CONTENTS
HIGHLIGHTS...... 2 CHAIRMAN’S AND MANAGING DIRECTOR’S REVIEW ...... 5 OUR COMPANY...... 9 WE’RE CONNECTED TO OUR COMPANY ...... 10
REVIEW OF OPERATIONS ...... 10 Financial performance...... 10 Generation...... 12 Networks ...... 13 Pilbara and Regional branches ...... 16 Retail ...... 18 People and support services...... 20 WE’RE CONNECTED TO OUR COMMUNITY...... 23
OUR COMMUNITY...... 23 EDUCATION...... 23 SCHOLARSHIPS/AWARDS...... 25 VOCATIONAL TRAINING...... 26 THE ENVIRONMENT...... 26 COMMUNITY ASSISTANCE...... 28 THE ARTS...... 29 SPORTS ...... 30 WESTERN POWER PEOPLE IN THE COMMUNITY...... 30 INDUSTRY...... 31 OUR FUTURE COMMUNITY COMMITMENTS...... 31 WE’RE CONNECTED TO OUR ENVIRONMENT...... 32
ENVIRONMENTAL PERFORMANCE...... 34 OPERATIONAL ENVIRONMENTAL MANAGEMENT...... 40 SUSTAINABLE ENERGY...... 43 ENVIRONMENTAL INCIDENTS...... 47 STRATEGIC RESULT AREAS ...... 49 CORPORATE GOVERNANCE ...... 54 FACTS AND FIGURES...... 64
STATISTICAL SUMMARY...... 64 GLOSSARY...... 68
DIRECTORS’ REPORT 73
DIRECTORS’ DECLARATION 79
APPENDIX ONE: WESTERN POWER FINANCIAL REVIEW 2001
Highlights
Western Power’s financial, environmental and social achievements over the past year are many, encompass the full extent of our activities, and see us well placed to take on the challenges ahead.
OUR COMPANY
Financial
- For the year ended 30 June 2001 the company achieved a profit after tax of $188.2 million, up 22% on last year.
- Direct contribution to State revenue totalled $149.8 million, an increase of 22% on last year. Contributions to State revenue since 1995 now exceed $629 million.
- Debt to equity continued to improve to 65/35, from 68/32 in 1999/2000.
- Capital expenditure of $270.6 million invested in upgrading existing infrastructure and catering for future growth in the South West Interconnected System.
Business Development
- Development of a 240 megawatts (MW) combined cycle plant at Kwinana Power Station to replace Kwinana Stage B announced.
- Contract signed with Energy Equity Corporation/Woodside Energy Limited consortium for the supply of power to towns in the West Kimberley.
- Installed transformer capacity increased by 4% to cater for customer load growth.
- Completion of the Worsley Alumina refinery cogeneration project.
- Highest electricity load ever generated at 2538 MW on 6 March 2001.
OUR COMMUNITY
Community
- Some 5,000 people visited the Safety Watchit Van, either for advice or to have their electrical appliances repaired at no cost.
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- 15,000 Western Australian students participated in the World of Energy’s hands-on education programs during the year.
- 40 secondary schools from metropolitan and regional areas participated in the 9th annual Western Power Solar Model Car Challenge.
- Western Power presenters spoke about electrical safety to 18,500 primary school children in Perth, Albany and the Pilbara.
- Kwinana Power Station provided paid traineeships to local teenagers under the Excellence in Education Compact.
- Launch of StreetVision Decorative Streetlighting to enhance streetscapes and increase security.
Customers
- Introduction of the Equal Payment Plan. Customers now have the option of paying their power accounts in regular instalments over 12 months.
- $10.5 million upgrade of the Customer Call Centre to increase the number of phone calls answered within 30 seconds.
- A further 10,000 customers connected retrospectively through the State Underground Power program.
- Growing customer support for NaturalPower, our renewable energy product for those wishing to contribute to environmental protection.
- Enhancement of the em_Power program, with new products introduced for major customers.
Western Power people
- Introduction of a Management Leadership Initiative program to further develop effective managerial leadership.
- An Employee Equity Perception Survey revealed wide awareness of the company’s diversity and human resource management policies.
- A continued commitment to developing skilled and talented people, with ten new trade apprentices, four cadet professionals and eleven graduate engineers joining the company.
- Safety procedures were reviewed and training upgraded.
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- The safety measure of lost time injury frequency rate (number of lost time injuries per million hours worked) improved from 8.2 to 8.0.
- Renewal for a further three years of the bilateral staff exchange agreement between Western Power and Japan’s Kyushu Electric Power Company.
OUR ENVIRONMENT
Sustainable Energy Development
- Construction of Australia’s largest and most advanced grid connected wind farm at Albany.
- Action to advance renewable energy projects using wind, solar, biomass and waste to contribute to the Commonwealth Government’s renewable energy targets.
- Announcement of a demonstration Integrated Wood Processing Plant to be built in Narrogin. The plant will generate renewable energy for 1,000 homes.
- Collie Power Station received AS/NZS ISO 14001 accreditation for its environmental management system.
- Increased recycling of ash by-products from power stations.
Environmental Care
- The Hotham-Williams Western Power Greening Challenge revegetation program won the WA Large Business category of the Prime Minister’s Award for Excellence in Community Business Partnerships.
- Environmental staff managed more than 250 sites including power stations, depots, wind farms, communication sites, substations and decommissioned properties.
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Chairman’s and Managing Director’s review
Proven performance in the State’s changing energy industry
Leadership, innovation and a strong customer focus have marked a significant year of progress for Western Power. In an increasingly competitive State energy marketplace, Western Power continued to deliver a cost effective and reliable power supply to the people of Western Australia, further building on our successful performance since the company’s formation in 1995.
The company is dedicated to delivering low and stable electricity prices and a reliable and quality electricity supply. Western Power has demonstrated its ability to deliver these benefits to all customers, with prices to business customers not increasing since 1994 and residential customers having only one small increase in this time. In fact, prices for virtually all customer groups have reduced over the past decade, with the average dropping by more than 20% in real terms (excluding the Goods and Services Tax). At the same time, controllable power interruptions were kept to a minimum.
With continued improvements in Western Power’s efficiency and the price rises being experienced in the national electricity market in other States, we expect our electricity prices to be among the lowest in Australia within the next few years.
