process is based on the Australian Standard AS/NZS Compliance Material breach of legislation or licence 4360:2004 – Risk Management. Reputation Sustained public criticism Risks to our Corporate Plan are continually identified and assessed Environment Significant environmental incident across eight categories, as shown in the table right: Retail Significant loss of value Strategic objectives not delivered Business strategy and business opportunities lost
The risk management strategy spans a three-year period while our business risk plan covers the current financial year. Our risk management strategy for 2009–12 is focused on strengthening the risk management framework while the business risk plan for 2009–10 focused on specific business risks for the delivery of the corporate plan. Both the risk management strategy and business risk plan are reviewed and approved by the Audit and Business Risk Board Committee annually.
2 | Our performance 19 20 2 | Our performance Integral Energy Annual Performance Report 2009–10 toprogram ensure employees a on in focused 2009–10, we strategy, the year of first the During dilemma. to ethical an answer clear no to be seems there when use can they model making adecision- to and provide behaviour for their takethey responsibility to aculture encourage in which work, everyday in their employees to meaningful principles and values aims to make strategy corporate our The workplace. the within risk fraud reduce corruption and help to objective of strategic our part strategy, forms which engagement and communication ethics five-year a developed 2009–10,we During strategy engagementand Ethics communication them. mitigate plansto action implemented and developed and objectives strategic our to risks continually identified 2009–10,we Throughout company. in the management to maturing of the aculture of risk significantly has contributed This Committee. Board Risk Business and Audit the and to management risks of review and monitoring ongoing of results the on reports regular to are required provide owners’ ‘Risk the procurement process. procurement the surrounding issues probity of the management and understanding managers’ and enhance suppliers’ will project other the and risks in managing ethical leaders our training focuson will for project for Energy. Integral initiatives One develop will strategy, managers the engagement and communication ethics of two year our part As ICAC. the and University National Australian by the jointly run Program Corruption Executive 2010the CorruptionAnti and to attend scholarship ICAC the awarded were Two managers senior prevention. in corruption leaders to be considered government, local and state in working officials public 10 in 2010 scholarships to NSW awarded Corruption (ICAC) Against Commission Independent The leaders. their by conducted divisions in their team discussions ethics attended 2,873 and employees workshops ethics leader’ inthe ‘train trained ofA total 139 were leaders situations. work in everyday of in Code our Ethics principles the to how apply and values, corporate Energy’s Integral on based be must decisions that workplace understand “During 2009–10, we developed a five-year ethics communication and engagement strategy.” part in an exercise which simulated which in exercise an part took they when in plan latethe June Team Leadership tested Executive by asimulated exercise.followed Our was which traininghalf-day session a attending keywith employees business, the across employees to out rolled was plan The Police. Federal and sector, NSW and services emergency the from personnel included latter The organisation. the outside from professionals management incident were as development, in its involved were organisation of fromall areas the of employees team Alarge processes. common using in any business areaof the any couldwe manage incident to ensure enough detailed but of incidents to avariety handle enough flexible to had plan be management incident new the so locations and array of functions vast a span operations Our challenges. of anumber presented work This of incident. type for any is prepared Energy Integral to plan enhance ensureand the that program update to asignificant on embarked we of 2009–10 course the event. Over disruptive any major through organisation the to guide aframework to provide designed is plan management incident Our Incident management
2 “Integral Energy is committed to maintaining continuity of supply during business interruptions and major incidents.”
a major network incident involving three injured employees and over 100,000 customers without power. The exercises and feedback from the training have been used to refine the plan.
Business continuity management Integral Energy is committed to maintaining continuity of supply during business interruptions and major incidents. A key function of our incident management plan therefore is to allow us to mobilise resources and set processes in motion to communicate with stakeholders and instigate actions for recovery of business processes at such times. We maintain business continuity and disaster recovery plans for all critical processes and systems. These are regularly reviewed and tested.
The year ahead
2010–11 Strategic objective Breakthrough priority action Reason
Manage business risk across Strengthen our controls to guard Recent major bushfires in Victoria all parts of the organisation. against the risk of a bushfire being and Western Australia have caused by the electricity network. highlighted the risks we and our communities are facing and we need to learn from these events.
2 | Our performance 21 22 2 | Our performance technology objectives: technology our to2009–10 support during strategies important two developed Energy Integral for network. our opportunities and challenges both present network broadband national and generation embedded meters, smart grid, smart emerging The productivity. labour and processes business management, project management, people service, safety, customer in improvements deliver can of technology use Effective Integral Energy Annual Performance Report 2009–10 customer.the to through generation from – usage of energy effectiveness and efficiency improve the to are designed These network. electricity the across control systems and monitoring communication, information, that encompass of technologies framework broad a describes ’smartgrid’ term The grid strategySmart 5. Leverage technology and efficiency our customers. for efficiency and demand energy levels, service To to improve technology use Objective 2009–10 Figure 1:Asmartgridelectricitynetwork 1 2 in our smart grid strategy. grid in smart our that were highlighted benefits assess and the costs confirm to field in the program a pilot 2010–11In implement will we • • • through: achieved benefits, potential that demonstrates analysis cost-benefit a preliminary has included strategy grid smart Our appliances. electrical ‘smart’ including networks home with integration and metering advanced automation, control and network fine-grained incorporate They investment. for plan thismajor ten-year acomprehensive to develop To resources and time invest 2009–10 Target2009–10 automation of manual tasks. automation the from efficiency Improved automated switching. and information improved from reliability increased as well as load of customer reduction and response demand through utilisation network Better information. timely granular ofa result more and as management asset Better 3 to Rahul Reddy, Claims OMS business Analyst, and and Analyst, business OMS Claims Reddy, Rahul to demonstrating the field force automation system system automation force field the demonstrating Ray Baunach, Operations Manager Emergency Emergency Manager Operations Baunach, Ray Services. This initiative will help improve our our improve help will initiative This Services. response time to customers during outages. during customers to time response 4 grid strategy.grid smart a comprehensive for approval Board gained and We have developed 2009–10 Result 2009–10 Allan Clifford, Emergency Service Officer, Officer, Service Emergency Clifford, Allan 5 2
“The term ‘smart grid’ describes a broad framework of technologies that encompass information, communication, monitoring and control systems across the electricity network.”
Technology strategy • Identify options for next-generation meter data Our technology strategy aims to management and network deliver a cost-effective, reliable billing systems. This has involved business platform while embracing EnergyAustralia and Integral emerging technologies that provide Energy working together on a a benefit to Integral Energy’s five-year metering and market customers. In 2009–10, the systems roadmap, through which prime focus was to: both organisations could utilise • Align our IT investment plan with systems changes required business objectives. This included to support a future smart the development of a five-year meter initiative and ongoing information and communications billing requirements. technology (ICT) strategy (2009– • Implement field force automation 2014) and an ICT annual program initiatives. This involved a pilot of capital works. project integrated to our outage • Prepare and implement a strategy management system in which for IT sourcing and asset renewals. mobile terminals are mounted This has resulted in an extension in the vehicles of emergency of contracts with our existing service officers to support suppliers which will lead to rapid deployment of crews significant changes in our to customer outages. delivery model and lower costs for ongoing IT requirements.
The year ahead
2010–11 Strategic objective Breakthrough priority action Reason
Leverage technology. Introduce the iSAFE vehicle system to It’s a key component of our Integral Energy’s road fleet. response to the recent Country Energy coronial inquiry and will improve our customer response times and fleet productivity.
2 | Our performance 23 3 | Our operations – providing energy for life
In a challenging year, Integral Energy has achieved some notable operational successes, including an increase in earnings and energy sales and the implementation of strategic plans to reduce costs and identify fresh business opportunities. Our $4.2 billion, five-year network investment and operating and maintenance plan will enable us to meet burgeoning demand, replace ageing assets and guarantee a more reliable supply for customers across our franchise area.
Duane Lee, Technologist, working on the construction of Springhill Transmission Substation
24 energy for life Integral Energy Annual Performance Report 2009–10 3 Serving customers with a safe, reliable and efficient network
Integral Energy is committed to We need to deliver this network Energy in hot weather requiring managing its network assets in a capital program as efficiently as more assets to service demand structured and systematic manner possible in order to minimise price that only exists for a short time to meet customers’ expectations, impacts on customers. As a result each year. fulfil the organisation’s business of our productivity initiatives and • The uptake of other appliances needs and satisfy our obligations strategies that were built into our such as plasma televisions, to stakeholders, the regulator pricing submission (see page 13 for in-home computers and and the community. more details), the AER-approved entertainment systems. This trend increase in our regulated network Our objective is to deliver a 45% is also changing consumption electricity rates for households and increase in this regulatory period patterns, resulting in heightened small businesses were the lowest (2009–14) in network investment customer expectations and of all NSW network distributors. approved by the Australian Energy awareness about reliability Regulator (AER). This investment will and security of supply. provide our customers with a safe, Network strategy • Many network assets were reliable and efficient network. Integral Energy needed to take built in the infrastructure boom Our network business is facing into account a range of regional, of the 1960s and 1970s and three significant challenges that climatic, asset, customer and licence are now approaching the end are driving this investment: requirement issues when developing of their useful lives. its network strategy. Some of these 1. Servicing growth in demand in considerations are: Integral Energy’s network area: Optimising network • Integral Energy’s network capacity • While growth in customer contains some of Australia’s numbers in the past year fastest growing communities. Integral Energy must ensure was lower than predicted, By 2013–14, population in the sufficient network capacity to meet the continued development region is forecast to grow by load and security requirements in of Sydney’s North West and 6% whereas maximum electricity a sustainable and cost-effective South West Growth Centres demand is forecast to increase manner. continue to pressure our by 33%. We will achieve this by investing in investment program. • As land use continues to shift our network, understanding factors • Customer uptake of appliances from rural and semi-rural to that influence future electricity use such as air conditioning, urban and light commercial, to ensure security of supply, through swimming pools and plasma customers are expecting regular maintenance of our assets televisions is increasing peak improved reliability performance. and via demand management electricity load well above programs, where feasible. natural growth. To meet these • Peak temperatures across the network are typically higher and demands, we need to invest Investment in the network in our network. more sustained than those of central Sydney and other coastal In response to growing demand and 2. Renewing ageing network assets areas, meaning extreme weather the need to renew ageing assets, to maintain network reliability. events are more likely. 11 major projects totalling $242.5 With assets in our franchise area million, were approved by the • Eighty-one percent of households reaching the end of their life, Board in 2009–10. Construction will in Greater Western Sydney now many must be replaced. commence in coming years. have air-conditioning units, 3. Meeting the NSW Government’s compared with 51% in the initiatives to improve the security Illawarra and 50% in the Blue and reliability of electricity supply Mountains. This has resulted in a across the state. ‘peakier’ load pattern for Integral
3 | Our operations 25 26 3 | Our operations Integral Energy Annual Performance Report 2009–10 Major works in 2009–10 progress Major projects approved in2009–10 Glenorie ZS establishment ZS Glenorie establishment ZS Oaks The ZS Blackheath of Redevelopment ZS Holroyd of Redevelopment establishment ZS Figtree establishment Tomerong ZS establishment ZS Casula establishment Tomerong TS West ZS Corrimal of Redevelopment ZS Granville South of Redevelopment Hill ZS Castle of Redevelopment Description Total Redevelopment Redevelopment SS Evans Lane Establishment ZS Richmond East Establishment ZS Doonside Augmentation Dapto ZS Establishment ZS Meadows Claremont Augmentation SS Park Douglas Establishment Cheriton Ave ZS Description Establishment Cawdor ZS Augmentation Augmentation Campbelltown ZS Establishment ZS Vista Bella Augmentation ZS Village Anzac Before 2009–10 Before 29,646,592 12,036,549 9,788,949 2,376,940 5,704,821 4,109,904 4,184,353 6,457,945 2,188,215 101,875 23,684 Cost ($) ($) Cost 2,008,873 1,950,839 4,095,742 4,532,816 1,035,352 2,836,193 4,312,631 1,105,095 1,121,319 2009–10 916,884 310,256 Estimated budget ($m) 30,661,687 10,770,576 14,872,742 11,739,789 Total cost Total cost 6,283,957 3,293,825 1,223,195 6,118,778 6,740,174 8,717,169 333,940 to date
$242.5 $23.4 $23.6 $32.5 $49.6 $26.0 $21.6 $10.0 $19.5 $14.7 $13.7 completion completion $7.9 April 2012April June 2012June Complete Complete Complete Complete Mar 2011Mar Dec 2010Dec Practical Practical July 2012July July 2012July Oct 2011Oct date switching station. switching anew to build project one and to substations works line major to connect projects two substations, existing rebuild to projects five substations, existing of capacity the augment to 16 projects substations, transmission 15 and zone new of construction the included program This pages. following the in $314.9 listed million, at valued 2009–10 during progress in works major to 39 addition in are works These outdoor switchgear.outdoor control building and new SS with existing Rebuild ZS. Richmond existing the to replace substation indoor 33/11kV anew Construct circuit breakers. three yard replace and switch 66kV Extended with indoor units. indoor with switchgear 33kV outdoor replace and units capacity higher three with transformers existing two Replace substation. indoor 33/11kV anew Construct indoor substation. indoor 132/11kV anew Construct 132/11kV substation. indoor capacity ahigher with substation existing Rebuild 33/11kV substation. anew Construct Comments 11kV switchboard. new control building with builtanew and transformer third anew Installed indoor substation. indoor 132/11kV anew Established 11kV switchboard. associated and transformer third anew Installed Our network strategy is summarised below: 3 Network business objective
Provide long term customer service by developing and operating a sustainable and reliable network
Network business target outcomes and strategies
Optimise network Meet customers’ Provide customers with capacity reliability needs value for money through effective through better over the long term by demand management management improving the effectiveness and investment for of planned and and efficiency for capital security and growth unplanned outages and operating programs
Figure 2: Integral Energy’s network strategy
Cost ($) Practical Total cost completion Description Before 2009–10 2009–10 to date date Comments Gerringong ZS 694,730 1,342,372 2,037,103 Oct 2010 Replace two existing Augmentation transformers with higher capacity units and replace all switchgear.
Granville ZS 9,154,551 4,624,089 13,778,640 Aug 2011 Construct a new 132/11kV Establishment indoor substation to replace the existing Granville ZS.
Kemps Creek ZS 735,684 3,973 739,656 Feb 2011 Extend control room Augmentation to accommodate new 11kV switchboard.
Liverpool TS 2,537,745 1,071 2,538,816 Oct 2011 Establish 132/33kV indoor Establishment substation.
Connection 2,621,915 3,479,322 6,371,237 Sep 2011 Connection works associated Works for the with the new TransGrid Establishment of Macarthur BSP. Macarthur BSP
Mt Ousley ZS 15,310,168 1,593,613 16,903,782 Sep 2010 Establish a new 33/11kV Establishment indoor substation.
Mittagong ZS 57,360 35,525 92,885 Aug 2011 Install a third transformer and Augmentation associated switchgear.
Mobile Zone 488,180 3,829,284 4,317,464 Mar 2011 Establish new 132/11kV Substations and 66/11kV Mobile ZS.
Mungerie 20,413,793 6,541,971 26,955,765 Oct 2010 Develop a new indoor Park ZS 132/22kV substation. Establishment
Narellan ZS 7,708,487 293,360 8,001,848 Complete Installed new 66/11kV Augmentation 35MVA transformers.
Nepean ZS 21,268 445,223 466,491 July 2012 Construct a new 66/11kV Establishment indoor substation to replace the existing Camden ZS.
North Eastern 8,976,033 2,755,602 11,731,634 Dec 2010 Develop a new Creek ZS 132/11kV substation. Establishment
3 | Our operations 27 28 3 | Our operations Integral Energy Annual Performance Report 2009–10 Major works in 2009–10 progress Establishment ZS Liverpool West Augmentation ZS Nowra South Augmentation ZS Sherwood Establishment ZS Schofields Augmentation Vale Russell ZS Establishment HillSS Rouse Redevelopment TS Penrith Line Works Line – Establishment ZS Park Oran Description Augmentation Warragamba ZS North Augmentation ZS Nowra Before 2009–10 Before 21,577,098 9,672,664 4,258,692 1,784,965 4,784,749 1,901,559 385,383 798,910 416,355 35,890 Cost ($) ($) Cost 6,460,863 4,688,461 1,348,828 4,996,798 3,396,670 3,054,928 1,598,501 2,561,956 2,142,601 2,597,811 2009–10 (continued) 12,234,619 28,037,961 Total cost Total cost 6,856,504 6,898,357 5,073,844 3,853,889 2,558,957 1,634,391 6,133,578 5,181,635 to date
completion completion Sept 2010Sept Complete Complete Aug 2011 Nov 2010Nov Nov 2010Nov Nov 2011Nov Dec 2011Dec Practical Practical Oct 2010Oct Feb 2011Feb date investment to date – $69 million –$69 date to investment largest our is 2010 and August in operational fully became and 2009 January in commissioned first was which Substation, Transmission Springhill our overseeing D’Angelo Peter and Director Project Schafer, Greg right: Far Substation Zone Parramatta West million $50 Right: Penrith. near 2010), June construction (commenced Substation Zone Meadows Claremont million $22 Left: include: projects major Energy’s Integral of some communities, our for energy essential Providing Hoxton Park ZS. Park Hoxton to replace substation indoor 33/11kV anew Construct 11kV switchboard. new to house room control anew Construct unit. capacity higher with transformer existing Replace noise units. noise low with transformers existing the Replaced indoor substation. indoor 132/11kV anew Construct units. capacity higher with transformers two 33/11kV replacing substation existing the Augmented switching station. switching 132kV indoor anew Develop 132/33kV substation. indoor of anew Construction Oran Park ZS. Park Oran temporary to supply feeders 132kV new two Construct capacity units. capacity higher with transformers two replacing substation 33/11kV existing Augment Comments associated switchgear. associated and transformer anew Install 3
Cost ($) Practical Total cost completion Description Before 2009–10 2009–10 to date date Comments West Parramatta 1,512,274 5,203,602 6,715,876 Dec 2012 Construct a new 132/11kV ZS and East indoor substation and a new Parramatta SS 132kV indoor switching station Establishment and associated feeder works.
Wetherill 594,303 751,801 1,346,104 Jan 2011 Extend existing control room Park ZS to accommodate the 11kV Augmentation switchboard extension.
Wetherill Park 23,178,502 542,175 23,720,676 Sep 2010 Construct a new 132/11kV West TS/ZS zone substation and a Establishment 132/33kV transmission substation.
Whalan ZS 2,173,548 3,025,788 5,199,336 Oct 2010 Install a new third transformer Augmentation and associated 11kV switchboard.
Wilton ZS 265,127 812,996 1,078,123 May 2012 Construct a new Establishment 66/11kV substation.
Windsor ZS 715,264 2,941,905 3,657,169 Jun 2012 Rebuild existing substation Augmentation with a higher capacity indoor substation.
Network maintenance and pre-summer bushfire inspections program at a cost of $211.1 million, of our overhead electricity lines in compared with our 2008–09 Our Strategic Network bushfire-prone areas. expenditure of $206.9 million, Maintenance Plan (part of our and 96% compliance with our Strategic Asset Management Plan), The plan is reviewed and updated maintenance target. Our maintenance analyses maintenance needs against annually to identify what network performance contributed to our business objectives and details maintenance activities will be continued improvement in system the strategies we require to meet needed over the ensuing 12 months. reliability at 79.4 minutes lost our network strategy. This work per customer. includes vegetation management, In 2009–10, Integral Energy asset inspections delivered a record maintenance
3 | Our operations 29 30 3 | Our operations Integral Energy Annual Performance Report 2009–10 Demand managementprojects implementedduring2009–10 including: network maintenance, $211.1 million on Integral Energy invested Distributors (the DM code) code) DM (the Distributors for Electricity Management –Demand Code of Practice NSW The projects. expenditure capital for specific augmentation to network alternatives management demand investigate is to management of network cost way the of reducing One management Demand commercial area commercial and industrial Granville Totals commercial area commercial and industrial Liverpool commercial area commercial and industrial Hill Rooty Description and implemented and identified reduction Customer demand and implemented and identified reduction Customer demand and implemented and identified reduction Customer demand • • • • • • • • • request for proposal is (RFP) to be conducted to determine whether a ‘reasonableness test’ must be The DM code stipulates that a options. support system other and management of demand development the to for allow upgrades network intoinput planning of the major to facilitate distributors requires
(kVA) reduction demand Peak 3,200 9,400 kVA 9,400 1,200 5,000 maintenance activities. $114.6 million largely on network operating overheads and some minor $5.7 million on street lighting including replacing 5,968 lamps. A total of 92,901 poles were inspected. million$6.5 for the overhead line and pole inspection program. transformers and switchgear paid by the customer. million$8.6 for relatedexpenses to the contestable market including $11.4 million to fix networkdefects. transmission and distribution network. $12.3 million on preventative maintenance and oninspections the events and third incidents. party $13.3 million for fault andwork emergency following weather related information for billing purposes. $17.3 million on metering including the reading of meters and providing reduce improve outages, reliability and manage bushfire risk. $21.4 million on vegetation management to maintain clearances,safety 10 years) than (greater 10 years) than (greater CO 10 years) than (greater reduction 1,127 t CO to be Estimated Est. 3,311Est. tpa 423 t CO to be Estimated 1,761 t CO to be Estimated 2
2 e pa 2 2 e pa e pa over 4years $948,000 over 3years $190,000 over 3years $620,000 Project Management Demand of costs of PV $1,758,000 demand management plan projects. plan management demand network 2009–10 completed our outlines below table The network options. options, to be evaluated against make submissions for system support invites interested stakeholders to process in which the distributor process used. An RFP is a public issued or some other investigation (Avoided distribution cost) distribution (Avoided $1,160,000 (Avoided distribution cost) distribution (Avoided $1,014,000 (Avoided distribution cost) distribution (Avoided $1,010,000 expenditure savings expenditure operating plus expenditure deferment capital of total of PV $3,184,000
3
Construction of Integral Energy’s $58 million Granville Zone Substation commenced in February 2010. Shown left is an artist’s impression of Granville Zone Substation in five to ten years.
The network demand management plan also details major projects planned in the next three years and as listed in the 2010 electricity system development review. Where the DM code reasonableness test indicates that a public RFP process is not warranted, Integral Energy may still perform an in-house investigation with specific major customers to identify the potential for demand reduction. Current investigation areas are detailed in the tables below: RFP programs and target dates
Project Fin year RFP issue RFP results Decision Huntingwood ZS 2010–11 Sept 2010 Feb 2011 April 2011 Minto ZS 2011–12 Sept 2011 Feb 2012 April 2012 Bowral ZS 2011–12 Sept 2011 Feb 2012 April 2012 Riverstone ZS 2012–13 Sept 2012 Feb 2013 April 2013 Woodpark ZS 2012–13 Sept 2012 Feb 2013 April 2013
The items that have been identified During 2009–10 we answered efficiently restoring supply after for in-house investigation have not 16,876 customer enquiries. The faults and minimising scheduled passed the DM code reasonableness NSW public lighting code requires maintenance outages. Where test, but may involve a possible broken streetlights to be repaired reliability is below acceptable levels, non-network demand management within an average of eight days. The we continue to improve these areas alternative for one or more major average response time for Integral by investing in network upgrades customers (generally those responsible Energy to repair streetlights during and targeted maintenance projects. for creating the peak demand). 2009–10 was just under four days. (see page 13 for more details). Planned in-house demand We introduced new energy efficient management investigation compact fluorescent lamps for Providing value streetlights this year, which are now Completion for money Project available as standard options for date local councils to consider. The network strategy ensures Abbotsbury ZS June 2011 customers receive value for money by continually improving the Westmead ZS June 2011 Meeting customer effectiveness and efficiency of Casula ZS June 2011 reliability needs capital and operating programs (see page 14 for more details). Integral Energy’s network business Streetlighting has delivered the best – or equal best – reliability performance of the As a public lighting service provider, three NSW distributors for the past we recognise that well-designed five years. and maintained public lighting contributes to public safety. We Integral Energy is committed manage 186,000 streetlights to maintaining the continuity on behalf of 29 public lighting and quality of supply to existing customers including 23 local councils. customers by preventing faults,
3 | Our operations 31 32 3 | Our operations with expectations. expectations. with in line has been switching customer where Queensland and in NSW active have remained Integral Energy Annual Performance Report 2009–10 1 in 2009 retailer energy to another switching customers 16%with of electricity world, in the dynamic most is the market energy retail Australian The Territory. Capital Australian the and in Victoria clients corporate large some includes base customer Our Queensland. South-East and NSW metropolitan rural and across businesses and homes over 850,000 marketing and for sales manages division Energy’sIntegral Retail by 9.5% 2008–09. with compared increased sales consumption, energy in thisdrop Despite industry. large and small business to medium by of electricity consumption Crisis business to lower led Financial Global of the impact The to-market. channels- successful existing our on continuing and to focus strategies, marketing and integratedour sales thisby implementing We achieved Queensland. and in NSW numbers customer in combined increase overall an and EBITDA on increase a10.3% with targets 2009–10 its exceeded and met business retail Our division. foryear Retail our to make achallenging 2009–10 market combined energy evolving an and of competition levels High Retail –customer numbers up • hours) (Gigawatt sold Electricity indicator: Performance Source:VaasaETT GlobalEnergyThink-Tank (vaasaett.com)2010 customers in NSW and Queensland during 2009–10. during Queensland and NSW in customers business and residential 850,000 to over 11,075.58 electricity of provided GWh business Retail The 2005–06 9,436 1 . Our competitors competitors . Our
2006–07 9,741 Market (NEM) by entering into Market (NEM) Electricity National in the prices of risk high the to manage need we ourselves, electricity generate not do we As by customers. our used electricity for the (AEMO) Operator Market Energy Australian the paying for is responsible Energy Integral How we trade transition to a new business owner. operation in 2010–11 and a potential to continue managing the Retail available, Integral Energy plans Based on information currently 2010. in mid start would transactions Gentrader and electricity retail NSW for the process diligence due that the announced 2010, Treasurer February In NSW the period. transition duringthe owner to anew services ongoing provide that would (TSA) Agreement a Transition Services for of aframework establishment the and requirements diligence due of all vendor completion the has included This business. Retail the of sale intended for the preparations necessary all the has undertaken Energy Integral requirements, Treasury’s NSW linewith In Retailour business Maintaining value in
2007–08 11,785 • • • • • of the: requirements environmental mandatory the with complies Energy Integral compliance Environmental previous year’s of $41.66. record previous falling the from prices to $38.85 to spot average led This constraints. rainfall, supply-side relieve helped higher and plant commissioning New demand. reduce helped which summer overthe temperatures to lower-than-average thanks year last with compared volatility price reduced saw year The financialproducts. sell and buy also we for customers, our certainty To NEM. in the prices ensure price electricity to spot exposures manage market actively we as wholesale the We in have apresence participants. with marketother financial contracts
NSW Energy Savings Scheme (ESS). Target Energy Renewable (VRET) Victorian Government’s Victorian 13% (GEC) Scheme Gas Government’s Queensland Target (MRET) Energy Renewable Mandatory Government’s Australian (GGAS) Scheme Reduction Gas Greenhouse NSW 2008–09 12,099
20009–10 11,076 3
The project team who helped former Jackgreen customers to transfer back to Integral Energy in a seamless manner (left to right): Jonathan Bramley, Anne Whitehouse, Russell Walsh, Anton Muller, Brendon McEntee, Steven Baker, Tony Taouk and Peter Payne.
