EVOLUTIONARY THINKING FOR Generations Ahead
PEOPLE | PORTFOLIO | GROWTH | SOCIAL LICENCE TABLE OF CONTENTS
Scope and Purpose of 2007/2008 In REVIEW the Annual Report CS Energy Corporate Scorecard 3 The Annual Report is written to Our Carbon Strategy 4 provide information to CS Energy About CS Energy 6 Limited’s (CS Energy’s) stakeholders including Ministerial shareholders, Highlights 2007/2008 8 customers, community, partners, Performance Against unions, industry, employees, Measures 2007/2008 9 suppliers, environmental groups Chairman’s Review 10 and the media. This is the eleventh Chief Executive’s Review 12 Annual Report for CS Energy. The Annual Report is also available Corporate Performance 14 online at www.csenergy.com.au. 01 People Our People 20
Where you see this symbol, Learning and Development 23 more information is available Health and Safety 26 on our website. 02 Portfolio Portfolio Performance 32 Kogan Creek Power Station 33 Callide Power Station 34 Mica Creek Power Station 35 Swanbank Power Station 36 Resources 38
03 Growth Major Projects Completed 42 Low-emission Coal 44 Gas Projects 46 Gas Developments 47 Renewable Technologies 49
04 SOCIAL LICENCE Environment 52 Community 56 Corporate Governance Report 59 Directors’ Profiles 65 Executive Management Team Profiles 66
Financial Report 67 Glossary Inside back cover Q: Where will the energy come from? A: Evolutionary thinking.
Addressing climate change is a huge challenge. Together, we need to find answers.
CS Energy, as a major provider of electricity, is contributing by investing in innovative technology, developing diverse fuel sources and increasing efficiency to provide reliable power for our customers. We are part of the evolution of our industry, exploring new ways to meet the energy needs of generations ahead.
Our corporate scorecard guides us, providing the framework for achieving our goals and measuring our progress. FOLD FOLD
CS Energy Corporate Scorecard
1. Zero lost time injuries 1. Plant availability and financial targets met 2. Major Generating Insight KEY initiatives approved 2. Zero reportable KEY TARGETS environmental incidents TARGETS 2008/2009 and implemented 2008/2009 3. Implement new learning 3. Implement carbon strategy and development program
1. Continually improve safety performance 1. Maintain market-driven plant performance 2. Enable a high performance culture KEY KEY 2. Continually improve OBJECTIVES OBJECTIVES environmental performance 3. Develop our people 3. Meet the carbon challenge
Implement Generations Ahead safety program Implement Value + initiative OUR PORTFOLIO Implement drug and alcohol OUR PEOPLE Develop consistent engineering initiative KEY KEY and operations systems INITIATIVES Optimise returns within INITIATIVES across portfolio Manage fatigue and stress 2008/2009 Maintain the capability to 2008/2009 a carbon-constrained deliver business outcomes Whole-of-life asset planning Review leadership program business environment and optimisation Embed learning Progress Callide B mid-life and development strategy refit project Implement attraction Develop carbon and retention strategy trading capability CS Energy Corporate Scorecard Conduct stakeholder benchmarking study Initiate new corporate branding Implement partnering strategy strategy Source gas suppliers OUR GROWTH OUR SOCIAL LICENCE Implement updated employee for new projects KEY KEY engagement strategy Participate in carbon INITIATIVES Balance business, INITIATIVES 2008/2009 Develop low-emission 2008/2009 Review internal communication market development community and on business strategy and technology pathways Lead Oxyfuel demonstration environment planning project at Callide A Communicate clearly and honestly with our stakeholders
1. Match funding to growth strategy KEY KEY 1. Be a responsible 2. Invest in low-emission plant OBJECTIVES OBJECTIVES corporate citizen and reduce carbon intensity 2. Secure employee support 3. Contribute to low-emission for our strategy and values technology development 3. Ensure our business meets stakeholder expectations 1. Maintain acceptable 1. Establish baseline corporate KEY gearing level social responsibility measure KEY TARGETS TARGETS 2008/2009 2. Approval of Swanbank F 2. Engage staff in strategy 2008/2009 and Mica Creek projects development process 3. Refurbish Callide A4 boiler in 3. Ensure 100% compliance preparation for Oxyfuel retrofit with government policies and guidelines
FOLD FOLD TRIM FOLD FOLD
CS ENERGY ANNUAL REPORT 2007/2008
Our Carbon Strategy
CS Energy is operating in a complex We are also participating in the environment. Demand for electricity deployment of solar thermal technology. is increasing yet we know that the This is a logical extension of our expertise continued consumption of fossil fuel-fired in thermal generation and another electricity is having a detrimental technology that could be retrofitted effect on our environment. Alternative to existing plants to supplement technologies are in development but, coal-fired boilers. at the moment, none is sufficiently These investments are complemented advanced to make a major contribution by work to develop a comprehensive to base load generation. carbon offset program, one that not only As industry and governments across the offsets the impact of our operations, but world work to find solutions that address also supports meaningful projects that both economic and environmental needs, will make a long-term difference. The first CS Energy is engaged in a parallel quest stage is underway, with $2 million set to provide reliable power, add value for aside in the Kogan Creek Power Project our shareholders and minimise the for tree planting. impact of our operations. Fuel switching remains central to our During 2008/2009, the economic business strategy. We continue to framework for this will become clearer as stimulate new developments in the the structure of the federal government’s coal seam methane industry and develop emissions trading scheme is revealed. new, large-scale gas generation plant. In anticipation of this new regime, Investment in Metgasco’s coal seam CS Energy has appointed a Carbon methane development at Casino, in GREENHOUSE INTENSITY Strategy Manager to co-ordinate the PER ENERGY SENT OUT (tCO -e/GWh) northern New South Wales, is intended 920 2 Company’s readiness program for carbon trading. to fuel CS Energy’s next major gas plant, 900 the Swanbank F development. This, however, is only one aspect of There is more information about our gas 880 our strategy. We are investing in the developments on pages 46 and 47 of development of Oxyfuel technology, a this report. 860 low-emission coal technology that may reduce the carbon emissions of coal-fired These developments build on a history 840 electricity to near zero. This project is of applying the latest technology and focused on examining the potential to investing to change our portfolio profile 820 retrofit this technology to existing plant, from 100 per cent coal-firing, to a mix helping to minimise the lead time and of coal, gas and landfill gas-firing. 800 financial burden associated with reducing Since 1997, we have added more than the carbon impact of Australia’s electricity 1,000 megawatts of new plant to our generation. Our progress to date on the portfolio and increased our generation Callide Oxyfuel Project is reported on by 73 per cent, whilst reducing our ’03 ’04 ’05 ’06 ’07 ’08 page 44. carbon intensity by 17 per cent.
Greenhouse Intensity per energy sent out (tCO e/GWh) ²
TRIM FOLD FOLD TRIM TRIM deliver businessoutcomes Maintain thecapabilityto Develop low-emission technology pathways OUR GROWTH OUR PEOPLE
CS Energy Scorecard Corporate
OUR SOCIALLICENCE Optimise returnswithin business environment a carbon-constrained Balance business, OUR PORTFOLIO community and environment
FOLD FOLD
About cs Energy
CS Energy’s mission is to develop the Company into a large, low-cost, multi-fuel generator.
Our long-term vision is to be the leading generator in the Australian energy market. To achieve this, we are developing the skills of our people, providing the technology and systems to support their work and fostering a corporate environment founded on six key values: safety, commercial approach, environmental responsibility, teamwork and mutual trust, innovation and creativity,
and integrity. 3
2
Location Key 1 Swanbank Power Station, Ipswich 2 Callide Power Station, Biloela 4 3 Mica Creek Power Station, Mount Isa 1 4 Kogan Creek Power Station, Chinchilla
PLANT FUEL TOTAL CAPACITY (MW) CS ENERGY OWNED CAPACITY (MW)
IN OPERATION
Swanbank Swanbank B Coal-fired 480 480
Swanbank E Gas-fired1 385 385
Callide Callide A2 Coal-fired 120 120
Callide B Coal-fired 700 700
Callide C Coal-fired 900 450
Mica Creek Mica Creek A (Units 1,2,3,4) Gas-fired 132 132
Mica Creek A (Units 5,6,7) Gas-fired1 103 103
Mica Creek B Gas-fired 35 35
Mica Creek C Gas-fired1 55 55
Kogan Creek Kogan Creek A Coal-fired 750 750
TOTAL CAPACITY 3,660 3,210
1 Combined cycle 2 Callide A is in storage for future use in the Callide Oxyfuel Project FOLD FOLD Our structure
THE PEOPLE OF QUEENSLAND
Who we are SHAREHOLDING CS Energy is a Queensland MINISTERS Government-owned electricity generator with more than 580 employees, four power Staff & Audit Remuneration Committee stations and a generating Committee capacity of 3,210 megawatts.
What we do BOARD We meet approximately 30 per cent of Queensland’s electricity demand, using a mix of coal, natural gas, coal seam Major Capital methane and landfill gas. Board Risk & Technical Committee Committee
Our stakeholders CS Energy has many stakeholders. Market Risk These include all individuals and groups Management who are affected by, or who have an Committee interest in, our operations, including: CHIEF EXECUTIVE
• current and future employees Risk Coordination • contractors Committee • customers • the local communities in which we operate • unions MAJOR PROJECTS NEW BUSINESS Callide Oxyfuel Project • suppliers Resources (Fuel & Water) Swanbank F Power Project Business Development • special interest groups Kogan B Power Project • relevant authorities Gas Developments • current and prospective business partners. Through our shareholding Ministers we OPERATIONS are ultimately responsible to the people Callide Power Station Swanbank Power Station FINANCE of Queensland. Mica Creek Power Station Finance Kogan Creek Power Station Information Technology Portfolio Services Business Process Support Operations Support Strategic Sourcing
CORPORATE ORGANISATION SERVICES DEVELOPMENT Market Trading Health and Safety Risk & Assurance People Services Legal Services Communication Company Secretariat
Highlights 2007/2008
2007/2008 was a busy year for us, with the following milestones achieved in our key focus areas of people, portfolio, growth and social licence.
PEOPLE
Appointed David Brown as CS Energy Chief Executive, John James as General Manager Portfolio Services, Gary Campbell as General Manager Operations and Don Woodrow as Carbon Strategy Manager.
Opened a Learning and Development Centre to co-ordinate training and development of staff across the Company.
Commenced applying the findings of an employee survey to target improvement through leadership, role clarity and teamwork initiatives at both individual and group levels.
PORTFOLIO
Opened the $1.2 billion Kogan Creek A Power Station and mine, adding 750 megawatts to the National Electricity Market.
Started using recycled water from the Western Corridor Recycled Water Project at Swanbank Power Station, allowing the station to continue operation despite drought conditions.
Generated 17,237 gigawatt hours of electricity and achieved electricity sales of $740 million.
Commenced mid-life refit of Callide B, and spent $47 million on overhauls across Swanbank, Callide and Mica Creek power stations.
Returned a $59 million net profit after tax for 2007/2008, up $15.7 million from the previous year.
GROWTH
Secured $50 million in funding for the Callide Oxyfuel Project from the Australian Federal Government’s Low Emissions Technology Demonstration Fund, and a further $140 million from public and private sector interests.
Officially signed the Callide Oxyfuel Project’s six-member Joint Venture Management Agreement.
Started planning Swanbank F, a highly efficient, combined cycle gas-fired power station to be built on the old Swanbank A site.
Established gas reserves in the Metgasco Joint Venture development of 227 PJ in 2P reserves.
SOCIAL LICENCE
Developed Generosity, a company-wide Workplace Giving program.
Furthered our partnership with Opera Queensland, sponsoring Moving Opera! workshops for high schools in Ipswich and Mount Isa.
Celebrated World Environment Day through an internal awareness campaign including a photography competition that will provide material for CS Energy’s 2009 corporate calendar.
Lost time injury frequency rate Total energy sent out (GWh) Profit after tax ($000) 5.1 3.36 3.3 13,110 13,996 15,426 56,468 43,300 59,007 05/06 06/07 07/08 05/06 06/07 07/08 05/06 06/07 07/08
Employee numbers Reliability (%) Return on productive assets (%) 530 559 588 93.4 95.5 91.8 7.3 3.7 5.3 05/06 06/07 07/08 05/06 06/07 07/08 05/06 06/07 07/08
Leadership principles training Greenhouse intensity (tCO2e/GWh) Qld average pool price ($/MWh) 460 66 77 851 829 834.4 28.12 52.14 52.34 05/06 06/07 07/08 05/06 06/07 07/08 05/06 06/07 07/08
Apprentices, trainees & graduates Significant environmental incidents Gearing (%) 41 47 52 0 0 0 39.3 51.81 47.81 05/06 06/07 07/08 05/06 06/07 07/08 05/06 06/07 07/08
1Gearing for 2006/2007 and 2007/2008 has been adjusted to reflect the impact of mark to market on financial instruments. CS ENERGY ANNUAL REPORT 2007/2008
Performance Against Measures 2007/2008
CS Energy has a 10-year strategic plan and every year we set targets that support this plan. We use these targets to measure our progress.