The establishment of five key business units is helping us achieve greater efficiencies and even better customer service.
Our financial, environmental and social performance is reviewed in this Annual Report. This is the second year that the company has adopted the sustainable business reporting framework, to reflect fully our commitment to environmental performance and community involvement. We are committed to delivering real benefits to Western Australians and will continue to work with the communities in which we operate.
In March 2001 a new company organisation structure was implemented to drive Western Power’s strategic direction and support improvements in overall business performance. Five key business units were formed, namely Commercial Services, Emerging Business, Networks, Retail and Generation. An Office of the Managing Director was also established, comprising internal audit, legal and strategic services functions.
Western Power improved upon its satisfactory financial position by delivering an after tax profit of $188.2 million, up 22.2% on the previous year. Rigorous financial management contained costs within budget (the benefits of Western Power’s debt refinancing program), improved the debt to equity ratio and provided direct contributions to State revenue of $149.8 million, an increase of more than 22.4% on last year’s result. This takes Western Power’s payments to State revenue to more than $629.0 million since our formation in 1995.
Our comprehensive preparations for the introduction of the Federal Government’s Goods and Services Tax (GST) legislation led to a smooth implementation on 1 July 2000.
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The company maintained its strong focus on customers with tailor-made solutions developed to meet each customer groups’ needs. Pleasingly, Western Power has demonstrated its responsiveness to customer needs with the majority of contestable customers choosing to stay with us.
Western Power’s innovative and responsive customer approach was also recognised in the WA Energy Efficiency Awards for 2001, for our Energy Advisor program. The program combines several innovative elements to offer large energy users a sustainable framework for reducing their energy costs and associated greenhouse gas emissions.
StreetVision Decorative Streetlighting, launched in October 2000, responded to the needs of local governments and commercial developers to enhance streetscapes while providing extra security.
Residential customers also benefited from Western Power’s innovation this year, with the introduction of an Equal Payment Plan that gives the option of paying power accounts in regular instalments throughout 12 months.
The company has also continued to add value to our core business activities with the following business initiatives:
?? In December 2000 Western Power signed a contract with the Energy Equity Corporation/ Woodside Energy Limited consortium for the supply of power to towns in the West Kimberley, under the State Government’s Regional Power Procurement program. Under this arrangement, Western Power is expected to save $200 million over the 18-year term of the contract. This saving reduces the company’s losses sustained in this region under the State Government’s uniform tariff policy. New gas fired generation will be installed in the towns of Broome, Halls Creek, Fitzroy Crossing and Camballin/Looma.
?? Our Fibre to the Curb venture aims to provide a high-speed telecommunications network to Perth residents. To date, conduits for fibre-optic cables have been laid in areas including South Perth, Riverton and Claremont as part of the retrospective underground power project being carried out in these suburbs.
?? The company’s demonstration Integrated Wood Processing (IWP) plant to be built in Narrogin was officially announced in December 2000. The plant, which will be operational from mid-2002, will convert mallee trees grown by local farmers into activated carbon and eucalyptus oil, and generate enough renewable energy for 1,000 homes.
?? The company’s Hotham-Williams Western Power Greening Challenge revegetation program won the WA Large Business category of the Prime Minister's Award for Excellence in Community Business Partnerships. The program was selected for its ability to combine resources and talents to achieve mutual goals, develop creative solutions to regional problems and, most importantly, extend and strengthen community links between business and community service organisations.
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?? The Worsley cogeneration project was completed during the year. The joint venture with Fletcher Challenge is a project indicative of the company’s intention to pursue new directions, including closer alignment with energy intensive industries.
?? A comprehensive plant replacement program was announced in December 2000. Tenders were invited for 240 MW of new high efficiency combined cycle gas plant to replace two ageing natural-gas and oil-fired 120 MW generating units at Kwinana Power Station. The Kwinana Combined Cycle Project will result in a significant efficiency improvement in electricity generation. It is planned to have the plant operating by December 2003.
?? Western Power began operating Australia’s largest and most advanced wind farm in June 2001. The 21.6 MW wind farm near Albany is connected to the South West Interconnected System and is expected to reduce greenhouse gas emissions by about 77,000 tonnes a year.
?? In partnership with Kings Park and Botanic Garden, Western Power will commence a much-needed upgrade of a popular recreational area in July 2001. The new Western Power Parkland at Kings Park will offer interactive, family-oriented activities related to energy and the environment.
As this State’s major supplier of energy, Western Power is well aware of the significant role it plays in the wellbeing of all Western Australians.
Ongoing consultation with community and industry stakeholder groups this year covered a broad range of topics; from environmental issues and industry regulation (network access pricing) through to energy education and community partnerships. It is gratifying that positive customer and stakeholder perceptions about the company’s commitment to environmental excellence continued during the year.
Western Power’s 2001/2002 Corporate Strategic Plan, introduced in February 2001, adopts a balanced scorecard framework approach, highlighting the company’s focus on shareholder value added (SVA). The plan outlines key corporate priorities with strategies aimed at ensuring that Western Power is the lowest cost provider of electricity in Western Australia.
To enhance further organisational efficiencies the company committed itself to a people management philosophy that will continue to build managerial leadership and strong individual relationships, by introducing a comprehensive program called the Managerial Leadership Initiative.
Safety continues to be the overriding priority for our people and our customers. A helicopter crash at Bencubbin in January 2001, which resulted in the deaths of Western Power employee Errol Glass and pilot Anthony Gard, was a tragedy that brought great sadness to Western Power people. It served as a sobering reminder that we must strengthen our relentless drive to keep our people safe at work and at home. Safety procedures have been further reviewed, and training upgraded.
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We would like to extend our thanks to Hon. Richard Lewis, who retired as Director of the Board in March 2001, following three years’ service. It is our pleasure to welcome Warren Murphy to the Board of Directors, following his appointment in July 2000. We also welcome Megan Enders as General Manager of the newly formed Commercial Services business unit.
We sincerely thank our colleagues on the Board, the management team, and all Western Power people for their commitment to delivering the company’s strategic vision, and in meeting our customers’ energy needs.
Western Power welcomes the challenges that further changes to the energy industry will bring. We have always supported and will continue to support change that will deliver benefits to our customers. Further deregulation of the electricity market, to 230 kW from 1 July 2001 is the immediate challenge – one that we are well prepared to meet.