Ongoing and proposed changes Despite increased competition in consumer advocates, welfare to the various national and state the corporate sector, we retained groups, customers and other environmental schemes creates several key customers that stakeholders to educate and inform challenges for market participants as contributed a substantial proportion them of our pricing and options that they strive to meet their regulatory of the wholesale energy load. can help reduce the impact of the obligations. The Commonwealth increases. This includes government On 1 January 2010, the NSW Government-proposed Carbon rebates, flexible payment plans and Government’s Solar Bonus Scheme Pollution Reduction Scheme (CPRS) better management of energy usage was introduced to support has been delayed and the national to improve efficiency. customers who produce renewable policy remains uncertain. energy through eligible roof-top solar photovoltaic systems and wind Successfully Sales and marketing turbines connected to the grid. To implementing initiatives accommodate the requirements of the scheme, and other new retail the RoLR plan We continued to implement our products that are related to the In December 2009, we assisted integrated sales strategy in the scheme, we undertook an extensive some 15,000 residential and NSW and Queensland markets investigation to ensure we had the business customers who were left with our primary sales channel of ability to facilitate a feed-in tariff without an energy retailer after door-to-door selling, once again for eligible NSW customers. Jackgreen (International) Pty Limited delivering the majority of residential was suspended from operating acquisitions. Telesales were used How we help in the NEM. As a Retailer of Last to access other prospects who Resort (RoLR), Integral Energy was could not be reached through our customers responsible for ensuring these the door-to-door channel. We The Retail team has worked customers continued to be supplied also continued our partnership diligently to ensure our marketing with electricity. Within days of the with National Seniors Australia, channels provide superior service announcement we made contact promoting special energy offers to customers. This year, overall to inform them that we would to their members. retail complaints decreased by be looking after their energy Partnerships also continued with 33% across NSW and Queensland requirements and to explain several business energy brokers compared with 2008–09. their options. to acquire new small to medium During 2009–10 the AER (network), We embarked on a complex business (SME) and corporate IPART (NSW retail) and Queensland inter-departmental project to transfer customers. This year, the energy Competition Authority (Qld retail) the customers to Integral Energy broker channel delivered over approved electricity price increases. over the Christmas holiday period. 60% of our business leads. New The project went to plan and we strategies were implemented which We understand the pressure our welcomed them to Integral Energy in provided highly competitive pricing. customers have been experiencing a professional and seamless manner. As a result, we increased our SME as a direct result of these increases We look forward to providing them customer acquisitions by 50% and are keen to support them with superior, reliable service for above target. through this difficult time, many years to come. particularly those who are in financial hardship. Integral Energy has been actively working with
3 | Our operations 33 34 3 | Our operations Integral Energy Annual Performance Report 2009–10 Hill. Castle in Substation Zone Avenue Cheriton million $48 Energy’s Integral of impression Artist’s Substation. Zone Creek Eastern North new the Inspecting Substation. Transmission Penrith the of construction the supervising Assistant, Project Cahill, Phil and Manager, Project Tunks, Mark bottom: to top From Scheme. Ombudsman Energy Queensland of the operation efficient and effective the on Ombudsman the council is to advise of the role The electricity. their with aproblem tounable resolve have been who consumers energy small and business for domestic quality,services fair confidential and high- effective, aims toIt provide consumers. state’sfor the energy service resolution independent and is afree Queensland Ombudsman Council thisyear. Energy The Advisory Ombudsman Energy to the appointed a representative to proud was have Energy Integral week. bills each 10,000 of average an generating and customers 10%around of electricity supplying Queensland, South-East market new entrantsuccessful in most is the Energy Integral year. past in the growth customer continued have we seen where in Queensland, for Energy Integral sun has continuedto shine The Sunshinein the State year good Another corporate planning framework, adding a sixth strategic objective –delivering “During 2009–10, we refined our performance through people.” 3
Strategic leadership for improved performance
Over the next three years Integral In the year under review we made Innovation and Energy will continue to develop significant progress in implementing and shape its corporate plan by changes in the strategic improving business reviewing key strategic plans in the procurement area that will improve performance areas of safety, asset management, the quality and reduce the cost of Integral Energy has a formalised finance, risk, human resource procured goods and services. Our Innovation structure to manage and management, technology and work included the establishment implement innovation and business our retail business. These core of a new operating model effective improvement initiatives to enhance strategic plans, updated annually from 1 January 2010. customer value. and prepared over a five-to-ten-year Importantly, our new operating horizon, underpin our corporate In 2009–10, we launched a model reinforces governance in the plan and help us identify medium corporate wide initiative to identify procurement process, facilitates to long term opportunities for the and implement productivity investment in capability, develops business. improvements, which has expertise and leadership and contributed to more efficient During 2009–10, we refined our provides tools for better reporting operations and a tightening of our corporate planning framework, and recording of information. operating expenditure. adding a sixth strategic objective In particular, our new model will – delivering performance through We also undertook benchmarking ensure that our procurement people. These six strategic objectives activities with a particular focus on activities are focused on these were supported by 37 priority understanding our performance core objectives: initiatives, allocated to our in network operations, customer business divisions. • Delivering value for money. management and key field activities. We will have a clear focus on These insights set the platform We developed a new purpose achieving the lowest whole-of-life for best practice initiatives to be statement during 2009–10, which costs for goods and services. undertaken in 2010–11. replaces our previous mission and vision statements. We also reviewed • Delivering the Strategic Asset Our priority in the coming period our corporate values, refreshing Management Plan. We will is to continue to drive quantifiable them and reducing them from focus on building collaborative improvements in organisational eight to five. relationships with network productivity to deliver value to our stakeholders to develop forecasts customers. To this end, we will for our materials and services continue the use of benchmarking, Progress on strategic requirements across the company. coupled with a structured program procurement review of continuous improvement teams, • Managing governance, probity to achieve best practice operations. As a result of the major forecast and risk. By implementing We will also review existing business growth in capital and operating robust management systems models and processes to streamline expenditure across the NSW we will facilitate high standards activities, review and implement electricity industry from 2009 to of integrity, probity, ethical applicable industry innovations and 2014, Integral Energy began a behaviour and conduct in all work with consumers to add value strategic review of procurement our procurement activities. to their energy use. operations in 2008–09.
3 | Our operations 35 4 | Our community – progress in partnership
Integral Energy continually engages our diverse stakeholders in open, honest dialogue on matters ranging from capital works and maintenance programs to vegetation management, community partnerships and serving and acknowledging our diverse customer base.
Barnardos is one of Australia’s oldest and most respected child welfare organisations, and one of our workplace giving charity partners. Funds from our workplace giving program are directed to the Penrith and Warrawong Family Support Programs, which helps support children in the context of their home and family.
Integral Energy has been a sponsor of the NSW Department of Education and Training’s Schools Spectacular event since 1999. This event has grown to become the state’s highest profile performing arts event for young people, with 4,000 students performing to large audiences at the Sydney Entertainment Centre.
36 energy for life Integral Energy Annual Performance Report 2009–10 4 Our stakeholders
Integral Energy has a complex and diverse stakeholder base, including government, regulators, shareholders, customers, employees, media and suppliers. We conduct an independent survey of critical stakeholders every two to three years to identify issues of concern and to assist in identifying areas of potential risk. This survey also helps us prioritise stakeholder engagement programs. The table below demonstrates how we engaged with our key stakeholders during 2009–10:
Key stakeholders Forms of engagement
Government
Shareholding Ministers Corporate Plan, Statement of Corporate Intent, Annual Report
Minister for Energy Briefings on key issues, media events
Local MPs Briefing notes, meetings, newsletters
Local councils Meetings, communication materials, community partnerships
Regulators Price determination submissions, meetings, forums
Customers
Business Chambers of Commerce, community partnerships, Customer Consultative Committee
Residential Newsletters, Customer Interaction Centre, website, energy audits, Customer Consultative Committee, NSW and QLD energy ombudsman schemes
Suppliers and contractors Inductions, website, electronic tendering portal (Tenderlink), publications
Accredited Service Providers Safety bulletins, hazard alerts, inductions, seminars, training, briefing sessions, dedicated website
Community
Employees Safety bulletins, hazard alerts, daily News@5 email, Consultative Committees, monthly team briefings, safety days, Inside Integral employee magazine, fact sheets, newsletters, podcasts, forums, bulletin boards, employee booklets, training
Local community, Community partnerships, Customer Consultative Committee, forums, community organisations energy audits, brochures/flyers, letters, website, advertisements, and environmental groups public notices
Media Media releases, media statements, briefings
Unions Joint Consultative Committees, notices, employee union representatives
Industry Membership of industry associations, representation on Boards and participation in working groups
4 | Our community 37 38 4 | Our community Integral Energy Annual Performance Report 2009–10 Transmission (near Substation Nepean existing the between 132kVnew line transmission of a construction the includes investment This development. Sector West South of the part forms Grove which Harrington and precinct Park Oran the service We $17.2 are investing to million line transmission – Nepean Park Oran issues. community on contractor for building our induction acomprehensive and media local Sydney, for Western Minister and Member Local the with newsletter, briefings community a included communication Our impacts. siteconstruction and of the selection the about information with stakeholders and community the to provide Substation Granville Zone million of $58 our construction for plan the engagement astakeholder implemented January, we Throughout Substation Granville Zone included: communities local with engaged we which on projects major of the 2009–10,some During assessments. impact stakeholder comprehensive undertake we works capital planning major When Energy’sof Integral operations. to success the is critical dialogue honest and in open stakeholders other and Engaging community the keyon projects Public consultation • • • • projects: four major incorporates which developed, has been plan engagement community A comprehensive region. in the growth expected given upgrade area, essential an Parramatta the for supply electricity reliable and asafe to million deliver $300 We over to plan invest projects CBD Parramatta considerations. design and environmental social, economic, route to ensure balances it of the design proposed the on keyconsulting with stakeholders have we been Meanwhile feedback. community seeking and project the announcing newspaper local in the appeared Articles (REF). Factors of Environmental Review the into input their Camden, seeking for Council Member the and lineroute, the Camden as well as along businesses and residents We have consulted over175 local Substation. Zone Park Oran new proposed the and Narellan) West Parramatta Zone Substation. Zone Parramatta West Transmission to Substation Guildford from works 132kVUnderground cabling CBD Parramatta in the works 132kVUnderground cabling Substation Switching Parramatta East Substation Zone Parramatta West survey of critical stakeholders every two identifying areas of potential risk.” issues of concern and to assist in “We conduct an independent to three years to identify online and written information for information written and online included which starting, to work the strategy, prior engagement month Mayor.and asix- involved This Council City Mountains Blue the and groups community including local area, in the of stakeholders anumber engaged we so doing In environment. local of the needs the and safety public provide, we services essential the between a balance for need the about parties affected areato educate government local Mountains Blue in the Program Management intensive Vegetation 2010, April In an began we in managing thisissue. communities affected with to engage efforts our have we increased thisreason For communities. our and ourselves to both is areaof an concern environments and streetscapes local on lines power around vegetation ofHowever, managing impact the risk. safety is apublic lines power contacting and climbing trees risk. safety Children of bushfire and asource and interruptions supply of causes primary of the one be continuesto lines power with coming intoVegetation contact management Vegetation Community Consultative Committee. includes the establishment of a the community. This engagement on the day-to-day activities of out in a way that minimises impacts to ensure these works are carried City Council and other stakeholders residents, businesses, Parramatta We will engage closely with local
“Vegetation coming into 4 contact with powerlines continues to be one of the primary causes of supply interruptions and a source of bushfire and safety risk.”
We placed this advertisement in the Blue Mountains Gazette to inform the local community about vegetation clearances.
residents, briefings for local media available at various meetings and Highlights in 2009–10 included: and community information to organise an annual field trip. Commemorating feature in local newspapers. An In May 2010 the Committee had the bicentenary of independent arborist employed the opportunity to speak with Governor Macquarie by Integral Energy responded to the Chairman and Members community and resident concerns. We were involved in two of the Board, and gain an insight major community programs Through regular meetings with into the operations and issues commemorating the bicentenary each of our stakeholders we aim to of the organisation from a of Lachlan Macquarie’s swearing-in develop a core set of issues in each Board perspective. as Governor of New South Wales: contract area and, where possible, In September 2009 the Committee to develop strategies and processes toured Integral Energy’s purpose- Integral Energy to address their concerns. Outcomes built Hoxton Park Technical Governor Macquarie will be measured against monthly Training Centre for apprentices, 2010 Education Program customer complaints in each region. which provided an insight into We worked with the Powerhouse their extensive training program Discovery Centre to develop a Customer Consultative and the apprentice recruitment historical education program for Committee process. The Committee also toured schools in the five Macquarie towns EnergyAustralia’s Energy Efficiency (Castlereagh, Pitt Town, Richmond, Integral Energy’s Customer Centre at Homebush. Wilberforce and Windsor). The Consultative Committee is Integral Energy Governor Macquarie comprised of important stakeholder 2010 Education Program provides groups: business customers, Community funds for a series of free educational residential customers, senior partnerships visits to the Powerhouse Discovery citizens, community organisations Integral Energy builds strong, Centre for primary and secondary and multicultural groups. It provides valuable partnerships with local students in the area. Up to 660 us with valuable information communities by engaging with, primary students participated in the and insights into issues that and investing in, them through Discovery Centre’s program Life in impact our customers and the sponsorship initiatives. In 2008, the Past and up to 600 secondary wider community. we developed our community students took part in Historical A workshop is held each year to partnership framework comprising Inquiry: Preserving our Past. determine topics of importance, criteria across six categories – which is documented into an health and safety, community, ParraMAC annual work plan. In 2009–2010, youth and education, environmental Integral Energy was also a partner of it contributed to important responsibility, business excellence the ParraMAC festival, coordinated discussions including our and regional investment, and by Parramatta Council and the greenhouse action plan, energy innovation and technology. Riverside Theatre. ParraMAC was price rises and customer hardship, The framework reflects our involved with many community bushfire risk management and obligations under the Energy events from June to October 2010. In our corporate plan. Services Corporations Act 1995 particular, we sponsored ‘Luminary’, and Corporate Plan. To help develop the Committee’s a five-day building illumination understanding of the industry and program for seven heritage sites in support its work, we make senior Church Street Mall and George Street managers and industry experts through to Old Government House.
4 | Our community 39 40 4 | Our community Integral Energy Annual Performance Report 2009–10 to $100,000 from $150,000 for for available matching increased donations total in 2009–10,the program of to the success the Due dollar-for-dollar Energy. by Integral are matched donations Employee charities. 11 employee-selected than$1 more donated to million care!) (I employees responsive and concerned Energy’s Integral program giving workplace our 2004, launch in July Since its giving Workplace community the Investment in www.integral.com.au. website: found our on be can program partnership Energy’s community Integral on information Further study. postgraduate undertake to students at encouraging local aimed scholarships two supplement will it time centre, first for and the at the academics full-time two to employ used funding be will The processes. and of equipment performance normal the affect that can disturbances electrical centre’s on The focuses research Centre. Reliability and Quality Power Energy Integral in the investment three-year, $1a further million by signing faculty engineering of Wollongong’s University the with 15-year, partnership million $4 2010In our celebrated we in partnership power quality research and development of Wollongong’s 15-year Integral Energy and University “ Integral Energy Power Quality and Reliability Centre.” signing afurther three-year, $1 million investment in the with the University of Wollongong’s engineering faculty by In 2010 we celebrated our 15-year, million $4 partnership , has diversity across our stakeholder base. acknowledging and valuing cultural values commit the organisation to groups, Integral Energy’s corporate communities and other stakeholder and our interactions with suppliers, our management of employees In our delivery of customer service, Program Services and Policies Multicultural to organisation. each $30,200 donated we excellent and was Participation charities. giving of workplace- our two Foundation, Research Medical Westmead the and at Westmead Hospital Children’s to The survey completed to $20 donate agreed for each we To participation, encourage patterns. consumption energy their insight and into understanding to us gain an help customers business small medium-sized and 2010, early In selected surveyed we benefits big brings Survey appeal. to Salvos’ the $36,260 to fund, donate able were we dollar-for-dollar matching corporate agreed an and of employees our to generosity the Thanks partners.) charity of workplace-giving our is one Army Salvation (The Appeal. Earthquake Army’sHaiti Salvation to the donation to make aone-off for employees deduction payroll tax 2010, apre- up set Energy Integral in January that hitHaiti earthquake devastating the Following appeal earthquake Haiti in Icare participate employees year.the Currently, of our 9% ! included an offer of the service. of the offer an included have Substation Zone Windsor and Substation Granville Zone works, line transmission Road Schofields for area. Tolocal date newsletters in their works capital proposed in about enquiring interested to residents interpreter service this offered Energy Integral Affairs. Indigenous and Multicultural and Immigration of Department Government Australian by the supplied service, interpreter of the main users the are customers Vietnamese-speaking and Arabic enquiries. all customer for interpreter an service provide we and languages in six is produced brochure INpower Our us. contact to may need – any of whom customers to 850,000+ our service of level same We the aim to provide (1.8%).Cantonese (2.0%)(3.7%), and Vietnamese areaare Arabic spoken in the languages common most three the thanEnglish,backgrounds. Other speaking non-English from comes area in the population 28% of the Australia.Approximately outside born –were Illawarra the and Highlands Southern the Mountains, – Sydney’s Blue the Greater West, area in franchise our living people Census of that 29% indicates 2006 the from collected Data because of their cultural backgrounds. customers are not disadvantaged multicultural customer base and that services are offered to our We strive to ensure that appropriate 4
“In early 2010, we surveyed selected small and medium-sized business customers to help us gain an understanding and insight into their energy consumption patterns.”
Our Customer Consultative Committee also considers the differing ethnic and cultural needs of customers. The Committee provides valuable feedback and Below: Integral Energy’s Deputy Chairman advice about our policies and Terry Downing with University of Wollongong’s Vice Chancellor Professor services. Its membership includes Gerard Sutton at the official signing ceremony representatives of Aboriginal and of our continued partnership of the Integral other communities. Energy Power Quality and Reliability Centre. In 2009, Integral Energy ran a six week pilot program – ‘PowerStart’ – in conjunction with Miller TAFE, to help strengthen indigenous employment opportunities in the organisation (see page 45 for more details). We have also formed a working group to develop an apprenticeship development program to recruit, develop and retain indigenous employees. Our goal is to increase indigenous participation in the workforce to 2.6% by 2015.
The official handover of Integral Energy’s donation to the Children’s Hospital at Westmead and the Westmead Medical Research Foundation. (left to right) Sameer Shrestha, Forecasting Analyst, Rod Howard, Group General Manager Network, the foundation’s Eric d’Indy, Gautam Gangopadhyay, Energy Forecasting Manager, Mike Martinson, Manager Network Regulation, and the hospital’s Gilly Paxton.
4 | Our community 41 5 | People – our most important energy source
Integral Energy understands that its performance as a business depends on the energy and commitment of its people. During 2009–10 we implemented a number of initiatives that will help our employees better deliver the performance our customers and communities expect of us.
Top: Graduate engineers Chris Mason, Eric Ren, Gavin de Hosson, Ben Armstrong, Terry Niemeier and Roshan Venkatraman visit Integral Energy’s Bella Vista ZS with tour guide Peter Norrie, Senior Engineer (back), accompanied by Michelle Scott, Network Executive Assistant (front). Bottom: First year apprentice, Zoe Osborne
42 energy for life Integral Energy Annual Performance Report 2009–10 5 Delivering performance through people Integral Energy’s full-time workforce continued to grow in a year in which we initiated a new strategic objective – ‘delivering performance through people’. This sixth strategic objective recognises the critical role that people and culture will play in achieving our organisation’s strategic and operational goals.
Performance indicator: Integral Energy employees 2,888
• Integral Energy’s full-time 2,871 workforce grew by 0.6% to
2,888 in 2009–10 with an 2,760 additional 60 apprentices, eight engineering graduates and four
trainee engineering officers 2,593 joining the organisation. Our network workforce grew 2,457 by 1% during the year and is expected to grow by a further 6.6% in 2010–11 to support our record electricity network investment program. 2005–06 2006–07 2007–08 2008–09 2009–10
Employee numbers
Employees 2005–06 2006–07 2007–08 2008–09 2009–10
Total staffª 2,457 2,593 2,760 2,871 2,888
Increase (%) 6.9 5.5 6.4 4.0 0.6 a – staff numbers are based on full time equivalents
At Integral Energy we take During 2009–10 we implemented A total of 283 employees were responsibility for safety excellence, a strategy to help employees better enrolled in these development we believe in respect for people, understand ethics in the workplace programs at 30 June 2010, we honour our commitment to and to equip them to make the accounting for almost 10% customers and communities, we right ethical choices in their of the total workforce. are committed to continuous day-to-day work. improvement and we always This year we also reflected on act with integrity. Career development the challenges that are ahead of and succession During 2009–10 we implemented a us and identified the qualities of number of initiatives that will help leadership that will help us deliver planning our employees better deliver the performance through our people. Succession plans for our senior performance our customers and We have developed a leadership management positions are now communities expect of us. competency that clearly describes in place and development plans the expectations of our leaders. To that end, we have put much for potential successors to those effort into planning what we need positions are being implemented. to achieve. However, we understand Learning on the job The development plans for potential that how our results are achieved is successors are designed to ensure we We continued to run development every bit as important. This is why have a supply of consistently high- programs throughout the year to we have taken the time and effort performing managers and executives. ensure we have adequate numbers to refresh our values and identify Some high-potential successors are of trained staff to meet future the supporting behaviours that all ready now for critical leadership needs. As part of these programs, employees are expected to adopt. roles, while others will develop employees participate in workplace over time. Potential successors rotations throughout the network have been involved with a range of business to develop their skills. individual development initiatives including stretch assignments, executive development programs and networking opportunities.
5 | Our people 43 44 5 | Our people Note: Integral Energy Annual Performance Report 2009–10 roles. new in their successful to be employees to enable provided training and is support Appropriate widely. more is advertised position a before mobility by employee reviewed are first positions vacant in to place put ensure all been have processes and Systems employees. to affected support to and provide communicators as role their to understand management of change challenges the addressing and in identifying confidence and competence their change, through to build others and themselves lead to effectively tools and strategies to develop managers with works also mobility Employee organisation. the within toposition gain anew need skillsthey and confidence the employees aim is to affected give Its skills workshops. interview and development resume assessment, career planning as well retirement as financialand issues, wellbeing and health on information provides program redeployment mobility employee The reform. by organisational impacted have been positions whose of staff 2010 redeployment the to support in February established was function mobility Energy’sIntegral employee Mobility Trends intherepresentation ofequalemploymentopportunitygroups (%oftotalstaff, excludingcasualstaff) Equal statistics Employment Opportunity spoken as a child was not English not was achild as spoken first language whose People work-related adjustment work-related requiring adisability with People adisability with People Torres Strait Islanders & people Aboriginal Women Representation Benchmark issetbytheNSWGovernment. Staff numbersare asat30June. or target (%) target or to implementation. achieve Commission Relations Industrial NSW of the support require the continue to projects savings of the Some implementation. before fromstaff input to enable committees consultative to local subject were items of these Each • • • • • • • • included: savings Those award. of the years two of the 2.5% above increases for each to wage fund sufficient savings related employee award contained 2007, Policy Wages Government the NSW accordance with In 2008. AwardConditions of Employment Integral the Energy certified Commission Relations Industrial NSW the 2009, June 30 On Employee relations Benchmark Benchmark Network automation. automation. Network practice to ensure best tasks of administrative Review accrualsleave of excess Management Call centre reform functions reading meter and change lamp Contesting bulk street switching network on demarcations Removing rosters shift Alternate shift afternoon of the introduction The 2.6 50 19 12 7 2005–06 0.5 22 5 8 1 2006–07 0.5 0.9 22 4 8 lost due to industrial action. to due industrial lost time no was there year past the In testing. alcohol and drug and fatigue management safety, and health occupational around policies through standards safety is strengthening outcome award ongoing Another the service from pre-tax earnings. earnings. pre-tax from service the to centre payfor the are able use who Employees to years. five weeks six site, for 39children aged catering Energy’s Integral from Huntingwood centre site childon care operates An achild is born. when employees to leave paternity paid week one or at half pay) 28 weeks pay (or at full leave 14 maternity weeks continuesto Energy offer Integral by 2015. to 2.6% participation indigenous aims to increase This employees. indigenous retain and develop to program recruit, development apprenticeship indigenous an to create formed has been group Aworking workplace. in the diversity on attention more to focus need a identified Energy Integral 2009–10 In Opportunity Equal Employment 2007–08 0.3 22 4 1 8 2008–09 0.3 0.9 21 4 8 2009–10 0.2 21 1 4 8 Trends in the distribution of equal employment opportunity groups (Distribution Index) 5 Distribution Index Benchmark 2005–06 2006–07 2007–08 2008–09 2009–10 Women 100 98 100 103 105 106 Aboriginal people & 100 96 96 97 100 99 Torres Strait Islanders People whose language first 100 110 112 115 116 113 spoken as a child was not English People with a disability 100 97 99 101 103 104 People with a disability requiring 100 – – – – – work-related adjustmenta
Note: A Distribution Index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency, the lower the index will be. In some cases the index may be more than 100, indicating that the EEO group is less concentrated at lower salary levels.
a – The Distribution index is not calculated where the EEO group or non-EEO group numbers are less than 20.
Performance indicator: record numbers of apprentices • Integral Energy continues to employ record numbers of apprentices. Two hundred and fifty one apprentices, aged from 16 to 49 years, are currently being trained to work on all aspects of our network. • Among the apprentices appointed during 2009–10 were two women and nine graduates of the adult apprenticeship support program, which provides support to employees who have been away from formal studies for some time. 75 63 62 60 60 60 60 60 45 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14
Award-winning ‘PowerStart’ program an understanding of what an electrical apprenticeship entails. apprentices To help strengthen Indigenous The pilot provided us with key Our apprenticeships are keenly employment opportunities at insights to help develop a more sought and attract the best and Integral Energy, in 2009 we ran a six robust program with Miller TAFE. brightest. Ben Dawson claimed week pilot program – ‘PowerStart’ best Electricity Supply Industry – in conjunction with Miller TAFE. The redesigned ‘PowerStart’ (ESI) Distribution apprentice and The pilot involved participants program will commence in 2010 Apprentice of the Year – attending TAFE for two weeks to September 2010. Western Sydney Region. Michael review and strengthen their literacy A working group has also been Williams was best Electrician and numeracy skills, and receive an formed to create an indigenous apprentice and Rhys Tanner was introduction to electrical theory. apprenticeship development best ESI Distribution apprentice in program offering pre-apprenticeship the Illawarra Region of the NSW They also completed a training with literacy and numeracy Training Awards. In addition, Guy three-week induction program coursework and work experience. Battin was jointly awarded the with Integral Energy, to learn This program, along with a pilot 2010 Rotary Walter Stone Memorial about our occupational health and work experience program for school Perpetual Trophy for the Hills District safety practices, how to climb students, aims to increase interest in Apprentice of the Year. poles, cable jointing and other aspects of the energy industry. electrical apprenticeships. The participants were also given
5 | Our people 45 6 | Environment – defending the needs of future generations
We recognise that every individual and every corporation has to take responsibility for the future of our environment. Integral Energy is dedicated to reducing emissions and waste and achieving our goal of direct emission carbon neutrality by 2020.
Understanding business energy needs – Integral Energy’s Demand Management Officer, John Prot, talks with Wire Industries Production Manager, Clive Raison, about initiatives to reduce energy demand for their operations.
46 energy for life Integral Energy Annual Performance Report 2009–10 6 Environmental policy
Integral Energy’s environment In providing energy for life, in every Over the past 12 months our policy is based on respect for the sense, we have developed our environmental expenditure environment and the community in environment strategy in a way that exceeded $7 million, up 22% which we operate, and safeguarding ensures we achieve performance from last year. the needs of future generations. improvements. The strategy We appreciate that this represents a embodies four key initiatives: significant challenge and recognise • Responding to climate change that achieving our stated purpose is dependent on us delivering • Improving our performance against our environmental • Continuing to learn and driving policy and remaining true to cultural change our corporate values. • Engaging with stakeholders.
Performance indicator: 11 environmental incidents • During the year one environmental incident was reported under the Protection of the Environment Operations Act 1997, an improvement on the previous year. 4 The incident (on page 49) was well responded to by 3 2 the NSW HAZMAT team and the Integral Energy 1 Incident Response Team. 0 No further action was taken by the regulator. 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10
Responding to achieving sustained reductions in operating programs planned over network losses. the next decade, as well as specific climate change asset management strategies. Analysis undertaken by the CSIRO As a responsible business, predicts that New South Wales Australia’s federal climate-change Integral Energy is mindful of its is likely to become warmer and policy framework continues to environmental obligations to extreme weather events, including be actively debated. In response, achieving sustained reductions in severe storms and heat waves, Integral Energy continues to focus our direct and indirect greenhouse are likely to be more common. on three key areas: gas emissions. We recognise that For Integral Energy this means customers expect energy companies • Reducing our carbon footprint managing increased summer to demonstrate leadership in this to zero by 20201. peak energy demands, as well area. A key component of our as significant asset management • Considering the impacts of environmental strategy is to manage challenges in operating a network climate change on our network the reduction of our carbon footprint that spans urban centres, rural and responding accordingly. through a holistic approach. This is areas and coastal regions. Wherever underpinned by action plans which • Empowering our customers possible, we have taken account are primarily focused on achieving to make more sustainable of these potential scenarios in carbon neutrality for Integral Energy’s power choices. the development of our network direct emissions by 20201 and by strategy, including its capital and
1 Integral Energy’s direct emissions include emissions from electricity consumption, petroleum products,
waste, sulphur hexafluoride (SF6) and hydrofluorocarbons (HFCs). 6 | Our environment 47 48 6 | Our environment Integral Energy Annual Performance Report 2009–10 2 (SF products, waste, sulphur hexafluoride electricity consumption, petroleum Including emissions from internal Progress towards neutrality direct our carbon 2020 goal initiatives were implemented: several key greenhouse gas reduction cars off the road This is the same as taking 3,488 CO result in over 180,000 tonnes of our target of carbon neutrality will GreenfleetAustralian Tree Totaller –www.greenfleet.com.au • emissions gas greenhouse indicator: Performance 6 2 ) and hydrofluorocarbons (HFCs), e being abated or offset by 2020. the commissioning of new buildings and continued growth in workforce. our continuedgrowth and buildings of new commissioning the methodology, in reporting achange from resulting increases emission to for allow planned years two previous of carbon dioxide equivalent (CO equivalent dioxide of carbon of 32,157 target greenhouse our met to activities our attributable tonnes directly Total emissions greenhouse * DirectemissionsincludeScope1,2 andsomeScope3emissions. Petroleum Products t CO High Voltage Testing Technician Testing Voltage High Hydro fluorocarbons (HFC) t CO 10,345 2004 9,800
– 4,555 05 1,981 2 . During the year 627 0
11,028 Bailie, Brian 2 2005 e 8,554
– 5,116 06 2 e 1,994
801 2 Direct e). Our greenhouse reduction target in 2009–10 was higher than in the thanin the higher was in 2009–10 target reduction greenhouse Our e). SF6 t CO Electricity (consumption) t CO
0 •
11,211 of COtonnes expected to save approximately 300 11 are initiatives these Both FSCs. hot water systems were installed at additional FSCs. In addition, solar EES has been implemented at three improved by an average of 36%), Centre (FSC) (energy consumption trial at the Kings Park Field Support the Energy Efficiency System(EES) In facilities, reflecting the success of * greenhouse gas emissions gas greenhouse 2006
2 8,945 e
– 5,030 07 1,594 382 2 e. 0 12,139 2 2007–08 e 8,859 4,502 Offsets purchased t CO Solid Waste (t CO 1,209 562 0 11,988 • 2008–09
10,690 of COtonnes of 1,200 saving expected in result an will This hours. working normal outside down shut are automatically computers ensuring that non-essential business, the across out rolled was initiative shutdown computer technology, information a In 2 e) 5,752 2,155 2 e 306 –1,003 2 e each year.e each 11,502 2009–10 8,880 5,996 1,963 321 –1,433 6
Integral Energy’s Eco Depots program (see page 51) focused on practical measures to improve our environmental footprint.