OUR BUSINESS IS PEOPLE
SAFETY Finish rollout of high-visibility and flame-retardant clothing
Complete drug and alcohol program development
Introduce fatigue management plan
Rollout consistent confined space procedure at all sites
Implement safety awards
STRUCTURE Establish Portfolio Services as a separate division
Implement outcomes of support services review
LEADERSHIP Evaluate the leadership program implementation
Respond to evaluation findings and develop next phase
TRAINING Conduct second intake of frontline management training for supervisors
Review technical training across the company to ensure greater consistency and identify areas for improvement
SECURING FOUNDATIONS
MAINTENANCE Conduct overhauls at Callide B, Swanbank E and Mica Creek
Implement Kogan Creek Asset Management Strategy
AVAILABILITY Continue high availability of Callide C
Receive recycled water at Swanbank
Achieve planned availability from Kogan Creek in first year of operation
FUEL MANAGEMENT Fund further gas appraisal work at Metgasco’s field to secure 2P reserves
Investigate other potential coal and gas supplies
WATER Incorporate air cooling in new and existing projects where feasible
Use recycled water at Swanbank
FOR GENERATIONS AHEAD
FINANCIAL STRENGTH Continue to examine finance options to support future projects
ENVIRONMENT Execute joint venture agreement between Callide Oxyfuel Project Partners
Commence construction on Callide Oxyfuel Project site
Finalise geosequestration site
Maintain ISO14001 certification at all certified sites
COMMUNITY Manage Kogan Creek’s transition from construction to operations
Communicate and consult on new and existing projects
Develop a staff Workplace Giving program, Generosity
GROWTH Secure sufficient power purchase agreements and competitively priced gas to progress Mica Creek expansion
Review market conditions on other projects
TARGET ACHIEVED CONTINUING TO PROGRESS TOWARD TARGET TARGET NOT MET Chairman’s Review
Stephen Lonie B Com, MBA, CA, F Fin, FIMCA, FAICD
The 2007/2008 financial year was another challenging period to the emerging world of carbon taxes and related greenhouse for CS Energy, both in achieving a safe, reliable and efficient gas policies. This project is now in progress and represents operating environment as well as addressing the many strategic a significant component of the Company’s carbon strategy. challenges that the industry faces in securing and maintaining The experience of the Callide Oxyfuel project can be applied access to key inputs such as fuel, water and skilled people. to achieve commercial scale deployment of low-emission coal In addition, the Company was assessing the emerging technologies by retrofitting to existing coal stations, as well as implications of the Federal Government’s greenhouse gas being applied to new build as and when the technology policies, which will have a direct impact on the Company’s becomes economic. business in 2010. Gas generation – building on the success of Swanbank E, The Company’s strategic direction is captured in the following a further high-efficiency gas-fired combined-cycle plant is four key goals: planned at the Swanbank site. In addition, the Mica Creek • To become a large scale merchant generator in the expansion is under discussion but requires National Electricity Market; commitment from the Mount Isa customers in • To build, own and operate a portfolio of low- order to proceed. emission, multi-fuel, cost competitive, ...safe, reliable Renewable technologies – building on the reliable plant; and efficient are existing capabilities of building, owning and • To focus on leading technology to reduce operating thermal based plant by assessing carbon emissions; and the Company’s renewable technologies which also utilise • To achieve a carbon footprint with an key operational thermal generation techniques. Evaluation emissions intensity of less than 400kg drivers... of both geothermal and solar thermal opportunities is planned for 2008/2009. CO2/MWh by 2030. As well as focussing on growth opportunities, These goals set the agenda for both the the Company will continue to improve the performance of our existing assets and business and performance of its current portfolio of plant – safe, for growing the business in a carbon constrained world, reliable and efficient are the Company’s key operational drivers whilst meeting the challenging emission target set for - to ensure that the Company can justify its appetite for further the business. development through operating its current portfolio of assets The growth plans for the portfolio focus on three main well. The Company is aware of its challenges in improving the technologies and energy sources: performance of its current portfolio and has initiated plans to • Low-emission coal technologies; address these challenges. • Gas generation; and Planning for new plant at Swanbank (gas) and Kogan Creek • Selected renewable technologies. (coal) is continuing, with the understanding that any new plant Low-emission coal – build on the Callide Oxyfuel low-emission must address the Australian Government’s emerging coal demonstration project. During the year, the Company greenhouse gas policies. successfully managed the financial close for its Oxyfuel Project, The agenda for CS Energy is large and complex. However, our which is a key initiative to underwrite the Company’s response people have the capability to successfully meet these challenges
10 CS ENERGY ANNUAL REPORT 2007/2008
and continue to deliver outstanding results for the Company, often under difficult circumstances. The Board is aware of and appreciates these efforts across the whole organisation. It is also a time of significant demand for talented people, particularly in the regional areas in which CS Energy operates, and the Company will continue to look at feasible ways to make working for CS Energy a rewarding and enjoyable proposition. CS Energy operates in a complex environment, with many stakeholders, the most important being our shareholding Ministers, the Honourable Geoff Wilson, MP, Minister for Mines and Energy and the Honourable Andrew Fraser, MP, Treasurer, and I would like to acknowledge their guidance and support for this Company’s endeavours over the past year. The 2007/2008 financial year was also a year of transition for the management team and, on behalf of the Board, I would like to acknowledge Tony Andersen’s contribution as Acting Chief A new decade, Executive during the first half of this financial year. After a long history in the industry, and over ten years as part of the a new era for CS Energy CS Energy Executive Team, Tony Andersen retired from the Company in July 2008. We thank him for his dedication and support over many years, and wish him well for the future. David Brown was appointed Chief Executive on 24 December STEPHEN LONIE 2007 and has already contributed constructively to the Chairman Company’s operations and future strategies. On 30 September 2008, two long serving Directors, Tony White and Tim Crommelin, will retire and I would like to recognise their significant input to this Company’s development over the past ten years and thank them for their efforts and commitment as two outstanding, industrious and strong team members. Finally, I would also like to thank all my fellow Directors for their efforts and support this year. It continues to be a challenging time, both in growing the Company and responding to industry changes, but I am confident that, with sustained effort, CS Energy will meet its challenges, and take advantage of the opportunities ahead.
11 Chief Executive’s Review
David Brown C.Eng BSc (Hons)
It is a very exciting time to be working in the energy sector. operate reliably and consistently for another 20 years. Callide C The pace of change in the energy industry is rapid. CS Energy reliability continues to be challenged by boiler performance issues. continues to evolve and grow by being at the forefront of The outstanding dispute with the boiler manufacturer has now developments and tackling the many challenges in the industry. been settled which allows a comprehensive plan to be The new corporate scorecard, introduced this year, outlines implemented to progressively improve the reliability of the four priority areas for the business – people, portfolio Callide C units. performance, growth and social licence. It will provide the How CS Energy responds to the carbon challenge will have the framework for continued growth and evolution within the greatest impact on our day-to-day business in the coming years. context of a changing business environment. In May 2008, the Company appointed a Carbon Strategy While CS Energy transitions to the new-look Manager to co-ordinate the many carbon related activities scorecard in the coming year, it will continue to across the business and to oversee our preparation for report its performance against the measures an emissions trading scheme. Continued set for 2007/2008. How CS Energy commitment to better environmental management responds to the I am pleased to report many significant and involvement in researching and developing achievements this year. After four years of carbon challenge will cleaner energy technologies, carbon abatement construction, the Company officially opened have the greatest initiatives and clean coal demonstration are key the Kogan Creek Power Station and mine in impact on our day-to- priorities for the Company. In August 2008, the November 2007. The state-of-the-art coal day business in the major contracts for the multi-million dollar fired power station sets new benchmarks in coming years. Callide Oxyfuel Project will be finalised. This project operational and environmental performance. demonstrates a clear commitment to developing this The single unit station’s environmental profile technology and our view that it can contribute to low is one of the best in the country and because the impact electricity production for future generations. plant is dry-cooled, it will use one tenth of the water of a The Company’s safety record is improving. However I feel strongly similar sized wet-cooled station. that the Company must continue to raise the bar with regard to Swanbank Power Station started using recycled water from safety awareness and performance. CS Energy considers any the Western Corridor Recycled Water Pipeline, which allowed injury unacceptable and remains committed to achieving a continued operations through the drought conditions in south workplace free of injury. east Queensland. Like many organisations, CS Energy faces tough competition After 20 years of operation, Callide B Power Station embarked to attract and retain the best people. This year, a number of on a major mid-life overhaul program, to ensure it continues to programs that focus on driving stronger leadership and
12 CS ENERGY ANNUAL REPORT 2007/2008
succession management across the organisation will be put in place. CS Energy will be successful in the future due to the capability and commitment of its staff and by having sufficient skilled resources to meet the challenges ahead. I feel privileged to be working with such a dynamic and enthusiastic team at CS Energy. I thank each and every one of them for their efforts in the last year. In particular, I would like to thank Tony Andersen for guiding the organisation through the first half of the financial year. Tony’s leadership ensured CS Energy stayed focused and provided a smooth transition for the executive during a potentially unsettling time. Evolving industry, I would also like to welcome John James as General Manager Portfolio Services and Gary Campbell as General Manager evolutionary thinking Operations to the Executive Team. I look forward to working with them, and the rest of the team and Board, as CS Energy moves ahead.
The future will see CS Energy continue to prosper by: DAVID BROWN Chief Executive • investing in its existing plant and people to achieve safe, reliable and efficient operation; • investing in low-emission technology; and • further developing the high level of knowledge and skills of its people.
13 Corporate Performance
Financial Performance
Progress 2007/2008 Financial Highlights
Produced record sent 07/08 06/07 05/06 04/05 03/04
out generation of Profit after tax (PAT) $000 59,007 43,300 56,468 40,680 30,397 15,426 gigawatt hours.
Return on productive assets (ROPA) % 5.3 3.7 7.3 5.2 5.3 Achieved record electricity sales of $739.9 million. Gearing % 47.81 51.81 39.3 40.9 30.6 Returned a 35.3 per cent increase in net profit. Assets $M 2,896 3,262 2,121 1,734 1,620
Time-weighted average pool price $/MWh 52.34 52.14 28.12 28.99 28.19
Green energy products $000 26,034 34,266 23,024 11,133 1,799
Total electricity sales $000 739,924 616,349 505,131 456,229 444,314
Costs (excl interest) $000 699,781 562,648 434,011 398,529 394,860
Dividends payable $000 47,206 34,640 40,170 29,151 28,877
Capital investment in power stations $000 280,248 373,163 490,795 248,696 46,655
1Gearing for 2006/2007 and 2007/2008 has been adjusted to reflect the impact of mark to market on financial instruments.
ENERGY SENT OUT (GWh) SALES REVENUE ($000) 739,924 15,426 616,349 13,996 505,131 13,110 456,229 444,314 12,494 12,429
’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08
sales revenue
energy sent out GWhr
14 CS ENERGY ANNUAL REPORT 2007/2008
CS Energy’s profit for the year was CS Energy’s operating expenses also $59 million, up $15.7 million on rose during the year, up $137.1 million 2006/2007. or 24.4 per cent, reflecting the addition Profit was affected by an increase of Kogan Creek Power Station to the in finance costs of $58.9 million, portfolio and a number of other significant reflecting changes to the accounting events, particularly the ongoing costs of treatment of both interest payments managing the boiler issues at Callide C. on the Kogan Creek Power Project Following a decision by the Queensland following its commissioning, and Government, the Collinsville Power finance costs associated with provisions Purchase Agreement, formerly held by for future obligations on other operations. the state-owned entity, Enertrade, was Earnings before interest and tax show transferred to CS Energy in August 2007. an even stronger result, with the Onerous obligations associated with this Company returning $135.6 million contract, in particular the fixed capacity compared to $66.9 million for the charge payable under the agreement, 2006/2007 financial year. significantly increased the Company’s expenses during 2007/2008. CS Energy achieved record generation for the second consecutive year in The Company’s accounts also contain 2007/2008. Over 15,000 gigawatt initial recognition of an onerous contract hours of electricity were sent out from provision associated with the new water its portfolio of plant, reflecting the supply contract for Swanbank Power introduction of the 750 megawatt Kogan Station, established by the Queensland Creek Power Station to its operations, Government under the Water Act 2000. which resulted in a 20 per cent increase A one-off $31.6 million impairment write in revenue from electricity sales. down in the value of Swanbank B is also This increased capacity was reflected in the 2007/2008 results. supplemented by improved results from hedging activities as the ongoing drought increased contract prices during the first half of the financial year. Consistent with this increased revenue, net cash inflow provided by operating activities increased by $93 million or 36.7 per cent. A portion of this amount was used to fund completion of the construction of Kogan Creek Power Station, as well as the Company’s capital overhaul program.
15 Market Performance
CS Energy receives its revenue from Ownership of the Collinsville Power selling electricity and its environmental Purchase Agreement (PPA) was products into the National Electricity transferred to CS Energy in August 2007, Market (NEM) and to off-grid customers. following the dissolution of Enertrade. Our NEM-connected power stations The Collinsville Power Station is owned are Swanbank and Callide and the and operated by Transfield Services new Kogan Creek. Mica Creek Power Infrastructure Fund and our Market Station near Mount Isa is the main Operations team has responsibility for source of electricity for the remote north the administration and operation of the west Queensland region, which is not PPA with Transfield Services. connected to the national grid. Commissioning of Kogan Creek in 2007 saw an additional 750 megawatts of Performance in NEM generation added to the NEM, which CS Energy sells electricity into the NEM contributed revenue to CS Energy through the spot market, where prices prior to the station’s commissioning are calculated every five minutes and on 7 December 2007. settled half hourly, and trades in the With almost a quarter of its portfolio contract market where it enters into gas-fired, CS Energy continued to financial contracts that lock in a fixed support the Queensland Government’s price for electricity. 13 per cent Gas Scheme, which requires Time-weighted average pool price for retailers to source at least 13 per cent of the 2007/2008 financial year was $52.34 their electricity from gas-fired generation per megawatt hour, almost unchanged and has resulted in a supplementary from the previous year’s average of revenue source for CS Energy. $52.14 per megawatt hour. Both years This year, our Swanbank B Power reflect the ongoing impact of the drought Station was accredited under the in NEM-connected states. New South Wales Greenhouse In September 2007, Swanbank was Gas Abatement Certificate Scheme, connected to the Western Corridor allowing us to generate marketable Recycled Water Pipeline, and started carbon offset certificates from the receiving up to 27 megalitres a day, co-firing of landfill gas with black which increased Swanbank’s availability. coal at Swanbank’s Unit B3.
16 CS ENERGY ANNUAL REPORT 2007/2008
TIME WEIGHTED AVERAGE POOL PRICE BY REGION CS Energy 30%
80
70
60 Percent of Qld 50 Coal Generation 2007/2008 40
30
20 Other 70%
NSW SA NSW TAS QLD Other 48% Off-grid activities Mica Creek Power Station recorded system reliability of 99.67 per cent during 5 year pool price the 2007/2008 financial year, down slightly on the previous year, reflecting Percent of Qld the fact that some of the plant is almost Gas Generation 50 years old. For more information on 2007/2008 our plans to replace this plant see page 46 of this Annual Report. Overhaul work at Mica Creek C Station during the year resulted in a performance CS Energy 52% gain of seven megawatts additional capacity for the station.
Looking forward 2008/2009
Manage the financial impact of the new SEQ Water Grid system on our operations.
Work with new retailers to encourage further competition and increase marketplace liquidity.
Participate in discussions regarding the formation of the Carbon Pollution Reduction Scheme, due to be implemented in 2010.