As an integrated utility, Western Power has a significant role to play in the Western Australian community through the supply of competitively priced energy and other services as well as providing significant payments to the State Government that are expected to exceed $1 billion over the next five years.
We will discuss, with the State Government’s Electricity Reform Taskforce, the unique nature of the Western Australian energy market and emphasise the positive advances an integrated Western Power has made since it was established and can continue to make.
The anticipated benefits of energy reform in the eastern states and overseas have so far fallen short of expectations. Electricity market reform is a complex process that should not be conducted in haste. It is important to learn from the reform mistakes made elsewhere and not repeat them. The risks and costs of implementing structural reform without proper analysis can be substantial.
Western Power’s overriding concern is to deliver, safely to our customers, low-cost, reliable electricity. Over the past five years we have performed strongly in the deregulated market. We are determined to build upon these achievements and strengthen our contribution to State Government assets and revenue while maintaining our full commitment to Western Australia’s economic and social development.
H I STEBBINS D R EISZELE Chairman Managing Director
18 July 2001
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Our company
Western Power is Western Australia’s leading energy company.
With operations across the State, Western Power owns four major power stations and 31 smaller power stations with a total capacity of 3255 MW, of which 3150 MW is located in the South West Interconnected System. Western Power operates and maintains all except one of the major power stations – Collie Power Station is privately operated and maintained. The 810,000 industrial, commercial and residential customers are supplied through two major interconnected systems – the South West and the North West Interconnected Systems – as well as 29 separate systems in remote areas.
Western Power owns about 56% of electricity generation capacity in Western Australia, with 44% owned by private industry.
Non current assets total $3.8 billion and annual revenue is almost $1.6 billion.
As a corporatised utility owned by the State Government of Western Australia, Western Power is required under the terms of the Electricity Corporation Act 1994 to act commercially and endeavour to make profits that maximise the long-term value of the company.
Western Power pays dividends to the State Government, local government rates and charges and the equivalent of Commonwealth income and sales taxes. The State Government partly reimburses Western Power for community service obligations.
The company’s economic and financial objectives and performance targets are set out each year in a confidential five-year Strategic Development Plan and a publicly available Statement of Corporate Intent.
Quarterly Reports that include financial statements on a consolidated basis and a performance summary are submitted to the Minister for Energy.
The Act also specifies the minimum content of Western Power’s annual report.
Our Vision Western Power: Connected to you. Western Power will be the company of choice for energy and complementary services.
Our Mission Western Power will be the leader in the delivery of energy products and services in Western Australia. We are a company that thrives in a changing market and vigorously pursues new business opportunities.
The skills and outstanding performance of our people will ensure our success. Our customers will regard Western Power as their provider of choice. We will increase the value of our business for our shareholders.
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We’re connected to our company
Offering a cost effective, reliable energy supply is one thing. Having the people, expertise, enthusiasm and facilities to deliver that service to more than 800,000 customers spread across a vast State such as ours involves ongoing commitment to do better tomorrow than we did today.
Review of Operations
Financial performance
An increasingly deregulated and more competitive environment has been a major feature of the energy industry since Western Power was formed in 1995. Major reforms introduced include the Goldfields Gas Pipeline Agreement, deregulation of the Transmission System and further staged deregulation of the distribution system, with customers who have loads in excess of 1 MW able to access energy from other suppliers.
In this business environment Western Power has continued to build on its strong foundations. Western Power is committed to maximising the value of the business, improving services and working with the community.
Significant efficiency improvements and relentless cost management within Western Power have enabled it to deliver consistent profit growth. The graph below shows Net Profit after Tax from 1996 – 2001.
Net Profit After Tax 1996-2001
210 180 150 120 $M 90 60 30 0 1996 1997 1998 1999 2000 2001
This strength has enabled Western Power to undertake a major capital works program totalling $2,150 million, including the construction of a 330 MW Collie Power Station. At the same time the company has reduced its debt-equity ratio. These programs have resulted in significant long-term improvements in efficiency and system reliability.
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As the following graph shows, Western Power has also consistently increased payments to the State Government, providing payments of approximately $630 million since 1995.
Payments to Government 1996-2001
160 140 120 100 $M 80 60 40 20 0 1996 1997 1998 1999 2000 2001
2000/01 has been a year of solid financial performance for Western Power delivering a record profit, revenue growth and a significant increase in dividends to our sole shareholder, the State Government.
Western Power’s profit after tax rose by 22.2% to $188.2 million in the year to 30 June 2001. The result was a significant increase on the previous year’s result of $154.0 million and exceeded expectations.
Revenue from the sales of electricity of $1,415.7 million was $10.7 million or 0.8% lower than last year. However the prior year balance has been increased by a $28.1 million adjustment to unread debtors that was previously classified as an Abnormal Item. Excluding this adjustment, electricity sales were $17.4 million higher. Western Power maintained positive sales growth despite further competition in the energy market. Unit sales of electricity in GWh were 3.1% up on the previous year although unit prices had fallen by 1.8% due to increased competition.
Other revenue was $9.4 million higher than the previous year reflecting the full year impact of Business Ventures entered into during 1999/2000 and proceeds from the sale of fixed assets.
Labour and materials were $28.1 million less than in 1999/2000 although the prior year results included redundancy payments totalling $26.6 million. Fuel and electricity purchases were higher than last year, reflecting higher fuel oil prices, sales growth and the purchase of electricity from third parties. The burden of uniform tariffs continues to weigh heavily on Western Power’s profitability. Oil prices in regional areas alone added $9.0 million to costs, with no opportunity to offset that extra expense through community service obligation payments from the State Government.
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Borrowing costs were $69.0 million less than the comparative result. This reflects a combination of interest savings arising from a substantial debt refinancing program undertaken in 1998/99 and 1999/2000 and debt premiums of $47.3 million incurred on the above program during 1999/2000.
This solid performance resulted in direct contributions to State Government revenue totalling $149.8 million, the highest contribution since Western Power’s inception in 1995.
Capital expenditure of $270.6 million was invested in upgrading existing infrastructure and to cater for future growth in the South West Interconnected System. Projects of note are:
?? Esperance – country infrastructure spending, and ?? the Albany Wind Farm.