• In fleet, we achieved emissions Under the NGERS reporting performance improves and the reductions by commencing the boundaries our direct emissions regulatory environment strengthens. progressive replacement of include scope 1, scope 2 and six-cylinder with four-cylinder some scope 3 emissions. Scope 1 vehicles and the increased emissions are emissions generated Compliance purchasing of E10 fuel. Our vehicle directly by the facilities or Integral Energy’s focus on regulatory fleet travelled approximately equipment owned or controlled by compliance resulted in us having no 25 million kilometres in 2009–10 the company. Scope 2 emissions fines or prosecutions in 2009–10. consuming approximately are those generated outside of the Only one incident required reporting 1,580 kilolitres of petrol company’s facility boundaries to to the regulator under the NSW (unleaded and E10), 2,600 provide energy to the facility, such Protection of the Environment kilolitres of diesel and 41 kilolitres as electricity purchased from the Operations Act 1997. This was the of LPG, resulting in the generation grid. Scope 3 emissions are those result of damage caused by a third of 11,502 tonnes of CO2e. The associated with a third party that are party when a semitrailer struck a progressive replacement of six- in direct relation to the company’s pole-top transformer. The impact cylinder vehicles is one of several operations such as the production caused the transformer to crack, initiatives in our fleet improvement and transport of purchased resulting in the loss of approximately plan as well as a comprehensive materials or waste disposal offsite. 300 litres of oil onto the road and review of the policy relating to Our direct emissions, as reported into a stormwater drain. We have an take home vehicles. in this performance report, experienced environmental incident include emissions from electricity response team and no further action consumption, petroleum products, was taken by the regulator. Changes in waste, sulphur hexafluoride (SF6) National Greenhouse and hydrofluorocarbons (HFCs). As a result of the training undertaken by our field-based employees and Gas Reporting targeted communication programs, methodologies Improving our we are able to minimise environmental impacts in the event of an oil spill. Since 1996, we have participated performance in the Greenhouse Challenge Defining the strategic direction of Plus program, adopting its our environmental performance Site investigation emissions reporting boundaries and recognising the opportunities and remediation and methodologies. In 2009, we presented by an integrated began to report our emissions strategy remained the focus of the Our proactive approach is evident using the National Greenhouse and Executive Environmental Steering in our ongoing contaminated Energy Reporting Scheme (NGERS) Committee. Chaired by the CEO, the land investigation and methodologies – and we use the committee tracks our performance remediation program. National Greenhouse Accounts and maintains a focus on reducing Over the year we progressively where NGERS methodologies are environmental risks. unavailable. Changes in reporting aligned the investigation program methodologies mean that our Our environmental management with our network investment emission levels, as reported in system and environment strategy program with the aim of proactively this and the previous annual are key tools to guide our investigating contamination report, have increased significantly performance improvements. that may pose a risk to workers compared with previous years. Developed in accordance with the undertaking excavation works in ISO 14001 international standard, substation sites. We also completed the environmental management a program of supplementary system continues to evolve as our investigations at six FSCs. These
6 | Our environment 49 50 6 | Our environment Integral Energy Annual Performance Report 2009–10 to was year continue to improve the for objective landfill,an from waste diverting focuson ongoing to maintaining our addition In Waste management 1999 2005. and between period in the completed works remediation from gaps knowledge residual addressed investigations • • (tonnes) recycling and management waste indicator: Performance reporting period. Note:2006–07 result reflects focus the remediationa on contaminatedof land and improved data capture methods during the furnaces or similar or applications. furnaces inindustrial hightemperature oil afuel as is used oil the recovery, where energy through recycled was oil remaining The 45% recycled. was of which network, from the removed A total of also was 956,658 litres oil completeness. and accuracy data has improved which capture data waste the of the success reflecting by 16% 2008–09, increased Total with compared disposed waste 2004–05 5,809 7,155 Recycled 2005–06 5,597 8,039 “ data management systems.” the accuracy and efficiency of our waste for the year was to continue to improve diverting waste from landfill, an objective In addition to maintaining our focus on We now seek to develop working working to develop We seek now targets. recycling and reduction waste informed more set and better us to futureallow for plan the will understanding improved Our processes. management waste our of into effectiveness completed the were investigations additional review, 2009 the Building on systems. management data waste our of efficiency and accuracy the Landfill 2006–07 31,780 11,551 2007–08 4,606 6,734 minimisation objectives. objectives. minimisation waste our us in achieving assist to contractors recycling and waste our with partnerships 2008–09 5,712 8,015 2009–10 10,370 6,653 6 Performance indicator: water consumption 17.0 16.3 • Water consumption per full-time equivalent employee during 2009–10 was 11.7 kilolitres this year. 13.1
This was a marginal increase 12.4 11.7
of 2.6% when compared 11.4 with 2008–09. 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10
Water resources Engaging with We had excellent feedback, and are now using key lessons from For the third year, Integral Energy stakeholders the trials to develop products for continued its participation in Sydney Integral Energy is committed to use in demand reduction programs Water’s Every Drop Counts business listening to stakeholder concerns over the next three years in Rooty program, which aims to promote about our capital investment Hill, Western Sydney. This work will and drive sustainable improvements projects. To improve our include a peak-time rebate product, in water efficiency and reduce costs. understanding of expectations and giving 30 customers an incentive to recognise potential opportunities for reduce demand on six afternoons Continuing to improvements, key stakeholders and a year, as well as an air-conditioner the local community are provided control program involving 50 learn and driving with an opportunity to comment other customers. cultural change and provide input into the review The products will be rolled out on of environmental factors (REF) as Employee engagement and cultural a small scale in 2010–11 before a part of our stakeholder engagement change remain a key focus for larger rollout the following year. If (see page 38 for more information). Integral Energy. In 2008, we revised successful they will be incorporated our approach to environmental The REF includes comprehensive into Integral Energy’s smart-grid learning and awareness and assessments on noise, flora, fauna, pilot program. developed an environmental electromagnetic fields, bushfire risk, guidelines handbook. In the coming visual amenity and heritage. It is Energy efficiency year we will be rolling out an annual a key element of Integral Energy’s for business environmental refresher training network capital program, which To allow the deferral of major program and developing job specific helps us understand the potential network upgrades we currently environmental training. impacts our proposed works have operate eight demand-side Our Eco Depots and Sustainable on the environment and community. management programs to reduce Huntingwood programs continue. the peak energy demand of large Over the year the programs Energy efficiency energy consumers. This can be included the installation of various solutions achieved by installing energy water saving devices such as flow efficient lighting, improving power restrictors and waterless urinals To investigate ways to reduce factor correction, curtailing energy at various FSCs. At Huntingwood, electricity demand, we completed load to off peak times and more the electrics for the 30-kilowatt the Blacktown Solar City energy efficient air conditioning. The photovoltaic system, installed saver trials with our consortium programs operating in Parramatta, between 1999 and 2002, have partners and the community this Liverpool, Minto, Chipping Norton, been upgraded, improving the year. After undertaking 3,500 home Windsor/Richmond, Rooty Hill, output of the system and our energy consultations in the area Granville and Bawley Point have ability to capture system data. we recruited 3,361 customers to achieved a demand reduction of the trials, supplying them with 19 MVA during 2009–10, which is 502 low-flow shower heads (to the equivalent to 4,200 homes. reduce hot water consumption) and 15,000 packs containing six energy-efficient light globes.
6 | Our environment 51 7 | Governance – leading by example
Integral Energy’s Board and executive believe that good governance is a prerequisite for a high-performing organisation with a sustainable future. They share a commitment to high standards of business integrity, ethics and professionalism across all activities. Our Code of Ethics sets out the expected staff behaviours fundamental to our business success, encourages a culture of responsibility and accountability and promotes ethical and responsible decision making.
Integral Energy’s Board of Directors visit the newly refurbished Parramatta Field Support Centre (left to right): Adrian Woodford – Project Director, Michael McLeod, Vince Graham, Paul Sinclair, Terry Downing, Penny Le Couteur, Irina White – Company Secretary and John Fahey, AC.
52 energy for life Integral Energy Annual Performance Report 2009–10 7 Integral Energy’s governance and organisational structure
NSW Parliament
Shareholding Ministers Portfolio Minister
Board of Directors Chairman: Michael McLeod
Directors: Terry Downing (Deputy Chairman), John Fahey, Paul Sinclair, Penny Le Couteur, Vince Graham
Audit and Business Risk Board Committee Chief Executive Officer
Vince Graham Human Resources and Remuneration Board Committee
Retail Risk Board Committee
Transaction Approval Committee
Group Group Group General Manager General Manager General General Manager Corporate Corporate Manager Chief Financial General Manager Company Network Services Development Retail Officer Health & Safety Secretary
Rod Howard Liz Schenke Daniel Lucas Bruce Rowley Joseph Pizzinga Drew Ferguson Irina White
Head of Audit & Risk
Integrated suite of ethical principles
Board Code of Conduct Code of Ethics Statement of Business Ethics
Outlines the unique obligations Sets out the principles and values Outlines Integral Energy’s and responsibilities of the Board by which employees of expectations of private sector service and expectations as to the conduct Integral Energy are expected to act. providers in conducting business with of Directors. Integral Energy.
Good governance helps ensure we deliver the outcomes our shareholders expect, supports our people and business operations and ensures sound ethical, financial and risk management practices and effective compliance and auditing programs.
7 | Governance 53 54 7 | Governance Risk Board Committee Board Risk Member, Business and Audit Member, Retail Risk Board Committee Committee Board Remuneration Chair, and Resources Human 1March2002 from Chairman Board of the Deputy –31 2011 August 1 March2000 Term re-appointments): (including Chairman in March Integral Energy Annual Performance Report 2009–10 March a non-executive director in Terry Downing was appointed Director Non-Executive Chairman Deputy FAICD DipBusStudies (Insurance), BComm, MMgmt, Terry Downing Committee Board Remuneration and Resources Human Invitee, Committee Board Member, Risk Retail Committee Board Risk Member, Business and Audit 1 March2002 Chairman from Board of the –31 2011 August 1 March2000 Term re-appointments): (including and Chairman in March non-executive director in March Michael McLeod was appointed a Director Non-Executive Chairman FAICD Michael McLeod Board of Directors Michael
2 000, and000, Deputy
ced Terry McLeod
2 002.
2 002.
2
onn John Downing 000, Remuneration Board Committee Board Remuneration and Member, Resources Human Committee Board Risk Member, Business and Audit 1999 – 1520131 January October Term re-appointments): (including 1999. in January director executive anon- Paul Sinclair appointed was Nominee NSW Unions Director Non-Executive DipHRM DipIR, Paul Sinclair Committee Board Remuneration and Member, Resources Human Chair, Committee Board Risk Retail 201114 May – 30 2008 May Term: in May director non-executive CouteurPenny a Le appointed was Director Non-Executive AICD BSc (Hon), Penny Le Couteur Committee Board Risk Chair, Business and Audit 2012 –291 March2002 February Term re-appointments): (including March 2002. in director non-executive a Fahey appointed John was Director Non-Executive DipL FaheyJohn AC
Fahey
C Penny AC
Le
otu Paul Couteur 2008. 2008. Board Committee Board Risk Business and Audit Invitee, Committee Member, Transaction Approval Committee Member, Board Risk Retail Committee Board Remuneration and Member, Resources Human years. for of three aterm 2008 7April on Director Executive and Officer Chief Executive Graham appointed was Vince Director Executive and Officer Executive Chief FAICD Mgmt, Grad Dip BE(Civil), Vince Graham
icar Vince Sinclair
Graham
7
Vince Graham Rod Howard Liz Schenke Daniel Lucas Bruce Rowley Joseph Pizzinga Drew Ferguson Irina White Executive Group Vince Graham Ethics and conduct Shareholders BE (Civil), Grad Dip Integral Energy’s Code of Ethics The Board is accountable to the voting Management, FAICD sets out the corporate values and shareholders for the performance Chief Executive Officer principles to which employees must of Integral Energy. The voting adhere when performing their shareholders each hold one share Rod Howard PSM duties. Supporting the Code of carrying the same rights for, and on BE (Hons), MEngSc, BBus, Ethics is the Statement of Business behalf of, the NSW Government. Ethics, which sets out the business There are two voting shareholders MBA, GAICD principles for our dealings at any one time, each holding the Group General Manager with suppliers. Network same number of shares and the same The Code of Ethics and Statement of rights. The shareholders hold their Business Ethics are available on our shares on behalf of the state. As at Liz Schenke website. Both documents provide 30 June 2010, the shareholders were B.Ed, Grad.Dip.Com information on how to report the Treasurer and the Minister for Group General Manager inappropriate behaviour. In addition Finance. The Portfolio Minister is the Corporate Services we provide a number of well- Minister for Energy. publicised mechanisms, including a Daniel Lucas confidential ethics hotline, through Role and responsibilities BBus, CA which fraud or corrupt conduct can be reported by employees. Our of the Board Group General Manager website provides an avenue for the The Board of Directors operates at all Corporate Development public to also report such conduct. times in accordance with its charter which is designed to complement Bruce Rowley As a state-owned corporation, Integral Energy and its Board and the Constitution of Integral Energy BBus, AssDipLG Executive Leadership Team have a Australia (the Constitution), the General Manager Retail strong commitment to preventing, Directors’ Manual and the Board’s detecting, investigating and Code of Conduct. Joseph Pizzinga responding appropriately to fraud The Board is responsible for the BCom, AssocDipAcc, CPA and corruption. Our fraud and corporate governance of Integral corruption control plan has been Chief Financial Officer Energy including setting the strategic devised to this end, and to allow us direction, establishing performance to build on the progress we have Drew Ferguson targets as set out in the Statement made in developing a corruption- of Corporate Intent and monitoring MComm (Workplace Relations) resistant culture over the years. the achievement of those targets. General Manager Health Under the plan we consult with key In carrying out its responsibilities, and Safety stakeholders, systematically review the Board undertakes to serve the controls and develop and implement interests of the voting shareholders Irina White revised control measures where we as well as its employees, suppliers DipT, GradDipCommMan, deem this to be appropriate. We also and customers and the broader community, honestly, fairly, MAdmin, MAICD take into account emerging fraud risks in the external environment. diligently and in accordance with Company Secretary all applicable laws. •
7 | Governance 55 56 7 | Governance Integral Energy Annual Performance Report 2009–10 aminimum, as reviewed, to be is required of Interest Disclosures Charter, Board the of Register the accordance with In of interest. conflicts regarding prohibitions and duties to statutory the subject are Energy of Integral all directors To status, ensureindependent their Conflicts of interest Energy’s Code of Conduct compliance with the directors’ own of high ethical standards, including approach to promoting the practice The Board adopts a ‘lead-by-example’ of Conduct Board Code basis. a six-monthly on to Board the is presented Plan the against Progress years. three next in the Board for the emphasis of areas the out sets and Charter Board in the stated as obligations Board’s the on is based Plan The measures. keyand performance outcomes desired priorities, strategic Board’s for the transparency provide to is designed which Plan Board the approved Board the 2009–10 In Board Plan practices. governance corporate for good aplatform provide which businesses of Government Boards for Treasury Guidelines NSW the with has complied Energy Integral Energy. of Integral operations for day-to-day and managing the direction strategic the implementing for responsibility Officer Executive to Chief the delegates Board The Code of Ethics as well as Integral . • • • Constitution, the Board consists of: Act 1989 (NSW) (NSW) Services Corporations Act 1995 In accordance with the Board of the Membership 2010 meeting. Board March at the approved changes 2010 in February charter with its of annual the review undertook Board The responsibilities. their of exercise in the committees its and Board the to assist Directors of Board by the adopted has been Businesses of Government Boards for Treasury Guidelines NSW the of requirements the incorporates Charter, Board The which Board Charter of Disclosures. Register maintains the Secretary Company The in circumstances. or a change of interest a conflict of by aDirector adeclaration upon is updated Additionally, Register the in 2009–10. undertaken were reviews isto up Energy date. These by Integral held information the to months ensure six that every than five other directors. other than five more not and two At least nominee NSW Unions One Director) (Executive Officer ChiefThe Executive , the “Good governance is aprerequisite for ahigh-performing organisation State Owned Corporations , and the Energy with asustainable future.” , remuneration details.) remuneration 105 pages 112 and (See for further director. executive an for being remuneration to additional entitled not is Officer ChiefThe Executive Energy’s of Integral funds. out is paid and voting shareholders by the is determined remuneration director’s non-executive Each the other directors at their discretion. The voting shareholders may appoint NSW.by Unions nominated persons of three panel a from committee by the selected be must nominee NSW Unions The • • comprising: committee selection of a recommendation the on nominee NSW Unions the appoint are to voting shareholders The votingof shareholders. the is byfilled nominee a nominee) NSW Unions and Officer Chief Executive of the exception the (with A vacancy voting by shareholders. the renewed be may Appointments years. five forof to up terms shareholders voting the by Officer,areappointed Chief of the exception Executive the with Board, of the members All Board members of office and Appointment framework and process to assess its its to assess process and framework a has approved Board The evaluationand Board performance Unions NSW. Unions by Two nominated persons Minister Portfolio by the Two nominated persons
7 “The Board adopts a ‘lead-by-example’ approach to promoting the practice of high ethical standards.”
effectiveness, its committees and Board planning Director induction directors with a view to ensuring that performance accords with workshops and education best practice. The Board conducts a workshop Board members are assisted The Board undertook the annual once per year without senior by Integral Energy to fulfil their review of its performance in management to discuss Board and roles and responsibilities in ways February 2010, paying particular management performance, as which include: well as strategic themes and the attention to the extent to which it • The provision of induction corporate planning process. The has met its responsibilities in terms materials for new directors. of its charter. The findings were Board participated in a planning • Professional development discussed at the Board planning workshop in February 2010 and opportunities to update workshop in February 2010 and at a combined Board and Executive and enhance their skills the Board meeting in March 2010. workshop in June 2010. and knowledge.
Board meetings Board meetings are normally held 11 times per year at venues, dates and times agreed in advance. Additional meetings may be scheduled as required. Urgent matters requiring the approval of the Board that arise between scheduled meetings can be dealt with by way of circulating resolution or by the Transaction Approval Committee in accordance with its Charter. The table below provides details of director attendance at those meetings during 2009–10.
Integral Energy Audit and Human Resources Transaction Retail Risk Board Australia Board Business Risk and Remuneration Approval Committee of Directors Board Committee Board Committee Committee
Meetings Meetings Meetings Meetings Meetings Name Eligible attended Eligible attended Eligible attended Eligible attended Eligible attended Michael McLeod 11 11 6 6 5 5d 11 10 2 2 Terry Downing 11 11 6 6 5 5 11 10 2 2 John Fahey 11 10 6 6 1 1d – – – – Penny Le Couteur 11 11 3 3cd 5 5 11 10 – – Paul Sinclair 11 9 6 5 5 4 – – – – Vince Graham 11 10 6 4d 5 5 11 9 1 1 Daniel Lucasa 1 1 2 2d – – 1 1 1 1 Rod Howardb – – – – – – 1 1 – – a Daniel Lucas attended the nominated meetings as Acting CEO for the period 12 October to 13 November 2009. b Rod Howard attended the nominated meeting as Acting CEO for the period 6 May to 31 May 2010. c Penny Le Couteur attended the May 2010 Audit and Business Risk Board Committee meeting as an alternate Committee member and two meetings as an invitee. d Invitee
7 | Governance 57 58 7 | Governance Integral Energy Annual Performance Report 2009–10 relevantto matters include and annually) reviewed and Board the by (approved charters in their out fullyset are more committees Board of the responsibilities and duties The • • • • follows: as were in 2009–10 committees Board Board. the to advise back and to and report detail in further issues certain to consider committees to those responsibility delegate may and it to assist committees may establish this role, Board the undertaking In management. of its oversight effective and organisation for guidance the overall strategic is to provide Board of the role The Board Committees in 2009–10. sought was Chairman.the such advice No of approval to prior the subject functions, of its performance in the it to assist appropriate determines it Energy, of Integral as expense at the advisors, other and counsel, experts such outside may retain Board The professional advice Access to independent • Transaction Approval Committee. Transaction Approval Committee Board Risk Retail Committee Board Remuneration and Resources Human Committee Board Risk Business and Audit operations. business of understanding a better to gain management with meet Energy’s and facilities Integral to visit opportunity The “ with in an independent manner.” matters, including compliance, are dealt and ensures that audit and business risk meets, as aminimum, five times per year The Audit and Business Risk Board Committee matters referred to it by the Board. the by it to referred matters other any examines committee the addition, In prevention. fraud and compliance management, risk audits, external and internal Energy, Integral of risks business and affairs financial the to relating matters cover responsibilities committee’s The matters. audit for Officer Executive Chief the and Committee Board Risk Business and lineto Audit the reporting a direct retains Risk of and Audit Head The manner. in independent an with including compliance, are dealt matters, risk business and audit ensuresthat and year per times five aminimum, as meets, Committee Board Risk Business and Audit The Risk Board Committee Audit Business and committee meetings. committee for all of papers copies as well as meetings, committee of Board minutes and agenda copy of the a receive directors All matters. sensitive on to Board the advice providing and issues, of major consideration for detailed allowing by Energy of Integral governance good in the assist committees These required. when meets which Committee, Transaction Approval ayear,four times for except the at least meet committees The in 2009–10. charter its reviewed committee Board of review, annualan process each of part appropriate. As considers Board the as matters such other and review reporting, authorities, responsibilities, composition, their matters referred to it by the Board. committee examines any other based employees. In addition, the senior executives), and award- to contract employees (including principles and guidelines applicable considers remuneration policies, OHS and safety. The committee in relation to human resources, and effectiveness of Board policy the development, implementation meets five timesper year and reviews Remuneration Board Committee The Human Resources and Board Committee Remunerationand ResourcesHuman • • • 11 year. per meetings It: monthly, aminimum of with meets Committee Board Risk Retail The Committee Retail Risk Board referred to Board. referred by it the any matters other examines committee the addition, In Committee. Governance Services Financial the from report monthly the reviews and strategy sales and future the month’snotes trades month’sprevious sales, and trades of the asummary Reviews compliance monitors and or implications modifications anyConsiders policy to Board the changes strategy and policy recommends and of Retail performance financial the Reviews 7
Integral Energy employees are expected to adhere to the highest standards of ethical conduct. We reviewed and updated our Code of Ethics in 2009–10.
Transaction employees, recognises and mitigates Internal audit risks and reports on performance. Approval Committee The Board and executive are In 2009–10, our Strategic The Transaction Approval committed to supporting the Compliance Plan was reviewed and operation of an objective and Committee has a rotating enhanced to build on our existing membership consisting of at least independent internal audit governance framework and promote function that adds value to two and no more than three non- compliance as a desired outcome executive directors and includes the organisation and improves of the way we undertake our its control environment and the Chief Executive Officer or work. The Board and executive his delegate. The committee is operations. Internal Audit supports have endorsed the Strategic management in achieving authorised by the Board to approve Compliance Plan. urgent business expenditure or Integral Energy’s statutory and revenue up to $10 million that might Initiatives in this Plan aim to business objectives by ensuring be required between meetings of demonstrate commitment to we take a disciplined approach the Board and that is outside the effective compliance throughout to evaluating and improving our standing delegations to the Chief the organisation. Our compliance risk management, control and Executive Officer under Board obligations across the organisation governance processes. policy. The Board may also authorise are identified and assessed and The 2009–10 audit program the Transaction Approval Committee appropriate resources are allocated approved by the Audit and Business to approve urgent business to deliver the Plan. Matters of Risk Board Committee covered a expenditure or revenue above $10 non-compliance are addressed range of operations and activities million. In 2009–10 the committee by remedial action or as part of and is aligned with the organisation’s met on two occasions. a planned or continuing work risk management plan. program in consultation with the appropriate authorities. The internal audit function is subject Compliance to an independent external quality In summary, the Strategic Integral Energy is committed to the assurance review at least once in Compliance Plan is designed to development, implementation and three years. The last review in facilitate the implementation of measurement of a fully integrated May 2009 concluded that Internal compliance activities across the compliance management framework Audit at Integral Energy conforms organisation while mitigating aligned to the Australian Standard to the standards of the Institute of compliance risk. Our emphasis will AS 3806–2006: Compliance Internal Auditors. continue to be on clearly assigned Programs as its foundation. responsibilities and actions that Our compliance objectives are to encourage appropriate behaviours. External audit promote an effective and efficient The Auditor-General of New culture of compliance through Insurance South Wales provides independent the Code of Ethics and provide external audit services through the a management framework that Integral Energy reviews the Audit Office of New South Wales, recognises the drivers of what we adequacy of insurance policy and provides no other services to do and outlines them in policies, coverage and limits during each Integral Energy. procedures and workplace annual insurance renewal process instructions. The management and ensures all participating framework allows employees to markets meet acceptable insurer act on process failures where security requirements. non-compliance is identified, educates, trains and informs
7 | Governance 59 8 | Management discussion and analysis
For the 2009–10 financial year, Integral Energy maintained a strong performance, achieved through continued focus on business fundamentals, strong financial discipline and corporate governance.
Keeping our customers connected to a safe and reliable network – Mark Tunks, Project Manager and Phil Cahill, Project Assistant at the construction site of our new Penrith Transmission Substation; Brian Bailie, High Voltage Testing Technician, testing equipment for the new North Eastern Creek Zone Substation.
60 energy for life Integral Energy Annual Performance Report 2009–10 8 Management discussion and analysis Overview Our obligations as a state-owned corporation require Integral Energy to submit a Statement of Corporate Intent (SCI) to NSW Treasury, as financial agent for the Government. The SCI represents an agreement with the NSW Government which documents the objectives, strategies and obligations by which the business is expected to operate over the next 12 months and following years. In particular, the SCI sets financial targets and sets clear limits on the scope of activities the business may undertake.
Summary For the 2009–10 financial year, Integral Energy maintained a strong performance, achieved through continued focus on business fundamentals, strong financial discipline and corporate governance.