17 people
PEOPLE PORTFOLIO GROWTH SOCIAL LICENCE 01
Our strength lies in the knowledge, experience, and skills of our people. Our goal is to attract and retain the best people, provide a healthy and safe work environment, and communicate with them clearly and honestly about our business. We also listen carefully to them, and act appropriately on what they tell us. CS ENERGY ANNUAL REPORT 2007/2008
people 01 People
Our People
Progress 2007/2008 CS Energy is Queensland’s largest Valuing diversity electricity generator, with more than We strive to keep our workplace Completed human resources, 580 employees at five sites across the free from all forms of discrimination training and safety systems at state – Swanbank, Callide, Mica Creek and harassment. We expect that all Kogan Creek. and Kogan Creek power stations, and people are treated with respect and Conducted our employee survey, Brisbane office. all employees value the diversity Generating Insight. within our teams. Our workforce profile This year we completed a new five-year Commenced negotiations for Equal Employment Opportunity (EEO) Enterprise Bargaining Agreements At 30 June 2008, we employed 588 Plan, with actions and initiatives to at Callide and Mica Creek. people in a variety of occupations and support a positive workplace culture. professions, including engineering and Undertook an Industrial Relations All employees will be trained in this plan. sciences, technical and trades, contract Working Party review of our industrial Our EEO policy can be found on our administration, project management, website . relations consultation processes. legal, workplace health and safety, Just over 12 per cent of our workforce finance, information technology, is female, with the number of women in procurement and human resources. technical and trade roles increasing each year. Across our operations we employ During the year we recruited 88 a diverse range of men and women permanent employees, and accepted of varying ages including a number 72 resignations. Our total staff turnover of people from non-English speaking for the year was 12.8 per cent, a slight backgrounds, Aboriginal or Torres Strait increase on the previous year’s figure Islanders and people with disabilities. of just under 10 per cent. Employee engagement
OCCUPATION PROFILE OF OUR WORKFORCE This year, we revised our employee survey, embarking on a new program, 47 1 144 Generating Insight. A total of 74 per cent of employees responded, up from 55 per cent for the last survey. We benchmarked our results against
85 other Australian organisations, which revealed that work is needed in the areas
52 of teamwork, role clarity and supportive 49 46
38 leadership. We exceeded the national benchmark in our approach to safety. 4 3 1 1 These survey results will be used in the coming year to implement specific improvements. The first stage is to work
Trades individually with all CS Energy leaders – Support Technical Operators 82 individuals – to meet our commitment Engineering Management Utility Worker of improving our approach to leadership. Market Trading Chemical/Environment
20 occupation profile CS ENERGY ANNUAL REPORT 2007/2008
1. Zero lost time injuries 2. Major Generating Insight KEY initiatives approved TARGETS and implemented 2008/2009 3. Implement new learning and development program
1. Continually improve safety performance 2. Enable a high KEY performance culture OBJECTIVES 3. Develop our people
Implement Generations Ahead safety program OUR PEOPLE Implement drug and alcohol initiative STRATEGY KEY Manage fatigue and stress INITIATIVES 2008/2009 Maintain the capability Review leadership program to deliver business Embed learning outcomes and development strategy Implement attraction We also conducted a comprehensive and retention strategy review of our Leadership Principles program during the year, using focus groups at each site to identify effective aspects of the program, as well as areas for improvement. NUMBER OF FEMALES IN OUR WORKFORCE YEAR TOTAL NO. OF FEMALES NO. OF FEMALES IN % FEMALES IN OUR The outcomes of these reviews will ENDED EMPLOYEES TECHNICAL OR TRADE WORKFORCE be implemented in 2008/2009. ROLES
2008 558 72 10 12.24 Industrial relations A total of 63 per cent of our employees 2007 559 65 9 11.62 are employed under Enterprise 2006 530 61 10 11.50 Bargaining Agreements (EBAs), with the remaining employed under Alternative 2005 467 59 9 12.63 Individual Agreements (AIAs). We have separate EBAs for each site, and this 2004 467 55 10 11.77 year we started negotiations with relevant unions to develop new agreements at the EEO NUMBERS Mica Creek and Callide power stations. EEO* NO. OF EMPLOYEES AT 30 JUNE 2008 Both the EBAs and the AIAs at Mica Females 72 Creek and Callide will expire in August 2008. In September 2008 we will start Non-English speaking background 26 negotiations to renew Swanbank’s EBA, People with a disability 18 which expires in March 2009. We are currently developing a negotiating Aboriginal and Torres Strait Islander (ATSI) 7 framework for the Corporate EBA, which TOTAL 123 will expire in June 2009. The current Kogan Creek EBA is in place until *Some people chose not to respond to EEO survey questions: non-English speaking background October 2010. (83 non-respondents to this question); disability (91); ATSI (92) We established an Industrial Relations Working Party during the year, to help us improve our industrial relationships and processes. This group comprises CS Energy and union representatives and is supported by an external facilitator. A final report and recommendations from the group’ will be presented in 2008/2009.
21 Our People continued
EMPLOYEE LENGTH OF SERVICE (years) Attraction and retention Looking forward 2008/2009 We continue to face the challenge of Implement Generating maintaining a skilled workforce in an 269 Insight action plans. increasingly competitive employment market. With more than 50 per cent of Consolidate Functional our staff in remote areas, we compete for Review outcomes. skilled people against major operations in the resource sector. Implement EEO management plan. This year we compiled a detailed report Negotiate new Enterprise of our workforce skills and demographics Agreements at Mica Creek, to assist with workforce planning. We Callide and Swanbank. also continued to look for opportunities to strengthen our remote area assistance Implement Industrial Relations
74 initiatives, such as housing benefits, travel Working Party findings. 69
1 support and study support for school 53 5 and tertiary-aged children. 1 3 1 2 6
1 Ensuring we have the right people in the
4 right jobs is a key element of ongoing employee commitment and loyalty. With 1-4 5-9 40+
10-14 15-19 20-24 25-29 30-34 35-39 this in mind, we undertook a major review of our recruitment and selection practices to ensure the most effective approach years of service across the portfolio. This has given us an e-recruitment tool, and a more structured process for managers and supervisors AGE PROFILE OF OUR WORKFORCE (years) during recruitment, including standard tools, templates and interview guides.
184 Functional review This year we continued a functional 157 review to assess the delivery of internal 142 support services across the portfolio. A review of the delivery of engineering services in 2006/2007 revealed that the most effective means to deliver these expert services was through a centralised 69 team, accessible to all sites. This year we rolled out a similar model for Information
34 Technology, Procurement, Finance and Human Resources. This has streamlined processes and has the potential to open 2 up new career paths for staff previously limited to site-based activity. 1-29 20-29 30-39 40-49 50-59 60-69
age profile
22 CS ENERGY ANNUAL REPORT 2007/2008
Learning and Development
Progress 2007/2008 Making sure our people have the right We were also part of an industry-wide skills for the right jobs is fundamental to Power Station Operator Training Opened the Learning our business strategy. It is also important Program during 2007 providing qualified and Development Centre. for our long term growth that our industry Operators for Kogan Creek and Callide power stations. These employees were Commenced second year has enough people, with the right skills, one of the first groups in Queensland of Power Generation for the future. to achieve a Certificate IV in Generation Skills Development Program This year, we implemented a Learning (Operations) on the completion of their and Operator Training Program. and Development Strategy, and opened studies and on-the-job requirements. a new Learning and Development Centre Finished first round of the Our first Supervisor Development at Swanbank Power Station. Supervisor Development Program was also completed in 2007, Program in 2007 and started The cornerstone of our skills development which saw 22 staff graduate with a second program in 2008. strategy, the centre provides a focal point Certificate IV in Business (Frontline for learning and development initiatives Management). A second program was Developed new Emerging for the whole company in an operational launched in early 2008, with a further Supervisor Program. setting. It also enables coordinated 26 CS Energy Supervisors currently completing this course. In response to Started review of succession management of all our training, training the demand for places in this current planning strategy. records and employee qualifications, ensuring a consistent approach to program, an ‘Emerging Supervisor Program’ has been developed for staff shaping employee development who are placed in ‘step-up’ or acting plans and recording compliance supervisor roles, or who aspire to training. We have also invested in an become supervisors in the future. e-learning tool to develop and manage online learning. Developing the next generation
Professional development This year we undertook a review of our Graduate Professional Development CS Energy joined forces with Tarong Program, which has expanded from two Energy, Stanwell Corporation and three to 13 participants and embraced five Queensland universities to develop an new disciplines since 2005. Following industry-specific post-graduate program the review, a graduate working group to build skills among engineers and para- was established, a graduate website was professionals. Launched in early 2007, developed to encourage peer support the Power Generation Skills Development among participants, and workshops will Program is offered through the University now be held annually to allow graduates of Queensland, Queensland University to share their experiences. of Technology and Central Queensland Most of our apprentices and trainees University. The course is targeted, are employed through group training providing industry with an increased pool organisations. At 30 June 2008, we of staff, and participants with professional had 36 group training apprentices and development opportunities. The course trainees, and eight employees who are entered its second year in 2007/2008 completing in-house apprenticeships/ and, as at 30 June 2008, we had six traineeships as part of their development staff enrolled. plans. This year we completed a
23 Learning and Development Looking forward to leadership and success
Last year I started in a new senior position and found myself responsible for supervising people for the first time. In the past I’ve had both good and bad managers, but I guess I really didn’t understand the specific skills required for managing people until I started CS Energy’s Supervisor Development Program. There were all sorts of supervisors from across all power stations in the training, which was specifically tailored to what we do at CS Energy, so we could share experiences and learn from each other. While our jobs may be different, we found that we shared a lot of the same challenges and faced similar situations when it came to managing teams. I now feel I’ve gained the confidence, tools and day-to-day skills I need to be an effective supervisor and a strong leader in the Company.
Cameron Smith – Mica Creek Power Station CS ENERGY ANNUAL REPORT 2007/2008
Learning and Development continued
review of apprentice and trainee With 32 per cent of our workforce aged management across all sites to ensure 50 years and above, effective workforce we are supporting their development planning is essential to our long-term consistently across the company. business strategy. We are currently One of our Swanbank apprentices, revising our succession planning to Adam Jolliffe, was awarded Apprentice address work volume, identify positions of the Year at the Ipswich City and associated skills critical to our Employee awards in May 2008. The business, and evaluate the current awards, organised by the Ipswich City breadth and depth of internal capability Council, honour the ‘front-line’ of the for progression to these critical positions. region’s workforce. Looking forward 2008/2009 Twelve graduate and fourth year apprentices completed a five-day Merge all training records Outward Bound Program in August 2007 from sites. to develop their leadership, teamwork and problem-solving skills. The program Start online training program. was initiated to build the capabilities of Commence Manager- the next generation of CS Energy leaders one-Removed system. and strengthen participants’ transition from training or study to the workplace. Develop revised workforce planning system. Development opportunities Providing development opportunities for our people is a core component of our people management philosophy. This year we piloted a new system, Manager-one-Removed (MoR), which provides an opportunity for staff to discuss their career paths with their supervisor’s manager. The MoR system gives employees access to personalised, long-term career development and is a catalyst for the development and maintenance of trusting relationships in line with our Leadership Principles. The MoR system will commence formally across the business during 2008/2009.
25 Health and Safety
Progress 2007/2008 We aim for a workplace free of impressive achievement of recording occupational illness and injury, and a just one lost time injury in five years. Finalised rollout of high visibility culture of responsibility toward health Callide Power Station also reached and flame retardant clothing and safety. Our Safe Move awareness 18 months without a contractor lost at all sites. program encapsulates this objective, time injury. using the most basic principle of safety Completed fatigue This year we completed the development – to think before acting. management training. of the Chairman’s Safety Awards, designed Our Occupational Health and Safety to encourage innovative approaches to Worked with energy GOCs, Management System (OHSMS) provides safety in the workplace. The awards will unions and sites to develop a uniform approach to safety at all include quarterly Safe Move Awards and a combined drug and alcohol sites and is designed to encourage an annual Generations Ahead Award for policy and procedure. continuous improvement. The system the most outstanding safety initiative. includes corporate policies, procedures, Finished rollout of our behaviour- We plan to roll out the awards program audits and health and safety manuals. early in the 2008/2009 year. based safety training program, Information about this system, as well as SAFEmap. our safety policies and procedures, can Emergency planning be found on our website . This year we joined forces with A key element of our OHSMS is the Queensland Fire and Rescue, Queensland Permit to Work system, which is used Ambulance and Queensland Police for a to coordinate and control the isolation joint crisis exercise at Swanbank Power of live electrical plant at all power stations. Station. Codenamed Operation Boombox, Regular site inspections, job observations it successfully tested our Emergency and toolbox talks encourage staff to take responsibility for health and Response Team and Crisis Team safety in their area. Our Permit to Work capabilities, as well as our coordination procedures are available at the suppliers with emergency services. section of our website . Fit for Duty Safety performance Our Fit for Duty Policy ensures everyone We improved our safety performance in our workplace can perform their duties this year, recording six lost time injuries without posing unacceptable risks to the (down from ten in the previous year), health and safety of themselves or others. with a corresponding lost time injury A copy of our Fit for Duty Policy is on our website . frequency rate of 3.3. These figures include staff and contractors at During 2007/2008, representatives CS Energy’s five sites. We continue from CS Energy, Tarong Energy and to aim for zero lost time injuries. Stanwell Corporation in conjunction with Mica Creek Power Station reached state union officials and site delegates, a safety milestone of one year without developed a combined policy and a lost time injury in March 2008, but procedure for the management of alcohol, the team at this site also boasts the other drugs and fatigue in the workplace.
26 CS ENERGY ANNUAL REPORT 2007/2008
In 2008/2009, we will progress DETAILS OF THE SIX LOST TIME INJURIES FOR 2007/2008 our Alcohol and Other Drugs Policy, which includes an education program for staff and a three-month introductory testing phase. Fatigue management was also a focus this year, with training in a new procedure designed to help staff and contractors Burn to face Dislocated from hot ash manage fatigue levels, particularly shoulder from a fall off a during overhauls and shift work, semi-trailer conducted at all sites. The training included lifestyle tips for employees, as well as outlining the company’s responsibility Back injury to ensure shift rosters and the sustained when removing workplace environment do not Hernia from a bolt cause undue fatigue. overexertion while using a torque wrench
Strain to abdomen when lifting a manhole cover
Pinched finger in trap bin
27 Health and Safety continued
Safety training Moving object striking body 30 This year we finished the rollout of our Other 3 new behaviour-based safety training program, SAFEmap. Behaviour-based Insect or spider bite 2 safety training aims to enhance our safety Burns or heat stress 2 management systems by focusing on Chemical 2 human factors and developing a stronger workplace safety culture. Specifically, the training improves participants’ risk identification and response skills, and the training was mandatory for every Manual handling 14 operations-based employee to complete. CS Energy takes electrical safety Causes of Injured Employees 2007/2008* very seriously. We initiated an internal investigation following a rise in electrical safety incidents this year. One major Muscular sprain/strain 8 outcome of this investigation was the purchase of four ground-penetrating radars, which will help to locate underground cables. We also continued Slips, trips and falls 3 our electrical safety training program Fall from height 1 to achieve a more consistent approach
Operating machinery/equipment 5 at all sites.
Electrical contact 4 Other safety training carried out in 2007/2008 included: Body part striking object (impact) 6 • Incident investigation training
*Causes of injured employees includes all lost time injuries, injuries • Safe Move inspection and and medical treatments for staff and contractors at our five sites. observation training • Asbestos management training • Emergency Response Team training at the Queensland Fire and Rescue training centre.
28 CS ENERGY ANNUAL REPORT 2007/2008
NUMBER OF EMPLOYEE ASSISTANCE NUMBER OF LOST TIME INJURIES Employee health and wellbeing PROGRAM CONTACTS We believe the physical and mental
health and wellbeing of our people is 1012 paramount. We offer a range of programs 8 880 to promote a healthy lifestyle and to 7 CSE Contrators
help staff balance their work and 763 personal lives.