Debt has been reduced from last year, improving the debt to equity ratio from 68/32 to 65/35. This was due to debt repayments of $70.9 million, as well as savings in interest expenses from the debt refinancing program.
Generation
The Generation business unit is accountable for the management and operation of Western Power’s generating assets within the South West Interconnected System.
Generation operates 3150 MW of generating plant. These plants are a mixture of conventional thermal units, gas turbines and cogeneration facilities. Coal is used to produce around 70% of the electricity generated, with the remaining electricity produced from gas.
Thermal plants are located at Kwinana, Muja and Collie. Older units at Kwinana and Muja have been in service for 30 to 35 years and are approaching the end of their economic and engineering lives. Accordingly, a strategy for the replacement of ageing assets has been developed. The first stage of the strategy has been approved and involves the development of a 240 MW combined cycle plant at Kwinana to replace Kwinana Stage B. It will also be necessary to replace other older units with new plant over the next decade. The result of the strategy will be a real reduction in the cost of generation and a very substantial reduction in greenhouse gas emissions from Western Power’s generation portfolio.
An order for the first combined cycle plant will be placed early in the third quarter of 2001, for commissioning in late 2003.
A contract for an expansion of the Tiwest cogeneration facility has been awarded. The expansion will double the steam raising capacity of the plant, further improving thermal efficiencies and reducing greenhouse gas emissions per unit of plant output.
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The safety performance of the Generation business unit improved this year, with the Lost Time Injury Frequency Rate falling to 7.6. This is a significant reduction over the last three years. Safety remains paramount in the Generation business unit’s performance, and strategies to improve safety results are constantly reviewed and implemented.
Fuel comprises about half of Western Power’s generation cost. Most fuel is bought through long term contracts originating prior to the establishment of Western Power. The primary reason for Western Australia’s relatively high power prices is the high cost of fuel. Our fuel prices are two to three times higher than those for equivalent eastern states’ power generators. The introduction of high efficiency combined cycle plant and optimised fuel arrangements will see the average cost of generation continue to decline in real terms.
Significant savings in costs related to the provision of maintenance services have also been achieved during the year.
Plant performance has continued to be acceptable, with high plant availability during critical summer peak periods. Older generating units have experienced loss of availability due to age related issues.
Following the decommissioning of the 40-year-old Bunbury Power Station, a contract for asbestos and plant removal is expected to be completed by September 2001. The next stage is to demolish and dispose of structures, with the site expected to be rehabilitated by mid 2002.
Coal stocks are currently at maximum levels due to the delay in the commissioning of the Collie Power Station in 1998/99. This caused coal stocks to increase at all coal fired power stations, especially at Muja (near Collie). To date we have been unable to lower the stock levels.
Generation sales this year were slightly less than last year due to the impact of both competition and the mild summer.
A record peak demand of 2538 MW for the Western Power load area occurred on 6 March 2001, followed by a new winter peak of 2243 MW on 5 June 2001.
Networks
Networks business unit was established in March 2001 and includes the former Transmission, Network Services, Regional Power and Pilbara Power divisions. The grouping of these four previous networks businesses into one promises to yield synergies and savings, and the wider adoption of best practices. This will enable customers’ expectations to be met and exceeded, through an enhanced holistic service.
The new structure enables consistent application of asset management and service provision standards to the operation of the power system for customers within the South West Interconnected System (SWIS). Western Power’s Pilbara and regional customers continue to be serviced via the North West Interconnected System and 29 regional power systems across the State, but with the same consistent asset management and service provider principles being applied.
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System minutes lost, a national measure for reporting reliability of supply of the transmission system, was 30% better than target at 88 minutes for this year.
Power from Western Power’s electricity networks (including Pilbara and regional areas) was available to Western Power customers better than 99.97% of the time.
Western Power’s Customer Charter, with its challenging benchmarks, continues to drive performance improvements in all aspects of network service delivery. Throughout 2000/2001 there have been significant improvements in the following areas:
?? 95% of unplanned outages were restored within four hours in metropolitan and major regional centres (against a target of 85%), an improvement of 12% on the previous year, and ?? more than 95% of faulty streetlights were repaired within five working days in the metropolitan area and major regional centres (against a target of 100%), an improvement of 8% on the company’s 1999/2000 result.
These improvements were in part achieved through the successful implementation in March 2001 of a new $1.1 million distribution network information management system. Developed with in-house expertise and believed to be unique in Australia, the system allows Western Power’s call centre staff to check the ‘real time’ status of customers’ queries, directly linking them to the network.
Western Power’s customer connection process has also been recognised for its high performance, including the conversion process from overhead to underground power supplies. A recent benchmarking study completed by performance analysts, UMS Group, found Western Power’s customer connection process to be among the best in the world.
Power distribution system reliability was maintained and further improved this year, with the completion of SWIS upgrade and network extension projects valued at more than $20.3 million. In particular, country customers in the Denmark-Walpole and Northcliffe areas have benefited from significant system reinforcement programs. Within the metropolitan area, upgrade work has benefited customers in the Shire of Serpentine- Jarrahdale and the Cities of Armadale, Wanneroo, Canning, Stirling and Joondalup.
The introduction of a new three-phase low voltage (415 V) scheme for rural lifestyle lots in June 2001 was enthusiastically received by the development industry and property investors alike. Using a newly designed transformer, rural customers can now access three-phase power without the need for converters or replacement of cable systems. Because the transformers have a greater power rating, fewer are required per lot, resulting in lower development start up costs.
Western Power continued to make good progress with the State Underground Power Program. The program, 50% funded by Western Power and the State Government, and the remainder by Local Government and customers, is replacing power poles and overhead distribution lines with underground power.
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Round two of the program commenced during the year, with more than 10,000 customers having their electricity supplies converted to underground power. The second half of round two will conclude next year with another 10,000 homes and businesses receiving underground power at a total cost of $27 million. More than 31.5% of the Perth metropolitan area is connected to underground power, with improved supply reliability and enhanced visual amenity. Western Australia is still the leading State in placing power underground with more homes and businesses connected to underground networks than anywhere in Australia.
In addition, several important initiatives completed this year will enable continued growth of the company’s transmission network and improve the security of supply to customers.