2009–10 2009–10 Variation 2008–09 Financial results Result SCI to SCI Result Earnings before interest, tax, depreciation 589.0 509.3 79.7 492.8 & amortisation (EBITDA) ($m)
Earnings before interest and tax (EBIT) ($m) 439.3 364.9 74.4 355.7
Operating profit before tax ($m) 251.6 174.3 77.3 205.6
Operating profit after tax ($m) 179.0 122.0 57.0 142.2
Dividend ($m) 142.6 90.5 52.1 103.6
Total distribution 215.3 142.8 72.5 167.1 (Dividend + Income tax expense) ($m)
Return on assets (%) 9.5 8.5 1.0 8.7
Return on equity (%) 17.3 13.6 3.7 14.6
Capital expenditure 417.4 508.8 91.4 442.9
Integral Energy’s 2009–10 SCI was Since Integral Energy’s retail of improving customer value and prepared against the backdrop operations were not transitioned protecting the organisation’s financial of the Global Financial Crisis by June 2009, Integral Energy’s position as a result of the GFC. (GFC). This created a high level of financial results are a reflection Total revenue and other income economic uncertainty, which forced of business-as-usual activities increased by $273.8 million, Integral Energy to take steps to undertaken by the Corporation, primarily due to an increase in protect its financial position to meet including the purchase, distribution electricity sales and network use its commitments to its shareholder and sale of electricity, meter data of system income driven by tariff and its customers. provision and maintenance, and the increases in line with Regulatory construction and management of In a deliberate strategy to improve allowances. Retail sales volumes electricity distribution assets. customer value and protect the decreased by 8.5% driven by organisation’s financial position, decreases in commercial and employees worked to identify Profit results industrial customers. Total Retail efficiency initiatives intended to customer numbers increased Integral Energy’s profit before deliver $35 million over the next however, by 2.1%, primarily due tax result was $251.6 million, three years. This was an important to increases in Queensland exceeding the 2009–10 SCI target priority for the year with electricity residential customers. of $174.3 million. Gross margin and predicted to become less affordable other revenue from Retail operations Network volumes were in line in the future. contributed to the favourable profit with the prior year, with network Integral Energy’s SCI also reflects before tax result compared to the customer numbers increasing financial targets based on a network SCI target, together with favourable by less than 1%. Expenses from only structure effective 1 July 2009 results from network operations, operating activities increased by given the proposed sale of Integral other revenue and savings in $190.2 million, in line with increased Energy’s retail business. operating expenditure in line with electricity sales and network use the deliberate strategy noted above of system income, plus additional
8 | Management discussion and anaylsis 61 62 8 | Management discussion and analysis Integral Energy Annual Performance Report 2009–10 $142.8 million. of SCI thanthe higher target $72.5 were and million million $215.3 totalled dividends, and expense tax of income consisting Shareholder, Government, NSW the Total to our distributions Retail. include not noted, did previously as which, to SCI the target, favourablethe compared result contributor to amajor were business Contributions Retail the from target. 46.7%or favourable to SCI the $142.2 million, $57.0 and million of result to 2008–09 the compared $179.0 million, a25.9% increase was tax after profit Operating loss. or to profit through opposed as loss or of profit outside recognised to be gains losses and actuarial superannuation benefits defined requires which Treasury policy NSW in accordance with in equity directly of $3.6 recognised was million loss actuarial superannuation benefits defined A statements. financial the of $25.0 in million, recorded were amount the in financial instruments derivative on million, losses and totalling $15.7 value) realisable net and of cost lower at the (recorded Rights and Emission Certificates Abatement Gas Greenhouse NSW relating to impairments addition, In $12.2 result. in the included million totalling decrements revaluation building and land with felt, to be continued GFC of the impact The Guarantee Fees. Government in increases and program capital to fund the borrowings increased by $37.5increased to due million below. noted as Finance costs costs Duane Lee, Technologist working working Technologist Lee, Duane on the construction of Springhill Springhill of construction the on Transmission Substation Transmission expenditure program. Provisions Provisions program. expenditure to capital fund the to need the $149.9 due million, primarily of of discounts/premiums) (inclusive in borrowings increase year, previous the by an driven $392.0 to compared million Total by increased liabilities by 12.4%.increased assets average above, while by 23.5% increased outlined as to 9.5% 2010. June at 30 EBIT 8.7% from increased in 2008–09 base, asset average by the divided EBIT as calculated assets, on Return $12.6 fair value. to million support of Certificates Energy of Renewable impairment an included which of $19.9 rights emission million in $26.4 million, a decrease and of financialassets derivative fair in the of value by adecrease offset partly were movements of $18.5equivalents million. These cash and in cash increase an and 21.4from to 24.1 in 2009 in 2010, in DSOs in increase an resulted and collections impacted which prices in Retail by increase an driven million by $50.0 increased Trade receivables other and assets. intangible and expenditure capital on spend increased and $362.0 totalled which million, revaluation asset system of the impact to net due the primarily plant equipment and of property, value written-down inmillion the of $620.4 increase an included year.previous Contributing factors to the compared million $634.9 by increased Total assets Balance sheet weighted average published rate published average weighted ETEF the in increase significant a with costs purchase electricity of $130.4 by higher million, driven spend operational and supplier by higher offset partly was This of $3.5 million. payments tax income lower and tariffs, by a 21% in electricity increase $311.3 14.9%), (or million impacted of customers from receipts higher by driven primarily was increase This of $172.0 2008–09. on million million, increase an $400.4 were year for the activities operating by provided flows cash Net year.prior by $18.5 to the compared million financial ofyear increased the end at the equivalents Cash cash and flowsCash marginal increase in average equity. in profit aftertax compared to a 14.6%, with a 25.9% increase outcomefrom the of 2008–09 was 17.3%. This result has increased after tax divided by average equity, Return on equity, calculated as profit results. improved by $39.0 in million linewith increased for dividend provision The reserve. revaluation asset the in movements on impact tax the to due million, primarily by $84.9 increased liabilities tax Deferred $50.7and respectively. million by $19.4 increased liabilities million financial derivative and payables $17.0 trade/other million, while by which increased benefits to due employee predominantly by $17.5increased million Cash flow statement summary 8 2009–10 2008–09 Variance $m $m $m Net cash provided by/ 400.4 228.4 172.0 (used in) operating activities Net cash provided by/ (407.8) (438.6) 30.8 (used in) investing activities Net cash flows from/ 25.9 228.0 (202.1) (used in) financing activities Net increase/(decrease) 18.5 17.8 0.7 in cash and cash equivalents Cash and cash equivalents 11.8 (6.0) 17.8 at beginning of financial year Cash and cash equivalents 30.3 11.8 18.5 at end of financial year
of 20.9%, and higher net interest Inflation linked debt as at 30 June demand from the NSW electricity payments of $12.4 million. 2010 totalled $220 million. Lower industry generally and challenges rates during the first part of the in the recruitment of suitably Net cash flows used in investing financial year enabled Integral qualified staff. activities for the year were Energy to extend its debt portfolio $407.8 million, a decrease of A strategy review of the network term to maturity and, as such, lock $30.8 million, driven by the reduced capital delivery process commenced in beneficial long-term interest rates. capital expenditure program. in 2008–09, and continued into The above factors reduced Integral Net cash flows provided by 2009–10. The implementation of Energy’s cost of debt (excluding financing activities for the year the review’s recommendations will Government Guarantee Fee) by were $25.9 million, a decrease position the organisation for an 0.1% from that incurred in the of $202.1 million compared to increased delivery capacity into previous financial year. the 2008–09 result, mostly due to the future. the better results in cash provided The capital program continues by the operating activities. Shareholder return to target asset renewals as well Unused credit facilities as at Integral Energy is committed as growth-related projects. The 30 June 2010 totalled $605.1 million. to delivering sustainable and capital program is underpinned by commercial returns to its Integral Energy’s Strategic Asset Debt shareholder, the NSW Government. Management Plan (SAMP). The The directors declared a first and SAMP reflects plans and strategies Balance Sheet debt increased by final dividend of $142.6 million, which are aligned to customer and $149.9 million compared to the representing an increase of technical drivers, improve long-term prior year, primarily due to the need $52.1 million or 57.6% compared network asset values and produce to fund the capital expenditure to the 2009–10 SCI target. Dividend optimal returns to shareholders. The program. The gearing ratio, distribution is based on 70% plan sets priorities and summarises calculated as debt divided by debt of profit after tax, adjusted for the investment in the network plus equity, decreased from 71.3% non-cash movements relating to required to maintain ongoing at 30 June 2009 to 67.7% at 30 fair value movements in financial network capability, consistent June 2010. This result was driven by instruments. The 2009–10 dividend with a ‘best in class’ network a 6.6% increase in debt compared distribution includes an additional asset manager. to a 12.4% increase in debt plus amount of $5.1 million. equity. Equity increased primarily Credit rating due to the net impact of movements in the Asset Revaluation Reserve as Capital expenditure Moody’s Investors Service assigned a result of system assets revaluation, Capital expenditure for the 2009–10 a public credit rating of Aa3 with partly offset by decrements in financial year was $417.4 million, a stable outlook. Organisations land and building valuations and $91.4 million below the SCI target. rated Aa are judged to be of movements in the hedge reserve. The under-spend compared with high quality and are subject to the SCI target was driven by very low credit risk. This rating Integral Energy accepted inflation network spend of $369.9 million reflects NSW Government linked debt for the first time during which was $70.3 million below ownership of Integral Energy. 2009–10 to better match debt target. Contributing factors to this The modifier 3 indicates a ranking expenses against revenue income. variance were continued pressure in the lower end of the generic on suppliers in meeting increased rating category.
8 | Management discussion and analysis 63 Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
CONTENTS Page Directors’ Report 65 Independent Audit Report 66 Statement of Comprehensive Income 67 Statement of Financial Position 68 Statement of Changes in Equity 69 Statement of Cash Flows 71 Notes to the Financial Statements 73 Statement by Directors 105
64 Integral Energy Annual Performance Report 2009–10 Directors’ Report For the year ended 30 June 2010 9 Annual Performance Report 2009–10
The Board of Directors of Integral (b) Events Subsequent to (d) Directors’ Benefits Energy (the Corporation) have Balance Date During the period no Director of pleasure in submitting the accounts There has not arisen, in the interval the Corporation has received, or of the economic entity for the period between the end of the financial become entitled to receive, any 1 July 2009 to 30 June 2010, and the period and the date of this report, benefits by reason of a contract independent audit report thereon. an event of a material and unusual made by the Corporation or a nature likely, in the opinion of the related body corporate with a 1. General information Directors of the Corporation, to Director, or with a firm of which a affect significantly the operations Director is a member, or with an (a) Directors of the economic entity, the results entity in which a Director has a The names of Directors in office at of those operations, or the state of substantial interest. any time during the year are shown affairs of the economic entity, in on page 54. subsequent financial years. (e) Environmental Regulation Details of meetings and attendance Performance by Directors are shown in the (c) Likely Developments The Corporation’s environmental Corporate Governance section The Corporation’s purpose is and waste discharge obligations on page 57. encapsulated in the statement: are regulated under both State Every day we deliver to our and Federal Law. All environmental (b) Principal Activities communities the ability to live performance obligations are The principal activities of the and the energy to grow. While monitored by the Environmental Corporation during the course of considerable changes are likely in Steering Committee and subjected, the period ended 30 June 2010 the operating environment during from time to time, to Government were the purchase, distribution 2010–11, particularly in relation agency audits and site inspections. and sale of electricity, meter data to the Retail operation, Integral The Corporation has a policy of provision and maintenance, and the Energy remains focussed on at least complying, but in most construction and management of operating profitably by maintaining cases exceeding, its environment electricity distribution assets. a strong commercial focus, performance obligations. balancing commercial outcomes 2. Business review whilst managing stakeholder and (f) Rounding of amounts community expectations, excelling Amounts in the financial statements (a) Operating Results within the core business processes have been rounded to the nearest The after tax profit of the that drive the business, and fully thousand dollars unless specifically Corporation for the year was harnessing the skills and capabilities stated to be otherwise. $179.0m (2009: $142.2m). of our people through a clear focus on organisational alignment Signed in accordance with a underpinned by the values of resolution of the Directors: 3. Other items the Corporation. (a) State of Affairs Further information about likely The Corporation operates in the developments in the operations of New South Wales, Victoria, ACT, the Corporation and the expected Queensland, South Australia and results of those operations in Vince Graham Tasmanian electricity industry in its subsequent financial years has not Director own right under the provisions of been included in this report as the 1 September 2010 the Electricity Supply Act 1995, and Directors believe, on reasonable in the national electricity market. grounds, that to include such information would be likely to The financial statements for the result in unreasonable prejudice Corporation for the period ending to the Corporation. 30 June 2010 are presented on pages 67 to 105 inclusive. Michael McLeod Director 1 September 2010
9 | Financial Statements 65 Independent Audit Report For the year ended 30 June 2010 Annual Performance Report 2009–10
66 Integral Energy Annual Performance Report 2009–10 Statement of Comprehensive Income For the year ended 30 June 2010 9 Annual Performance Report 2009–10
2010 2009 Notes $’000 $’000
Revenue 3 2,164,292 1,875,964 Other income 3 107,853 122,410 Expenses excluding finance costs 4 (1,832,883) (1,642,664) Finance costs 4 (187,616) (150,075)
Profit before income tax 251,646 205,635 Income tax expense 5 (72,667) (63,445)
Profit for the year 178,979 142,190 Other comprehensive income Defined benefit plan actuarial gains/(losses) 14(g) (3,566) (70,901) System asset revaluation 12 362,036 – Revaluation of land and buildings 12 (32,001) (21,202) Effective portion of changes in fair value of cash flow hedges 21(h) (26,809) (142,436) Net change in fair value of cash flow hedges transferred to profit or loss 21(h) (4,658) (2,390) Income tax on other comprehensive income 5(c) (88,502) 71,080
Other comprehensive income for the period, net of income tax 206,500 (165,849)
Comprehensive income for the year 385,479 (23,659)
The above statement should be read in conjunction with the accompanying notes.
9 | Financial Statements 67 Statement of Financial Position As at 30 June 2010 Annual Performance Report 2009–10
2010 2009 Notes $’000 $’000
ASSETS Current assets Cash and cash equivalents 8 30,355 11,825 Trade and other receivables 9 309,965 259,938 Inventories 10 37,463 41,843 Derivative financial assets 21(g) 70,947 95,169 Current tax receivable – 4,481 Estimated revenue from unread meters 127,037 121,674 Emission rights 19,406 39,283 Non-current assets classified as held for sale 11 4,800 9,183
Total current assets 599,973 583,396
Non-current assets Property, plant and equipment 12 4,275,733 3,669,490 Intangible assets 13 63,290 49,098 Derivative financial assets 21(g) 1,598 3,731
Total non-current assets 4,340,621 3,722,319
TOTAL ASSETS 4,940,594 4,305,715
LIABILITIES Current liabilities Trade and other payables 15 322,547 290,803 Borrowings 17 461,353 566,561 Current tax payable 32,397 – Provisions 18 128,694 127,802 Provision for dividend 2(aa) 142,610 103,619 Derivative financial liabilities 21(g) 75,521 42,828 Other 16 26,954 28,281
Total current liabilities 1,190,076 1,159,894
Non-current liabilities Trade and other payables 15 34,288 46,627 Borrowings 17 1,952,945 1,697,865 Deferred tax liabilities 6 390,950 306,056 Derivative financial liabilities 21(g) 43,755 25,739 Provisions 18 170,912 154,286 Other 19 3,819 4,268
Total non-current liabilities 2,596,669 2,234,841
TOTAL LIABILITIES 3,786,745 3,394,735
NET ASSETS 1,153,849 910,980
EQUITY Contributed equity 335,046 335,046 Reserves 610,437 407,572 Retained earnings 208,366 168,362
TOTAL EQUITY 1,153,849 910,980
The above statement should be read in conjunction with the accompanying notes.
68 Integral Energy Annual Performance Report 2009–10 Statement of Changes in Equity FOR THE YEAR ENDED 30 June 2010 9 Annual Performance Report 2009–10
Asset Contributed Retained Revaluation Hedge Equity Earnings Reserve Reserve Total Note $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2009 335,046 168,362 443,486 (35,914) 910,980 Total comprehensive income for the period Profit or loss – 178,979 – – 178,979 Other comprehensive income Defined benefit plan actuarial gains/(losses) 14(g) – (3,566) – – (3,566) System assets revaluation 12 – – 362,036 – 362,036 Revaluation of land and buildings – – (32,001) – (32,001) Effective portion of changes in fair value of cash flow hedges 21(h) – – – (26,809) (26,809) Net change in fair value of cash flow hedges transferred to profit or loss 21(h) – – – (4,658) (4,658) Income tax on other comprehensive income 5(c) – 1,069 (99,011) 9,440 (88,502)
Total other comprehensive income – (2,497) 231,024 (22,027) 206,500
Total comprehensive income for the period – 176,482 231,024 (22,027) 385,479
Transactions with owners, recorded directly in equity Transfers to retained earnings – 8,760 (8,760) – – Income tax on transfers to retained earnings – (2,628) 2,628 – – Dividends paid or provided for – (142,610) – – (142,610)
Total transactions with owners – (136,478) (6,132) – (142,610)
Balance at 30 June 2010 335,046 208,366 668,378 (57,941) 1,153,849
The above statement should be read in conjunction with the accompanying notes.
9 | Financial Statements 69 Statement of Changes in Equity continued FOR THE YEAR ENDED 30 June 2010 Annual Performance Report 2009–10
Asset Contributed Retained Revaluation Hedge Equity Earnings Reserve Reserve Total Note $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2008 335,046 179,417 458,331 65,464 1,038,258 Total comprehensive income for the period Profit or loss – 142,190 – – 142,190 Other comprehensive income Defined benefit plan actuarial gains/(losses) 14(g) – (70,901) – – (70,901) Revaluation of land and buildings 12 – – (21,202) – (21,202) Effective portion of changes in fair value of cash flow hedges 21(h) – – – (142,436) (142,436) Net change in fair value of cash flow hedges transferred to profit or loss 21(h) – – – (2,390) (2,390) Income tax on other comprehensive income 5(c) – 21,271 6,361 43,448 71,080
Total other comprehensive income – (49,630) (14,841) (101,378) (165,849)
Total comprehensive income for the period – 92,560 (14,841) (101,378) (23,659)
Transactions with owners, recorded directly in equity Transfers to retained earnings – 4 (4) – – Dividends paid or provided for – (103,619) – – (103,619)
Total transactions with owners – (103,615) (4) – (103,619)
Balance at 30 June 2009 335,046 168,362 443,486 (35,914) 910,980
The above statement should be read in conjunction with the accompanying notes.
70 Integral Energy Annual Performance Report 2009–10 Statement of Cash Flows FOR THE YEAR ENDED 30 June 2010 9 Annual Performance Report 2009–10
2010 2009 Notes $’000 $’000
Cash flows from operating activities: Receipts from customers 2,396,991 2,085,689 Payments to suppliers and employees (1,814,909) (1,684,530) Interest received 1,071 537 Interest paid (143,330) (130,404) Income taxes paid (39,395) (42,853)
Net cash provided by (used in) operating activities 7(a) 400,428 228,439
Cash flows from investing activities: Proceeds from sale of property, plant and equipment 4,816 4,086 Purchase of property, plant and equipment and intangible assets (412,623) (442,670)
Net cash provided by (used in) investing activities (407,807) (438,584)
Cash flows from financing activities: Proceeds from borrowings 162,894 353,986 Repayment of borrowings (33,366) (1,019) Dividends paid (103,619) (124,992)
Net cash provided by (used in) financing activities 25,909 227,975
Net increase (decrease) in cash and cash equivalents 18,530 17,830 Cash and cash equivalents at beginning of financial year 11,825 (6,005)
Cash and cash equivalents at end of financial year 8 30,355 11,825
The above statement should be read in conjunction with the accompanying notes.
9 | Financial Statements 71 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
1 Corporate Information financial instruments, emission rights Information about critical Integral Energy’s financial report for and provisions which have been judgements in applying accounting the year ended 30 June 2010 was measured at fair value and, except policies that have the most significant authorised for issue in accordance where stated, does not take into effect on the amounts recognised in with a resolution of the Directors on account changing money values. the financial statements, and information about assumptions and 1 September 2010. Amounts in the financial report are estimation uncertainties that have a rounded to the nearest thousand Integral Energy is a state-owned significant risk of resulting in a dollars. The financial report is energy Corporation, incorporated in material adjustment within the next presented in Australian dollars. New South Wales under the Energy financial year, is included in the Services Corporations Act 1995. following notes: Integral Energy Australia’s registered (b) Comparative Figures office is 51 Huntingwood Drive, When the presentation or Note 2(j) – Unread Meters Huntingwood NSW 2148. classification of items in the financial Note 12 – Property, Plant and report are amended, comparative The nature of the operations and Equipment Revaluations amounts are reclassified unless the principal activities of the Corporation reclassification is impracticable. Note 14(h) – Employee Benefits are described in the Directors’ Report. No material amounts have Superannuation Valuation Method been reclassified. and Principal Economic Assumptions 2 Statement of Significant Accounting Policies Note 18 – Provisions (c) Change in accounting policy Note 21 – Financial Instruments (a) Basis of preparation Starting as of 1 July 2009, the The financial report is a general- Corporation has changed its Note 22(b) – Contingent Liabilities purpose financial report which has accounting policy with respect to been prepared in accordance with accounting for borrowing costs. (e) Contributed equity the requirements of applicable In accordance with AASB 123 The State Owned Corporations Australian Accounting Standards, the Borrowing Costs, borrowing costs Act 1989 (as amended) requires State Owned Corporations Act 1989, relating to qualifying assets for Integral Energy to have two voting the Public Finance and Audit Act which the commencement date is on shareholders. Current shareholders 1983 and the Regulation 2010. or after 1 July 2009, are capitalised are the New South Wales Treasurer and the Minister for Finance who This report has been prepared on a if they are directly attributable hold the shares on behalf of the NSW going concern basis which assumes to the acquisition, construction Government. Each shareholder holds that Integral Energy will be able to or production of a qualifying one $1 share, with each share being pay its debts as and when they fall asset as part of the cost of that of the same class with equal rights. due, and continue operation without asset. Previously the Corporation any intention or necessity to liquidate immediately recognised all borrowing (f) Foreign currency translation or otherwise wind up its operation. costs as an expense. In accordance with the transitional provisions of the Both the functional and presentation The Corporation is classified as a for- standard, comparative figures have currency of Integral Energy Australia profit entity for the purposes of the not been restated. is Australian dollars (A$). application of Australian Accounting Transactions in foreign currencies are Standards and after consideration of (d) Use of estimates and initially recorded in the functional all factors contained in New South judgements Wales Treasury Policy TPP 05-4 currency at the exchange rates at The preparation of financial Distinguishing For-Profit from the date of the transaction. At each statements in conformity with Not-For-Profit Entities. balance sheet date, monetary items AASBs requires management denominated in foreign currencies The Corporation applies revised to make judgements, estimates are retranslated at the rates AASB 101 Presentation of Financial and assumptions that affect the prevailing on the balance sheet date. Statements and, as a result, presents application of accounting policies in the Statement of Changes in and the reported amounts of assets, Any foreign currency income or Equity all owner and non-owner liabilities, income and expenses. expense items are translated at changes in equity, and presents in Actual results may differ from exchange rates as at the date of the Statement of Comprehensive these estimates. the transaction, with resulting Income all non-owner changes in exchange differences recognised Estimates and underlying equity. Comparative information has as income or expense in profit or assumptions are reviewed on been represented so that it also is in loss. Any foreign currency assets or an ongoing basis. Revisions to conformity with the revised standard. liabilities are translated at exchange accounting estimates are recognised rates prevailing on the balance The financial report has been in the period in which the estimates sheet date, with resulting exchange prepared on a historical cost basis are revised and in any future differences classified as equity and with the exception of property, periods affected. transferred to the foreign currency plant and equipment, derivative translation reserve.