Our Employee Assistance Program 582 provides free, independent counselling 4 4
to staff and their families on work or 3 3 3 personal issues in a private atmosphere. This year, our employees sought 2 2 assistance 763 times through the program, compared with 582 in the previous year. We will continue with 0 regular promotion of the service to ensure a high level of awareness throughout the organisation. CSE employee We continue to provide pre-employment CSE LTI stats vertical assistance program combined medicals for all new power station staff, which have proven successful Looking forward 2008/2009 in identifying current and developing health problems and formulating Launch Chairman’s Safety Awards. proactive management plans. Free health Finalise Emergency Response training assessments are also offered for staff at Kogan Creek and Mica Creek. over 50, and we provide free influenza vaccinations to all staff. Focus on reducing workplace stress A major weight-loss campaign was as part of our Fit for Duty program. initiated at Callide, with participants working with the onsite nurse to Ensure consistent plant identification, numbering, signs and symbols across determine a weight loss strategy, and all sites. supporting each other in healthier lifestyle choices and exercise. In 2007, we tested 199 people and found 80 per cent were overweight; in 2008 we tested 169 people, and just 38 per cent were overweight. This weight-loss effort has also seen a dramatic reduction in the number of staff with an unhealthy cholesterol level, falling from 70 last year to 27 this year.
29 our portfolio
PEOPLE PORTFOLIO GROWTH SOCIAL LICENCE 02
Our business strength is our diverse portfolio of operating plant, spread across four locations. Using a mix of coal, natural gas, coal seam methane and landfill gas, we have 18 generating units supplying electricity making us competitive and flexible. CS ENERGY ANNUAL REPORT 2007/2008
our portfolio 1. Plant availability and financial targets met 2. Zero reportable KEY environmental incidents TARGETS 2008/2009 3. Implement carbon strategy
1. Maintain market-driven plant performance
KEY 2. Continually improve 02 OBJECTIVES environmental performance 3. Meet the carbon challenge
portfolio Implement Value + initiative OUR PORTFOLIO Develop consistent STRATEGY KEY engineering and operations systems INITIATIVES across portfolio Optimise returns within 2008/2009 Portfolio Performance a carbon-constrained Whole-of-life asset planning business environment and optimisation Progress Callide B mid-life refit project Develop carbon trading capability
Progress 2007/2008 Our portfolio recorded a reliability of 91.8 the team has expertise in engineering, per cent and sent out 15,426 gigawatt environment, chemistry and asset and Opened the $1.2 billion, hours in 2007/2008. Our reliability has overhaul management and works in 750 megawatt Kogan Creek A decreased 3.7 per cent from last year partnership with technical staff at sites. Power Station. due to ongoing technical issues with both This year the team continued the rollout Callide C boilers, water restrictions at of a new overhaul process, to achieve Spent more than $47 million on consistency and efficiency across sites, overhauls across the portfolio. Swanbank B and the early replacement of some gas turbine blades at Swanbank E. and coordinated the first stages of refurbishment at Callide B. Started using recycled water The introduction of the new supercritical, at Swanbank Power Station. dry-cooled Kogan Creek A Power In line with our business strategy, we Station in December 2007 boosted our initiated a new project this year, Value +. Conducted the first stage capacity by a further 750 megawatts and Established to examine cost efficiencies, of a mid-life refurbishment methodologies and processes across of Callide B Power Station. improved our ability to provide electricity to Queensland during the peak summer the portfolio, Value + will help secure our future by maximizing value across the Achieved one year without demand period. portfolio to maintain our competitiveness. a lost time injury at Mica Creek Although water restrictions affected The Value + project team will work Power Station. Swanbank Power Station’s operation, closely with teams across the whole the diversity of CS Energy plant enabled business to develop a clear perspective our Market Operations team to take on how we currently do business and advantage of stronger spot and contract what improvements can be made. This prices during the drought affected period. year we started reviewing our business The Portfolio Services team coordinates processes, and in the coming year the long-term asset management of we plan to identify and scope the key CS Energy’s portfolio. Based in Brisbane, projects arising from this review.
RELIABILITY
100% 95.5 95 94.7 93.4
91.8 22% Gas
50% Energy sent out by fuel type 2007/2008
78% Coal 0%
32 Reliability CS ENERGY ANNUAL REPORT 2007/2008
Kogan Creek Power Station
On 27 November 2007 the new The Kogan Creek mine increased $1.2 billion Kogan Creek A Power production in 2007/2008 to meet the Station and mine was officially power station’s coal demand during opened by the Queensland Premier, commissioning and operation. Black coal the Honourable Anna Bligh MP and from three mine seams is blended and the Minister for Mines and Energy, supplied to the station at an average rate the Honourable Geoff Wilson MP. of 8,000 tonnes of black coal a day across The station achieved commercial a four-kilometre conveyor. In the seven handover on 7 December 2007. months of operation to 30 June 2008, the The 750 megawatt baseload power mine produced 2.1 million tonnes of coal, station sets a new benchmark for and removed 4.7 million cubic metres of environmental performance and overburden. At this rate of production, we innovative design among coal-fired estimate the open-cut Kogan Creek mine plants in Australia. Kogan Creek is dry- has about 100 years of coal reserves. cooled, which means it uses one-tenth Rehabilitation of our mine operations of the water of a similar wet-cooled is a priority and, this year, we started power station. The station’s single boiler, earthworks on a section of the overburden turbine and generator unit is the largest dump, in preparation for planting with in Australia, and took just over three native trees and grasses. years to construct. We set up a transitional team to support Looking forward 2008/2009 our Kogan Creek staff through their Hand over coal handling system busy start-up period and to share in early 2008/2009. operational knowledge and skills. The team comprises ten employees Prepare for the first 8,000 hours relocated from Swanbank and Callide overhaul in October 2008. power stations. Start mine rehabilitation program, Since commissioning, Kogan Creek planting native trees and grasses. has achieved a reliability of 87.6 per cent, which is slightly better than we expected for the station’s first year of operation. Exceptionally heavy rainfall in early February 2008 temporarily shut down operations at the mine, as the wet conditions made it too dangerous to operate trucks in the mine pit. The mine and power station were offline for one day as a result. While the main plant was taken over in December 2007, operation and maintenance of the coal and ash plant remained the responsibility of construction contractor, Siemens Hitachi. Handover of these activities will occur once rectification of outstanding defects has been satisfactorily completed in early 2008/2009.
33 Callide Power Station
Callide B celebrated the 20th anniversary To help us improve our understanding of operation in October 2007, and, around of the composition of coal going into the the same time, started a mid-life refit boiler, and improve plant performance, strategy to extend its operational life until we installed a new coal analyser at at least 2028. This $200 million, five-year Callide. This analyser is the first of its overhaul program started with a major type in Australia, and it will be fully overhaul of Unit 1 in October 2007, which commissioned by July 2008. We are saw an extra 300 contractors on site. also starting to see results from the first Callide B recorded 89.6 per cent reliability stage of the dense phase ashing system, for 2007/2008, reflecting its age and the designed to improve water efficiency and need for the mid-life works. A two month extend the ash storage capacity of the outage of Unit 2 has been moved to early station until the end of its operational life. calendar 2009, to facilitate a dual outage Water continues to be a challenge for to overhaul shared plant such as the the region and we are investigating cooling tower. retrofitting dry-cooling technology at Callide C recorded a reliability of Callide, with a proposal to be submitted 81.9 per cent, with unresolved technical to the Gladstone Area Water Board in issues with the boilers continuing to be 2008/2009. The Callide Dam, which a major challenge for our team. supplies the township of Biloela with drinking water, has received little rain Since commissioning in 2001, Callide C’s this year. However, the Awoonga Dam boiler manufacturer, IHI, has maintained rose to 58 per cent, up 20 per cent on responsibility for some boiler issues. This the previous year. Awoonga Dam is the year, negotiations between IHI and the power station’s main water supply, with CS Energy InterGen Joint Venture were the water piped to the Callide Dam for completed, with the responsibility of the use by the station and the town. This boilers handed back to CS Energy, as increase represents about three years asset manager. A strategy to improve the of water for the station and the town. reliability of the Callide C boilers is being developed, and will be progressively In early 2008, Callide’s Site Manager implemented during 2008/2009. left to take up the position of General Manager Operations in the Brisbane We have engaged an external facilities Corporate Office, and the recruitment management contractor at Callide for of a new site manager was finalised in areas such as cleaning, airconditioning, August 2008. fire protection, grounds maintenance and security. This means that the Callide team Looking forward 2008/2009 can concentrate on its core business. The process will be further evaluated and Conduct dual overhaul as part of the a similar model is planned for other sites. Callide B mid-life refit program.
Recruit a new site manager.
Develop an operations and maintenance agreement between Callide Power Station and the Callide Oxyfuel Project Joint Venture Partners.
34 CS ENERGY ANNUAL REPORT 2007/2008
Mica Creek Power Station
Mica Creek Power Station recorded A proposal from IsaLink to connect a system reliability figure of 99.67 north west Queensland to the national per cent and continues to perform grid gained media attention in January strongly for the CS Energy portfolio. 2008. While CS Energy was not involved The station continued its excellent safety in this proposal, we welcome any project performance, recording one year without that increases the energy options a lost time injury (LTI) in March 2008. The available in remote north west injury in March 2007 ended a record four Queensland. We are continuing to year injury-free period, but the station progress potential expansion plans for boasts just one LTI in five years. the Mica Creek Power Station. For more A bushfire caused a fault in Xstrata’s high information on the Mica Creek Renewal voltage transmission line in November Project, see page 46 of this report. 2007, resulting in six units tripping at The media also reported elevated lead Mica Creek and loadshedding and loss levels in residents around Mount Isa. of supply to customers. It took crews Although this is not linked to our two days to restore full generation at the operations, we offered free testing for station. Since then, we have worked with our staff and several individuals took the parties involved in power distribution up this offer. in the Mount Isa region to establish the North West Off-takers Working Looking forward 2008/2009 Committee, with the aim of improving system protection and reviewing the Finalise investigation of A station equity of load shedding protocols for concrete issues. system emergencies. Introduce a comprehensive Significant performance gains have been training program for operations achieved from the combined cycle C and maintenance personnel. station, following a major overhaul and upgrade in April and May 2008. Focus on succession planning and The unit has performed well since its attraction and retention strategies. return to service with a capacity gain of about seven megawatts. A major overhaul on Unit A3 was also successfully completed, and other plant improvements during the year included the addition of a large raw water tank and the upgrade of facilities in the chemistry laboratory. We have identified some structural concrete degradation in A station, and have engaged an engineering consultant to test and analyse concrete samples. We received their final report in July 2008, which provided repair strategies and actions.
35 Swanbank Power Station
In 2007/2008, Swanbank operated Swanbank E recorded 92.7 per cent consistently and reliably, despite reliability for the year, down slightly continued water restrictions imposed against the budget of 96 per cent due in the face of drought conditions. to the early replacement of selected In September 2007, the station took gas turbine blades in August 2007. delivery of recycled water from the The storage of ash from the coal-fired Queensland Government’s Western B station continues to be a challenge. Corridor Recycled Water Project, This year, the Swanbank ash dam ash which meant the station stopped Management Plan was revised after taking water from the Wivenhoe Dam, upgrading of the spillway, as part of an alleviating pressure on the region’s ongoing storage capacity assessment main water supply. and review with the EPA. We also Since September 2007, 70 per cent of the submitted a certified engineering raw water used at the station has been design plan to the EPA for approval to recycled water, with the remainder taken construct low-height internal bunds in the from stormwater runoff from the Warrill Swanbank ash dam, to further increase Scheme. The station currently receives storage capacity. In response, the EPA 22 megalitres of recycled water a day. has requested a third party review of the proposed design, which is under way. As a major user of Ipswich town water, the station submitted a Water Efficiency The successful demolition of the old Management Plan to Ipswich Water coal-fired Swanbank A has made the last year, and reduced its overall town site available for a new, highly-efficient water consumption by 45 per cent. gas-fired Swanbank F station, if it proves In 2007/2008, the site continued to feasible. The project team started meet this commitment, maintaining community engagement for the project, reductions well below the 25 per cent which will be built on the old Swanbank target required under Level 6 Water A site. For more information on the Restrictions. Swanbank F Power Project, please see page 46 of this report. During 2007/2008, the Environment Protection Agency finalised amendments Looking forward 2008/2009 to Swanbank’s development approvals to support operation under drought Prepare for major overhaul of conditions and on recycled water. Swanbank E gas turbine to check The delivery of recycled water and internal hot gas path components. a focus on preventative maintenance saw Swanbank B achieve 94.7 per cent Evaluate the impact of increased water reliability for the year. This figure was and carbon costs on Swanbank B. well above budget, and the station Progress plans for the new gas-fired has recorded reliability figures above Swanbank F Power Project. 95 per cent for the past five years, which is commendable given the age of the plant. Maintenance of the station is targeted at running Swanbank B units until at least 2011.
36 CS ENERGY ANNUAL REPORT 2007/2008
Recycled water to Swanbank Using recycled water to conserve drinking supplies
Swanbank started taking recycled water from the Western Corridor Recycled Water Pipeline in August 2007. Since then, we’ve used almost 5,000 megalitres of recycled water in our operations, instead of taking this water from the Wivenhoe Dam. The Western Corridor Recycled Water Scheme is the first of its kind in Australia, and Swanbank was the first power station to start operating on recycled water. Getting ready for this project gave us technical challenges, but we’ve now secured a reliable source of water for the station’s future.