Eleven upgrade projects have increased Western Power’s installed transformer capacity by more than 4% (450 MVA) to cater for customer load growth. This includes the purchase of three additional rapid response spare transformers for the 132 kV and 66 kV networks. These mobile units help increase overall system reliability and reduce power outage time by replacing damaged transformers. They also enable the deferral of permanent additional transformer capacity and hence deliver capital savings.
To further cater for increases in peak load demand, the Cook Street and North Perth substations are being upgraded from voltage levels of 66 kV to 132 kV. The Cook Street substation upgrade will involve the installation of new gas insulated switchgear. This system offers increased safety, with no exposed ‘live’ parts, and has the additional benefits of taking up less space, increasing supply reliability and requiring less maintenance.
Rural customers north of Perth are also benefiting from increased transmission power system capacity and supply reliability, with the commissioning of the new Regans substation in August 2000. Progress on a new substation at Mount Barker in the State’s Great Southern region is also well advanced; it will be completed by the end of 2001.
Another significant program is underway to improve the performance of Western Power’s network control systems. This three year $17 million upgrade program involves replacing the existing master and emergency backup system with two closely coupled systems, enabling more rapid response to network faults and customer queries.
Following extensive industry consultation, the Networks business unit, together with the Office of Energy, is close to finalising revised pricing structures for independent power producers to access Western Power’s transmission and distribution networks to supply electricity to their customers.
Operating costs for both Western Power’s transmission and distribution systems within the SWIS were contained within this year’s budget. Continuing cost effective and timely service delivery was made possible through ongoing innovation and effective maintenance programs.
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Safety continues to be the overriding priority for the Networks business unit. The tragic Bencubbin helicopter crash in January 2001 has stimulated a further review of safety procedures and training. Safety performance this year for transmission and distribution systems was mixed. The former transmission division recorded a decline in safety performance with a 6.7 lost time injury frequency rate (LTIFR) result compared with an LTIFR of two the previous year. Pleasingly the safety performance for Western Power’s distribution system improved from an LTIFR of 13.1 to 11.2 this year.
The Networks business unit will continue to pursue external business opportunities in the competitive marketplace. Many consulting and contracting projects for external customers have already been completed successfully. In the future, Networks plans to grow the business and provide expert services to both Australian and overseas markets.
Pilbara and Regional branches
The operational structures of Western Power’s Pilbara and Regional branches are sufficiently different from that of the SWIS networks to be reported on separately.
Pilbara branch is responsible for the sourcing of generation and the transmission, distribution, marketing and sales of electricity to customers through the North West Interconnected System.
This year has seen Pilbara branch restructure, its alignment with Western Power’s South West business processes and systems being achieved in March 2001. Leveraging the scale of a large networks organisation while retaining the flexibility and customer focus of a regional business is already improving business performance.
The branch continued the profitable performance it has maintained since 1998/99, achieving a 20 year best ever profit before interest and tax of more than $16.4 million. This result was greatly enhanced by the sale of the Dampier gas turbine. Business improvement strategies aimed at optimising revenue and reducing generation costs and line losses also contributed to the year’s profit.
A strong focus on customer service and supply reliability standards enabled Pilbara branch to achieve nearly 100% of its Customer Charter targets.
Safety performance was strong this year. The implementation of a Pilbara branch Safety Improvement Action Plan and other initiatives saw the business achieve a full year without a single lost time injury (LTI).
Pilbara branch has also focussed on improving Western Power’s corporate reputation. By working closely with local and State Government representatives and industry bodies in developing and implementing a comprehensive stakeholder management plan, significant relationship gains are being made. Initiatives and highlights of the year included:
?? implementation of a strategic Outage Notification Procedure with WAFM and ABC radio stations so that the public is well informed in the event of major power interruptions,
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?? planning for the introduction of key Western Power initiatives in the Pilbara region, including the State Underground Power Program for Karratha and the StreetVision streetlighting program for the Shire of Roebourne, and ?? further developing a comprehensive community partnership program supporting local sporting and cultural events.
In addition to its community focus, Pilbara branch has implemented a major program of rationalising and upgrading employee housing in Karratha and Port Hedland. The program was introduced following survey feedback that identified this as a significant issue for employees and their families.
The Pilbara region is on the verge of another boom in resource and industry development, with the recent announcement of expansion by Woodside Energy and proposed new industries in the Burrup Peninsula and West Intercourse Island.
Pilbara branch is working with the Department of Resource Development and local generators to develop a long term vision and plan for the North West Interconnected System. The branch is taking a leading role in developing this new vision, which will see a major paradigm shift from industries owning and operating their own power plants, to an environment where they are able to source their power requirements from existing generators who wheel their electricity through Western Power’s network. This strategy will ensure improved utilisation for Pilbara’s generators, and access to competitively priced electricity for new industries.
Regional branch is responsible for the provision of reliable power to more than 21,000 customers across the State in towns not serviced by the South West and North West Interconnected Systems.
The branch operates 29 regional power systems and generates the majority of the electricity requirements for 23 of these systems. The balance is purchased from independent power producers, with backup generation provided for three of these systems by Western Power.
Diesel is the major fuel used for power generation in the regional systems, although the use of gas as a fuel is increasing. Power is also produced using renewable resources through wind turbines (incorporating innovative inertial storage systems) and hydroelectric plant. Overall, electricity demand in the regional systems increased during the year, requiring additional generating equipment to be installed in Broome, Carnarvon, Exmouth, Fitzroy Crossing, Marble Bar and Mount Magnet.
The Regional Power Procurement process, which is competitively introducing private generation into the State’s regional areas, has continued to advance during the course of the year. An agreement has been signed for the West Kimberley region, and preferred bidders have been selected and negotiations are at an advanced stage in the Mid West and the Esperance regions. The process is designed to reduce Western Power’s costs and increase power system reliability by introducing modern and efficient generating equipment to the regions.
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Performance against Customer Charter targets was mixed for the Regional branch, with improvements in the areas of planned interruption notifications and meeting of targets in new connection times. Performance in streetlight repairs and some fault restoration times was below target. However these areas are expected to improve with the implementation of a number of initiatives to improve these response times.
Power reliability improvements in Wyndham, Kununurra and Esperance, in particular, will result from the planned installation of remotely controlled reclosers to these areas’ networks to add to the 10 reclosers already installed there. Environmental factors such as lightning strikes and vegetation encroachment have consistently impacted on the power supplies of these areas. However, the $5.4 million rural upgrade program currently being undertaken in Esperance has already resulted in significant improvements to the system’s performance.