72 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
2 Statement of Significant (j) Unread meters Non financial assets Accounting Policies At reporting date, Integral Energy The carrying amounts of non- continued accrues an estimate of electricity financial assets other than consumed where the meter has inventories, current tax receivable (g) Cash and cash equivalents not been read. The accounting and estimated revenue from Cash and cash equivalents in the estimating methodology for unread meters are reviewed at Statement of Financial Position calculating the unbilled revenue each reporting date to determine comprise cash at bank and in accrual calculates unbilled revenue whether there is any indication of hand, short-term deposits readily volume where energy imports impairment, or when events or convertible to cash, investments relating to basic meters are phased changes in circumstances indicate for a fixed term where the maturity over the current month and future the carrying value may not be date is three months or less from months in order to estimate the recoverable. If any such indication year end balance date, and readily likely billing pattern relating to exists, then the asset’s recoverable tradeable investments which are consumption. This calculation is amount is estimated. likely to be converted to cash within accounted for as revenue on unread The recoverable amount of an asset three months of year end balance meters in profit or loss. date even though the maturity date or cash-generating unit (CGU) is the greater of its value in use and may be greater than three months (k) Impairment from year end balance date. its fair value less costs to sell. In Financial assets assessing value in use, the estimated (h) Trade and other receivables (including receivables) future cash flows are discounted to their present value using a pre-tax Trade and other receivables are A financial asset not carried at discount rate that reflects current financial assets recognised initially fair value through profit or loss is market assessments of the time at fair value plus any directly assessed at each reporting date to value of money and the risks specific attributable transaction costs. determine whether there is objective to the asset. For the purpose of Subsequent to initial recognition evidence that it is impaired. impairment testing, assets that receivables are measured A financial asset is impaired if cannot be tested individually are at amortised cost using the objective evidence indicates that a grouped together into the smallest effective interest rate method, loss event has occurred after the group of asset that generates cash less any impairment losses. This initial recognition of the asset, and inflows from continuing use that are measurement is equivalent to the that the loss event had a negative largely independent of cash inflows original invoice amount. effect on the estimated future cash flows of that asset that can be of other assets or groups of assets (the CGU). (i) Inventories estimated reliably. Inventories are measured at the Impairment for receivables is An impairment loss is recognised lower of cost and net realisable generally considered at a collective if the carrying amount of an value. Costs incurred in bringing level, however where objective asset or its CGU exceeds its each product to its present location evidence exists that a receivable estimated recoverable amount. and condition are accounted for is impaired, such as when a Impairment losses are recognised as follows: debtor ceases trading, individual in profit or loss where there is no significant receivables are assessed corresponding entry in the Asset (i) Raw materials – purchase cost for impairment. In assessing Revaluation Reserve. Impairment on weighted average cost; and collective impairment an estimate losses recognised in prior periods (ii) Finished goods and work- is made of probable non-payment are assessed at each reporting date in-progress – cost of direct based on historical trends and an for any indications that the loss material, labour and a assessment of current economic and has decreased or no longer exists. proportion of manufacturing credit conditions. An impairment loss is reversed if there has been a change in the overheads based on normal An impairment loss in respect operating capacity. estimates used to determine the of a financial asset measured at recoverable amount. An impairment Net realisable value is the estimated amortised cost is calculated as the loss is reversed only to the extent selling price in the ordinary course difference between its carrying that the asset’s carrying amount of business, less the estimated costs amount and the present value of does not exceed the carrying of completion and selling costs. the estimated future cash flows amount that would have been discounted at the asset’s original determined, net of depreciation or effective interest rate. Losses are amortisation, if no impairment loss recognised in profit or loss. When a had been recognised. subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
9 | Financial Statements 73 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
2 Statement of Significant revaluation reserve are transferred independent valuer and recognised Accounting Policies to retained earnings. as at 30 June 2010. The valuations continued were based on market-based System assets evidence in accordance with AASB (l) Property, plant In accordance with NSW Treasury 116 Property, Plant and Equipment. and equipment Accounting Policy TPP07-1 Valuation Other plant and equipment Recognition and measurement of Physical Non-Current Assets at Items of property, plant and Fair Value system assets are carried In accordance with NSW Treasury equipment are initially recognised at fair value less accumulated Accounting Policy TPP07-1 Valuation at cost. Cost includes expenditure depreciation and impairment losses. of Physical Non-Current Assets at that is directly attributable to the System assets are considered to Fair Value depreciated historical acquisition of the asset. The cost be of a specialised nature, and cost with respect to non-specialised of self-constructed assets includes fair value is estimated using a assets is considered an acceptable the cost of materials and direct depreciated replacement cost surrogate for fair value, with any labour, an appropriate proportion of method in accordance with AASB difference unlikely to be material. overheads, costs directly attributable 116 Property, Plant and Equipment. Accordingly, other plant and equipment are carried at fair value to bringing the asset to a working A revaluation of system assets was less accumulated depreciation and condition for intended use, costs undertaken by an independent any impairment in value. of dismantling and removing the valuer and recognised as at asset and restoring the site on which 30 June 2010. System assets were Property, plant and equipment they were located, and capitalised valued at Optimised Depreciation in the course of construction borrowing costs. Replacement Cost (ODRC). The Property, plant and equipment ODRC valuation was determined After recognition as an asset, items in the course of construction are based on a roll forward of the of property, plant and equipment carried at cost, less any recognised previous ODRC using escalation are measured at fair value. Fair impairment loss. Depreciation of factors which measure the change in value is determined in accordance these assets commences when costs of key inputs to the electricity with NSW Treasury Accounting the assets are ready for their network industry. Policy TPP07-1 Valuation of Physical intended use. Non-Current Assets at Fair Value System assets are revalued at least and AASB 116 Property, Plant and every five years, in accordance Depreciation Equipment, and reviewed annually with NSW Treasury Accounting Depreciation is recognised in profit for impairment in accordance with Policy TPP07-1 Valuation of Physical or loss on a straight-line basis over AASB 136 Impairment of Assets. Non-Current Assets at Fair Value. the estimated useful lives of each part of an item of property, plant Revaluation increments are credited The frequency of valuations is and equipment, since this most to the asset revaluation reserve considered appropriate given the closely reflects the expected pattern included in the equity section of nature, size and geographical spread of consumption of the future the Statement of Financial Position, of system assets, and annual fair economic benefits embodied in unless the increment reverses a value assessments. the assets. Land is not depreciated. revaluation decrement of the same Non-system land and buildings asset previously recognised in profit Estimated useful lives are as follows: or loss. Any revaluation decrement is Following initial recognition at years recognised in profit or loss unless it cost, non-system land and building assets are carried at fair value less directly offsets a previous increment System assets 7–60 of the same asset in the asset accumulated depreciation and Buildings 40 revaluation reserve. impairment losses, in accordance with NSW Treasury Accounting Plant and equipment 4–10 When parts of an item of property, Policy TPP07-1 Valuation of Physical plant and equipment have different Non-Current Assets at Fair Value. Depreciation methods, useful lives useful lives, they are accounted for and residual values are reviewed at Non-system land and buildings are as separate components of property, each financial year-end and adjusted subject to independent valuation plant and equipment. if appropriate. on a cyclical basis over a three year Gains and losses on disposal of period. The carrying amount of Capitalisation Policy an item of property, plant and non-system land and building assets Property, plant and equipment equipment are determined by is reviewed between independent assets below $1,000 are expensed comparing the proceeds from valuations, to ensure the carrying in the year of acquisition disposal with the carrying amount amount does not differ materially or construction. of property, plant and equipment, from fair value. and are recognised in profit or loss. When revalued assets are A revaluation of non-system land sold, the amounts included in the and buildings was undertaken by an
74 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
2 Statement of Significant Easements are an interest in land undertaken by Cumpston Sarjeant Accounting Policies allowing access to network assets. Pty Limited as at 28 February continued As no time period is attached to 2009 and the associated formulae the easements, they are considered provided for intervening periods (m) Non-current assets held to have an indefinite life and are between assessments. for sale not amortised. Cumpston Sarjeant Pty Limited Non-current assets held for sale are Gains or losses arising from has based their assessment on the measured at the lower of carrying derecognition of an intangible asset following assumptions: amount or fair value less costs are measured as the difference to sell. a) Rate of investment return (after between the net disposal proceeds tax and investment related and the carrying amount of the (n) Intangible assets expenses) 5.5%; and asset and are accounted for in Intangible assets acquired separately the profit or loss when the asset b) Rate of general salary increase are capitalised at cost. Subsequent is derecognised. in line with prior year. to initial recognition the intangible Liability for employee benefits (long asset is measured at cost less (o) Trade payables accumulated amortisation and service leave, pre 93 sick leave and Trade and other payables are accumulated impairment losses. maturing allowance) which are financial liabilities recognised not expected to be settled within Development activities relating initially at fair value plus any directly twelve months are discounted at to new or substantially improved attributable transaction costs. 5.5% per annum, based on 10 year internally generated software is Subsequent to initial recognition Government bond rates. capitalised where development trade and other payables are costs can be measured reliably, measured at amortised cost using All other provisions have been the process is technically and the effective interest rate method. calculated at nominal amounts commercially feasible and future This measurement is equivalent to based on expected settlement rates. economic benefits are probable. the original invoice amount. Defined contribution plans Other development expenditure and expenditure on research activities (p) Provisions A defined contribution plan is a post-employment benefit is recognised in profit or loss as A provision is recognised if, as under which an entity pays fixed incurred. Capitalised development a result of a past event, the contributions into a separate expenditure is measured at cost Corporation has a present legal or entity and will have no legal or less accumulated amortisation and constructive obligation that can be constructive obligation to pay accumulated impairment losses. estimated reliably, and it is probable further amounts. Obligations that an outflow of economic The useful lives of intangible assets for contributions to defined benefits will be required to settle are assessed to be either finite or contribution plans are recognised the obligation. indefinite. Amortisation is charged as an employee benefit expense on assets with finite lives, with the in profit or loss in the periods (q) Employee benefits expense accounted for in the profit during which services are rendered or loss. Useful lives are examined on General by employees. an annual basis and adjustments, Provision is made for employee where necessary, are made on a benefits accruing to employees prospective basis. up to reporting date in respect of Intangible assets are tested for annual leave, maturing allowance, impairment where an indicator of pre 93 sick leave and long service impairment exists, and in the case leave, when it is probable that of indefinite lived intangible assets settlement will be required and annually, either individually or at the they are capable of being measured cash generating unit level. reliably. Long service leave, pre 93 sick leave and maturing allowance provisions have been based on an actuarial assessment
A summary of the policies applied to the Corporation’s intangible assets is as follows:
Software Easements Useful lives Finite Indefinite Amortisation method used 4 to 9 years – straight line Not depreciated or revalued Internally generated/acquired Internally generated/acquired Acquired Impairment test Where an indicator of impairment exists Annually and where an indicator of impairment exists
9 | Financial Statements 75 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
2 Statement of Significant Cash flow hedges (s) Derecognition of Accounting Policies In relation to cash flow hedges to financial instruments continued hedge firm commitments which meet The derecognition of a financial Defined benefit plans the conditions for hedge accounting, instrument takes place when the the portion of the gain or loss on Corporation no longer controls the A defined benefit plan is a post- the hedging instrument that is contractual rights that comprise employment benefit plan other than determined to be an effective hedge the financial instrument, which is a defined contribution plan. The is recognised in other comprehensive normally the case when the net obligation in respect of defined income and the ineffective portion instrument is sold, or all the cash benefit plans is calculated separately is recognised in profit or loss. When flows attributable to the instrument for each plan by estimating the the hedged firm commitment are passed through to an future benefit that employees have results in the recognition of an asset independent third party. earned in return for their service in or a liability, then, at the time the the current and prior periods – that asset or liability is recognised, the (t) Borrowings benefit is discounted to determine associated gains or losses that had its present value. Any unrecognised Borrowings are initially recognised previously been recognised in other past service costs and the fair value at fair value of the consideration comprehensive income are included of any plan assets are deducted. The received, net of transaction costs. in the initial measurement of the calculation is performed annually acquisition cost or other carrying After initial recognition, borrowings by a qualified actuary using the amount of the asset or liability. are subsequently measured at projected unit credit method. amortised cost using the effective For all other cash flow hedges, the All actuarial gains and losses interest method. Amortised cost is gains or losses that are recognised arising from defined benefit calculated by taking into account in other comprehensive income plans are recognised in other any issue costs, and any discount or are transferred to profit or loss comprehensive income. premium on settlement. in the same period in which the hedged firm commitment affects (r) Derivative financial (u) Revenue the net profit and loss, for example instruments Revenue is recognised when the when the future sale of electricity significant risks and rewards of Integral Energy uses derivative actually occurs. Fair value has ownership have been transferred financial instruments to hedge its been determined at year end to the buyer, recovery of the exposure to electricity price risk, by performing mark to market consideration is probable, and the interest rate risk and foreign exchange calculations on the cash flow hedges amount of revenue can be measured risk. Such derivative financial using financial market rates available. instruments are initially recognised at reliably. The following specific fair value on the date the derivative is Hedge accounting is discontinued recognition criteria must also be met entered into and any gains or losses when the hedging instrument before revenue is recognised: on subsequent remeasurement are expires or is sold, terminated or Revenue from ordinary activities recognised in profit or loss unless the exercised, or no longer qualifies for derivative is designated and effective hedge accounting. At that point Revenue from ordinary activities as a hedging instrument, in which in time, any cumulative gain or comprises revenue earned from the case the timing of the recognition in loss on the hedging instrument provision of energy products and profit or loss depends on the ongoing recognised in other comprehensive other ancillary services to entities effectiveness of the hedge or maturity income remains until the forecasted outside the Corporation. Revenue is of the hedging instrument. The transaction occurs. If a hedged recognised when energy products fair value of any financial derivative transaction is no longer expected and services are provided to the contract is calculated by reference to to occur, the net cumulative consumer. Metered energy supply current forward rates for contracts gain or loss recognised in other is recognised when the meters are with similar maturity profiles. comprehensive income is transferred read, and an estimate is brought to profit or loss for the period. to account where meters have not Hedge accounting been read (refer Note 2(j)). Network Derivatives that do not qualify For the purposes of hedge use of system charges are invoiced for hedge accounting accounting, hedges are classified as to out-of-area retailers following either fair value hedges when they Derivatives that do not qualify for the reading of meters of customers hedge the exposure to changes in hedge accounting are designated within the franchise area who are the fair value of a recognised asset or as held for trading. Gains or losses contracted to external retailers. liability, or cash flow hedges where on derivatives held for trading are Network use of system income is they hedge exposure to variability in recognised in profit or loss and recognised on an accrual basis, as cash flows that is either attributable the related assets or liabilities are revenue is accrued for consumption to a particular risk associated with a classified as derivative financial assets which is not invoiced at month end. recognised asset or liability or a highly in the Statement of Financial Position. probable forecast transaction.
76 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
2 Statement of Significant (w) Finance costs A deferred tax asset is recognised Accounting Policies Borrowing costs include interest, for unused tax losses, tax credits continued amortisation of discounts or and deductible temporary Interest receivable and other premiums relating to borrowings, differences, to the extent that it is revenue from operating activities is amortisation of ancillary costs probable that future taxable profits brought to account as it is earned, incurred in connection with will be available against which they and is recognised when goods and arrangement of borrowings and can be utilised. Deferred tax assets services are provided. Government guarantee fee costs. are reviewed at each reporting date The amount excludes borrowing and are reduced to the extent that Developer or customer contributions costs relating to qualifying assets it is no longer probable that the of noncurrent assets are recognised that have been capitalised in related tax benefit will be realised. as revenue and an asset when accordance with AASB 123 Integral Energy gains control of Since 1 July 2001, Integral Energy Borrowing Costs. Borrowing costs such contributions. Customer has been subject to the National are recognised in profit or loss in the contributions are considered a Taxation Equivalent Regime period in which they are incurred. separately identifiable service in (NTER) based on the Income Tax accordance with Interpretation 18 Assessment Act 1936 and the (x) Income tax Transfers of Assets from Customers. Income Tax Assessment Act 1997. The amount recognised is the fair Income tax expense comprises Tax equivalents are payable to the value of the contributed asset at current and deferred tax. Current Office of State Revenue. the date on which control of such and deferred tax are recognised assets is gained. in profit or loss except to the (y) Other taxes extent that it relates to a business FBT, payroll tax and land tax are Other revenue, outside the combination, or items recognised recognised in accordance with provision of energy products, is directly in equity or in other relevant legislation. In relation to recognised on an accrual basis and comprehensive income. GST, revenues, expenses and assets in accordance with the substance are recognised net of the amount of the agreement covering Current tax is the expected tax of GST except: such transactions. payable or receivable on the taxable income or loss for the year, using • where the GST incurred on a Other income outside tax rates enacted or substantively purchase of goods and services is ordinary activities enacted at the reporting date, and not recoverable from the taxation Revenue arising from the sale of any adjustment to tax payable in authority, in which case the GST assets is recognised when the respect of previous years. is recognised as part of the cost significant risks and rewards of Deferred tax is recognised in respect of acquisition of the asset or ownership have been transferred of temporary differences between as part of the expense item as to the buyer, recovery of the the carrying amounts of assets and applicable; and consideration is probable, and liabilities for financial reporting • receivables and payables are the amount of revenue can be purposes and the amounts used stated with the amount of measured reliably. for taxation purposes. Deferred tax GST included. is not recognised for the following (v) Leases temporary differences: the initial Cash flows are included in the Leases where the lessor retains recognition of assets or liabilities in Statement of Cash Flows on a gross substantially all the risks and a transaction that is not a business basis and the GST component of benefits of ownership of the combination and that affects neither cash flows arising from investing asset are classified as operating accounting nor taxable profit or loss. and financing activities, which is leases. Operating lease payments Deferred tax is measured at the tax recoverable from, or payable to, the are recognised as an expense in rates that are expected to be applied taxation authority are classified as the Statement of Comprehensive to temporary differences when they operating cash flows. Income on a straight line basis reverse, based on the laws that Contingencies are disclosed net over the lease term, except where have been enacted or substantively of the amount of GST recoverable another systematic basis is more enacted by the reporting date. from, or payable to, the representative of the time pattern in Deferred tax assets and liabilities taxation authority. which the economic benefits from have been offset as there is a legally lease assets are consumed. enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.
9 | Financial Statements 77 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
2 Statement of Significant AAASB 2009-14 Amendments (ac) Capital risk management Accounting Policies to Australian Interpretation – Consistent with NSW Treasury continued Prepayments of a Minimum Accounting Policy TPP02-7 Capital Funding Requirement: Structure Policy for Government (z) Workers compensation AASB Interpretation 14. Businesses which is a component of insurance AASB 2010-1 Amendments to the NSW Government’s Commercial Integral Energy is a self-insurer Australian Accounting Standards Policy Framework, the Corporation’s through its insurance provision for – Limited Exemption from objectives are to determine an workers compensation and meets Comparative AASB 7 Disclosures appropriate capital structure to all liabilities under the Workers for First-time Adopters. enable an appropriate return on Compensation Act 1987. equity and efficient investment AASB 124 Related Party Disclosures During 2009–10 a consulting decisions to be made on a and AASB 2009-12 Amendments to actuary, David A Zaman Pty Limited, commercial basis. Australian Accounting Standards. undertook the annual investigation Under the policy, an appropriate of Integral Energy’s estimated Interpretation 19 Extinguishing capital structure and a minimum- liability for workers compensation Financial Liabilities with Equity to-maximum capital structure range as at 30 June 2010. The liability Instruments and AASB 2009-13 are determined in consideration is measured as the present value Amendments to Australian of the following: of future payments and as at Accounting Standards arising from 30 June 2010 was estimated to be Interpretation 19. • Provision of an acceptable stream $9.5m (2009: $9.1m), including the of dividends; The following standards, liability for dust related diseases. amendments to standards and • Maintenance of an appropriate interpretations have been identified investment grade rating, taking (aa) Dividend as those which may impact the into account industry and entity The dividend is calculated in Corporation’s financial statements specific factors; accordance with TPP 02-3 Financial in the period of initial application. • Ability to meet key debt service Distribution Policy for Government They are available for early adoption criteria, based on industry Businesses. The dividend payable at 30 June 2010, but have not benchmarks; of $142.6m (2009: $103.6m) is been applied in preparing the calculated based on profit adjusted financial statements. • Capacity to finance the approved for certain non-cash items. In capital expenditure program the Statement of Comprehensive AASB 2009-5 Further Amendments through internally generated Income, this is based on 70% of to Australian Accounting cash flows and debt, with the line item ‘profit for the year’, Standards Arising from the Annual consideration of the current phase adjusted for non-cash adjustments Improvements Process affects of the investment cycle; and relating to fair value movements in various AASBs resulting in minor • Provision of sufficient flexibility for financial instruments. The 2009–10 changes for presentation, disclosure, relevant contingencies. dividend distribution includes an recognition and measurement additional amount of $5.1m. purposes. The amendments, which The minimum-to-maximum capital become mandatory with respect to structure range is an acceptable (ab) New standards and the 2011 financial statements, are variation around the Corporation’s interpretations not not expected to have a significant capital structure. The Corporation yet adopted impact on the financial statements. monitors this on the basis of The following standards, AASB 9 Financial Instruments and gearing levels and ratios. This ratio amendments to standards and AASB 2009-11 Amendments to is calculated as debt divided by debt interpretations have been identified Australian Accounting Standards plus equity. as those which will not impact the arising from AASB 9 address the The agreed capital structure and Corporation’s financial statements: measurement and recognition range is reviewed on an annual criteria for financial assets. AASB2009-8 Amendments to basis as part of the Statement The standard and associated Australian Accounting Standards of Corporate Intent process. The amendments become mandatory – Group Cash-settled Share-based purpose of the review is to confirm with respect to the 2014 financial Payment Transactions. whether or not the current capital statements, and are not expected structure and range continue to be AASB 2009-9 Amendments to to have a material impact on the appropriate and, if not, to negotiate Australian Accounting Standards – financial statements. revised arrangements between the Additional Exemption for First-time Board and Shareholders. Adopters. AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issue.
78 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
2 Statement of Significant The NSW Electricity Supply Integral Energy accounts for NGAC Accounting Policies Amendment (Greenhouse Gas certificates under AASB 102 continued Emission Reduction) Act 2000 Inventories. Certificates which imposes on electricity retailers are created and held for sale are (ad) Greenhouse legislation the obligation to “surrender” recognised initially at the point of The Commonwealth Renewable sufficient certificates each year registration and measured at the Energy (Electricity) Act 2000 to satisfy the State Government’s registration fee paid. Certificates imposes on electricity retailers the strategy to reduce greenhouse which are purchased and held for obligation to “surrender” sufficient gas per capita emissions from sale are recognised initially at the certificates each year to meet the electricity purchases. This imposes point of acquisition and measured Commonwealth Government’s an obligation on Integral Energy at cost, being the fair value of strategy to lift Australia’s use to purchase or produce NSW the consideration paid. They are of electricity generated from Greenhouse Abatement Certificates subsequently measured at the lower renewable sources. This imposes (NGACs) and surrender them to the of cost and net realisable value. an obligation on Integral Energy Independent Pricing and Regulatory The profit on sale is recognised to purchase Renewable Energy Tribunal (IPART) in discharge of when the entity delivers the Certificates (RECs) and surrender Integral Energy’s greenhouse gas certificates under an agreement or them to the Office of the Renewable emission reduction obligations. sells them. The surrender of these Energy Regulator in discharge of certificates will be recognised in the Integral Energy’s renewable energy underlying purchase commitment obligations. These certificates are as an element of electricity accounted for as “other assets” purchase costs. and, as such, are reviewed for impairment and carried at the lower of cost or net realisable value at the close of the reporting period.
3 Revenue
2010 2009 $’000 $’000
Revenues Metered sales of electricity 1,480,817 1,345,279 Estimated revenue on unread meters 127,036 121,673 Street lighting 1,853 3,110
Total electricity sales 1,609,706 1,470,062 Network use of system income 524,159 381,940 Reimbursement of community service obligations 30,427 23,962
Sales revenue 2,164,292 1,875,964
Interest income 1,071 537 Capital contributions 44,679 57,441 Other income 62,103 64,432
Other income 107,853 122,410
Total revenue and other income 2,272,145 1,998,374
9 | Financial Statements 79 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
4 Expenses
2010 2009 $’000 $’000
Amount set aside to provisions Allowance for impairment of receivables 6,758 6,392 Employee benefits 88,841 89,124 Other provisions 6,187 5,532
Total amount set aside to provisions 101,786 101,048
Other expenses relating to operating activities Bad debts written off 7,435 6,463 Consultants 1,782 1,556 Contractors 46,854 47,670 Employee benefits 139,978 125,969 Superannuation contributions 23,688 29,918 Superannuation (defined benefits) expense excluding actuarial gains or losses* 11,064 7,953 Operating lease rentals 330 184 Net loss on disposal of property, plant and equipment and assets held for sale 24 1,670 Unrealised loss on held for trading assets 24,383 7,567 Net loss arising from ineffectiveness on cash flow hedges 566 770 Retailing and distribution of electricity and other services 1,325,275 1,174,789
Total other expenses relating to operating activities 1,581,379 1,404,509
Depreciation of non-current assets System assets 106,780 97,739 Buildings 3,036 2,963 Plant and equipment 23,386 21,779
Total depreciation of non-current assets 133,202 122,481
Amortisation of intangible assets Software 16,516 14,626
Total depreciation and amortisation expense 149,718 137,107
Total expenses from operating activities 1,832,883 1,642,664
Finance costs Gross interest expense 127,796 121,332 Net amortisation of discounts/premiums on loans 19,308 10,941 Other interest expense 40,512 17,802
Total finance costs 187,616 150,075
* Refer Note 14. Superannuation (defined benefits) expense totals $14.6m (2009: $78.9m), including actuarial losses of $3.6m (2009: $70.9m) recognised in other comprehensive income and other superannuation expenses totalling $11.0m (2009: $8.0m) recognised in profit or loss. Maintenance expenses included within other expenses relating to operating activities are as follows: (i) Employee related costs included in employee benefits expense $67.9m (2009: $62.8m) (ii) Contracted labour and other (non-employee related) expenses $41.4m (2009: $41.1m)
80 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
5 Income Tax
2010 2009 $’000 $’000
(a) Income tax expense Current tax expense Current year 76,178 41,333 Adjustments for prior years 97 329
76,275 41,662
Deferred tax expense Origination and reversal of temporary differences (2,838) 20,858 Under/(over) provided in prior years (770) 925
(3,608) 21,783
Total income tax expense 72,667 63,445
(b) Numerical reconciliation between tax expense and pre-tax accounting profit Profit excluding income tax 251,646 205,635 Income tax using the Corporation’s domestic tax rate of 30% (2009: 30%) 75,494 61,691 Increase in income tax expense due to: Tax concessions/non-deductible expenses (2,154) 501 Under/(over) provided in prior years (673) 1,253
Income tax expense on pre-tax accounting profit 72,667 63,445
(c) Income tax recognised in other comprehensive income Relating to hedge revaluation reserve (9,440) (43,448) Relating to revaluation of property, plant and equipment and assets held for sale 99,011 (6,361) Relating to superannuation (defined benefits) actuarial gains/(losses) (1,069) (21,271)
88,502 (71,080)
9 | Financial Statements 81 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
6 Deferred Tax (Assets)/Liabilities Deferred tax (assets)/liabilities are attributable to the following:
2010 2009 $’000 $’000
Assets subject to depreciation/amortisation/capital allowances 482,426 365,106 Assets held for sale 1,067 2,230 Deferred income and interest (95) 1,592 EISS superannuation (18,511) (18,445) Unread meters 38,111 36,502 Provisions and accruals (80,204) (71,953) Emission rights and deductible prepayments 6,106 12,049 Derivatives (37,950) (21,025)
Deferred tax (assets)/liabilities 390,950 306,056
Recognised in other Opening Recognised in comprehensive Closing balance profit or loss income balance Movement in temporary differences $’000 $’000 $’000 $’000
Assets subject to depreciation/amortisation/capital allowances 365,106 18,810 98,510 482,426 Assets held for sale 2,230 (1,664) 501 1,067 Deferred income and interest 1,592 (1,687) – (95) EISS superannuation (18,445) 1,003 (1,069) (18,511) Unread meters 36,502 1,609 – 38,111 Provisions and accruals (71,953) (8,251) – (80,204) Emission rights and deductible prepayments 12,049 (5,943) – 6,106 Derivatives (21,025) (7,485) (9,440) (37,950)
Tax (assets)/liabilities as at 30 June 2010 306,056 (3,608) 88,502 390,950
Assets subject to depreciation/amortisation/capital allowances 351,773 19,095 (5,762) 365,106 Assets held for sale 2,829 – (599) 2,230 Deferred income and interest 2,413 (821) – 1,592 EISS superannuation 2,116 710 (21,271) (18,445) Unread meters 34,239 2,263 – 36,502 Provisions and accruals (66,048) (5,905) – (71,953) Emission rights and deductible prepayments 4,619 7,430 – 12,049 Derivatives 23,412 (989) (43,448) (21,025)
Tax (assets)/liabilities as at 30 June 2009 355,353 21,783 (71,080) 306,056
82 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
7 Cash Flow Information
(a) Reconciliation of Cash Flows from Operating Activities with Profit After Tax
2010 2009 $’000 $’000
Profit after tax 178,979 142,190 Adjustments for: Depreciation non-current assets 133,202 122,481 Amortisation non-current assets 16,516 14,626 Amortisation of discounts/premiums 19,308 10,941 Non-cash capital contributions (44,127) (56,032) Net loss on disposal of property, plant and equipment (5) 4,193 Asset revaluation reserve movements 12,238 10,377 Changes in assets and liabilities (Increase)/decrease in trade and other receivables (48,991) (30,375) (Increase)/decrease in unread meters (5,363) (7,544) (Increase)/decrease in derivative financial assets (5,112) (124,500) (Increase)/decrease in inventories 4,380 (10,195) (Increase)/decrease in other assets 19,877 (25,055) (Increase)/decrease in assets classified as held for sale 4,383 – Increase/(decrease) in trade and other payables 19,406 104,310 Increase/(decrease) in provisions 13,534 13,118 Increase/(decrease) in current tax balances 36,878 (1,191) Increase/(decrease) in deferred tax liabilities (3,608) 21,785 Increase/(decrease) in derivative financial liabilities 50,709 42,435 Increase/(decrease) in other liabilities (1,776) (3,125)
Net cash flows from operating activities 400,428 228,439
9 | Financial Statements 83 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
7 Cash Flow Information continued
(b) Financing Facilities
2010 2009 $’000 $’000
Total facilities available The Corporation has access to the following lines of credit: Bank overdraft 2,000 2,000 T-Corp short term accommodation 150,000 150,000 T-Corp loans 2,866,000 2,590,000 Inscribed stock 1,407 1,417
Total facilities available 3,019,407 2,743,417
Facilities utilised at reporting date* Bank overdraft – – T-Corp short term accommodation – – T-Corp loans 2,412,891 2,263,009 Inscribed stock 1,407 1,417
Total facilities utilised at reporting date 2,414,298 2,264,426
Facilities unused at reporting date Bank overdraft 2,000 2,000 T-Corp short term accommodation 150,000 150,000 T-Corp loans 453,109 326,991 Inscribed stock – –
Total facilities unused at reporting date 605,109 478,991
* Facilities utilised at reporting date reflect actual balances and do not account for unpresented cheques.
T-Corp short term accommodation Integral Energy has approval from the Public Authorities (Financial Arrangements) Act 1987 (“PAFA Act”) to obtain a $150 million short term accommodation (Come-and-Go facility) from NSW Treasury Corporation (T-Corp).
T-Corp loans Integral Energy has approval from the “PAFA Act” to obtain $2,866m loan funding from T-Corp. The loans are secured by a guarantee from the NSW Government and a government guarantee fee is payable by Integral Energy to NSW Treasury. The guarantee fee payable is calculated in accordance with NSW Treasury Accounting Policy TPP04-2 Government Guarantee Fee Policy for Government Businesses. The loan amounts in current liabilities include the portion of the Corporation’s T-Corp loans payable within one year of $461.4m (2009: $566.6m). Non-current T-Corp loans payable on or before 15 April 2039 total $1,952.9m (2009: $1,697.9m), with maturity dates ranging between one and twenty nine years from reporting date. All T-Corp debt is fully payable on maturity with the majority being fixed rate loans.
Inscribed stock Integral Energy has borrowings by the issue of inscribed stock to companies and various government bodies. There have been no new debt issues for this type of borrowing since November 1994. The loan amount in current liabilities includes the Corporation’s inscribed stock principal repayments to be made within one year of $1.15m (2009: $7,000). The non-current inscribed stock comprises principal repayments to be made on or before 14 February 2012, with repayment dates due within 1.6 years from reporting date. All inscribed stock are fixed rate loans and fully payable on maturity, with the exception of one loan which requires half yearly principal repayments.
84 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
8 Cash and Cash Equivalents
2010 2009 $’000 $’000
Cash on hand 34 32 Cash in bank 30,321 11,793
Total cash and cash equivalents 30,355 11,825
For the purposes of the Cash Flow Statement, cash includes cash on hand and cash equivalents
9 Trade and Other Receivables
2010 2009 $’000 $’000
Trade receivables 183,310 144,767 Allowance for impairment (20,849) (13,813)
162,461 130,954 Other debtors 140,669 122,001 Prepayments – other 6,835 6,983
Total trade and other receivables 309,965 259,938
Trade receivables are non-interest bearing. The Days Sales Outstanding (DSO) as at 30 June 2010 is 24.1 (2009: 21.4). Movements in the allowance for impairment loss were as follows:
Opening balance 13,813 13,885 Charge for the year 14,193 6,151 Amounts written off (7,435) (6,463) Amounts recovered during the year 278 240
Closing balance 20,849 13,813
Past due but Considered Total not impaired impaired $’000 $’000 $’000
2010 < 3 months overdue 24,409 24,376 33 3 months – 6 months overdue 11,146 5,177 5,969 > 6 months overdue 14,847 – 14,847
2009 < 3 months overdue 21,835 21,835 – 3 months – 6 months overdue 9,308 2,514 6,794 > 6 months overdue 7,019 – 7,019
All trade debtors are recognised as amounts receivable at balance date. Collectibility of trade debtors is reviewed on an ongoing basis. Procedures as established in company policies and procedures are followed to recover outstanding amounts. Debts which are known to be uncollectible are written off. An allowance for impairment is raised when there is objective evidence that the entity will not be able to collect all amounts due. This evidence includes past experience, and current and expected changes in economic conditions, debtor credit ratings and company policy. No interest is earned on trade debtors. Sales are made on 21 – 30 day terms. Integral Energy is not materially exposed to concentrations of credit risk to a single trade debtor or group of debtors.
9 | Financial Statements 85 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
10 Inventories
2010 2009 $’000 $’000
Stores and materials 27,128 30,249 NSW Greenhouse Gas Abatement Certificates 10,335 11,594
Total inventories 37,463 41,843
During the year ended 30 June 2010 stores and materials and NSW Greenhouse Gas Abatement Certificates recognised in profit or loss amounted to $16.5m (2009: $20.1m).
11 Assets Classified as Held for Sale
2010 2009 $’000 $’000
Non-current assets held for sale 4,800 9,183
Total assets classified as held for sale 4,800 9,183
Non-current assets held for sale relate to vacant non-infrastructure land and buildings.