Darren Kendrick – Swanbank Power Station
37 Resources
Our power stations are fuelled by black Fly ash coal, natural gas, coal seam methane Fly ash is a by-product of coal (CSM) and landfill gas. combustion, comprising primarily In the last ten years, we have increased alumina and silica in a fine powder. the proportion of gas-fired generation It can be used as a cement replacement in our portfolio and invested in the in concrete, as a soil improver, an latest technology for both coal and adsorbent for oil waste removal, or as gas-fired plant. fill in large civil engineering projects such Water is also an essential resource as highway embankments. We are for generating electricity, and we use a member of the Ash Development recycled water, raw water and town Association of Australia, which promotes water in our operations. Each site the beneficial use of power station fly ash. has water management strategies This year we continued to work with to maximise the efficient use of this a number of major cement companies precious resource. on recycling fly ash, and we recycled A by-product of coal-fired generation approximately 82,000 tonnes of fly ash is fly ash, which can be recycled for from Callide and 27,000 tonnes from use in concrete manufacturing, soil Swanbank. We currently supply ash enhancement or as fill. to Cement Australia, Global Cement, Renewed Resources and Transpacific. Coal We have a coal supply agreement for Gas each of our three coal-fired power CS Energy’s gas portfolio underpins stations, and are currently investing our business objective of lowering our in low-emission coal technology. carbon intensity through fuel diversity. For more information on our clean coal We have gas purchase agreements demonstration project, the Callide Oxyfuel at Mica Creek and Swanbank E power Project, please see page 44 of this report stations, but our long-term growth and the CS Energy website . depends on securing additional gas At Swanbank, coal is supplied under for the future. a supply agreement with New Hope Coal Australia. Mica Creek Power Station is fuelled by gas from Santos’ south west Queensland The black coal is transported by either fields, via the Carpentaria Pipeline. truck or rail from New Hope’s mines at In south east Queensland, we source Acland, on the Darling Downs, and gas for Swanbank E from Santos’ Scotia Oakleigh and Jeebropilly in the Amberley/ CSM field, Queensland Gas Company’s Rosewood region near Ipswich. Callide Berwyndale South CSM field, Mosaic’s is supplied by conveyor belt from the conventional gas field near Wallumbilla, adjacent Callide coalfields under a and the CS Energy/Arrow Energy CSM contract with a subsidiary of Anglo joint venture at Kogan North. Coal Australia. We own the coal mine that supplies our newest station at Our strategy of combining long-term Kogan Creek, and the coal is transported gas agreements with investment from the mine to the power station positions in CSM development fields via a four-kilometre conveyor belt. will provide a diverse mix of supply. 38 CS ENERGY ANNUAL REPORT 2007/2008
WATER CONSUMPTION INTENSITY (ML/GWhso) 2.175 2.166 2.163 2.112 16.5% Western Corridor Recycled Water Scheme 1.986 1.641 1.3% Groundwater bores
Water Supply Sources 2007/2008
82.3% Dams
portfolio water consumption intensity (ML/GWhso) In 2007/2008 we advanced a number year. We also measure our water use established during 2007/2008 to of our gas options, including: intensity, which shows how many control and operate all water supplies • CS Energy/Metgasco Joint Venture megalitres of water we use per gigawatt in south east Queensland. at the Casino CSM field, NSW hour of energy sent out (ML/GWhso). Kogan Creek has a dry-cooling This year we recorded a water use system and our water consumption • CS Energy/Arrow Energy Joint Venture intensity of 1.64 ML/GWhso, a at the Kogan North CSM field, is minimal at this station. The water it 17.3 per cent decrease from 2006/2007. does use is supplied from local bores. near Chinchilla Water for the Callide Power Station is Mica Creek receives water from the • CS Energy/Mosaic Oil Buyer-Funded supplied predominantly from the Leichardt supply system and Rifle Operations in the Surat-Bowen Basin Gladstone Area Water Board’s Awoonga Creek Dam. The station cycles its • Queensland Gas Company’s Dam, and is piped to the Callide Dam to cooling water up to 12 times through Berwyndale CSM field minimise evaporation. We also have an the power station, and provides its allocation from the Callide Dam, which • Santos’ Scotia CSM field near Roma. effluent water for reuse by Xstrata provides the Banana Shire with drinking mining operations. This year, the For more information on our gas water, and we are currently investigating station supplied 381.5 megalitres developments, see page 47 of this opportunities to dry-cool Callide to help of water to the mine. report and the CS Energy website . reduce the pressure on water supplies in the region. Water This year Swanbank Power Station Efficient water use is a high priority for our started taking water from the Western sites. Each site has water management Corridor Recycled Water Project. We also strategies in place to maximise its water have an allocation from SunWater’s conservation and this has resulted in Warrill Scheme, a supplementary water improved water usage at all sites except supply based on Moogerah Dam, and Callide, which recorded an increase of SEQWater’s Wivenhoe Dam for the just two per cent. station. These arrangements will be Across the portfolio this year, our water replaced in July 2008 by a single consumption was 25,324 megalitres, an arrangement with the South East 8.9 per cent decrease on the previous Queensland Water Grid, an organisation 39 growth
PEOPLE PORTFOLIO GROWTH SOCIAL LICENCE 03
A number of projects took shape during the year, all of which were key to our future success in a carbon-constrained environment. We are investing in low-emission, new generation coal technology, replacing old plant with new high efficiency plant, and switching to cleaner fuels. growth 03
GROWTH
Major Projects Completed
Progress 2007/2008 Kogan Creek Power Project ENVIRONMENTAL BENCHMARKS FOR THE KOGAN CREEK POWER STATION The Kogan Creek Power Project drew Completed the handover of the BENCHMARK IMPROVEMENT ON to a close with the start of the station’s NATIONAL AVERAGE Kogan Creek Power Project from FOR COAL-FIRED PLANT the construction consortium, commercial operations on 7 December Siemens Hitachi. 2007. The 750 megawatt station is now Water 90% supplying the National Electricity Market CO2 5% Started commercial operation with enough electricity to power one NOx 22% of the Kogan Creek A Power million homes. The Kogan Creek coal Station and coal mine on mine was brought into production at Particulates 55% 7 December 2007. the same time as the station. On opening, the $1.2 billion station Finished the demolition of the was heralded as a new era in electricity old coal-fired Swanbank A Following handover, the construction generation due to its efficiency, Power Station. consortium entered a 12-month defect environmental performance and liability period to address any ongoing innovative design. It was officially operational issues. One of the issues opened on 27 November 2007 by the during initial operation was the coal Queensland Premier, the Honourable transfer system, with coal supply chutes Anna Bligh, MP and Queensland Minister becoming blocked when the coal was for Mines and Energy, the Honourable wet. This has been resolved through Geoff Wilson, MP. a chute redesign. Siemens Hitachi A Siemens Hitachi consortium continues to work on operational issues constructed the station, and Golding with the coal chain conveyor system. Contractors developed the adjacent Since construction began in September coal deposit as an open cut mine. 2004, approximately four million hours The supply and construction contract were worked. In the busiest period, for the power station was approximately October 2006, the workforce peaked $900 million. The contracts awarded at 974. During construction Siemens to Australian firms accounted for more Hitachi recorded nine lost time injuries. than half the value of the works, at around $460 million. Queensland firms At its peak, there were just over 200 local were a major beneficiary of the project, personnel, representing about 23 per cent being awarded approximately $330 of the workforce. These skills were million worth of work, with $60 million supplemented by industry specialists worth of work awarded to regionally- from nine countries. While every effort based firms. Additionally, local Chinchilla was made to recruit locally, low and surrounding shire businesses unemployment rates in the region and obtained direct construction and site competing developments in gas-fired services contracts of around power stations, coal mines, gas $21 million with Siemens Hitachi, and exploration and establishment, and a similar amount in direct cash flow is transmission and pipeline construction estimated to have been generated in the projects all impacted on the availability local area from sub-contractor services. of suitable personnel.
42 CS ENERGY ANNUAL REPORT 2007/2008
Implement partnering strategy Source gas suppliers for new projects Participate in carbon market development KEY OUR GROWTH INITIATIVES STRATEGY Lead Oxyfuel demonstration 2008/2009 project at Callide A Develop low-emission technology pathway
1. Match funding to growth strategy KEY OBJECTIVES 2. Invest in low-emission plant and reduce carbon intensity Siemens Hitachi, in conjunction 3. Contribute to low-emission with CS Energy, the Department technology development of Employment and Training (DET), 1. Maintain acceptable TAFE, Building and Construction KEY gearing level TARGETS 2008/2009 2. Approval of Swanbank F Industry Training Fund (BCITF) and Mica Creek projects and other stakeholders such as 3. Refurbish Callide A4 boiler in the Chinchilla Shire Council (CSC), preparation for Oxyfuel retrofit developed a training program to support both the project and the community. The program was designed to complement those already offered regionally by the DET, TAFE, KOGAN CREEK POWER PROJECT DETAILS
BCITF and CSC. In summary, more SITE AREA Construction site was approximately 50 hectares; than 29,000 hours of community Main plant footprint 7.5 hectares up-skilling and over 42,000 hours STRUCTURAL STEEL Between 13,000 - 14,000 tonnes of structural steel used of on-site program delivery were BOILER STRUCTURE DIMENSIONS 64m wide x 71m deep x 78m high provided for 1,822 participants. BOILER WEIGHT 24,000 tonnes The total training and up-skilling FOUNDATIONS Approximately 35,000 cubic metres of concrete expenditure by DET and BCITF was in excess of $735,500. TAFE training BOILER PIPING Approximately 27,000 metres was also provided to the retail, MAXIMUM FLAME TEMPERATURE Approximately 2,000˚C hospitality and business sectors so the local workforce could meet STEAM TEMPERATURE Main steam temperature, 541˚C demand for these services in REHEAT STEAM TEMPERATURE 561˚C support of the project. COAL CONSUMPTION Between 330 and 355 tonnes per hour For more information on the Kogan Creek Power Station, please see page 33 of this report.
Swanbank A demolition project The $19 million Swanbank A demolition project was finished in November 2007, with the site now prepared for the planned new Swanbank F Power Project. It took the contractor, Trio Industries, two and a half years, and around 129,000 hours to demolish the old coal-fired power station built in the 1960s. Over the life of the project, two lost time injuries were recorded.
43 Low-emission Coal
Progress 2007/2008 The Callide Oxyfuel Project Final ratification of the project was given in March 2008, at an official joint Signed joint venture agreement The $206 million Callide Oxyfuel Project passed several major milestones venture signing between Australian between six international and Japanese project partners. project partners. this year to become one of the most advanced clean coal projects The project comprises two key Secured $50 million funding in Australia. processes: from the Australian Government’s Led by a joint venture partnership of 1. oxyfuel combustion and CO Low Emission Technology 2 six international companies, the project capture at the power station, and Demonstration Fund and will demonstrate how we can produce 2. the long-term storage of CO $10 million from the electricity from coal, with almost no 2 Queensland Government. emissions, by capturing the carbon underground (geosequestration). dioxide (CO ) from the power station Building international partnerships is a Started technical work on the 2 and storing it underground. key element of this project. We further first stages of the Callide A4 strengthened our links with Japanese boiler refurbishment. The Callide Oxyfuel Project, a flagship project of the Asia-Pacific Partnership climate change and clean coal Progressed design concepts on Clean Development and Climate experts through three major events for Kogan B, including (APP), is an important step towards in March and April 2008. dry-cooling technology and demonstrating practical and In March 2008 we participated in the carbon-capture readiness. adaptable technology to help third Oxyfuel Combustion Network in to tackle climate change. Japan, organised by the International Construction of the project will begin Energy Agency’s Greenhouse Gas with oxyfuel technology being retrofitted Research and Development Program. to our Callide A Power Station next Later in the month, we hosted a year on Unit 4 (30 MW), with oxyfuel group of leading Japanese resource electricity generation scheduled to and energy experts, including start by 2011. representatives from government, leading industrial companies and This year, CS Energy received Japanese research institutions. $50 million in funding from the Australian Government’s Low Emission Technology In April 2008, our Chief Executive, Demonstration Fund and an additional David Brown, accompanied the $10 million from the Queensland Queensland Premier, The Hon Anna Government, which it will direct into the Bligh MP, during a trade mission Callide Oxyfuel Project together with to Japan to meet with coal industry its own direct funding of $35 million. representatives. In a series of high- Additional funding was received from the level meetings, the group discussed Australian Coal Association’s COAL21 plans for Queensland infrastructure Fund, Xstrata Coal, Schlumberger, and opportunities for scientific and IHI Corporation, JPower, Mitsui and technological collaborations for the Japanese Government. the state.
44 CS ENERGY ANNUAL REPORT 2007/2008
THE OXYFUEL PROCESS
Technical work also started on the first Kogan B Power Project stages of the construction program, We continue to examine expanding the with the completion of the front‑end new Kogan Creek Power Station to include engineering design studies and a second generating unit on the site. preparation of plant refurbishment and Design concepts for Kogan B include an supply contracts. These contracts were ultra-supercritical, high-efficiency steam-cycle awarded in August 2008, and work on unit. It will be dry-cooled and ready for carbon the boiler refurbishment started on site capture technology. If the Callide Oxyfuel in September 2008. Construction of the Project successfully proves oxyfuel main plant is scheduled to begin in 2010. technology as a carbon capture option, The project is due for completion by 2012, we will fit this technology at Kogan B as and will operate for up to four years. part of our low-emission coal portfolio. Sub surface experts Schlumberger have supported the Joint Venture in assessing Looking forward 2008/2009 areas suitable for geological storage of Commence boiler refurbishment of the CO2. This year, several deep reservoirs within the Denison Trough geological Callide A4 boiler in preparation for Oxyfuel. formation, 200 kilometres west of Callide, Select a suitable geological storage site were identified as potential sites for for carbon dioxide storage. storing CO2. Over the next 12 months, more detailed investigations and Officially launch the Callide Oxyfuel Project stakeholder consultation proposed to in late 2008. define the specific location for the 2CO storage demonstration, targeted for 2012. Continue to progress Kogan B plans, with the aim of retrofitting it with carbon capture For further information on the Callide and storage as a future showcase for Oxyfuel Project including project low-emission coal. schedules and technical details please visit our website . Work with industry and government in the development of the necessary infrastructure and regulations for
CO2 storage in Queensland.
45 Gas Projects
Progress 2007/2008 Mica Creek Power Station In August 2007 we commenced a Renewal Project stakeholder engagement program, Completed initial designs for providing briefings to state members for This year we continued plans to replace the Mica Creek Renewal Project. the area and local councillors. We also some of the older generating plant at held an open community information Commenced stakeholder Mica Creek with new, high-efficiency session about the project to identify any engagement for the Swanbank F plant. We have completed the initial community concerns. Power Project. design work for the project, and have been working with customers to secure This year we finalised the plant technical Finalised Swanbank F gas supporting power purchase agreements specifications, which will enable us to plant design specifications. so the project can move forward. call tenders for construction of the station. We will also complete relevant In 2008/2009 we will make a final environmental reviews by this time, as decision on the project and, if approved, required under the Integrated Planning we will be seeking firm commitments Act 1997 (IPA). from customers, carrying out the environmental impact assessment and In 2008/2009 we will be focusing on calling for tenders to supply the first stage proving and securing gas supply, putting of the upgrade. The new plant will supply plant supply contracts in place, and up to 115 megawatts of electricity. seeking final development approval, if it is decided to go ahead with the project. This project will reduce our fuel Subject to the successful development consumption and carbon intensity of the Metgasco project, we aim to at Mica Creek, meet the continued commence construction in the next demand growth in the North West financial year. Minerals Province and continue to provide competitively priced power to our customers. Looking forward 2008/2009 Prove and secure gas Swanbank F Power Project supply arrangements. Our Swanbank F Power Project made significant progress this year. Subject to project approval, obtain This planned new gas-fired combined licences and start construction cycle unit will be located on the former of the Swanbank F Power Project. Swanbank A site. It will use state-of-the- Finalise power purchase agreements to art technology, and generate about underpin the Mica Creek Power Station 400 megawatts of electricity. We plan Renewal Project. to have Swanbank F in commercial operation by early 2012. The concurrent development of Metgasco’s Casino coal seam methane (CSM) fields underpins the gas supply for Swanbank F.