Denham, north of Perth, had its existing single wind turbine system expanded to a 690 kilowatt three turbine wind farm with the opening of the town’s wind/diesel project in October 2000. This innovative, Australian designed world leading system enables more than half the town’s electricity to be supplied from wind energy; reducing diesel consumption by 450,000 litres a year and cutting annual greenhouse gas production by around 1400 tonnes. The project was awarded a $1 million Renewable Energy Showcase Grant by the Australian Greenhouse Office.
A new lateral from the Mid West gas pipeline was commissioned in the first half of 2001 and connects to the privately owned Hill 60 power station near Mount Magnet. The pipeline, stretching from east of Geraldton to Windimurra, was commissioned in August 1999 and is jointly owned by Western Power and the Australian Pipeline Trust.
Overall, more than $7.6 million was invested in regional capital projects throughout the year.
Increasing oil prices and deterioration of the exchange rate drove fuel prices up, causing financial performance to decline during the year. These factors also accentuated the impact of the uniform tariff policy and the inability to either pass on these additional costs or be recompensed for the community service obligations fulfilled by Regional branch. An operating loss before interest and tax of $45.8 million for the 2000/2001 period was recorded by the branch, an increase of 32% from the previous year.
Retail
Western Power has been privileged to work with more than 810,000 customers this year, meeting their energy needs and providing a dependable service.
Because we live and work in the State, we are committed to forming strong and lasting customer relationships that extend beyond the day-to-day running of our company. To succeed in an increasingly competitive environment, it is crucial to understand, and respond to, customers’ changing expectations.
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Our Retail team continues to develop innovative products and services tailored to our customers, from families to large industries.
We revised our Customer Charter to clearly show the high targets we set in key service areas. While we have not achieved all of these targets, it is pleasing to report significant progress in the speed in which we are answering customer enquiries. Western Power's Call Centre received some 1.7 million phone calls from customers throughout Western Australia and answered 85.35% of these within 30 seconds. After undertaking a $10.5 million upgrade of our Call Centre, our recent performance shows we have made considerable improvements, answering more than 95% of customer calls within 30 seconds. We continue to pursue technological advancements in this area.
Requests for a payment system allowing people to better budget for their electricity accounts resulted in the introduction of an Equal Payment Plan in March 2001. The Equal Payment Plan gives customers the option of paying their power accounts in regular instalments during the year. Some 700 customers joined the Equal Payment Plan in the first two months. It has been praised by the Western Australian Council of Social Services for giving people the ability to budget their expenses more accurately.
Support continues to grow for our renewable energy product among customers seeking to contribute to environmental protection. NaturalPower supplies electricity from hydro, wind, bio-energy and solar generation. More than 550 customers have purchased NaturalPower since it was launched in March 2000.
The Retail team is helping residents, community groups and businesses find ways to reduce their energy consumption and greenhouse gas emissions. We are proud to have worked with two top contenders in the WA Energy Efficiency Awards 2001. They were the Shire of Serpentine-Jarrahdale (finalist in the Educational and Community Based Programs Award) and the Western Australian Police Services (joint finalist in the Energy Achiever Award). The Energy Efficiency Awards were given to individuals and organisations for their achievements in energy efficiency, energy conservation and the use of renewable energy.
Another new product, StreetVision Decorative Streetlighting, was launched in October 2000 for local governments and commercial developers looking for ways to improve the appearance of their streets while providing extra security.
For major business clients, we are continuing to enhance the em_Power suite of products and services. Introduced in July 1999, businesses can constantly monitor their power consumption levels through the em_Power website. The package offers flexible tariff, billing and metering options, plus a range of services aimed at improving energy efficiency.
Several new products are now available to our em_Power clients:
?? the Energy Advisor program includes a software tool that allows organisations to develop a structured system to reduce their energy use and improve profitability. Energy Advisor won the Innovation Award at the WA Energy Efficiency Awards 2001,
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?? Incremental Load – Super off-peak provides financial incentives to business clients who are seeking to increase their energy consumption during off-peak periods, and ?? the em_Power Online Warning System allows our largest customers to check their energy consumption and efficiency against their contracted conditions. If customers approach or exceed these conditions, our system will email direct warnings to customers. Under this new system, Western Power can work closely with customers who may not have the equipment or the time to monitor their energy usage.
Through em_Power and products such as Energy Advisor, Western Power is helping major clients increase business efficiencies and gain a competitive edge by driving down their power costs.
Our Retail team is constantly striving to challenge and improve the way in which we work to deliver the best range of energy products and services available. It is increasingly clear that the deregulated market is opening up valuable opportunities for us to grow and develop total energy solutions upon which every Western Australian can rely.
People and support services
With a restructure of the company’s corporate service areas, and the introduction of a new Corporate Strategic Plan and a management framework program, Western Power’s people are well placed to take on the challenges of working in an increasingly competitive marketplace. During the year the 2001/2002 Corporate Strategic Plan was presented to all employees. It adopts a balanced scorecard reporting framework, with four major perspectives: financial, customer, internal process, and growth. The new approach complements the company’s focus on shareholder value added (SVA) and will enable Western Power people to work in a coordinated and collaborative fashion in achieving the company’s corporate goals.
Safety continues to be Western Power’s overriding value, both for our people and for the communities in which we operate. The overall safety performance trend for the company remains positive with a favourable decrease in the Lost Time Injury Frequency Rate (LTIFR) and a discernible decrease in the total number of medical treatment cases.
The introduction of Contractor Safety and Health Management Guidelines in January 2001 and the ongoing successful implementation of the company’s Safety and Health Plan are serving to further strengthen the company’s relentless drive to keep our people safe at work and at home.
Western Power seeks to ensure that the principles of equity and diversity are upheld throughout the company. During the year, a training program in diversity management for all managers and supervisors was finalised, and the availability of teleworking arrangements was reviewed and extended. The Contact and Grievance Officer Network is the company’s facility for resolving complaints of discrimination and harassment, and this was also reviewed and significant improvements were implemented.
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In December 2000, the first internally designed Employee Equity Perception Survey was conducted to measure our overall performance in the area of diversity and human resource management. The results confirmed a pleasing awareness of the company’s diversity policy; the willingness of people to raise Equal Employment Opportunity (EEO) issues; and the relevance of work-related criteria (performance, education and experience) in determining career advancement at Western Power.