12 Property Plant and Equipment
System Land & Plant & Under assets buildings equipment construction Total $’000 $’000 $’000 $’000 $’000
Gross carrying amount Balance at 1 July 2008 6,929,655 404,508 222,440 324,126 7,880,729 Additions 361,029 27,241 32,959 442,879 864,108 Disposals (2,254) (55) (23,366) – (25,675) Transfers – – – (389,971) (389,971) Revaluation – (35,100) – – (35,100)
Balance at 30 June 2009 7,288,430 396,594 232,033 377,034 8,294,091
Balance at 1 July 2009 7,288,430 396,594 232,033 377,034 8,294,091 Transfer opening balance to intangible assets – – – (15,956) (15,956) Additions 286,938 24,142 19,244 403,047 733,371 Disposals (2,170) (557) (8,304) – (11,031) Transfers – – – (286,158) (286,158) Transfer to assets held for sale – (4,800) – – (4,800) Revaluation 678,075 (47,238) – – 630,837
Balance at 30 June 2010 8,251,273 368,141 242,973 477,967 9,340,354
Depreciation Balance at 1 July 2008 3,013,616 2,829 116,393 – 3,132,838 Depreciation for the year 97,739 2,963 21,779 – 122,481 Disposals (339) – (17,655) – (17,994) Revaluation – (5,518) – – (5,518)
Balance at 30 June 2009 3,111,016 274 120,517 – 3,231,807
Balance at 1 July 2009 3,111,016 274 120,517 – 3,231,807 Depreciation for the year 106,780 3,036 23,386 – 133,202 Disposals (414) (1) (5,808) – (6,223) Revaluation 11,523 (2,999) – – 8,524
Balance at 30 June 2010 3,228,905 310 138,095 – 3,367,310
86 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
12 Property Plant and Equipment continued
System Land & Plant & Under assets buildings equipment construction Total $’000 $’000 $’000 $’000 $’000
Impairment losses Balance at 1 July 2008 1,392,794 – – – 1,392,794
Balance at 30 June 2009 1,392,794 – – – 1,392,794
Balance at 1 July 2009 1,392,794 – – – 1,392,794 Additional impairment recognised 304,517 – – – 304,517 during the year
Balance at 30 June 2010 1,697,311 – – – 1,697,311
Carrying amounts At 1 July 2008 2,523,245 401,679 106,047 324,126 3,355,097
At 30 June 2009 2,784,620 396,320 111,516 377,034 3,669,490
At 1 July 2009 2,784,620 396,320 111,516 377,034 3,669,490
At 30 June 2010 3,325,057 367,831 104,878 477,967 4,275,733
Recoverable amount At 30 June 2009 Gross replacement cost 7,288,430 396,594 232,033 377,034 8,294,091 Accumulated depreciation (3,111,016) (274) (120,517) – (3,231,807)
Depreciated replacement cost 4,177,414 396,320 111,516 377,034 5,062,284 Accumulated impairment losses (1,392,794) – – – (1,392,794)
Recoverable amount at 30 June 2009 2,784,620 396,320 111,516 377,034 3,669,490
At 30 June 2010 Gross replacement cost 8,251,273 368,141 242,973 477,967 9,340,354 Accumulated depreciation (3,228,905) (310) (138,095) – (3,367,310)
Depreciated replacement cost 5,022,368 367,831 104,878 477,967 5,973,044 Accumulated impairment losses (1,697,311) – – – (1,697,311)
Recoverable amount at 30 June 2010 3,325,057 367,831 104,878 477,967 4,275,733
Property, Plant and Equipment Impairment Losses Integral Energy’s valuation policy provides for a valuation of assets to be undertaken at least every five years in conjunction with NSW Treasury Policy TPP 07-1 Valuation of Physical Non-Current Assets at Fair Value. A revaluation of system assets was undertaken by an independent valuer and recognised as at 30 June 2010. System assets were valued at Optimised Depreciated Replacement Cost (ODRC). The ODRC valuation was determined based on application of escalation factors which measure the change in costs of key inputs to the electricity network industry. The recoverable amount of the cash generating unit was determined using the Value in Use methodology and compared to the carrying amount. The estimate of Value in Use was determined using a discount rate of 7.97%. The carrying amount was determined to be higher than its recoverable amount and an additional impairment loss of $304,517 was recognised as a reduction to the Asset Revaluation Reserve.
Capitalised borrowing costs As a result of the change in accounting policy with respect to the treatment of borrowing costs (see note 2(d)), at 30 June 2010 capitalised borrowing costs amounted to $14.1k, with a weighted average capitalisation rate of 7.8 percent.
9 | Financial Statements 87 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
12 Property Plant and Equipment continued
Historical cost of revalued assets If assets were measured using the cost model, the carrying amounts would be as follows:
2010 2009 $’000 $’000
System assets At cost 3,017,519 2,732,750 Less accumulated depreciation (501,363) (394,996)
Total system assets 2,516,156 2,337,754
Land & buildings At cost 292,031 273,246 Less accumulated depreciation (45,730) (51,455)
Total land & buildings 246,301 221,791
Plant & equipment At cost 242,921 231,981 Less accumulated depreciation (138,094) (120,517)
Total plant & equipment 104,827 111,464
Total property, plant and equipment 2,867,284 2,671,009
88 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
13 Intangible Assets
Under Software Easements construction Total $’000 $’000 $’000 $’000
Cost or deemed cost Balance at 1 July 2008 139,692 9,992 – 149,684 Additions 22,748 653 – 23,401 Disposals (22,566) – – (22,566)
Balance at 30 June 2009 139,874 10,645 – 150,519
Balance at 1 July 2009 139,874 10,645 – 150,519 Transfer opening balance from property, plant & equipment – – 15,956 15,956 Additions 16,870 390 14,364 31,624 Disposals (40) – – (40) Transfers – – (16,869) (16,869)
Balance at 30 June 2010 156,704 11,035 13,451 181,190
Amortisation and impairment losses Balance at 1 July 2008 109,366 – – 109,366 Amortisation for the year 14,615 – – 14,615 Disposals (22,560) – – (22,560)
Balance at 30 June 2009 101,421 – – 101,421
Balance at 1 July 2009 101,421 – – 101,421 Amortisation for the year 16,516 – – 16,516 Disposals (37) – – (37)
Balance at 30 June 2010 117,900 – – 117,900
Carrying amounts At 1 July 2008 30,326 9,992 – 40,318
At 30 June 2009 38,453 10,645 – 49,098
At 1 July 2009 38,453 10,645 – 49,098
At 30 June 2010 38,804 11,035 13,451 63,290
9 | Financial Statements 89 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
14 Employee Benefits – Superannuation
(a) Superannuation plans Integral Energy has a defined benefit superannuation plan covering a significant number of employees, which requires contributions to be made to a separately administered fund. The superannuation plan provides for defined benefits based on years of service and final average salary. Employees contribute to the plan at various percentages of their wages and salaries. Integral Energy also contributes to the plan, generally at the rate of twice the employees’ contributions. Contributions by Integral Energy of up to 9% of employees’ wages and salaries are legally enforceable in Australia.
General description of the type of plan The Energy Industries Superannuation Scheme Division B Division C Division D These Divisions are all defined benefit schemes – at least a component of the final benefit is derived from a multiple of member salary and years of membership. All divisions are closed to new members. The following tables summarise the components of net benefit expense recognised in the profit or loss, actuarial gains and losses recognised in other comprehensive income, and the funded status and amounts recognised in the Statement of Financial Position for the plan.
(b) Expense recognised in profit or loss
2010 2009 $’000 $’000
Net superannuation expense (11,064) (7,953)
Expense recognised in profit or loss (11,064) (7,953)
Assets invested in entity or in property occupied by the entity All Scheme assets are invested by the trustee at arm’s length through independent Scheme managers.
(c) Amounts recognised in the Statement of Financial Position
2010 2009 $’000 $’000
Present value of the defined benefit obligation (329,764) (294,602) Fair value of plan assets 268,056 233,120
Net superannuation asset/(liability) (61,708) (61,482)
(d) Movement in the present value of the defined benefit obligation
2010 2009 $’000 $’000
Defined benefit obligation at 1 July 294,602 283,014 Current service cost 12,593 11,522 Interest cost 17,162 18,765 Contributions by scheme participants 4,225 4,502 Actuarial (gains)/losses in other comprehensive income 12,133 (3,467) Benefits paid by the plan (10,951) (19,734)
Defined benefit obligation at 30 June 329,764 294,602
90 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
14 Employee Benefits – Superannuation continued
(e) Movement in the present value of plan assets
2010 2009 $’000 $’000
Fair value of plan assets at 1 July 233,120 290,066 Expected return on plan assets 18,691 22,334 Actuarial gains/(losses) in other comprehensive income 8,567 (74,369) Employer contributions 14,404 10,320 Contributions paid into the plan 4,225 4,502 Benefits paid by the plan (10,951) (19,733)
Fair value of plan assets at 30 June 268,056 233,120
(f) Expense recognised in profit or loss
2010 2009 $’000 $’000
Current service cost 12,593 11,522 Interest on obligation 17,162 18,765 Expected return on plan assets (18,691) (22,334)
Expense recognised in profit or loss 11,064 7,953
The superannuation expense recognised in profit or loss is included in the line item ‘total other expenses relating to operating activities’. Superannuation actuarial losses of $3.6m (2009 $70.9m) are separately identified in other comprehensive income.
(g) Actuarial gains/(losses) recognised in other comprehensive income
2010 2009 $’000 $’000
Cumulative amount at 1 July (79,973) (9,072) Recognised during the period (3,566) (70,901)
Cumulative amount at 30 June (83,539) (79,973)
(h) Valuation method and principal economic assumptions The Projected Unit Credit (PUC) valuation method was used to determine the present value of defined benefit obligations and related current service costs. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Principal actuarial assumptions used in determining pension and post-employment benefit obligations for the Corporation’s plans are shown below (expressed as weighted average):
2010 2009 % %
Discount rate 5.17 5.35 Anticipated return on plan assets 8.10 7.78 Expected future salary increases 4.00 4.00 Future CPI increases 2.50 2.50
9 | Financial Statements 91 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
14 Employee Benefits – Superannuation continued
(i) Actual return on plan assets
2010 2009 $’000 $’000
Actual return on plan assets 26,495 (50,439)
26,495 (50,439)
(j) Historical information The percentage contribution of each major class of total plan assets comprises:
2010 2009 2008 2007 2006 $’000 $’000 $’000 $’000 $’000
Present value of the defined benefit obligation (329,764) (294,602) (283,014) (287,875) (253,193) Fair value of plan assets 268,056 233,120 290,066 322,730 281,508
(Deficit)/surplus in the plan (61,708) (61,482) 7,052 34,855 28,315
Experience adjustments arising on plan liabilities 12,133 3,466 26,323 (22,053) 68 Experience adjustments arising on plan assets (8,567) (74,369) (53,389) 23,056 26,075
(k) Arrangements for employer contributions for funding The following is a summary of the 30 June 2010 financial position of the Scheme, calculated in accordance with AAS25 Financial Reporting by Superannuation Plans.
2010 2009 $’000 $’000
Accrued benefits 277,585 253,178 Net market value of Scheme assets (268,056) (233,120)
Net (surplus)/deficit 9,529 20,058
Recommended contribution rates for the entity are: Div B = 1.90 x member contributions Div C = 2.5% x salaries Div D = 1.64 x member contributions The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding method. The method adopted affects the timing of the cost to the employer. Under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions.
(l) Nature of asset/liability If a surplus exists in the employer’s interest in the Scheme, the employer may be able to take advantage of it in the form of a reduction in the required contribution rate, depending on the advice of the Scheme’s actuary. Where a deficiency exists, the employer is responsible for any difference between the employer’s share of Scheme assets and the defined benefit obligation.
92 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
14 Employee Benefits – Superannuation continued
(m) Percentage contribution of each major class of total plan assets The percentage contribution of each major class of total plan assets comprises:
2010 2009 % %
Australian equities 36.40 34.30 Overseas equities 32.30 33.10 Australian fixed-interest securities 14.60 9.00 Australian inflation-linked bonds 3.80 – Overseas fixed-interest securities – 6.90 Property 2.50 6.10 Cash 5.70 6.10 Other 4.70 4.50
100.00 100.00
All scheme assets are invested by the Trustees at arm’s length through independent managers. The expected return on assets assumption is determined by weighting the expected long term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees. In addition to normal contributions, Integral Energy does not expect to contribute any additional amounts to the defined benefits plan for the year ended 30 June 2011, as advised by the Scheme’s actuary.
15 Trade and Other Payables
2010 2009 $’000 $’000
Trade payables 23,603 29,343 Accruals 286,689 249,921 Other payables 12,255 11,539
Total current trade and other payables 322,547 290,803
Trade payables 34,288 46,627
Total non-current trade payables 34,288 46,627
Trade and other payables are non-interest bearing and are normally settled within 38.6 days. The net of GST payable and GST receivable is remitted to the appropriate tax body on a monthly basis.
16 Other Current Liabilities
2010 2009 $’000 $’000
Deposits and retentions 24,017 24,654 Unearned income 2,937 3,627
Total other current liabilities 26,954 28,281
9 | Financial Statements 93 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
17 Borrowings
Effective 2010 2009 interest rate $’000 $’000
Current Unsecured bank loans Floating rate loans 4.8% 195,000 382,000 Fixed rate loans 7.6% 266,353 184,561
Total current borrowings 461,353 566,561
Non-current Unsecured bank loans Fixed rate loans 6.2% 1,952,945 1,697,865
Total non-current borrowings 1,952,945 1,697,865
Bank loans are unsecured and repayable in full on various maturity dates. Interest rates are based on weighted average effective rates on the entire debt, excluding the impact of the Government Guarantee fee.
18 Provisions
(a) Movement in carrying amounts
Employee Benefits Self Insurance Other Total $’000 $’000 $’000 $’000
Balance at 1 July 2009 203,831 9,069 69,188 282,088 Provisions made during the period 88,841 795 5,392 95,028 Provisions used during the period (71,854) (325) (5,331) (77,510)
Balance at 30 June 2010 220,818 9,539 69,249 299,606
Current 119,865 1,288 7,541 128,694 Non-current 100,953 8,251 61,708 170,912
Balance at 30 June 2010 220,818 9,539 69,249 299,606
Current 113,108 1,247 13,447 127,802 Non-current 90,723 7,822 55,741 154,286
Balance at 30 June 2009 203,831 9,069 69,188 282,088
Employee benefits The provision for employee benefits relates to amounts accruing to employees up to reporting date in respect of employee benefits including annual leave, maturing allowance, pre 93 sick leave and long service leave. Amounts provided for in relation to maturing allowance, pre 93 sick leave and long service leave are based on an actuarial assessment and associated formulae provided for intervening periods between assessments as outlined in note 2(q). All other employee benefit amounts have been calculated at nominal amounts based on expected settlement rates.
Self insurance The self insurance provision relates to workers compensation, and is based on an actuarial assessment as detailed in note 2(z).
Other Other provisions include $61.7m relating to the Defined Benefits Superannuation liability as detailed in note 14. The remaining balance of $7.5m is not detailed due to commercial and legal sensitivity.
94 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
19 Other Non-Current Liabilities
2010 2009 $’000 $’000
Deposits and retentions 3,819 4,268
Total other non-current liabilities 3,819 4,268
20 Reserves
(a) Asset Revaluation Reserve The asset revaluation reserve is used to record increments and decrements in the fair value of property, plant and equipment to the extent that they offset one another. The reserve can only be used to pay dividends in limited circumstances. Refer to the Statement of Changes in Equity for movements in the asset revaluation reserve during the period.
(b) Hedge Reserve The hedge reserve records revaluations of items designated as hedges. Refer to the Statement of Changes in Equity for movements in the hedge reserve during the period.
21 Financial Instruments
(a) Financial risk management objectives and policies Integral Energy’s principal financial instruments comprise cash, trade debtors, trade creditors, short term deposits, bank loans and derivatives. The main purpose of these financial instruments is to raise finance or invest surplus cash for the Corporation’s operations, and to manage exposure to price movements. Integral Energy’s Treasury function, Financial Risk function, Treasury Committee and Board manage the Corporation’s exposure to key financial risks including interest rate risk, liquidity risk, electricity price risk and credit risk, in accordance with the Board’s financial risk management policies. The Board reviews and agrees policies for managing each of the key financial risks by approving an annual Debt Funding Strategy paper and receiving regular updates with respect to the management of the debt portfolio, and a monthly energy risk management paper providing updates of the management of the electricity trading portfolio and adherence to policy parameters.
9 | Financial Statements 95 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
21 Financial Instruments continued
(b) Credit risk Credit risk is the risk of financial loss arising from another party to a contract, or financial position failing to discharge a financial obligation thereunder. The carrying amount of the Corporation’s financial assets represents the maximum credit exposure. The Corporation’s maximum exposure to credit risk at the reporting date was:
2010 2009 $’000 $’000
Cash and cash equivalents 30,355 11,825 Trade and other receivables 309,965 259,938 Treasury derivatives designated at fair value through profit or loss 298 2,438 Treasury derivatives classified as cash flow hedges 1,376 – Electricity derivatives classified as held for trading 70,481 94,712 Electricity derivatives classified as cash flow hedges 390 1,750
Total exposure to credit risk 412,865 370,663
Integral Energy’s Treasury and Financial Risk function control risk through the use of external credit ratings which are used to derive risk limits as approved by the Board of Directors, and monitoring procedures. On occasion Integral Energy may require collateral or other security to support financial instruments with credit risk. At 30 June 2010 Integral Energy held collateral in the form of Letters of Credit. Integral Energy does not have any significant exposure to any individual customer or counterparty outside Board approved counterparty limits. Credit risks from derivative contracts recognised in the Statement of Financial Position is minimised due to Integral Energy having policies in place which prevent excessive counterparty concentration, and limit individual counterparty exposure based on an assessment of individual counterparties credit worthiness. Financial assets which are neither past due nor impaired have been transacted with approved creditworthy counterparties in accordance with Board approved financial risk management policies, and are assessed on a continual basis.
(c) Electricity price risk Price risk is the risk that Integral Energy’s cash flows will be adversely affected by the movements in commodity prices that will increase the Australian dollar value of commodity payables. Integral Energy is exposed to price risk through electricity purchasing within the National Electricity Market (NEM) pool. Integral Energy purchases electricity from the NEM pool to meet customer load requirements. Price risk arises from the purchase of electricity at variable pool prices in the NEM. It is the responsibility of the Board to use a combination of risk management tools such as swaps, options and futures contracts transacted with market participants and energy trading operators to hedge the customer load and control exposure to NEM pool prices. Trading is performed under Board approved mandates which permit active portfolio management within regularly monitored risk limits. The limits consider measurements of Cashflow at Risk and Earnings at Risk, accompanied by Volumetrics Position Analysis. The following table summarises the impact of changes in commodity prices on the Corporation’s post-tax profit and equity. A 6% movement in electricity prices has been applied to the forward electricity curve as at balance date. All variables other than the commodity price are held constant in the summary below.
Price risk – impact of changes in prices
2010 2009
Profit Equity Profit Equity $’000 $’000 $’000 $’000
Change in electricity price 6% increase in electricity price 8,097 28,634 3,084 37,903 6% decrease in electricity price (8,893) (28,634) (3,084) (37,903)
Sensitivity to reasonably possible price movements in the above table reflects Integral Energy’s use of electricity derivatives within a portfolio to manage risk. Equity movements are a reflection of the impact of changes in prices on derivatives that have been designated in cashflow hedging relationships.
96 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
21 Financial Instruments continued
(d) Interest rate risk Interest rate risk is the risk of a reduction in earnings and/or the net present value of the Corporation as a consequence of adverse movements in interest rates. Interest rate risk is managed by the Treasury function within Integral Energy. The Corporation’s exposure to market risk for changes in interest rates relates primarily to interest bearing liabilities as Integral Energy borrows funds at both fixed and floating interest rates. The Corporation’s policy is to manage its interest cost using a mix of fixed and variable rate debt, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal strategies are applied by either positioning the Statement of Financial Position or protecting interest expense through different interest rate cycles. At the reporting date the interest rate profile of the Corporation’s interest-bearing financial instruments was:
<1 year 1–5 years >5 years Total $’000 $’000 $’000 $’000
2010 Floating rate Financial assets Cash and cash equivalents 30,355 – – 30,355 Financial liabilities Borrowings 195,000 – – 195,000 Treasury derivatives – interest rate swaps 60,000 – – 60,000 Fixed rate Financial liabilities Borrowings 266,353 618,406 1,334,539 2,219,298 Treasury derivatives – interest rate swaps (60,000) – – (60,000)
2009 Floating rate Financial assets Cash and cash equivalents 11,825 – – 11,825 Financial liabilities Borrowings 382,000 – – 382,000 Treasury derivatives – interest rate swaps (60,000) 60,000 – – Fixed rate Financial liabilities Borrowings 184,561 713,504 984,361 1,882,426 Treasury derivatives – interest rate swaps 60,000 (60,000) – –
Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument. Other financial instruments of the Corporation not included in the above tables are non-interest bearing and therefore not subject to interest rate risk. Exposure to interest rate risk arises primarily through the Corporation’s interest bearing liabilities. This risk is minimised by undertaking mainly fixed rate borrowings, primarily with NSW T-Corp. The Corporation does not account for any fixed rate financial instruments at fair value through profit or loss or as available for sale. These are accounted for at amortised cost. The only impact on profit or loss would be the change in interest rates on floating rate borrowings. A reasonably possible change of +/- 1% is used, consistent with current trends in interest rates. This analysis assumes that all other variables remain constant. The basis will be reviewed annually and amended where there is a structural change in the level of interest rate volatility. The Corporation’s exposure to interest rate risk is set out below.
9 | Financial Statements 97 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
21 Financial Instruments continued
(d) Interest rate risk continued
-1% +1% Carrying Amount Profit Equity Profit Equity $’000 $’000 $’000 $’000 $’000
2010 Financial assets Cash and cash equivalents 30,355 (304) – 304 – Treasury derivatives – interest rate swaps 298 (200) – 200 – Financial liabilities Borrowings 2,414,298 1,950 – (1,950) – Treasury derivatives – interest rate swaps 222 800 – (800) –
2009 Financial assets Cash and cash equivalents 11,825 (118) – 118 – Treasury derivatives – interest rate swaps 2,437 (1,150) – 1,150 – Financial liabilities Borrowings 2,264,426 3,820 – (3,820) – Treasury derivatives – interest rate swaps 1,794 1,150 – (1,150) –
The Corporation’s sensitivity to interest rates has decreased during the current year mainly due to a decrease in the amount of variable rate borrowings and decreases in interest rate swap contracts.
(e) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Integral Energy’s exposure to foreign currency risk is immaterial. The Corporation limits currency risk by entering into foreign currency options and forward foreign exchange contracts. As the foreign currency risk is immaterial in terms of a possible impact on profit and loss or total equity, a sensitivity analysis has not been completed.
98 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
21 Financial Instruments continued
(f) Liquidity risk Liquidity risk refers to the risk of difficulty in ensuring the availability of sufficient funds to meet obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk is managed by the Treasury function. Treasury maintains a balance between continuity of funding and flexibility through the use of bank overdrafts and debt. The Corporation’s funding requirements and strategy is reviewed annually and monitored on an ongoing basis. The Corporation manages debt via a term to maturity approach. At 30 June 2010 the Corporation’s term to maturity duration was within the policy limit approved by the Board. During the current and prior year no assets have been pledged as collateral. Liquidity risk management with regard to electricity derivatives is managed by ensuring the Corporation has sufficient funds available to settle its commitments to counterparties. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting arrangements:
Carrying Contractual amount cash flows < 1 year 1–5 years > 5 years $’000 $’000 $’000 $’000 $’000
2010 Non-derivative financial liabilities Trade and other payables 356,833 356,833 322,545 34,288 – Borrowings 2,414,298 3,413,370 536,707 1,018,358 1,858,305 Derivative financial liabilities Electricity derivatives – swaps 109,461 109,461 62,003 47,458 – Electricity derivatives – options 14,436 14,436 14,436 – –
Total financial liabilities 2,895,028 3,894,100 935,691 1,100,104 1,858,305
2009 Non-derivative financial liabilities Trade and other payables 337,430 337,430 290,803 46,627 – Borrowings 2,264,426 2,264,426 566,561 713,504 984,361 Derivative financial liabilities Electricity derivatives – swaps 63,575 63,575 35,004 28,571 –
Total financial liabilities 2,665,431 2,665,431 892,368 788,702 984,361
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different times. The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur:
Carrying Expected amount cash flows < 1 year 1–5 years > 5 years $’000 $’000 $’000 $’000 $’000
2010 Forward exchange contracts Assets 1,766 1,766 586 1,180 – Liabilities (76,560) (76,560) (40,109) (36,451) –
(74,794) (74,794) (39,523) (35,271) –
2009 Forward exchange contracts Assets 1,750 1,750 772 978 – Liabilities (45,262) (45,262) (27,804) (17,458) –
(43,512) (43,512) (27,032) (16,480) –
9 | Financial Statements 99 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
21 Financial Instruments continued
(g) Fair values Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows:
2010 2009
Carrying Carrying amount Fair value amount Fair value Note $’000 $’000 $’000 $’000
Assets carried at fair value Treasury derivatives – interest rate swaps 2(r) 298 298 2,438 2,438 Treasury derivatives – options 2(r) 1,376 1,376 – – Electricity derivatives – swaps 2(r) 2,275 2,275 10,612 10,612 Electricity derivatives – options 2(r) 68,596 68,596 85,850 85,850
72,545 72,545 98,900 98,900
Assets carried at amortised cost Cash and cash equivalents 2(g) 30,355 30,355 11,825 11,825 Trade and other receivables 2(h) 309,965 309,965 259,938 259,938
340,320 340,320 271,763 271,763
Liabilities carried at fair value Treasury derivatives – interest rate swaps 2(r) 222 222 1,794 1,794 Electricity derivatives – swaps 2(r) 104,618 104,618 66,773 66,773 Electricity derivatives – options 2(r) 14,436 14,436 – –
119,276 119,276 68,567 68,567
Liabilities carried at amortised cost Trade and other payables* 2(o) 356,833 356,833 337,430 337,430 Borrowings 2(t) 2,414,298 2,512,761 2,265,843 2,305,871
2,771,131 2,869,594 2,603,273 2,643,301
* Excludes derivatives (shown separately). Where available, fair value is determined directly through the use of market quoted prices. Valuation techniques are used to varying degrees for financial instruments where direct market quotes are not available. Exchange traded instruments are recorded at closing market prices. Fair value is calculated on the basis of discounted cash flows at an assumed discount rate for swap transactions using published market prices as the basis for deriving a continuous forward price curve. Over the counter option instruments are valued with reference to quoted market prices.
Interest rates used for determining fair value The interest rates used to discount estimated cash flows, when applicable, are based on referable market rates at the reporting date plus an adequate credit spread, and were as follows:
2010 2009
Treasury derivatives 4.5% – 4.7% 3.4% – 4.2% Electricity derivatives 4.6% – 5.1% 3.0% – 4.7% Borrowings 4.5% – 5.9% 3.0% – 6.4%
100 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
21 Financial Instruments continued
(g) Fair values continued Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000
30 June 2010 Assets carried at fair value Treasury derivatives – interest rate swaps – 298 – 298 Treasury derivatives – options – 1,376 – 1,376 Electricity derivatives – swaps – 2,275 – 2,275 Electricity derivatives – options – 68,596 – 68,596
– 72,545 – 72,545
Liabilities carried at fair value Treasury derivatives – interest rate swaps – 222 – 222 Electricity derivatives – swaps – 104,618 – 104,618 Electricity derivatives – options – 14,436 – 14,436
– 119,276 – 119,276
(h) Hedge accounting – cash flow hedges At 30 June 2010 Integral Energy held swaps, options and futures contracts to reduce the exposure of the Corporation to the NEM pool prices. The cash flows are expected to occur, and will enter into the determination of profit and loss over forthcoming years ending 2013. Due to the variability in total usage estimates for customers, forecast purchases of electricity fluctuate. These fluctuations are reflected in the hedged item. During the period ending 30 June 2010 a reduction has been experienced in a limited number of periods due to a deferral in the roll off of the Electricity Tariff Equalisation Fund (ETEF), which has resulted in de-designation of hedging relationships during those periods since the forecast transaction is no longer expected to occur. Movement in swaps and futures contract cash flow hedge reserve (net of tax)
2010 2009 $’000 $’000
Opening balance (35,914) 65,464 Amounts recognised in equity (18,766) (99,705) Amounts removed from equity and recognised in profit and loss (3,261) (1,673)
Closing balance (57,941) (35,914)
9 | Financial Statements 101 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
22 Contingent Liabilities and Contingent Assets
(a) Contingent Assets
2010 2009 $’000 $’000
Sundry General Claims – 1,500
– 1,500
(b) Contingent Liabilities
2010 2009 $’000 $’000
Self Insurance 2,836 2,320 WorkCover Authority – 2,925 Sundry General Claims 5,200 3,540
8,036 8,785
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement. The contingent liabilities relate to injury claims (self insurance) and sundry general claims. The Directors do not expect the outcome of any actions associated with the above contingent liabilities to have a material effect on the Corporation’s financial position.