46 CS ENERGY ANNUAL REPORT 2007/2008
Gas Developments
Progress 2007/2008 Metgasco Gas Kogan North Gas
Commenced drilling at Metgasco’s The Metgasco Joint Venture underpins We hold a 50 per cent interest in Arrow CSM field near Casino, with five pilot the gas supply for the proposed Energy’s Kogan North CSM field PL194. wells completed during the year. Swanbank F development. These CSM In June 2008, the field increased fields are located near Casino in northern production to just below 10 terajoules Increased production at Arrow New South Wales. We signed a a day (TJ/d). This remains below Energy’s Kogan North CSM field. farm‑in agreement with energy company the full contract quantity of 11 TJ/d Metgasco in December 2006 to establish but field production is increasing. Signed agreement with Mosaic 540 petajoules (PJ) in 2P gas reserves Arrow Energy has drilled four new Oil to fund four initial wells at its (proven and probable). If sufficient wells and four maintenance wells to Waggamba field. reserves are established, 18 PJ per year increase production. will be supplied to the Swanbank Power Station. Mosaic Gas We currently hold a 15 per cent interest In March 2008, we signed a Buyer- in three blocks in the tenement PEL 16, Funded Operations Agreement with with the right to acquire a further 35 per Mosaic Oil to fund four initial wells at its cent farm-in interest. A pilot well program Waggamba field development in south commenced in November 2007 and west Queensland. The first well was a total of five horizontal wells have been drilled in April 2008 and has produced in drilled. Production testing of the flow the order of 2 TJ/d, which is a pleasing rates in these wells will continue through result. The second well was drilled in the remainder of calendar 2008. The gas June 2008 and is expected to produce reserves were upgraded in March 2008 a similar quantity of gas. The field will to 227 PJ (2P). supply 5 PJ of gas to Swanbank Power Pipeline approvals are also under way Station until June 2013. for the development of a 150 kilometre pipeline from Casino to Swanbank. Looking forward 2008/2009 The Pipeline has been declared a major Continue development of the project in New South Wales, and federal Metgasco field. and Queensland approvals are currently being processed. Survey field work to Work with other gas partners confirm the location of the pipeline has to secure additional gas supply commenced in both Queensland and for Swanbank Power Station. New South Wales. The development, which has been renamed the Lionsway Pipeline, is being managed by Metgasco and we expect the pipeline licence to be issued by June 2009.
47 Callide Oxyfuel Project Low-emission coal bridges to the future
Coal is the lifeblood of this region. Thirty-four years ago I started at the Callide A Power Station as a young apprentice. Since then, I’ve been part of the start-up of six coal-fired power stations around central Queensland. But now it’s time to look to the future. Our country is very reliant on coal, but we also need to act now to reduce our greenhouse emissions. New generation coal technology, like Oxyfuel, is based on the thermal power station process we’ve been using for years. Oxyfuel is a step ahead of other projects because it can be retrofitted to existing power stations. If we can prove this technology, we’re a step closer to securing a future for our region and this community.
David Van Itallie – Callide Power Station.
48 CS ENERGY ANNUAL REPORT 2007/2008
Renewable Technologies
Progress 2007/2008 ReOrganic Energy This year saw the end of the CCSD’s seven-year program, which has ReOrganic Energy Swanbank, Celebrated six years of renewable contributed significantly to the knowledge a joint project between CS Energy, energy generation at the ReOrganic and technical capability that will underpin Thiess Services, Landfill Management Energy Swanbank project. the development of low-emission coal Services and New Hope Energy, generation in Australia. The program Finalised a seven-year partnership entered its sixth year of operation sought to gain a better understanding with the Cooperative Research Centre in 2008 and is still one of Australia’s of the environmental performance for Coal in Sustainable Development largest waste-to-energy initiatives. of coal in power generation, and (CCSD). The project takes landfill gas from contribute to the development of Thiess Services’ Swanbank Landfill Worked with our CS Energy Research lower emission technologies. and co-fires it with coal in one of Fellow and the CCSD to produce The centre’s research and feasibility Swanbank B’s boilers. ReOrganic a handbook on biomass co-firing. study into oxyfuel combustion produces five megawatts of electricity underpinned the development of the continuously and has reduced Callide Oxyfuel Project. We also played greenhouse gas emissions by over a key role in the technical assessments of 780,000 tonnes since its inception. other clean coal technologies, including co-firing of coal and biomass. This year Developing renewable energy the CCSD completed handbooks on technology biomass co-firing and coal combustion Our aim is to introduce an additional products in conjunction with CS Energy’s renewable energy project to our portfolio Research Fellow. in the next couple of years. We are Through our association with EPRI, currently in discussion with proponents we access the industry’s best practice, of three separate renewable energy training and research opportunities aimed technology development projects, at enhancing the performance of coal including advanced solar thermal and gas-powered generation plant. energy, solar voltaic energy and In 2007/2008, we continued to support geothermal energy. EPRI research into improving plant In 2008/2009 we will conduct a feasibility performance in steam turbines, study on these projects, with the aim to generators and balance of plant; heat have a firm proposal by the end of recovery steam generators; boiler and calendar 2009. turbine steam and cycle chemistry; and plant maintenance. Research and development We continue to focus on improving the Looking forward 2008/2009 use of coal in power generation through Continue generating green energy other research and development at ReOrganic Energy Swanbank. programs. We have been actively involved with the Cooperative Research Conduct feasibility study into three Centre for Coal in Sustainable renewable energy projects. Development (CCSD) since its inception in 2001, the Ash Development Association of Australia and the United States-based Electric Power Research Institute (EPRI).
49 social licence
PEOPLE PORTFOLIO GROWTH SOCIAL LICENCE 04
A social licence to operate is earned through many years of delivering on commitments – through responsible planning and decision making, as well as strong management of our environmental, social and governance performance. CS ENERGY ANNUAL REPORT 2007/2008
social licence 04
SOCIAL LICENCE
Environment
Progress 2007/2008 We are committed to responsible and fitted to existing coal-fired power stations, best practice environmental performance. so we can start making an impact on Reduced water use intensity More specifically, we are committed emissions from operating power stations by 17.3 per cent. to monitoring and carefully managing around the world. For more information each of the inputs and outputs of the on the Callide Oxyfuel Project, refer to Commenced development electricity generation process through page 44 of this report. of carbon offset program. continual improvement in emission Information on other emissions from Participated in Earth Hour and reduction, resource management, water our operations, including sulphur oxides marked World Environment Day conservation, and waste management. and nitrous oxides, can be found on the with a staff photography National Pollutant Inventory website at competition. Emissions www.npi.gov.au .
In anticipation of the Federal Government’s Emissions Trading Scheme Managing our resources (ETS), CS Energy has commenced We work to ensure our operations are development of a comprehensive carbon as efficient as possible, which includes offset program. The final shape of the our use of natural resources. We aim to program will be dictated by the national reduce our natural resource use, and ETS but we are working to create a increase the efficiency of our waste program that supports meaningful management, including: projects and creates a genuine impact in the long term. Water management – in response to environmental conditions and the We have been a member of the Australian vital need to conserve water, we have Greenhouse Office’s Greenhouse introduced a number of water efficiency Challenge Program since 1997, with the initiatives at our power stations, such aim of reducing the greenhouse impact of our operations. Since that date, we as recycling and wastewater treatment, have decreased our carbon intensity to ensure we continue to conserve this scarce resource. For more information by 15 per cent, from 933 tonnes of CO2 equivalent per gigawatt hour sent out on our water management, please see page 39 of this report. (tCO2-e/GWhso) in 2001/2002 to 834.4 in 2007/2008. This outcome has been Fly ash emission control – fly ash is largely achieved through increasing the produced at all coal-fired power stations proportion of gas-fired generation in our as a result of generating electricity. portfolio, and decommissioning older, At Swanbank, Kogan Creek and Callide, less efficient plant. more than 99.9 per cent of the ash A key commitment in our carbon strategy produced is collected before it is released is the Callide Oxyfuel Project. This $206 into the air through giant vacuum‑like million project is a partnership between cleaners. Some of this recovered Australian and Japanese industry and fly ash is sold for reuse in cement government, to demonstrate how we can manufacturing, soil improvement or as fill. produce electricity from coal with near- For more information about recycling fly zero emissions. This technology can be ash, see page 38 of this report.
52 CS ENERGY ANNUAL REPORT 2007/2008
Conduct stakeholder benchmarking study Initiate new corporate branding strategy
OUR SOCIAL LICENCE KEY Implement updated employee STRATEGY INITIATIVES engagement strategy 2008/2009 Balance business, Review internal communication community and on business strategy and planning environment Communicate clearly and honestly with our stakeholders
KEY 1. Be a responsible OBJECTIVES corporate citizen 2. Secure employee support for our strategy and values 3. Ensure our business meets stakeholder expectations Flora and Fauna – Our power stations 1. Establish baseline corporate social responsibility measure KEY provide habitats for a variety of wildlife TARGETS 2. Engage staff in strategy 2008/2009 and the evaporation ponds, lakes and development process surrounding buffer zones provide a safe 3. Ensure 100% compliance with government policies haven for a variety of bird species, koalas, and guidelines echidnas and kangaroos.
Innovative improvement We consider that there are always opportunities for improvement. Innovative Agency, as part of the ClimateSmart by turning off all non-essential lighting thinking is sometimes needed to Living Communities program. and equipment at its four stations and generate ideas, and, this year, some All CS Energy sites participated in in the corporate office, and encouraged innovative thinking from those who Earth Hour, an initiative that aims to staff to do the same at home. know our operations best – our staff demonstrate the large reduction in World Environment Day in June 2008 – produced first-class improvements. electricity consumption that can be was an opportunity for us to consider the At Swanbank, an improved stormwater achieved when many of us make a small global impact we have as a business and management system was developed. change. For one hour on 29 March to show our motivation as individuals. Two maintenance staff members devised 2008, participants turned off all electrical We celebrated the day by giving each an efficient way to remove particles and appliances and lights. Since beginning in of our staff an Australian native shrub, oil from stormwater run-off, replacing the Sydney in 2007, this concept is now sourced from local, native nurseries, old sandbag method with a metal guard a global event, encompassing 50 million and conducting an internal photography and filter system. These drain guards people in more than 35 countries across competition. The winning entries will be have been fitted at over 20 locations 18 time zones. CS Energy participated featured in our 2009 CS Energy calendar. around the station. At Callide, a project to enclose the coal INPUTS AND OUTPUTS slot bunker has resulted in a significant reduction of coal dust on site, and we INPUTS/OUTPUTS 2006/2007 2007/2008 % CHANGE have initiated a voluntary program to Total Energy Sent out (GWh) 13,996 15,430 10.25 improve bunding at the Callide Bulk Coal Used (Tonnes) 5,234,787 6,123,291 16.97 Oil facility. Gas and Renewables Used (TJ) 37,885 34.502 -8.931
Raising sustainability awareness Gas and Renewables Elec. Generation (% of portfolio) 29.31 24.83 -4.48 In May 2008, we participated in Biloela’s Renewable Generation (GWh) 31.49 30.93 -1.80 inaugural Sustainability Day, an event Greenhouse Gas equivalent produced (Million tonnes CO2-e) 11.60 12.87 10.98 to profile energy conservation and Greenhouse Gas Intensity (tCO -e/GWhso) 828.91 834.39 0.66 sustainability projects in the local region. 2 This day provided us with an opportunity Water consumption (ML) 27,796 25,324 -8.89 to update the local community on clean Ash Produced (Tonnes) 1,117,616 1,391,951 24.55 coal, and the Callide Oxyfuel Project. The event was organised by Ergon Ash Sold (Tonnes) 81,548 106,464 30.55 Energy and the Environmental Protection 1Drop in gas and renewables used due to outages associated with the replacement of turbine blades at Swanbank E.
53 Environment continued
Environmental Management System Demonstrating our commitment to strengthening the link between We recognise that sound environmental governance and sustainability, all our management is vital to our long- environmental incidents are identified, term business success. In addition reported, assessed and monitored to adhering to a company-wide under our EMS. Our performance is Environmental Policy, our four power benchmarked against other Australian station sites and our corporate office generators in accordance with ESAA’s operate within an Environmental rating system. In 2007/2008 CS Energy’s Management System (EMS), which environmental performance was rated REPORTABLE ENVIRONMENTAL INCIDENTS* helps us understand the impact our 4.4 out of 5. operations have on our environment,
8 and systematically address risks by We class environmental incidents preparing targets, strategies and action as Internal (category 1 and 2), which plans to minimise each site’s impact. means the incident was minor, with 6 Our policy and details of our EMS can no off-site impact, and External be found on our website . (category 3 and 4), which must be
reported to the EPA, and may have
4 All sites except Kogan Creek A Power resulted in off-site impact. See our Station are certified to the international glossary for a more detailed definition standard ISO14001 for Environmental of environmental incidents. Management Systems. In the coming year, we will seek re-certification of In 2007/2008 we recorded a solid 1 the Swanbank, Callide and Mica Creek environmental performance at our
0 power stations’ EMS. Our new Kogan operating sites, with no external ’04 ’05 ’06 ’07 ’08 Creek A Power Station developed its incidents classed as ‘notifiable’ under initial EMS in advance of operational the Environmental Protection Act 1994. *Incidents classed as category commencement, which was accepted We voluntarily reported two minor events 3 or 4, which are reportable to the reportable environmental incidents by the Environmental Protection at the Callide Power Station and five Environmental Protection Agency. Agency (EPA) in February 2007. We are minor events at Swanbank Power Station working towards future certification of to the EPA. In all cases the EPA was Kogan Creek’s EMS under the satisfied by our responses. ISO14001 standard. Looking forward 2008/2009 ENVIRONMENTAL INCIDENTS BY SITE 2007/2008 Environmental performance Re-certify Swanbank, Callide and SITE INTERNAL EXTERNAL We are a foundation signatory of Mica Creek’s EMS in line with Swanbank 8 0 the Code of Environmental Practice, ISO14001. developed by the Energy Supply Callide 72 0 Association of Australia (ESAA). Establish carbon offset activities. Mica Creek 15 0 Through this Code, we aim to sustain Kogan Creek 3 0 a standard of industry-specific best practice by adopting practices that *More than half of Callide’s internal incidents are responsible and progressive in relate to ash leaks. In June 2008, we replaced the areas of sustainable development, over four kilometres of pipe between the power social responsibility, environmental station and the ash dam to rectify this problem. management and resource management.
54 CS ENERGY ANNUAL REPORT 2007/2008
Chinchilla Community Benefits Trust Growing together with the community
The long term future of a community depends on everyone thriving. That’s why, during the construction of the Kogan Creek Power Station, we set up the Chinchilla Community Benefits Trust. Money from the trust funded social infrastructure and community service projects to help local community and our business grow together. In its first three years we have invested $622,900 in local community projects.
Warren Brell – Kogan Creek Power Station
55 Community
Progress 2007/2008 Our operations impact a range of groups, industry leaders and the local stakeholders, including the communities council. A community engagement Celebrated the eight year anniversary that host our operations, our employees, program for the project is currently in of the Swanbank Community shareholders, government regulators development, and will be implemented Reference Group. and special interest groups. as the project advances during the 2008/2009 year. Developed Generosity, a company-wide An active community relations program workplace giving program. helps us to keep in touch with our Callide Power Station is preparing stakeholders to understand and address for a busy year with the dual outage Invested more than $210,000 their concerns at a local level, and to mid-life overhaul planned for Callide B in sponsorships and donations in identify better ways of doing business in April/May 2009. This will be the the communities which host in these regions. biggest overhaul the station has our operations. undertaken, with work opportunities Community Relations available for an extra 500 people for set Conducted Moving Opera! workshops periods at a time. We have been talking in Mount Isa and Ipswich. In 2007/2008, we strengthened our reputation and stakeholder relationships with Biloela businesses to establish by engaging and maintaining open and strategies to cope with the expected honest dialogue with our stakeholders accommodation pressure and we and building regional links to support the continue to keep them abreast of the communities in which we operate. station’s timetable. During the year we continued our face- In Chinchilla, a CRG was formed for to-face communication with neighbours the Kogan Creek Power Project. With who are directly or indirectly impacted construction of the power station now by our operations. At Swanbank, our complete, the group was wound up and Community Reference Group (CRG), run in December 2007, we hosted a special jointly with Thiess Services, is now in its community function for more than eighth year. The Group provides a vital 150 Chinchilla residents to thank them link between the operations of CS Energy for their support during the construction and Thiess Services, and the booming of the Kogan Creek Power Station residential population in the area. The and mine. CRG meets every eight weeks, delivers As a lasting gesture, CS Energy a newsletter, Swanbank Talk, to more commissioned Queensland sculptor than 8,000 local residents, and holds bi- Peter Kozina to craft a sculpture from annual public meetings. power station scrap metal, to be At Callide, community briefings in displayed in Chinchilla. The result response to operational issues or activity was ‘Monitor’, a metal goanna sitting at the power station continue. During atop a silky oak base, which the the year, briefings on our Callide Oxyfuel Chinchilla Shire Mayor accepted Project were held with various business on behalf of the community.