Areas of concern that were highlighted by the survey, such as the need for refresher training for management and awareness training for all employees, will assist Western Power to further focus our efforts in diversity management. The Employee Equity Perception Survey will be a valuable tool for measuring the outcomes of these and other initiatives in the area of diversity and human resource management.
Western Power also works to ensure that people with disabilities have the same access to the company’s services (and employment opportunities) as other members of the Western Australian community. In delivering this, Western Power ensures its call centre staff are sensitive to the needs of people with disabilities; and customer information is made available in formats that meet special communication needs (via a TTY telephone typewriter facility and large print format power accounts/newsletters).
The annual organisational culture employee opinion survey result showed improved scores in 17 of the 22 cultural areas surveyed. For the fourth consecutive year previous improvements in workplace culture were expanded upon.
Our commitment to developing skilled and talented people continued this year with the company recruiting 10 trade apprentices, four cadet professionals and 11 graduate engineers. A total of 51 trade apprentices, 65 trainees, nine cadet professionals and 26 graduate engineers is currently employed.
To ensure Western Power’s continued growth and success, we need to attract and retain the very best people, and create an environment in which everyone can contribute, work to their full potential and find work a satisfying experience.
An important part of creating that environment is the continued development of a strong, direct relationship with our people, based on a high level of trust, individual commitment and accountability, and recognition of achievement. This requires a high level of managerial leadership, with leaders accountable for the performance and development of their teams to produce outcomes that reinforce the company’s values and business objectives.
With the introduction of a Managerial Leadership Initiative (MLI) program the company has adopted a management framework to further develop strong managerial leadership. While the framework especially applies to those occupying formal leader positions, it also is relevant to our technical and professional specialists and to the many dedicated Western Power people who operate our power stations, depots and customer centres.
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In addition to the business acumen development achieved through the MLI program, other specific professional development throughout the year included programs in the Trade Practices Act, employment law, the Goods and Services Tax (GST), and the practice and principles of financial investment. A second pay increase instalment of 4.25 % was awarded to eligible Western Power people in September 2000, as part of the company’s three year Certified Agreement. The agreement, which has been in place since September 1999 and will reward people with pay increases totalling 12.85%, has assisted in increasing flexibility and addressing changes to working patterns and conditions across the business. A number of employees also chose to accept individual contracts of employment with Western Power.
Process improvement gains have been made throughout the year with Western Power’s internal consulting group supporting more than 30 projects across the company. The group took a leading role in the review of Western Power’s structure, which is expected to deliver $5 million in benefits by the end of 2002/2003. Other projects delivered process improvements ranging from a revised organisational structure and processes for distribution network asset management and operational groups, to improved processes for collection of Fringe Benefit Tax data and the handling of customer payment arrangement enquiries.
In January 2001 a bilateral staff exchange agreement was renewed for a further three years between Western Power and Japanese utility Kyushu Electric Power Company. Western Power has other similar agreements with Singapore Power, Scottish and Southern Energy plc and the Electricity Generating Authority of Thailand. Since 1995 more than nine staff exchanges have occurred, providing valuable sharing of knowledge, technology and experience.
The Western Power Superannuation Fund continued to attract new members. More than 2047 people have joined the fund, and assets under management currently total nearly $55 million.
Western Power’s smooth introduction of the GST on 1 July 2000 was testimony to the company’s extensive preparations to ensure compliance with the Federal Government’s legislation. A comprehensive communications program with suppliers, customers and Western Power people, together with detailed systems work assisted in this successful implementation. Western Power constantly reviews its systems and ongoing legislative amendments to ensure the company complies with its GST requirements.
Commercial Improvement Program (CIP)
Following the replacement of 78 business and operations support systems with the Australian Company Mincom's Enterprise Asset Management software, MIMS, Western Power signed a partnering agreement with Mincom in November 2000. MIMS combines asset, logistics, human resources and financial management systems. Western Power will continue to gain efficiencies by developing and streamlining work processes by working with Mincom to further develop MIMS’ functionality.
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We’re connected to our Community
For more than 80 years Western Power and it predecessors have played a crucial role in the development of Western Australia’s industry, technology and agriculture. We remain committed to supporting Western Australians in all endeavours of life.
Our Community
Western Power is an enthusiastic member of many communities. Our financial and other support is actively promoting many educational, cultural, environmental and sporting activities at all levels.
Through our community partnerships, Western Power is educating young people about science, energy and the environment, working with landcare groups to preserve flora and fauna and fostering the development of sports and the arts throughout the State.
In everything we do, our priority is to protect and provide for the local communities in which we live and work, by giving something back to our customers.
Education
Western Australia’s talented young individuals are leading our State into a bright future. Western Power is committed to helping young people discover and develop their talents. Our education programs are designed to involve young people in the joy of learning and fire their imaginations, whether we are talking to children about being safe around electricity or showing university students the latest in solar technology.
Young people enter a world of ideas, inventions and futuristic technology at Western Power’s Energy Education Centre, the World of Energy. Based in Fremantle, the World of Energy is Western Australia’s premier energy education program, teaching children about the entire energy industry. Students engage in active learning through curriculum- linked, hands-on education programs. Learning occurs in small groups facilitated by student teachers trained as science interpreters.
Some 15,000 students visited the World of Energy during 2000-2001. After each program, teachers are asked to evaluate their visit to the World of Energy. Ninety-eight per cent of teachers rated the programs as “excellent” and “very high” in 2000.
One of our most popular educational activities is the Western Power Solar Model Car Challenge. Some 2,500 secondary students have enjoyed being involved in the challenge over the past nine years. Student teams design solar model cars in class and race them at Forrest Place, Perth. They discover the benefits of solar power while teachers find the challenge works well with other learning areas, such as science and maths. Forty secondary schools, from city and regional areas such as Esperance and Jerramungup, took part in last year’s solar model car challenge. Western Power sent the top three teams to the Australian- International Model Solar Car Challenge in Sydney. The Sydney challenge was won by Hampton Senior High School, which has been invited to compete in Argentina in September 2001.