23 Expenditure Commitments
(a) Operating Expenditure Commitments
2010 2009 $’000 $’000
Estimated operating expenditure contracted for at reporting date, but not provided for: Within one year 187,081 204,705 After one year but not more than five years 485,418 288,366 More than five years 196,358 182,124
Total operating expenditure commitments 868,857 675,195
(b) Lease Expenditure Commitments
2010 2009 $’000 $’000
Operating leases (non cancellable): Within one year 2,148 1,367 After one year but not more than five years 7,700 3,442 More than five years 1,755 1,219
Total lease expenditure commitments 11,603 6,028
102 Integral Energy Annual Performance Report 2009–10 Notes to the Financial Statements For the year ended 30 June 2010 9 Annual Performance Report 2009–10
23 Expenditure Commitments continued
(c) Capital Expenditure Commitments
2010 2009 $’000 $’000
Estimated capital expenditure contracted for at reporting date, but not provided for: Within one year 161,021 185,232 After one year but not more than five years 6,228 989
Total capital expenditure commitments 167,249 186,221
(d) Smithfield Energy Purchase Contract Operating Expenditure Commitments
2009 2008 $’000 $’000
Estimated operating expenditure contracted for at reporting date, but not provided for: Within one year 88,890 88,386 After one year but not more than five years 346,535 359,383 More than five years 1,085,311 1,154,868
Total Smithfield energy purchase contract operating expenditure commitments 1,520,736 1,602,637
The Corporation leases property under operating leases expiring from one to fifteen years. Leases generally provide the entity with a right of renewal, at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. Capital expenditure commitments relate primarily to works to be performed under the Strategic Asset Management Program. Smithfield energy purchase commitments relate to a 30 year Power Purchase Agreement (PPA) entered into in 1995 by Integral Energy’s predecessor Prospect Electricity. The PPA, with the Smithfield Power Partnership, is for the purchase of electricity from a 160-megawatt natural gas-fired power plant. The plant, which began operating in 1997, produces around 1 million megawatt-hours per annum. The PPA expires in June 2027. Total expenditure commitments include input tax credits of $233.4m (2009: $223.8m) which are expected to be recovered from the Australian Taxation Office.
24 Events After the Balance Sheet Date There has not arisen, in the interval between the end of the financial period and the date of this report, an event of a material and unusual nature likely, in the opinion of the Directors of the Corporation, to affect significantly the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity, in subsequent financial years.
25 Auditor’s Remuneration
2010 2009 $’000 $’000
Amounts received or due and receivable by the Auditor-General for: – Auditing the Financial Report 318 311 – AFSL Audit 8 –
Total auditor’s remuneration 326 311
9 | Financial Statements 103 Notes to the Financial Statements For the year ended 30 June 2010 Annual Performance Report 2009–10
26 Key Management Personnel
(a) Directors’ Appointments Continuing Directors Michael McLeod Terry Downing John Fahey Penny Le Couteur Paul Sinclair Vince Graham (Chief Executive Officer – Executive Director)
(b) Key Management Personnel Remuneration
Short term Post Other employee employment long term Termination benefits benefits benefits benefits Total $’000 $’000 $’000 $’000 $’000
Executive 3,073 203 – – 3,276 Directors 395 36 – – 431
2010 Total remuneration 3,468 239 – – 3,707
Executive 3,262 321 134 187 3,904 Directors 420 38 – – 458
2009 Total remuneration 3,682 359 134 187 4,362
27 Prudential Requirements An unsecured Bank Guarantee of $223.4m (2009: $125.m) is given to the Australian Energy Market Operator Limited (AEMO) by way of a New South Wales Treasury Corporation guarantee. The guarantee is a condition of Integral Energy Australia’s trading licence.
28 Related Party Transactions
Directors The name of each person who held or is holding the position of director of Integral Energy during the financial period is set out in Note 26 above. Details of directors’ remuneration is set out above. There were no director related party transactions for the 2009–10 financial year.
29 Energy Reform On 10 September 2009, the NSW Government released its Energy Reform Transaction Strategy which adopted a “dual track” process involving a trade sale and a potential Initial Public Offering of selected assets. The Government’s reforms include maintaining public ownership of existing power stations and electricity transmission and distribution networks; transferring the electricity retailing operations of EnergyAustralia, Integral Energy and Country Energy to the private sector; selling a number of potential development sites for new power stations; and contracting to the private sector the right to sell electricity produced by the State-owned generators, namely Delta Electricity, Macquarie Generation and Eraring Energy (the Gentrader model).
End of audited Financial Statements
104 Integral Energy Annual Performance Report 2009–10 Statement by Directors For the year ended 30 June 2010 9 Annual Performance Report 2009–10
Pursuant to Section 41C of the Public Finance and Audit Act 1983, we state that in the opinion of the Directors of Integral Energy Australia: (a) the accompanying financial statements and notes are a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, the State Owned Corporations Act 1989, the Public Finance and Audit Act 1983 and the Public Finance and Audit Regulation 2005, and Accounting Interpretations, and give a true and fair view of the financial position of Integral Energy Australia as at 30 June 2010 and its financial performance for the year ended on that date. (b) At the date of this statement, there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and payable. (c) We are not aware of any circumstances at the date of this statement that would render any particulars included in the financial report to be misleading or inaccurate. This declaration is made in accordance with a resolution of the Board of Directors.
Vince Graham Michael McLeod Director Director 1 September 2010 1 September 2010
9 | Financial Statements 105 Appendices
Annual Performance Report 2009–10
CONTENTS Page Five-year statistical table 107 Australian Financial Services Licence 108 Consultants 108 Credit card certification 108 Exemption from Annual Reporting provisions 109 Electronic service delivery 110 Executive remuneration and performance 110 Freedom of information 112 Funds granted to non-government organisations 117 Network determination 2009–14 merits review 117 Network prices 2010–11 117 Regulated retail determination 2010–13 118 Solar Bonus Scheme 118 Notifications to the Independent Commission Against Corruption 118 Overseas travel 119 Summary of legislative changes and judicial decisions 119 Glossary 122 Index 124 Location, address, phone numbers and hours of operation Inside back cover
106 Integral Energy Annual Performance Report 2009–10 Appendices 10 Annual Performance Report 2009–10
Five-year statistical table
(1) 2005–06 2006–07 2007–08 2008–09 2009–10
EFFICIENCY Employment (2) 2,457 2,593 2,760 2,871 2,888 Output/employee (GWh) (3) 7.2 6.9 6.5 6.2 6.0 Sales revenue ($'000) (4) 1,259,831 1,368,075 1,705,953 1,852,002 2,133,865 Customer/employee ratio (5) 348.1 331.7 316.8 304.2 299.8 Operating cost/unit sold ($/MWh) (6) 26.5 26.2 30.3 32.5 33.8 Operating cost/customer (7) 550.7 547.3 624.1 660.3 681.6 System loss index (%) (8) 5.4 5.4 4.8 4.4 4.6 Days sick leave/employee 6.7 5.8 6.4 6.8 7.1 Lost time incidents (9) 26 24 22 21 17
EFFECTIVENESS Output (GWh) (10) 17,197 17,483 17,440 17,426 17,411 Supply reliability (minutes) (11) 95.9 94.1 97.8 89.3 79.4 Customer service indicator (12) Target 80% 82% 82% 82%–84% 82%–84% Result 81% 83% 83% 83% 80%
FINANCIAL INDICATORS EBIT ($m) 300.2 346.8 367.3 355.7 439.3 Operating profit after tax ($m) 138.6 153.2 172.4 142.2 179.0 Revenue ($m) (13) 1,434.3 1,538.9 1,848.1 1,998.4 2,272.1 Return on assets (%) (14) 9.8 9.6 9.2 8.7 9.5 Return on equity (%) (15) 15.6 13.9 14.6 14.6 17.3 Asset base ($m) 3,179.4 4,067.9 3,918.7 4,305.7 4,940.6 Asset sales ($m) (16) 7.2 7.6 9.6 4.1 4.8 Financial distribution ($m) 169.1 193.0 191.7 167.1 215.3 Tax equivalent ($m) (17) 65.2 86.0 66.7 63.4 72.7 Dividend payment ($m) 103.9 107.0 125.0 103.6 142.6 Gross external debt ($m) 1,381.6 1,531.5 1,900.5 2,264.4 2,414.3 Gearing ratio (%) (18) 61.0 53.6 64.7 71.3 67.7 Times interest earned (19) 3.1 3.2 2.9 2.4 2.3 Social programs ($m) (20) 20.6 19.7 21.1 24.0 30.4
(1) All dollar amounts are reported in real (8) Energy imported less energy sold, divided the percentage of complaints closed dollars. by energy imported. For 2007–08 energy within 30 days and the percentage of imported has been reduced by the impact customer service guarantee breaches. (2) Full time equivalent staff as at 30 June. of a one-off unread meters adjustment. (3) Network GWh sold per average number of (13) Revenue includes sales revenue and other (9) As at 30 June 2010, 15 LTIs had been FTE employees. income, including capital contributions. recorded; 2 additional lost time shifts (4) Sales revenue includes total electricity occurred during July 2010 related to (14) EBIT divided by the average asset base. sales and network use of system income 2009–10 events. Similarly, as at 30 June (15) Operating profit after tax divided by only. 2009 17 LTIs were recorded, with 4 average equity. additional lost time shifts occurring in (5) Average network customers per average (16) Total proceeds from asset sales. subsequent months relating to events in number of FTE employees. 2008–09. (17) Defined as income tax expense per NSW (6) Operating expenditure including Treasury. (10) Network sales (GWh) including accruals depreciation and amortisation but and off peak bulk transfers. For 2007–08 excluding finance costs, divided by (18) Debt divided by debt plus equity. GWh have been reduced by the impact of number of units sold. (19) Times interest earned calculated by adding the one-off unread meters adjustment. (7) Operating expenditure including the net interest expense to the profit (11) Average minutes per customer per year depreciation and amortisation but before income tax and dividing by the net without supply for unplanned outages. excluding finance costs, divided by the interest expense. average number of network customers. (12) Factors contributing to the calculation (20) Based on reimbursement of Community include the number of issues with EWON, Service Obligations (CSOs).
10 | Appendices 107 Appendices
Annual Performance Report 2009–10
Australian Financial monthly. The Committee met eleven Investments Commission of any Services Licence times in 2009–10 and reported to reportable breaches of the licence Integral Energy holds an Australian the Retail Risk Board Committee conditions within ten working Financial Services Licence effective that obligations under the licence days. Potential breaches of licence from 1 July 2005. The licence had been complied with as far as conditions are fully investigated by authorises Integral Energy to provide reasonably practical. a subcommittee of the Financial Services Governance Committee. financial advice, deal and/or make A number of employees have been No potential breaches of the licence a market in financial products and nominated as representatives for the conditions were identified during miscellaneous financial products to purpose of the Australian Financial 2009–10. wholesale clients. Services Licence and have been The Financial Services Governance trained extensively on the workings The Financial Services Governance Committee, established in 2005–06 of the licence. Committee also oversees compliance with the Anti-Money Laundering to monitor licence compliance Integral Energy must comply with and Counter-Terrorism Financing and good governance, reports to the licence conditions and inform Act 2006. the Retail Risk Board Committee the Australian Securities and
Consultants In 2009–10, Integral Energy engaged six consultants for major projects (equal to or greater than $50,000) totalling $2.3 million, as detailed below:
Consultant Purpose Cost $m
McLachlan Lister To provide technical support in the Network organisational and process review 0.86 to facilitate delivery of the Strategic Asset Management Program (SAMP)
KPMG To provide technical consulting on the strategic procurement review to support 0.73 an annual procurement spend of $600m; to review credit and collections management
KEMA Consulting To provide advice on the Smart Grid strategy 0.20
Deloitte Touche Tohmatsu To provide advice on the unbilled revenue process; advice on the Smart Grid 0.19 strategy, and advice following a Retail business investment review
Everest Group To provide technical support for the development of the ICT outsourcing 0.19 strategy and a review of governance surrounding outsourced suppliers
Dattner Grant To provide strategic advice on cultural change and organisational values 0.16
Integral Energy also engaged seven consultants (less than $50,000) during 2009–10 for a total cost of $0.15 million. The consultants were engaged to undertake projects for accounting, economic and managerial advice.
Credit card certification Integral Energy’s corporate and purchasing card program is governed by approved policies and procedures that were developed having regard to the Treasury Circular Section P Credit card Use – Best Practice Guide published in August 2005 (originally published in 1999), Treasurer directions and Premier’s memoranda.
108 Integral Energy Annual Performance Report 2009–10 Appendices 10 Annual Performance Report 2009–10
Exemption from Annual Reporting provisions
Reference for exemptions Requirement Comment s. 41B(c) PF&AAa Financial statements Exemption from preparing manufacturing, trading, and profit and loss statements. Integral Energy is required to prepare a summarised Operating Statement, summarising major categories of revenues and expenses.
Schedule 1, Part 1: PF&AA (General)
Item 2 Notes: Income and expenditure amounts set aside for renewal or replacement of fixed assets
Item 4 Amounts set aside to any provision for known commitments
Item 6 Amount appropriated for repayment of loans, advances, debentures or deposits
Item 13 Material items of income and expenditure Integral Energy is required to summarise the items of on a program or activity basis revenue and expenses on a program or activity basis. s. 7(1)(a)(iii) ARSBAb Budgets: detailed budget for the year reported on; outline budget for next year cl. 6 ARSBRc Particulars of material adjustments to detailed budget for the year reported on s. 7(1)(a)(iv) ARSBA Summary Review of Operations Exemption subject to the following condition: comments and information relating to the summary review of operations are to be disclosed in a summarised form.
Schedule 1 ARSBR Management and Activities Exemption subject to the following condition: comments and information relating to ‘management and activities’ are to be disclosed in a summarised form.
Schedule 1 ARSBR Research and Development
Schedule 1 ARSBR Human Resources Exemption subject to the following condition: overseas visits with the main purposes highlighted are required to be disclosed.
Schedule 1 ARSBR Consultants Exemption subject to the following condition: the total amount spent on consultants is to be disclosed along with a summary of the main purposes of the engagements, together with a list of single consultancies with a value exceeding $50,000.
Schedule 1 ARSBR Consumer Response Exemption subject to the following condition: comments and information relating to consumer response are to be disclosed in a summarised form.
Schedule 1 ARSBR Time for Payment of Accounts As above.
Schedule 1 ARSBR Report on Risk Management and Exemption subject to the following condition: comments Insurance Activities and information are to be disclosed in a summarised form.
Schedule 1 ARSBR Disclosure of Controlled Entities Exemption subject to the following condition: the names of the controlled entities are to be disclosed along with a summarised disclosure of the controlled entities’ objectives, operations and activities, and measures of performance. cl. 12 ARSBR Investment Management Performance cl. 13 ARSBR Liability Management Performance s. 7(1)(a)(ia) ARSBA Financial Statement of Controlled Exemption from preparing manufacturing and trading Entities statements. Integral Energy is required to prepare a summarised Operating Statement (i.e. summarising major categories of revenues and expenses). a Public Finance and Audit Act 1983; b Annual Reports (Statutory Bodies) Act 1984; c Annual Reports (Statutory Bodies) Regulation 2005.
10 | Appendices 109 Appendices
Annual Performance Report 2009–10
Electronic service delivery Executive remuneration For the year ending June 2009, the and performance Board approved increases in the Integral Energy website fixed remuneration of Executive The aim of Integral Energy’s website General principles for Officers of 2.5%. Although this (www.integral.com.au) is to remuneration of increase was effective from April provide customers with a relevant, Executive Officers 2009, payment of this 2.5% convenient and personalised on-line Integral Energy has established increase was postponed to align service by: remuneration strategies designed to with the completion of Award attract and retain Executive Officers negotiations. The proportion of • providing relevant information on who drive business performance and back pay arising from the postponed energy-related areas, including who consistently demonstrate high increase applicable to the year products, education, safety standards of personal behaviour ending June 2009 has been included and efficiency consistent with Integral Energy’s in the remuneration paid for the • ensuring all product, bill payment values and Code of Ethics. year ending June 2010. options and price changes are Table 1 shows how the fixed readily available and easy to find Components of remuneration remuneration of Executive Officers • ensuring key network, safety Executive Officers in Integral has moved over the past two years and community documents Energy are employed under in-line with the increases paid in are accessible. performance-based fixed term 2009 and 2010. employment contracts. Electronic tendering portal Total remuneration for Executive Annual performance payment Integral Energy manages its tenders Officers in Integral Energy Annual performance payments are using an electronic tendering consists of fixed remuneration, made to Executive Officers on the solution provided by TenderLink Pty which is the annual salary paid basis of individual performance Ltd. This electronic tendering portal to Executive Officers inclusive of assessed against pre-agreed considerably streamlines tender superannuation contributions and measures and targets aligned to submission and enhances probity all salary sacrificed benefits, and an Integral Energy’s corporate plan and information security. In order annual performance payment that and Statement of Corporate Intent to be eligible to receive request for represents the proportion of total (SCI). Eligibility to receive an annual tender and request for expressions- remuneration that is “at risk” for performance payment is also of-interest documents, suppliers each Executive Officer. contingent on a rigorous assessment must register at the e-tendering of the leadership performance and portal https://www.tenderlink.com/ Fixed remuneration business targets of each Executive integral/. Registration is free and As a condition of employment, fixed Officer during the course of relatively simple. remuneration of Executive Officers the year. Suppliers that are registered to is reviewed in April each year in-line The Board reviews these use the solution will be notified with market trends and is based on performance assessments and immediately by email of all new rigorous performance assessments approves all annual performance open requests for tender in relation of each Executive Officer. In payments to Executive Officers. to categories for which they have approving increases to the fixed registered. They will also have rapid remuneration of Executive Officers, access to all relevant documentation the Board considers the outcomes to better understand the scope and of these performance assessments, details of the request for tender. advice from external remuneration specialists on Executive salary trends and contemporary remuneration practices, movement in the consumer price index and NSW Government Wages Policy. In April 2010, the Board approved increases in the fixed remuneration of Executive Officers of 3.5%.
110 Integral Energy Annual Performance Report 2009–10 Appendices 10 Annual Performance Report 2009–10
Table 1 Movement in fixed remuneration of Executive Officers
Fixed Annual Remuneration (as at 30 June)
Executive Current position 2008 2009 2010
V. Graham CEO $558,600 $572,565 $592,605 R. Howarda Group General Manager Network $320,800 $328,820 $374,489 B. Rowley General Manager Retail $305,200 $312,830 $323,779 I. White Company Secretary $280,300 $287,307 $297,363 D. Lucas Group General Manager Corporate Development $353,000 $361,825 $374,489 D. Fergusonb, c General Manager Health and Safety $275,100 $281,978 $274,275 J. Pizzinga Chief Financial Officer $320,000 $328,000 $339,480 L. Schenked Group General Manager Corporate Services – $280,000 $289,800
Notes: a R. Howard was appointed to the expanded role of Group General Manager Network in July 2009. b D. Ferguson was seconded to the General Manager Human Resources role from August 2007 to June 2009 and therefore Fixed Annual Remuneration listed for 2008 and 2009 is for this role. c D. Ferguson acted in the General Manager Health and Safety role from September 2009 to January 2010, and was appointed to this role in February 2010. d L. Schenke was appointed to the Group General Manager Corporate Services role in June 2009.
Table 2 Executive performance and remuneration paid
Actual remuneration paid to Performance Executive Current position 30 June 2010 paymenta 2009–10 performance
V. Graham CEO $571,949 $107,356 Organisational leadership and achievement of corporate plan targets: delivered improved safety, financial and customer service improvements. R. Howard Group General Manager Network $366,996 $47,679 Delivered Integral’s best reliability performance result to date; successfully consolidated two network business units into one division and delivered improved safety performance. B. Rowley General Manager Retail $317,475 $54,745 Led successful customer growth in highly competitive markets and demonstrated leadership in the retail transition program. I. White Company Secretary $291,573 $41,660 Led delivery of initiatives to improve governance, risk and compliance frameworks and effective and efficient Board support. D. Lucas Group General Manager Corporate $367,197 $52,465 Led strategic review of Development procurement, developed the corporate plan and innovation strategies. D. Ferguson General Manager Health and Safety $258,651 $40,887 Leadership of improved safety performance and cultural change. J. Pizzinga Chief Financial Officer $332,487 $47,560 Risk managed the implementation of the 2009–10 budget in the wake of the GFC and provided strong leadership on all financials. L. Schenkeb Group General Manager Corporate $281,377 – Led the Human Resources, Services Environment and Corporate and Government Affairs functions.
Notes: a Performance payments are made in October each year and are based on the performance of Executive Officers in the previous year. b L. Schenke was not eligible for a performance payment in 2009. 10 | Appendices 111 Appendices
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Freedom of information In 2009–10 Integral Energy received 15 new requests pursuant to the Freedom of Information Act 1989 (FOI Act). Requests were received from members of the public, Members of Parliament, lawyers and investigators. There was one internal review sought during the 2009–10 financial year. The Ombudsman was not involved in any matters involving requests under the FOI Act during the financial year, nor were there any appeals to the Administrative Decisions Tribunal in relation to any requests under the FOI Act. The following tables provide a summary of the responses to requests pursuant to the Freedom of Information Act 1989 (NSW) in 2009–10.
Section A New FOI applications
Number of FOI applications How many FOI applications were Personal Other Total received, discontinued or completed? (previous year) (current year) (previous year) (current year) (previous year) (current year) A1 New 1 3 8 12 9 15 A2 Brought forward – – 1 – 1 – A3 Total to be processed 1 3 9 12 10 15 A4 Completed 1 3 9 12 10 15 A5 Discontinued – – – – – – A6 Total processed 1 3 9 12 10 15 A7 Unfinished – – – – – – (carried forward)
Section B Discontinued applications No FOI applications were discontinued in the current or previous financial year.
Section C Completed applications
Number of completed FOI applications
What happened Personal Other Total to completed FOI applications? (previous year) (current year) (previous year) (current year) (previous year) (current year) C1 Granted or otherwise – 3 6 10 6 13 available in full C2 Granted or otherwise 1 – 1 1 2 1 available in part C3 Refused – – – – – – C4 No documents held – – 2 1 2 1 C5 Total completed 1 3 9 12 10 15
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Section D Applications granted or otherwise available in full
Number of FOI applications (granted or otherwise in full)
How were the documents Personal Other Total made available to the applicant? (previous year) (current year) (previous year) (current year) (previous year) (current year) D1 Provided to the applicant – 3 6 10 6 13 D2 Provided to the applicant’s – – – – – – medical practitioner D3 Available for inspection – – – – – – D4 Available for purchase – – – – – – D5 Library material – – – – – – D6 Subject to deferred access – – – – – – D7 Available by a combination – – – – – – of any of the reasons listed in D1–D6 above D8 Total granted or otherwise – 3 6 10 6 13 available in full
Section E Applications granted or otherwise available in part
Number of FOI applications (granted or otherwise in part)
How were the documents Personal Other Total made available to the applicant? (previous year) (current year) (previous year) (current year) (previous year) (current year) E1 Provided to the applicant 1 – 1 1 2 1 E2 Provided to the applicant’s – – – – – – medical practitioner E3 Available for inspection – – – – – – E4 Available for purchase – – – – – – E5 Library material – – – – – – E6 Subject to deferred access – – – – – – E7 Available by a combination – – – – – – of any of the reasons listed in E1–E6 above E8 Total granted or otherwise 1 – 1 1 2 1 available in part
Section F Refused FOI applications No FOI applications were refused in the current or previous financial year.
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Section G Exempt documents
Number of FOI applications (refused or access granted or otherwise available in part)
Personal Other Total
Why were the documents classified as exempt? (previous (current (previous (current (previous (current (identify one reason only) year) year) year) year) year) year) Restricted documents: G1 Cabinet documents (Clause 1) – – – – – – G2 Executive Council documents (Clause 2) – – – – – – G3 Documents affecting law enforcement and public safety – – – – – – (Clause 4) G4 Documents affecting counter terrorism measures – – – – – – (Clause 4A) Documents requiring consultation: G5 Documents affecting intergovernmental relations – – – – – – (Clause 5) G6 Documents affecting personal affairs (Clause 6) – – – – – – G7 Documents affecting business affairs (Clause 7) – – 2 – 2 – G8 Documents affecting the conduct of research (Clause 8) – – – – – – Documents otherwise exempt: G9 Schedule 2 exempt agency – – – – – – G10 Documents containing information confidential to – – – – – – Olympic Committees (Clause 22) G11 Documents relating to threatened species, Aboriginal – – – – – – objects or Aboriginal places (Clause 23) G12 Documents relating to threatened species conservation – – – – – – (Clause 24) G13 Plans of management containing information of – – – – – – Aboriginal significance (Clause 25) G14 Private documents in public library collections (Clause 19) – – – – – – G15 Documents relating to judicial functions (Clause 11) – – – – – – G16 Documents subject to contempt (Clause 17) – – – – – – G17 Documents arising out of companies and securities – – – – – – legislation (Clause 18) G18 Exempt documents under interstate FOI Legislation – – – – – – (Clause 21) G19 Documents subject to legal professional privilege – – – – – – (Clause 10) G20 Documents containing confidential material (Clause 13) – – – – – – G21 Documents subject to secrecy provisions (Clause 12) – – – – – – G22 Documents affecting the economy of the State – – – – – – (Clause 14) G23 Documents affecting financial or property Interests of – – – – – – the State or an agency (Clause 15) G24 Documents concerning operations of agencies – – – – – – (Clause 16) G25 Internal working documents (Clause 9) – – – 1 – 1 G26 Other exemptions (e.g. Clauses 20, 22A and 26) – – – – – – G27 Total applications including exempt documents – – 2 1 2 1
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Section H Ministerial Certificates (s. 59) No Ministerial Certificates were issued in the current or previous financial year.
Section I Formal consultations
Number
How many formal consultations were conducted? (previous year) (current year) I1 Number of applications requiring formal consultation 4 3 I2 Number of persons formally consulted 8 5
Section J Amendment of personal records No applications for amendment of personal records were agreed or refused in the current or previous financial year.
Section K Notation of personal records No applications for notation of personal records were made in the current or previous financial year.
Section L Fees and costs
Assessed costs Fees received
What fees were assessed and received for FOI applications processed (excluding applications transferred out)? (previous year) (current year) (previous year) (current year) L1 All completed applications $Nil $Nil $240 $450
Section M Fee discounts No fee waivers or discounts were allowed in the current or previous financial year.
Section N Fee refunds No fee refunds were granted as a result of significant correction of personal records in the current or previous financial year.
Section O Days taken to complete request
Number of completed FOI applications How long did it take to process completed Personal Other Total applications? (Note: calendar days) (previous year) (current year) (previous year) (current year) (previous year) (current year) O1 0–21 days – statutory – 3 6 10 6 13 determination period O2 22–35 days – extended 1 – 3 2a 4 2 statutory determination period for consultation or retrieval of archived records (S.59B) O3 Over 21 days – deemed – – – – – – refusal where no extended determination period applies O4 Over 35 days – deemed – – – – – – refusal where extended determination period applies O5 Total 1 3 9 12 10 15 a As Integral Energy was required to obtain the views of third parties it was necessary to extend the 21-day response period by a further period of 14 days, pursuant to Section 59B of the FOI Act.