56 CS ENERGY ANNUAL REPORT 2007/2008
Partnerships Station, in its first years of operation. Business and Industry events The fund supports charitable projects As a major employer in each of the We continue to support the Chamber that benefit the local community, and communities that host our operations, of Commerce Business Awards in Mount to date has invested $622,900 in social we aim to actively contribute to initiatives Isa, Ipswich and Chinchilla. The awards infrastructure and community service that have a positive impact on these provide an opportunity for the regional projects in the region. communities. This year we invested business communities to come together more than $210,000 in sponsorships Boonah Arts Festival and celebrate their achievements. Callide and donations. also supported the Banana Shire Industry We continue to sponsor the Boonah Arts Summit in 2007, which saw key industry Moving Opera! Festival, which encourages creativity and leaders discussing current and future innovation in this regional community. In We established one of our flagship activities and needs within the 2009, we plan to make the festival carbon partnerships, Opera Queensland’s Gladstone hinterland. neutral, as part of our business focus on Moving Opera! more than six years ago. carbon footprints. Biloela Rockfest and Comedy This five-day workshop and performance and Food Festival program introduces students to opera Great Letterbox Challenge and music theatre, and was originally We continue to support two of the major At Swanbank, apprentices got creative offered only to schools in the Brisbane events on the Biloela calendar. Rockfest, for charity by competing in the Great area. Our partnership enables Opera a showcase for local musical talent, Letterbox Challenge. Six apprentices Queensland to offer Moving Opera!, and the Comedy and Food Festival, designed a 3D letterbox, which was free of charge, to students in regional a celebration of food and laughs in auctioned at the Ipswich Arts Council communities. In 2007/2008 Moving central Queensland. fundraising event to assist local charities. Opera! workshops were conducted in Mount Isa and Ipswich. Swanbank Community Reference Group Grants Program Keep Australia Beautiful (Queensland) During 2007/2008 local community groups continued to receive valuable In conjunction with Thiess Services, support from the Swanbank CRG. we have established a partnership with With funds and services provided by Keep Australia Beautiful (Queensland), CS Energy, Thiess Services and Ipswich and assist with their environmental City Council working through the CRG, education program by inviting students improvements have been made to local to tour the Swanbank Power Station and facilities and programs. This included a the adjacent Thiess Services Swanbank tree planting project at Redbank Plains Landfill. This year, more than5 27 State School, sun protection awnings at students participated in the tours. a local child care centre and a sandpit fencing project at Raceview Prep School. Chinchilla Community Benefits Trust Older members of the community also CS Energy and the Chinchilla Shire received assistance with the extension Council established the Chinchilla of a retaining wall for the Rose Memorial Community Benefits Trust in 2004, to Gardens at Ipswich Hospice and provide community support during the the provision of furniture for the Elim construction of the Kogan Creek Power Retirement Village.
57 Community continued
Philanthropy In March we continued our support for the Shave for a Cure fundraiser to raise money In June 2008 we established Generosity, for the Leukaemia Foundation. Staff from a new workplace giving program whereby Swanbank and Callide participated in the staff can make a pre-tax payroll deduction annual World’s Greatest Shave for a Cure to a charity, with CS Energy matching event, raising more than $4,000 for this staff donations up to $50,000 each year. great cause. The program will commence at the Callide staff also supported Anglicare’s beginning of the 2008/2009 financial year, Adopt-A-Family Christmas Appeal again and we have committed up to $50,000 in 2007 where local disadvantaged families in the first 12 months of the program. are “adopted” by various community Together with staff contributions, groups or individuals. This is the second we have the potential to donate more successful year Callide has been involved than $100,000 to our staff’s chosen in the program. charities, including:
• Angel Flight Looking forward 2008/2009 • Blue Care Establish baseline corporate social • The Cancer Council Queensland responsibility measure. • Greening Australia • Hannah’s House Establish the Generosity workplace giving program across the portfolio. • Hear and Say Centre These charities were selected through a collaborative process involving presentations, staff survey feedback and committee meetings, and represent a range of national, state-based and local charity groups. While some charities are well-known to CS Energy staff through local or regional fundraising initiatives such as Australia’s Biggest Morning Tea (Cancer Council), Greening Australia and Hannah’s House, others such as Angel Flight and Hear and Say Centre will be new beneficiaries.
58 Corporate Governance Report
Corporate Governance Framework 60 The Board 60 Board Committees 60 Audit Committee 61 Board Risk Committee 61 Staff and Remuneration Committee 61 Major Capital and Technical Committee 62 Executive Management Team 62 Appointment of new Chief Executive 62 Reporting 62 Performance 62 Risk and Assurance 62 Climate Change 63 Ethical and Responsible Behaviour 63 Information and Advice 64 Remuneration 64 Directions and Notifications 64 Statement of Corporate Intent 64 Directors’ Profiles 65 Executive Management Team Profiles 66
59 Corporate Governance Report
CS Energy has a comprehensive series The Board of policies, procedures and guidelines OUR OUR Our Board comprises seven, PEOPLE relating to corporate governance PORTFOLIO independent, non-executive directors to ensure we maintain the highest appointed by the Governor in Council standards of ethics, efficiency, and under the GOC Act. The Board is CS Energy financial and risk management. responsible for setting strategic direction, reviewing and approving plans by the Corporate Governance Framework Executive Management Team, monitoring OUR OUR SOCIAL GROWTH LICENCE CS Energy was established in 1997 corporate performance, managing risk under the Government Owned and upholding the Company’s Code Corporations Act 1993 (GOC Act) of Conduct, which can be found on and is incorporated as a public our website .
company, subject to Corporations A key responsibility of our Board is Law. Shares in CS Energy are held by reporting to shareholding Ministers Our corporate scorecard guides two state Government Ministers on on CS Energy’s performance against us, providing the framework for behalf of the State of Queensland. the objectives set out in our annual achieving our goals and measuring At 30 June 2008 these Ministers were: Statement of Corporate Intent (SCI). our progress. - Queensland Treasurer, The The Board meets monthly, and more Effective corporate governance is Honourable Andrew Fraser MP, and frequently if required, to oversee our vital to our commercial performance - Minister for Mines and Energy, operations. We provide an induction and a key requisite for our continued The Honourable Geoff Wilson MP. manual to all new Board members growth and success. to ensure they understand their The cornerstone of our corporate responsibilities, and we arrange site visits governance framework is our Corporate and briefings to ensure Directors maintain Governance Charter, which reflects the the knowledge and skills needed to fulfill objectives outlined by the ASX Corporate their roles. Governance Council’s principles of Good Corporate Governance and For biographies of our current Directors, Best Practice Recommendations. Our please refer to page 65 of this report. Corporate Governance Policy can be There were no changes to the Board in found on our website . 2007/2008.
Responsibility for ensuring we practise Since January 2007, CS Energy has had good corporate governance rests with two registered Company Secretaries, our Board. Chris Turnbull and Warren Packer.
Board Committees Our Board has established four committees to assist us with the management of particular business areas and provide a forum for our Directors and the Executive Management Team to discuss more complex business issues. All four committees report to the Board.
60 CS ENERGY ANNUAL REPORT 2007/2008
BOARD MEETING AND BOARD COMMITTEE MEETING ATTENDANCES FOR 2007/2008 The Committee meets quarterly, comprises all Directors and is NAME BOARD BOARD RISK AUDIT MAJOR CAPITAL STAFF & 11 MEETINGS COMMITTEE COMMITTEE & TECHNICAL REMUNERATION chaired by Timothy Crommelin. 4 MEETINGS 5 MEETINGS COMMITTEE COMMITTEE 11 MEETINGS 7 MEETINGS Highlights for 2007/2008 include: Stephen Lonie 11 4 4 11 5 • Review and comment on CS Energy’s Tim Crommelin 7 3 n/a n/a n/a eight key risks. Julie Leaver 10 4 5 n/a n/a • Continued monitoring of operational Bob Henricks 10 4 n/a 10 n/a risk activity across CS Energy’s four Tony White 10 3 n/a 9 7 operating sites.
Sarah Israel 10 4 5 n/a n/a • Insurance placement process including strategy for using CS Energy’s Mark Bucknall 10 3 n/a n/a 6 Protected Cell Captive. • Pecuniary risk / conflict of interest review and comment. Audit Committee The committee meets quarterly and its members are Julie Leaver (Chair), • Mica Creek load management system The Audit Committee assists the Board Stephen Lonie and Sarah Israel. review and monitoring. in overseeing the reliability and integrity of our financial reporting practices, Highlights for 2007/2008 include: Staff and Remuneration Committee accounting policies, auditing and external reporting. The committee • Establishment of a compliance Our Staff and Remuneration Committee provides advice to the Board on financial intranet website to reflect CS Energy’s provides advice on remuneration statements, financial systems integrity compliance processes. policies and practices. It makes and business risks. It also ensures that • Continued monitoring of the CS Energy recommendations to the Board on we comply with all applicable laws, contracting process. negotiation parameters for enterprise regulations and Company policies and bargaining agreements as well • Audit activity review and comment that an adequate internal control system as remuneration packages and on year-end accounting requirements is in place for areas such as business other terms of employment for our risk and safeguard of assets. Our Audit • Comment on CS Energy’s physical Executive Management Team. The Committee Charter can be found on our and electronic safety regime. committee ensures employees are fairly website . remunerated for their work and that we
Board Risk Committee always act in the best interests of our The committee oversees development shareholders on remuneration matters. of the Internal Audit Plan and the As risk management is a core results of internal audit activities and responsibility of our Board, we have recommendations. It is also the primary a dedicated Board Risk Committee. point of reference for CS Energy’s This committee oversees our risk external auditor, the Auditor General of management system and ensures Queensland. The committee accepts compliance with its policies, procedures reports from the Queensland Audit and legal obligations. The Board Risk Office and oversees progress on Committee Charter can be found implementing recommendations flowing on our website . from Queensland Audit Office reports, on behalf of the Board of Directors.
61 Corporate Governance Report continued
Each year, the committee reviews • Review and monitoring of Callide C Quarterly Reports of our progress in executive remuneration against agreed boiler performance challenges and meeting the performance targets and performance measures. Our Staff and improvement strategy. measures in the SCI. Remuneration Committee Charter can be • Planning and strategic direction for An Annual Report on our performance found on our website . a second unit at Kogan Creek. for each financial year that meets statutory The Staff and Remuneration Committee requirements for government-owned meets quarterly and its members are Executive Management Team corporations and the ASX Corporate Tony White (Chair), Stephen Lonie and Our Board appoints CS Energy’s Chief Governance Council’s Principles of Good Mark Bucknall. Executive and other members of our Corporate Governance and Best Practice Recommendations. Highlights for 2007/2008 include: Executive Management Team after receiving prior written approval from • Review of employee salary system shareholding Ministers. The Chief Performance including performance payments Executive is accountable to the Board, The performance of our Board is and is responsible for managing the • Comment and review of the periodically evaluated at a formal workshop performance of the CS Energy business process for appointment of new facilitated by an independent corporate and our Executive Management Team. Chief Executive. governance specialist. In 2006/2007, we implemented the recommendations of a Appointment of new Chief Executive Major Capital and Technical Board Performance Review finalised in July Committee In December 2007, Tony Andersen 2006. The review found that our corporate As we manage a significant capital stepped down as Acting Chief Executive governance processes were sound and development program, the Board Major of CS Energy and David Brown, General suggested improvements to executive Capital and Technical Committee plays Manager Operations, was appointed as succession planning, key stakeholder an important role in overseeing our major Chief Executive to lead the organisation. communication processes and Director projects. The committee meets monthly professional development. This year, we to review progress on major projects and Reporting conducted the review in June 2008, and provide technical and commercial advice. Our Board regularly reports to its the recommendations will be reported and Details of the Major Capital and Technical shareholding Ministers to ensure they implemented in 2008/2009. Committee Charter can be found on are informed about the operations, our website . Its members are performance and financial position of the Risk and Assurance Stephen Lonie (Chair), Bob Henricks Company. CS Energy produces four key Our Board has ultimate responsibility and Tony White. documents to report on our performance: for managing potential risks for CS Energy Highlights for 2007/2008 include: A Corporate Plan that outlines our key and ensuring we comply with relevant strategies and objectives for the next five • Finalising the Kogan Creek laws, regulations and policies. CS Energy years and our performance indicators. Power Station construction with employs an internal Risk and Assurance The plan also provides an industry and commercial load being achieved function to oversee this activity and report economic outlook and the potential on 7 December 2007. to the Board and management. The Risk impact of these developments on and Assurance Team reviews our activities, • Overview and comment on CS Energy. information and records to ensure that: CS Energy’s involvement in the A Statement of Corporate Intent (SCI) • Financial and operational information Callide Oxyfuel Project. outlines our goals and objectives for the is reliable. • Overseeing technical improvements for next financial year. A summary of the CS Energy’s Callide B Power Station 2007/2008 SCI appears on page 64 • Compliance with laws, regulations, at its midlife point. of this report. policies and procedures occurs.