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Section P Processing time
Number of completed FOI applications
How long did it take Personal Other Total to process completed applications? (previous year) (current year) (previous year) (current year) (previous year) (current year) P1 0–10 hours – 3 5 5 5 8 P2 11–20 hours 1 – 4 6 5 6 P3 21–40 hours – – – 1 – 1 P4 Over 40 hours – – – – – – P5 Total 1 3 9 12 10 15
Section Q Number of reviews
Number of completed reviews
How many reviews were finalised? (previous year) (current year) Q1 Internal reviews – 1 Q2 Ombudsman reviews – – Q3 ADT reviews – –
Section R Results of internal reviews
Number of internal reviews What were the results of internal reviews finalised? Personal Other Total
Grounds on which the internal Original agency Original agency Original agency Original agency Original agency Original agency review was requested decision upheld decision varied decision upheld decision varied decision upheld decision varied R1 Access refused – – – 1 – 1 R2 Access deferred – – – – – – R3 Exempt matter deleted from – – – – – – documents R4 Unreasonable charges – – – – – – R5 Failure to consult with third – – – – – – parties R6 Third parties views – – – – – – disregarded R7 Amendment of personal – – – – – – records refused R8 Total – – – 1 – 1
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Impact of the requirements of 50% reduction in fees and charges averaging period. This resulted in the Freedom of Information Act may apply. Any formal access Integral Energy’s total smoothed 1989 (NSW) application must clearly identify the revenue allowance over the five year The impact of the requirements of applicant and a return address, be regulatory control period rising from the Freedom of Information Act in writing, clearly indicate that it is $4,506 million to $4,827 million 1989 (NSW) (FOI Act) on Integral an access application made under (nominal dollars). the GIPA Act and contain sufficient Energy’s activities was minor and The tribunal also determined that information as is reasonably no major issues arose in connection the “X factors” (the maximum necessary to enable the requested with Integral Energy’s compliance amounts by which the average document(s) and information to be with the requirements of the Act. network price can be changed located and identified. each year within the period) should Statement of Affairs be amended so that, relative to Funds granted to non- Section 14 of the FOI Act requires the AER’s original Determination, government organisations a Statement of Affairs of an agency average prices: to be published every 12 months. Integral Energy does not grant funds • in 2010–11 and 2011–12 would Integral Energy’s Statement of to non-government organisations. rise in real terms each year by Affairs is incorporated within this Instead, the organisation lends 13%, rather than the 7% in the Annual Report, as is a description support to selected community AER’s final determination; of Integral Energy’s structure organisations that reflect Integral and functions. Energy’s obligations as a state- • in 2012–13 would increase in real owned corporation and align to terms by 0.15% rather than a 2% Access to information Integral Energy’s Corporate Plan. rise; and As a statutory state-owned The organisation’s community • in 2013–14 would decrease in corporation, Integral Energy partnership strategy and criteria are real terms by 1.72% compared to is subject to the Government available on the internet. Examples no change. Information (Public Access) Act of the organisations that met the 2009 (NSW) (GIPA Act) which criteria in 2009–10 can be found on Importantly, the revised “X factors” commenced on 1 July 2010 and page 39. were set to achieve the revenue replaces the FOI Act. stream consistent with the tribunal’s Network determination decision in net present value terms. Integral Energy is committed to 2009–14 merits review complying with the GIPA Act in a Network prices 2010–11 fair and objective manner with a Under the National Electricity Law, Each June the AER is required to view to ensuring that the spirit of the Australian Energy Regulator approve Integral Energy’s proposed the GIPA Act is upheld. Integral (AER) is responsible for the network prices for the upcoming Energy supports the proactive economic regulation of electricity financial year. On 4 June 2010 the release of information and the distribution network services. The AER advised that, Integral Energy’s requirement for the release of AER sets a five year price path for pricing proposal was compliant government information in response Integral Energy. The current five with Part 1 of the transitional to an informal request for access to year determination took effect from Chapter 6 National Electricity Rules information, unless there is a good 1 July 2009 and will apply until and the AER’s 2009 distribution reason for requiring a formal access 30 June 2014. determination and that all forecasts application, or there is an overriding Following the release of the associated with the proposal were public interest against the release of AER’s determination on 30 April reasonable. The AER approved the government information. 2009, Integral Energy lodged an 2010–11 Network prices become If required, a formal access application with the Australian effective on 1 July 2010. application can be made by Competition Tribunal (the tribunal) Integral Energy’s network tariff completing the access application seeking a merits review of the risk strategy aims to efficiently and form, together with a cheque or free rate averaging period used by responsibly signal the costs money order in the sum of $30 the AER to determine the Weighted associated with increased demand payable to ‘Integral Energy’, for Average Cost of Capital (WACC) and network congestion while the application fee, and submitted that would apply to Integral Energy’s recovering the necessary revenues to to the following address: Right of asset base over the period. support our investment programs. Information Officer, Integral Energy, A two week hearing commenced on PO Box 6366, Blacktown NSW 2148. 10 August 2009 and the tribunal’s Consistent with the tariff strategy, Integral Energy’s network prices are In addition to the application fee, decision was handed down on designed to: charges may be imposed for the 25 November 2009. The tribunal time spent in searching for and found that the AER had been • Attain revenue sufficiency within retrieving relevant documents, unreasonable or incorrect in the way the regulatory framework. decision-making time, photocopying that it had set the averaging period. • Signal the long run marginal cost and postage. In certain cases a The tribunal substituted a revised of supply through network tariffs.
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• Manage adjustment in a socially On 28 April 2010, IPART confirmed Solar Bonus Scheme responsible manner. electricity prices would change as a On 1 January 2010 the NSW result of the Federal Government’s • Improve cost reflectivity and Government introduced the Solar delay in implementing the CPRS. reduce revenue variability. Bonus Scheme to implement a 60 As a result, IPART advised that cent per kWh feed-in tariff for roof • Preserve TransGrid’s transmission from 1 July 2010, average annual top photovoltaic systems and wind price signals where possible. prices were to increase by 7% for turbines up to a maximum of 10 kW. Integral Energy customers rising • Encourage tariff and non-tariff In creating the Solar Bonus Scheme to a cumulative total of 20% by based demand management the Government had a number of 2012–13; 10% for EnergyAustralia opportunities, including voluntary objectives including encouraging customers, rising to a cumulative time of use tariffs and localised and supporting those who want total of 36% by 2012–13; and 13% air-conditioning cycling programs. to generate renewable energy as for Country Energy customers, rising a response to climate change and to a cumulative total of 42% by Regulated retail to increase public exposure to 2012–13. determination 2010–13 renewable energy technology to encourage the whole community to The Independent Pricing and Integral Energy is also exploring respond to climate change. Regulatory Tribunal (IPART) regulates whether other changes arising the prices Integral Energy may from the delay in implementing the The Scheme is limited to customers charge customers whose electricity CPRS and changes to the MRET with an annual electricity usage is supplied under a standard form scheme have a bearing on the prices of less than 160 MWh. For supply contract. currently charged to its regulated eligible Integral Energy small retail retail customers. customers, this feed-in tariff is On 18 March 2010, IPART released credited on a gross metered basis. its final report and determination On 8 June 2010, IPART approved The credit is paid by distributor on the regulated retail charges to Integral Energy’s annual regulated businesses to customers via their apply from 1 July 2010 to 30 June retail pricing proposal for prices to retailers. The recovery of the costs 2013. For a typical medium sized take effect on 1 July 2010. associated with the Solar Bonus residential customer using 7,000 The NSW Government has Scheme will commence in kWh per annum, regulated prices introduced a Customer Assistance 1 July 2011. were expected to increase on Policy (CAP) to help customers average by 7% in 2010–11, to meet the challenge of rising As at 30 June 2010 Integral Energy 14% in 2011–12 and a further electricity and natural gas had a total of 8,557 customers 20% in 2012–13 in nominal terms. prices. The Energy Rebate has who have installed and connected This represented a cumulative been extended to holders of a complying generator. These rise over the three year period of Commonwealth Health Care cards generators have an installed 46%. This total was lower than and the rebate was increased to capacity in excess of 10.0 MW those applicable to EnergyAustralia $145 per year from 1 July 2010. and have supplied a total of 3,027 and Country Energy (60% and The rebate will rise further to MWh in the period from 1 January 64%, respectively). $161 per year from 1 July 2011. to 30 June 2010. The two main drivers of this increase This targeted financial assistance Notifications to the were the estimated impact of the will now be accessible to over one Independent Commission Federal Government’s Carbon million NSW households. The CAP Against Corruption Pollution Reduction Scheme has also introduced more extensive (CPRS) on the cost of purchasing customer hardship charters and In 2009–10 there were 13 electricity on the wholesale market is preparing to launch a retail notifications to the Independent (representing more than half of price comparator service to assist Commission Against Corruption the total increase) and the AER- customers to find the best deal for (ICAC) in accordance with the approved rise in network charges their particular circumstances. provisions of the Independent (over one third of the increase). The Commission Against Corruption remaining retail operating costs Act 1988 (NSW). Integral Energy will increase but at less t.han the received 2 notifications from the expected inflation rate. ICAC concerning allegations of corrupt conduct. On 27 April 2010 the Federal Government announced that the CPRS would not be introduced before 2012. It also made changes to the Mandatory Renewable Energy Target (MRET) scheme.
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Overseas travel
Name Date Destination Purpose
Gerard Tillinger 14–19 July 2009 Thailand Inspection of 60 MVA transformer
Peter Norrie 19–26 July 2009 Vietnam Attend witness testing and inspection of 45 MVA transformer
Rod Howard 6–17 September 2009 United States Consultation with industry and insurers Bermuda England Switzerland
David Neville 30 October–17 November 2009 United States Innovation/Benchmarking International Maree Zammit United Kingdom Study Program France
Drew Ferguson 13–28 November 2009 Singapore Attend Integrated Safety Management System course conducted by the Civil Aviation Authority of Singapore
Christian Demuth 13–18 December 2009 United States Acceptance testing of camera system for helicopter inspections
Peter Norrie 17–21 December 2009 Vietnam Inspection of 35 MVA transformer
Andrew Tang 28–31 December 2009 Vietnam Inspection of 35 MVA transformer
Andrew Tang 3–11 January 2010 Vietnam Inspection of 35 MVA transformer
Georges Cascales 24–27 February 2010 Philippines Assessing Logica’s off-shore services as part of Richard Paine IT Sourcing and Asset Renewal
Scott Ryan 26 April–13 May 2010 Canada Network Technology Study Program Jim Battersby United States Spain France
Summary of legislative From 1 July 2009, scheme that are currently covered by the changes and judicial participants including Integral Greenhouse Gas Reduction Scheme decisions Energy need to meet individual (GGAS). For example, certificates Integral Energy’s operations are energy savings targets for each may not be created in relation to subject to numerous state and year by surrendering energy savings energy savings already claimed federal laws, codes and rules, certificates. They also need to lodge under GGAS. and Judge made law. A number an annual energy savings statement NSW Feed-in Tariff Scheme of these laws were amended and with the scheme regulator with an new laws affecting Integral Energy assessment of their individual energy The Electricity Supply Amendment commenced in the financial year savings target for the year and the (Solar Bonus Scheme) Act 2009 ending 30 June 2010. energy savings certificates they commenced on 1 January 2010. propose to surrender to meet that The Act is supplemented by Material changes to target. An energy savings shortfall the Electricity Supply (General) NSW legislation penalty is payable if a scheme Amendment (Solar Bonus Scheme) participant fails to meet its individual Regulation 2010 which commenced Amendments to the Electricity energy savings target. on 26 June 2010, and the Electricity Supply Act 1995 (NSW) Supply (General) Amendment (Solar An energy savings certificate is a Bonus Scheme) Regulation 2009, Energy Savings Scheme tradable certificate which may be which commences on 1 July 2010. The Electricity Supply Amendment created by an accredited person (Energy Savings) Act 2009 amended carrying out a “recognised energy The amendments introduce a gross the Electricity Supply Act 1995 from saving activity”. One certificate feed-in tariff scheme under which 1 July 2009 by establishing the represents one tonne of carbon small retail customers may obtain a NSW Energy Savings Scheme (ESS). dioxide equivalent of greenhouse payment from their retailer if they The ESS aims to lower electricity gas emissions saved by that activity. install a complying generator which supplies all electricity generated consumption by encouraging Transitional arrangements apply into the grid. Customers are paid a energy saving activities. for accreditation and other issues
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premium rate by their retailer for the also be required to ensure that their (The second tranche of the electricity they generate ($0.60 per pricing information is accurate and Australian Consumer law reforms kilowatt hour). This rate is fixed for up to date. is expected to commence on seven years from 1 January 2010. 1 January 2011.) Repeal of Freedom of Transitional provisions apply to Information Act 1989 (NSW) Cartel Conduct existing net feed-in schemes The Trade Practices Act 1974 was operated by retailers including The Government Information also significantly amended by the Integral Energy. A generator (Public Access) (Consequential Trade Practices Amendment (Cartel connected to Integral Energy’s Amendments and Repeal) Act 2009 Conduct and Other Measures) distribution network as a net feed- repeals and replaces the Freedom Act 2009, which had a staggered in generator prior to 1 January of Information Act 1989 (NSW) commencement from 26 June–24 2010 is deemed to be a complying from 1 July 2010. It is replaced July 2009. The amendments define generator and Integral Energy is by the Government Information and prohibit types of serious cartel required to pay the premium rate on (Public Access) Act 2009 (NSW), conduct for which civil and criminal a net basis until 1 July 2011. which promotes greater pro- active disclosure of information by penalties are available. It is a breach Customer hardship government and confers a legal of the law for competitors to make, or giving effect to, a contract, The Electricity Supply (General) right for any member of the public arrangement or understanding that Amendment (Customer Hardship) to apply for access to information contains a cartel provision. A cartel Regulation 2010 commenced on held by the NSW Government. provision is a provision that has the 1 March 2010. The Amendment purpose or effect of fixing prices, Regulation imposes new licence Material Changes to and/or the purpose (directly or conditions in relation to supply Commonwealth legislation indirectly) of restricting outputs in to small retail customers. The Amendments to the Trade the production, market sharing or new conditions require Integral Practices Act 1974 (Cth) allocating customers, suppliers or Energy to: territories, or bid-rigging. New Australian Consumer Law • Develop and implement a customer hardship charter to The first tranche of the Australian Amendments to the assist small retail residential Consumer Law was established Renewable Energy (Electricity) customers experiencing financial under the Trade Practices Act 2000 (Cth) Amendment (Australian Consumer difficulty to better manage their There has been a raft of changes to Law) Act (No. 1) 2010 with the energy bills on an ongoing the Renewable Energy (Electricity) second tranche under the Trade basis; and Act 2000 aimed at bolstering Practices Amendment (Australian the Commonwealth Mandatory • Not discontinue supply for a Consumer Law) Bill (No. 2) 2010 Renewable Energy Target failure to make payment, unless passed with a few amendments on (MRET) scheme and providing in the previous 12 months the 24 June 2010. supplier has twice offered the for the transition from State to customer assistance under a The Australian Consumer Law Commonwealth renewable payment plan operated by introduces a national unfair contract energy schemes. terms regime which prohibits unfair the supplier. The first round of substantial terms in standard form contracts changes was introduced through Retail Price Disclosures between business and consumers. the Renewable Energy (Electricity) and Comparisons These provisions apply to terms of Amendment Act No 78 of 2009. The Electricity and Gas Supply standard form consumer contracts The Act commenced on 8 Legislation Amendment (Retail Price (including retail electricity contracts) September 2009 (although some Disclosures and Comparisons) Act which are entered into, renewed provisions commence between 2010 gained assent on 28 June or varied on or after 1 July 2010. 1 July 2010 and 1 July 2011). 2010 (but has not yet commenced). “Unfair” terms are prohibited In brief, the amendments: The amendments establish a price where the term causes a significant • Increase annual targets for disclosure and comparison scheme imbalance in the parties’ rights renewable energy generation for the supply of electricity and gas and obligations, is not reasonably from 2010, including a target of to small retail customers. Electricity necessary to protect the legitimate 45,000 GWh in 2020 maintained retailers will be required to provide interests of the party advantaged until 2030; electricity pricing information in by that term, and where its relation to small retail customers application, or reliance on it, would • Provide for partial exemptions on their website, and provide this cause detriment (whether financial from liability under the scheme to any person on request, and also or otherwise). in respect of electricity-intensive, to the Independent Pricing and trade-exposed activities; and Regulatory Tribunal. Retailers will
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• Provide for the transition of Amendments to the National Electricity Law (as it applies in NSW), existing and proposed State Greenhouse and Energy including substituting references to renewable energy target schemes. Reporting Act 2007 NEMMCO with references to AEMO, setting out the role and functions of Amendments were also made to The National Greenhouse and AEMO under the National Electricity the Renewable Energy (Electricity) Energy Reporting Amendment Law and clarifying the powers of (Charge) Act 2000 (Cth) to support Act 2009 commenced on the AER. these changes and increase the 18 September 2009, making minor amendments in relation to audits. charge payable by non-compliant National Electricity Rules liable parties from 1 January 2010. It also repealed the requirement for the Greenhouse and Energy Data The National Electricity Rules (rules) The Renewable Energy (Electricity) Officer to publish corporate level govern the operation of the National Amendment Act 2010 also energy production information. Electricity Market. The rules have the introduced further significant force of law and are made under the changes by separating the These amendments were supported National Electricity Law. During the Renewable Energy Target scheme by regulations contained in the current financial year the following into two parts: the Large-scale National Greenhouse and Energy amendments to the rules materially Renewable Energy Target and the Reporting Amendment Regulations impacted on Integral Energy: Small-scale Renewable Energy 2009 Nos 1 and 2, commencing • The National Electricity Scheme. This Amendment Act on 16 September 2009 and Amendment (Congestion commenced on 28 June 2010, but 17 December 2009 respectively. Information Resource) Rule most of the substantive provisions The National Greenhouse and 2009 No. 16 commenced on have effect from 1 January 2011. Energy Reporting (Measurement) 1 September 2009, requiring In brief, the amendments: Amendment Determination 2010 AEMO to develop and publish a (No. 1) commenced on 25 June Congestion Information Resource • Create separate obligations for 2010. The amendments respond and guidelines. The change aims liable entities in respect of “large- to feedback from stakeholders in to ensure that market participants scale generation” and “small- the first year and clarify matters have access to timely and cost- scale technology”. Both attract such as estimation methods and effective information on planned potential shortfall charges and emission factors. network events and patterns and civil penalties. incidence of mispricing in the • Retain the Renewable Energy Amendments to Do Not Call national electricity market. Target concept, but only for large Register Act 2006 (Cth) • The National Electricity scale generation. For small-scale The Do Not Call Register Legislation Amendment (Confidentiality technology, liable entities must Amendment Act 2010 commenced Provisions for Network (together) surrender all small-scale on 18 May 2010. It increases the Connections) Rule 2009 technology certificates created in scope of the Do Not Call Register No. 20, commenced on a year (i.e. without limit). A fixed Act 2006 by extending the numbers 12 November 2009. The change price of $40, plus GST (where eligible for registration on the clarifies network service providers’ applicable) will apply. Do Not Call Register to include rights to disclose applicants’ emergency service and government • Facilitate the creation of an confidential information telephone numbers and all optional “clearing house” for when considering connection Australian fax numbers. It also adds small-scale technology certificates. applications. specific prohibitions in respect of Further changes to the Renewable marketing faxes, and creates civil Significant judicial decisions Energy (Electricity) (Charge) penalty provisions. Amendment Act 2010, supports Integral Energy is unaware of any the separation of the RET scheme Material changes to the significant judicial decisions during and establish the rate of charge for National Electricity Law the financial year ending 30 June calculations under the Act. and Rules 2010 that have affected or may affect it in its capacity as an These amendments to the Act National Electricity Law energy services corporation or were supplemented by a number The National Electricity (South affect the users of its services in of regulations which amended Australia) (National Electricity Law – their capacity as customers of the Renewable Energy (Electricity) Australian Energy Market Operator) an energy services corporation. Regulations 2001). Amendment Act 2009 of South Australia commenced on 1 July 2009. The Amendment Act amends the National Electricity (South Australia) Act 1996 and the National
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Glossary
AEMO Australian Energy Market Operator AER Australian Energy Regulator AFSL Australian Financial Services Licence AIFRS Australian equivalents to International Financial Reporting Standards ARSBA Annual Reports (Statutory Bodies) Act 1984 ARSBR Annual Reports (Statutory Bodies) Regulation 1995 AS Australian Standard ASPs Accredited Service Providers bund area protected by a low wall to prevent the spread of dangerous liquids being stored or processed CAP Customer Assistance Policy CAPEX Capital Expenditure CBD Central Business District CEO Chief Executive Officer CPRS Carbon Pollution Reduction Scheme CSIRO Commonwealth Scientific and Industrial Research Organisation CSOs Community Service Obligations
CO2e (carbon dioxide units used to describe global warming potential of all greenhouse gases, e.g. carbon dioxide, nitrous oxide, equivalent) methane, carbon monoxide
CO2 carbon dioxide Cth Commonwealth DSO days sales outstanding E10 fuel fuel containing 10% ethanol EAPA Energy Accounts Payment Assistance EBIT earnings before interest and tax EBITDA earnings before interest, tax, depreciation and amortisation EEO Equal Employment Opportunity EES Energy Efficiency System EISS Energy Industries Superannuation Scheme esaa Energy Supply Association of Australia ESS Energy Savings Scheme ETEF Electricity Tariff Equalisation Fund FBT Fringe Benefit Tax FOI Act Freedom of Information Act 1989 (NSW) FTE Full time equivalent FSC field support centre GAAP Generally Accepted Accounting Principles GFC global financial crisis GGAS Greenhouse Gas Reduction Scheme GIPA Act Government Information (Public Access) Act 2009 GIS Geographic Information System (database of all physical assets) GPS global positioning system GRI Global Reporting Initiative GWh gigawatt hour GST goods and services tax HAZMAT hazardous materials HFC hydrofluorocarbon ICAC Independent Commission Against Corruption I care! Integral’s concerned and responsive employees ICT information and communications technology
122 Integral Energy Annual Performance Report 2009–10 Appendices 10 Annual Performance Report 2009–10
INgreen a range of Green Power accredited products, launched by Integral Energy in February 2006 INpower an Integral Energy program to assist customers facing financial hardship to pay for their electricity consumption IPART Independent Pricing and Regulatory Tribunal ISDA International Swaps and Derivatives Association ISO International Organization for Standardization IT Information technology IVR interactive voice response kV kilovolt kVA kilovolt ampere kWh kilowatt hour LPG liquefied petroleum gas LTI lost-time injury MRET Mandatory Renewable Energy Target MVA megavolt ampere MWh megawatt hour NEM National Electricity Market NEMMCO National Electricity Market Management Company Limited NGAC NSW Greenhouse Abatement Certificates NGERS National Greenhouse and Energy Reporting Scheme NPAT net profit after tax including capital contributions NSW New South Wales ODRC optimised depreciated replacement cost OHS/OH&S occupational health and safety OMS Outage Management System OPEX operating expenditure PCBs polychlorinated biphenyls PESAP Public Electrical Safety Awareness Plan PF&AA Public Finance and Audit Act 1983 PPA power purchase agreement PV present value REF review of environmental factors RFP request for proposals RoLR retailer of last resort SAIDI system average interruption duration index SAMP Strategic Asset Management Plan SCI Statement of Corporate Intent SENI serious electrical network incident
SF6 sulphur hexafluoride SME small and medium enterprise SMS Safety Management System SNMP Strategic Network Maintenance Plan SS switching station TAFE Technical and Further Education TOU time of use TSA Transition Services Agreement TS transmission substation VRET Victorian Renewable Energy Target WACC weighted average cost of capital ZS zone substation
10 | Appendices 123 Index
Annual Performance Report 2009–10
A equal employment opportunity 44–45 O apprentices 4, 7 ethics 20, 53, 55 oil recycling 50 – awards won by 45 Executive Leadership Team 20, 55, 111 organisational structure 53 – development program 41, 45 exemptions from reporting 109 overseas travel 119 – Indigenous recruitment 44 external audit 59, 66, 103 P – numbers of 45 financial statements 67–104 peak resourcing strategy 7, 18 Australian Financial Services Licence 108 financial results 3, 9, 61–63 performance indicators 11, 13, 15, five-year statistical table 107 B 16, 17, 32, freedom of information 112–117 43, 45, 47–51 balance sheet 62 funds granted to non- ‘PowerStart’ program 41, 45 blackspot power pole program 7, 11 government organisations 117 principal activities 65 Blacktown Solar City project 51 procurement operations 35 Board Charter 56 G profit results 61, 62 Board of Directors 52–59, 54, 65 global financial crisis 6, 32, 61–62 glossary 122–123 property, plant Board Committees 58 and equipment 74, 86–88 governance and C organisational structure 53 public consultation 38 capital works program 7, 17–18 Government Wages Policy 14, 44 purpose statement 2 – expenditure commitments 63 greenhouse gas emissions 47–48 Q – major projects 25–29 H Queensland operations 34 carbon neutrality goal 48 hardship management 15, 120 R Carbon Pollution Reduction Scheme 33, 118 Health and Safety 11–12 remuneration 103, 104, 110–111 cash flows 62–63, 83–84 I retail business 6, 32–34 Chairman’s and Chief Executive incident management plan 20–21 Retail determination 118 Officer’s report 6–8 Independent auditor’s report 66 review of environmental factors 38, 51 challenges 5 Independent Commission risk management 19–21 climate change 8, 47 Against Corruption 20, 118 S community relations 36–41 Independent Pricing and safety performance 6–7, 9, 11–12 compliance management 59 Regulatory Tribunal 6, 15, 118 sales initiatives 33 Conditions of Employment Award 14, 44 innovation 35 scorecard 9 consultants 108 INpower program 6, 15, 40 shareholders 3, 4, 55, 63 corporate governance 9, 52–59 insurance arrangements 59, 94 smart grid technology 22 corporate plan 35 internal audit 59 smart meters 8, 22 credit card certification 108 IT investment plan 23 Solar Bonus scheme 33, 118 customers 3, 7, 9, 13–16, 31–34, 37 J stakeholders 37, 51 D Jackgreen suspension 33 successes 4 demand management 30–31, 51 L T disconnections for non-payment 16 leadership, strategic 35 technological change 8, 22–23 dividends paid (distributions) 61–63, 78 legislative and regulatory changes 119–121 trading 32 E Lifeguard program 12 training 11, 20, 43, 57 earnings 4, 7, 61 lost time injuries 3, 5, 6, 9, 11, 107 V Eco Depots program 51 M values 2 efficiency initiative 14 maintenance 29, 30 vegetation management 38–39 electricity prices 96, 117–118 management 60–63 electronic service delivery 110 marketing initiatives 33 W employee 3, 42–45 Multicultural Policies and waste management 50 – benefits 62, 75–76, 90–93, 94 Services Program 40 water resource use 51 workers compensation 78 – engagement 51 N Workforce Plan 9 – growth in 7, 43 National Broadband Network 8 workplace giving program 4, 40 – mobility 44 National Greenhouse – safety days 12 Gas Reporting 49, 121 Y – scorecard 9 network determination 117 year at a glance 3 – turnover and recruitment 18 network reliability 4, 7, 13, 31 environmental performance 3, 9, 32–33, network strategy 25, 29, 47 46–51, 65
124 Integral Energy Annual Performance Report 2009–10 Locations, addresses, Glendenning Central Springhill Field Support Centre phone numbers and Logistics Facility 191–195 Five Island Road hours of operation 49 Glendenning Road Unanderra NSW 2526 Emergencies, streetlights out, Glendenning NSW 2761 Ulladulla Field Support Centre hot water hotline Glendenning Civil Works Centre 18 Deering Street Tel: 131 003 (24 hours) 15 Belfast Place Ulladulla NSW 2539 Customer service Glendenning NSW 2761 Windsor Field Support Centre © Integral Energy 2010 Tel: 131 002 Glendenning Field Corner Ham Street and Fairey Street (8.00am–5.30pm Monday to Friday; This work is copyright. Material contained in this document may be Support Centre South Windsor NSW 2756 8.00am–1.00pm Saturday) reproduced for personal, in-house or non-commercial use without 43 Glendenning Road formal permission or charge provided there is due acknowledgement of Integral Energy as the source. Account enquiries Glendenning NSW 2761 Requests and enquiries concerning reproduction and rights for a Residential customers Hoxton Park Field purpose other than personal, in-house or non-commercial use should Tel: 131 002 Support Centre be addressed to the Manager Corporate and Government Affairs, Integral Energy, PO Box 6366, Blacktown NSW 2148. Business customers 490 Hoxton Park Road ISSN 1834-0733 Tel: 1300 136 335 for the Hoxton Park NSW 2171 INbusiness Solutions team Kandos Field Support Centre About this report (8.00am–6.00pm Monday to Friday) This report provides a candid account of Integral Energy’s performance 16 White Crescent during the fi nancial year 2009–10. It notes Integral Energy’s successes, Credit card payments Kandos NSW 2848 areas for improvement and our future direction and challenges. Energy Tel: 1300 361 104 (24 hours) Australia The theme for this years report is ‘Energy for life’, highlighting Integral Katoomba Field Support Centre Energy’s commitment to provide a safe, reliable and effi cient electricity Head offi ce enquiries 27–29 Whitton Street supply to the communities we serve. Tel: 131 081 or (02) 9853 6666 Katoomba NSW 2780 Kandos This report complies with the requirements of the NSW Annual Reports (8.00am–5:30pm Monday to Friday) legislation and embraces the principles of the Global Reporting Kings Park Field Support Centre Initiative (GRI). Fax: (02) 9853 6000 10 Tasha Place Statutory accounts and fi nancial information are verifi ed by the NSW Email: [email protected] Kings Park NSW 2148 Auditor General. Bowenfels Website: www.integral.com.au We printed 300 copies of the report on 100% recycled paper. The report Moss Vale Field Support Centre was produced at a total cost of $43,400 (GST inclusive). Ethics hotline 8–10 Old Dairy Close Windsor Moss Vale NSW 2577 Further information about Integral Energy is available at our website Tel: 1800 ETHICS (384 427) Northern at www.integral.com.au or email [email protected]. Narellan Field Support Centre Katoomba Glendenning Project management Main offi ce Kings Park Corporate and Government Affairs, Integral Energy 17 McPherson Road Penrith Blacktown 51 Huntingwood Drive Parramatta Smeaton Grange NSW 2567 Huntingwood Design Huntingwood NSW 2148 Impress Design PO Box 6366 Nowra Field Support Centre Photography Blacktown NSW 2148 Narellan Hoxton Park 20 Depot Road Penny Clay West Nowra NSW 2541 Neil Billington Network Project Picton Management Offi ce Editing Parramatta Field Support Centre Central Businesswriters & Design Level 5 Westpoint Tower 84–86 Macarthur Street 17 Patrick Street Moss Vale Printing Parramatta NSW 2150 Coniston STI Lilyfi eld Blacktown NSW 2148 Country Springhill Penrith Field Support Centre Energy Shellharbour Bowenfels Field Support Centre 96–120 Blaikie Road 9-13 Cooerwull Road Jamisontown NSW 2750 Bowenfels NSW 2790 Picton Field Support Centre Nowra Coniston Offi ce 94 Bridge Street Corner of Bridge Street and Southern Picton NSW 2571 Old Springhill Road Coniston NSW 2500 Shellharbour Field Support Centre Pacific Ulladulla Buckleys Road Ocean Shell Cove NSW 2529
2 energy for life Integral Energy Annual Performance Report 2009–10 2 Annual Performance Report 2009 Report Performance Annual Energy Integral – 10
energy for life
Annual Performance Report 2009–10