62 CS ENERGY ANNUAL REPORT 2007/2008
• Business risks are identified and Highlights for 2007/2008 include: Ethical and Responsible Behaviour appropriate management plans • Overview and comment on We are committed to conducting all are adopted. CS Energy’s Electricity Market business activities with integrity, honesty • Procedures are in place to safeguard Risk Policy. and in compliance with relevant laws assets and revenue, and ensure • Review by Ernst & Young of and standards. Our staff and the Board effective use of resources. CS Energy’s pecuniary interests act in accordance with the CS Energy Code of Conduct , which outlines our Our risk management framework is and share trading processes with designed to ensure all potential financial, consequent discussion and advice. principles for conducting our business operational and other risks are identified, An annual routine audit of processes in an ethical and responsible manner. assessed, monitored and reported to in these areas was conducted, and The Board has also adopted the the Board. CS Energy’s systems and processes Directors’ Code of Conduct from the were found to be sound. Articles of Association of the Australian The Board Risk Committee oversees Institute of Company Directors. our risk management framework and • Strategy development with responsibilities which are outlined CS Energy’s Protected Cell Captive To ensure compliance and prevent earlier in this section. The Board’s Insurance Company, EnMach. conflicts of interest, we have a number responsibilities in this area are facilitated of policies and procedures in addition to the Code of Conduct including a by the work of the following two Climate Change Share Trading Policy , Compliance management committees that report to Climate change is quickly becoming Policy and a Procedure for Pecuniary the Board Risk Committee: a business risk for the energy sector. Interest, Conflict of Interests and Under the National Greenhouse and Protected Disclosures . Risk Coordination Committee: Energy Reporting Act (Cth) (NGER Act), The Share Trading Policy provides meets on a quarterly basis to coordinate CS Energy will be required to extend guidance on the legal requirements of the responses to market and operational its greenhouse and energy reporting Corporations Act 2001 with respect risks as they arise. obligations, and provide details of the to inside information and insider trading. Company’s climate change risks and Market Risk Management The policy requires officers and directors responsibilities in its 2008/2009 Committee: to not engage in share trading transactions Annual Report. monitors market risk on a monthly basis with companies with whom CS Energy has and recommends appropriate systems CS Energy notes climate change may a contractual relationship and where the and controls to manage those risks. affect the Company’s financial position, officer could be in possession of price- operations and business strategy. This sensitive information or be placed in a CS Energy’s Risk Management Policy year, CS Energy has reported on a new position of a conflict of interest. provides guidance for the Board and staff carbon strategy for the Company. We have a standing item on the agenda on our risk management approach. Our The introduction of an emissions trading of the monthly Board meetings for any staff are required to conduct all business scheme in 2010, other regulatory conflicts by the Board or Executive activities in a manner that complies with responses of government to climate Management to be declared. Board and the law, and within Board-approved limits change, and adverse effects of variable Executives are also required to make of authority. weather will all affect CS Energy’s annual declarations of Companies in business and future growth. which they hold shares, or relationships that have the potential to lead to a conflict of interest. We also commission an external, independent check of these declarations against publicly available databases.
63 Corporate Governance Report continued
We encourage staff and Directors to Remuneration Statement of Corporate Intent report any conduct they observe that Directors are remunerated at a level Under the Government Owned they believe is a potential breach of determined by the Governor in Council Corporations Act 1993, CS Energy CS Energy policies or external regulations and reimbursed for reasonable expenses is required to prepare a Statement of or laws. The CS Energy Procedure for incurred while conducting business on Corporate Intent (SCI) each financial year. Pecuniary Interest, Conflict of Interests behalf of CS Energy. and Protected Disclosure outlines The SCI is a performance agreement the process for responding to these The Board, in consultation with between CS Energy and our shareholding disclosures and confidentiality provisions shareholding Ministers, approves Ministers and complements our five-year for the individual making the disclosure. the remuneration levels for the Chief Corporate Plan. Executive and other members of the As a Government Owned Corporation, The full SCI, which includes details Executive Management Team. we have an obligation to comply with of our mission, vision, objectives, the requirements of the Freedom of Details of remuneration paid to Directors activities, capital structure and Information Act 1992 (the FOI Act). and Executive Management Team dividend policies, will be tabled in the CS Energy is exempted under the FOI Act members during the year appear in Queensland Parliament in accordance from disclosing documents relating to our Note 30 of the Financial Statements. with Section 132 of the GOC Act. commercial activities or our community In summary, the 2007/2008 SCI outlines service obligations under the Government Directions and notifications the following key business objectives: Owned Corporations Act 1993. CS Energy received no directions from its • Increase the Company’s portfolio shareholding Ministers during the year. of generating assets. Information and advice • Secure future fuel supplies to facilitate Directors can seek independent the expansion of existing assets. professional advice on matters before the Board after receiving approval from • Continue its focus on safety, the Chair. CS Energy bears the cost of environment and plant reliability. this external advice. Directors can also • Progress the Callide Oxyfuel Project. seek professional information from CS Energy employees, subject to approval from the Chief Executive and attendance by a member of the Executive Management Team.
64 CS ENERGY ANNUAL REPORT 2007/2008
Directors’ Profiles
STEPHEN LONIE Awarded a Commonwealth sports achievement JULIE LEAVER B Com, MBA, CA, F Fin, FIMCA, FAICD award for services to Australian Football, he is B Com, FCPA, MAICD Director since 1999 Chair Director since 1999 an active community member and contributes professional support to community legal centres Julie Leaver has held senior financial roles in the Stephen Lonie is an independent management and sporting organisations. telecommunications and mining industries with consultant and company director. companies listed on the Australian and New Mr Bucknall is a member of CS Energy’s York stock exchanges. During her 10 years with His directorships include Grosvenor Australian Staff and Remuneration Committee and Telstra Corporation, Ms Leaver was responsible Investments Limited, Queensland Coal Mining Board Risk Committee. for preparing the Group’s financial statements, Management Limited, Pioneer Mortgage annual reports and US prospectus. She was the Services Pty Limited, Figtree Developments Telstra Group coordinator of the US prospectus Limited and the Brisbane Grammar School. BOB HENRICKS Queensland Certificate of Competency as for T2, the second tranche of the sale of the Mr Lonie chairs CS Energy’s Major Capital Electrical Mechanic (Electrician) Federal Government’s interest in Telstra. and Technical Committee and is a member Director since 1999 Ms Leaver’s experience also extends to of the CS Energy Audit Committee, Staff 15 years with the former Mount Isa Mines Group and Remuneration Committee and Board Bob Henricks brings more than 40 years (MIM), membership of the Australian Accounting Risk Committee. of experience to the CS Energy Board. Standards Board and project management and Mr Henricks has served on the board of corporate govern ance roles. Ms Leaver chairs AUSTA Electric and chairs the Electricity TIMOTHY CROMMELIN CS Energy’s Audit Committee and is a member Supply Industry Superannuation Fund, and B Com, ASIA, FAICD of the Board Risk Committee. Deputy Chair Director since 1997 two other superannuation funds. He is also chair of Meanderham Pty Ltd, Electro Group Tim Crommelin is Chairman Stockbroking Training Qld Ltd and Electro Group Apprentices TONY WHITE of ABN Amro Morgans Limited, a Member Qld Pty Ltd. Dip Mech Eng, FIE Aust, Aus IMM, FAIM Corporation of the Australian Stock Mr Henricks is a director of Qld Private Director since 1997 Exchange. Mr Crommelin brings more than Capital Group Pty Ltd. He chairs the Tony White is a technical consultant for Itochu 35 years experience in investment, marketing, Queensland Electrotechnology Industry Australia Ltd and a Director of Community stockbroking and capital raising to the Board. Training Council, is past State Secretary and and Corporate Financial Services Pty Ltd He holds a commerce degree from the National President of the Electrical Trades and the Queensland Coal and Oil Shale University of Queensland. Union and is also a member of the (Australian Superannuation Fund. His directorships include Australian Government) Central Trades Committee. National University Superannuation Mr Henricks, who took his apprenticeship at 15, He is also Chairman of Copperform Holdings Investment Fund, Australian Cancer is still a licensed electrician. He is a member of Pty Ltd and was Chairman of CS Energy Research Foundation, Brisbane Grammar CS Energy’s Major Capital and Technical subsidiary Sigma Process Solutions until its School, Abney Hotels Limited and the Committee and Board Risk Committee. acquisition by Alstom Power Australia in 2003. Queensland Museum Foundation. Mr White has extensive experience in the resources sector, having previously been Mr Crommelin is a member of the Senate, SARAH ISRAEL Executive General Manager, Coal, Copper and University of Queensland, and chairs B Bus, FCPA, FAICD Metals Processing with the former MIM Group, CS Energy’s Board Risk Committee. Director since 2005 where he was able to combine his engineering experience with business development and Sarah Israel has extensive experience in MARK BUCKNALL financial management. BA, LLB, MAICD project finance, investment banking and Director since 2005 regional development and currently has Mr White chairs CS Energy’s Staff and consulting roles in finance projects in Australia Remuneration Committee and is a member Mark Bucknall is the managing partner of his and internationally. Her experience also includes of the Major Capital and Technical Committee own legal practice. He came to CS Energy from time in the mining and minerals processing and and Board Risk Committee. the Energex Retail Board, where he chaired oil and gas industries. the Audit Committee and the joint Energex Ms Israel is a Director of Queensland Sugar Remuneration Committee. He also served as Limited (QSL), Australian Biodiesel Group and inaugural chair of the South-East Queensland ESI Superannuation. She is Chair of the Audit Regional Electricity Council. Committees of QSL, ESI Super and Australian Mr Bucknall’s other board appointments include Biodiesel. She was previously a director of the a directorship of Queensland Cruising Yacht Queensland Electricity Transmission Corporation Holdings and membership of the Council of the (Powerlink). Ms Israel is a member of CS Energy’s Brisbane North Institute of TAFE. Audit Committee and Board Risk Committee.
65 Executive Management Team Profiles
DAVID BROWN Richard Boys John James C.Eng, BSc (Hons) BCom, MBA, FCIS BE, Grad Dip (Automatic Control), Grad Dip Chief Executive Chief Financial Officer (Management), GAICD General Manager Portfolio Services David Brown is a chartered engineer with Mr Boys has more than 20 years experience in more than 25 years experience in the energy business management and administration in the John James has almost 30 years experience industry in the United Kingdom and Australia. resources and energy sectors. in the power generation sector. He has worked Mr Brown graduated with first class honours at power plants in Australia and overseas, As Chief Financial Officer, Mr Boys is responsible in a Bachelor of Science degree in natural gas including Gladstone Power Station, Killingholme for finance, information technology and business engineering from the University of Salford in the Power Station in the United Kingdom and most systems. He is also a director of various UK. He started his career with British Gas plc recently, CS Energy’s Swanbank Power Station CS Energy subsidiary companies associated before joining Southern Electric plc at a time of at Ipswich, where he held the position of Site with Mica Creek Power Station, Callide Power significant change in the UK power industry. Manager for five years. Project, Kogan Creek Power Project and In Australia, Mr Brown has worked as a Swanbank E Project. As General Manager of the Portfolio consultant to the power industry and later as Services team, John is responsible for asset General Manager of Bell Bay Power Pty Ltd, management, overhauls, projects and high level a Hydro Tasmania subsidiary company. He was Chris Turnbull technical support to CS Energy’s portfolio of appointed as Chief Executive of CS Energy in B Bus, MAICD plant, as well as the procurement, environment December 2007, after joining the Company as General Manager Corporate Services and chemistry functions. General Manager Operations. and Company Secretary Mr Turnbull has worked in the energy industry Bill Andrew Tony Andersen in the areas of business management and BA BE, MIE (Aust) administration for more than 20 years. He is General Manager Organisation Acting Chief Executive and Deputy Chair of the Electricity Credit Union and Development General Manager Major Projects a member of that Board’s Audit, Risk, and Staff and Remuneration committees. Mr Andrew has more than 20 years experience Mr Andersen has more than 30 years in organisational and individual development, Mr Turnbull is also Company Secretary for the experience in the energy sector. He has worked change management and strategic planning. CS Energy group of companies. As General in management at Tarong, Callide, Swanbank He has worked with a range of public and Manager Corporate Services, he is responsible and Queensland’s hydro power stations. private sector companies throughout Australia for market operations, internal audit, legal and He was appointed as Acting Chief Executive and New Zealand in a consulting capacity, corporate administration. of CS Energy on 24 May 2007, and retired on including BHP Billiton, Brisbane City Council, 4 July 2008. Bougainville Copper and Tarong North. Most recently, he was based in Canberra as General As General Manager Major Projects, Gary Campbell Manager Organisation Development, CSIRO Mr Andersen was responsible for the BE (Elect) Sustainable Ecosystems. development of major projects, including the General Manager Operations Kogan Creek Power Project, the Callide Oxyfuel In his role at CS Energy, Mr Andrew is Mr Campbell has more than 30 years in the Project and progress on the Swanbank F Power accountable for the human resources, energy sector in Australia and New Zealand. Project. He was also a director of Callide Energy industrial relations, occupational health and He has held positions of Station Manager of Pty Ltd, Callide Power Management Pty Ltd and safety, and marketing and communication New Plymouth and Huntly Power Stations Kogan Creek Power Project Pty Ltd. functions and has a wider role in organisation and Chief Executive of Waitaki Power in New change and development. Zealand. He was General Manager Operations in the newly corporatised Tarong Energy from 1999. Mr Campbell joined CS Energy in 2004 as Site Manager at Callide Power Station and was appointed to the General Manager Operations role in April 2008. In his role he is accountable for the overall performance of CS Energy’s generation assets at Callide, Swanbank, Kogan and Mica Creek. 66 Glossary and Abbreviations
Term Definition
2P Proven and probable gas reserves (50 per cent chance of being recovered). 3P Proven, probable and possible gas reserves (10 per cent chance of being recovered). A measure of a generator’s capacity to achieve full load. Availability This measure takes into account both planned and forced outages. CO2CRC Cooperative Research Centre for Greenhouse Gas Technologies Energy sent out The amount of electricity sent to the grid. Gearing A financial term that describes the relationship between debt and equity GEC Gas Electricity Certificate GW Gigawatt (One GW = one thousand megawatts) GWh Gigawatt hour
Greenhouse intensity
per energy sent out Emissions of CO2 per gigawatt hour of energy sent out
(tCO2-e/GWh) ISO14001 International Standard for Environment Management Systems
A lost time injury is an occurrence that results in time lost from work of one shift or more, Lost time injury not including the shift in which the injury occurred. Lost Time Injury Frequency Rate. The number of lost time injuries per million hours worked LTIFR by employees and contractors. (Calculated on a 12 month moving average.) ML Megalitre (One MW = one million litres) MW Megawatt (One MW = one million watts) MWh Megawatt hour NEM National Electricity Market NEMMCO National Electricity Market Management Company PAT Profit after tax PEL Petroleum Exploration Licence PPA Power Purchase Agreement Pool price The variable market price for electricity A measure of a generator’s capacity to achieve full load when plant is not undergoing Reliability a planned outage. ROPA Return on productive assets SAP Systems Applications and Products software SCI Statement of Corporate Intent TJ Terajoule (one TJ = one million megajoules) Water use intensity Water use per gigawatt hour of energy sent out to the grid
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Callide Power Station PO Box 392 Biloela Queensland 4715 For further inquiries regarding Telephone +61 7 4992 9329 this Annual Report contact: Facsimile +61 7 4992 9328
CS Energy Ltd Mica Creek Power Station Level 21 Central Plaza Two PO Box 1077 66 Eagle Street Mailing Distribution Centre Queensland 4000 Mount Isa Queensland 4825 Telephone +61 7 4740 0700 GPO Box 769 Facsimile +61 7 4740 0710 Queensland 4001 Swanbank Power Station Telephone +61 7 3222 9333 Mail Service 460 Facsimile +61 7 3222 9300 Ipswich Queensland 4306 Email [email protected] Telephone +61 7 3810 8800 Facsimile +61 7 3810 8777 www.csenergy.com.au Kogan Creek Power Station © 2008 CS Energy Ltd PO Box 41 ABN 54 078 848 745 Brigalow Queensland 4412 Telephone +61 7 4665 2500 All rights reserved Facsimile +61 7 4665 2599