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More schoolchildren are learning about the importance of being safe around electricity through the Corporation’s Shockproof School Electrical Safety Program. Western Power presenters spoke about electrical safety to 18,500 primary school children in Perth, Albany and the Pilbara in the past year. We are extending the program to other regional centres, including Bunbury and the Peel region.
Learning about science can be fun, as more than 3,500 children have discovered after joining The Power Kids’ Club. The club was formed in March 2000 to teach four to 12- year-old children about electricity, energy, natural resources and the environment. Members enjoy corresponding to the ‘Club Chairmouse’, named Socket. They receive regular newsletters, fact sheets, contests and birthday cards. Socket, a giant native mouse, made his first public appearance at the Western Power Ideal Home Show in March 2001, and is scheduled to visit other public events later this year.
(The following column will appear as a separate “pull out box” in the community section
Western Power’s new VIP
Name: Socket. Business Title: Chairmouse, The Power Kids’ Club. Species: Pebble Mound Mouse. Place of Birth: The Pilbara region. Residence: World of Energy, Fremantle. Height: 185cm (in bare claws). Weight: No comment. Favourite food: Double cheeseburger followed by a large helping of chocolate cheesecake. Hobbies: Meeting my Power Kid mates, playing junior cricket and netball, answering fan mail, planting trees for the Greening Challenge.)
During National Science Week, we conduct the State’s only solar cooking contest for primary school children. This year, more than 500 Year 6 pupils from Perth metropolitan schools designed, built and tested solar cookers in class. The best cookers from each school were entered in the third Western Power Solar Cook-off. The competition was held at Western Power’s World of Energy in May 2001.
Primary school children are developing their understanding of the weather and its relationship to energy and the environment through the Junior Weather Watch program. With Western Power’s support, six primary schools around Western Australia are selected each school term to measure daily temperature and rainfall figures, which are then broadcast on Channel Nine’s nightly weather segment. Fifty-five city and country primary schools have reported for Junior Weather Watch since it began in 1999.
We continued to work closely with the Scitech Discovery Centre to increase children’s understanding of scientific concepts through lively “hands-on” activities. Western Power has supported Scitech since the centre began in 1988. The Western Power Zone at Scitech features 10 interactive exhibitions, where children enjoy participating in the Western Power High Voltage Show.
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More than 5,500 children visited Scitech at no cost through the Western Power School Visit Support Program. We provided admission charges to Scitech for more than 100 worthy primary schools throughout Western Australia, from Bunbury to Shark Bay.
For more than a decade, students have experienced a ‘living classroom’ when touring our power stations. More than 30,000 people have visited Kwinana Power Station to see how electricity is generated. The tours are part of the University of Western Australia's engineering curriculum. We also have hosted tours of the State’s oldest power station, Muja Power Station in Collie, since 1987.
To encourage university students interested in alternative energy, Western Power helped develop Western Australia’s first academic degree in this field. Students become skilled in alternative energy technologies through the Renewable Energy Engineering Degree Program at Murdoch University’s Rockingham campus. The degree course was offered for the first time this year through the Western Power Chair in Renewable Energy Engineering and is sponsored by Western Power and the Alternative Energy Development Board.
Scholarships/awards
Young people are encouraged to maximize their potential and achieve their dreams through our scholarship and award programs. Both city and country students have benefited from Western Power’s assistance.
We offer a range of scholarships to support regional and remote communities. The problems of distance and a lack of resources can be prohibitive for young country people who hope to study in Perth. Since 1996, we have awarded the annual Stuart Morgan Scholarship to a country student to assist with the costs of gaining an undergraduate degree at a Perth university. Successful scholars receive financial assistance for up to five years. This year’s scholarship winner was Michael Evans, from Brookton. Since 1989 Muja Power Station in Collie has also provided annual scholarships to two high school graduates from the region.
Inaugurated in 1993, The Bruce Kirkwood Memorial Scholarship offers a university scholarship to an electrical engineering student at either the Curtin University of Technology or the University of Western Australia. The annual scholarship encourages studies in the field of electric power engineering.
We encourage young people to experience other countries and cultures through the AFS Scholarship. Since 1997, we have provided an annual overseas scholarship to the child of a Western Power employee, through a program administered by AFS Intercultural Programs, Australia. Jade Goodlet is Western Power’s 2001 AFS Scholar and will spend a year studying in Brazil.
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Western Power is delighted to reward the exciting work of young scientists by sponsoring the Young Australian of the Year Awards. Genetics scientist Kristen Nowak was presented with the 2001 Science and Technology Award, the category sponsored by Western Power for the past eight years. The award and associated funding will assist Kristen’s research to find a cure for a rare muscle disease known as floppy baby syndrome.
Vocational training
To help young people secure their future and enter rewarding careers, Western Power provides opportunities to gain practical industry experience. In 2000/2001 some 130 apprentices and trainees worked at Western Power in a wide range of areas across the organisation. We recognise individual achievements by presenting annual awards to outstanding apprentices and trainees. To further strengthen the link between the public training system and the electricity industry, Western Power is represented on the Western Australian Information, Electrotechnology and Utilities Industry Training Council.
The Kwinana Industries Council Excellence in Education Compact
This partnership with Kwinana industries and high schools has won national and international awards. Under the Excellence in Education Compact, Kwinana Power Station offers paid traineeships to local teenagers during their studies. The traineeships have helped revive students’ interest in their schoolwork through the application of practical work skills. Since the Compact began, the number of Kwinana students who finished Year 12 increased from 68% in 1995 to 82% in 2000. This program won the prestigious Millennium Global Best Award, presented in Edinburgh, Scotland in 2000.
The environment
No matter where we are operating – in the middle of Kalgoorlie’s red dusty outback or in the lush tropics of the far North – our top priority is to protect the local environments in which we are working.
Our environmental work extends beyond maintaining the current state of the physical environment. Western Power is actively involved in community projects that aim to restore degraded land, rescue endangered wildlife and find solutions to environmental problems.
We began operating Australia’s largest, most advanced wind farm on the Albany coast in June this year. The $45 million wind farm was built at Sand Patch, 12 kilometres south- west of Albany, in response to community demands for clean, green energy. The facility includes 12 wind turbines, mounted on 65 metre-high towers and carrying three 35 metre- long blades.
Western Power engineers consulted with local groups and individuals during each phase of the project to ensure the Albany Wind Farm had the community’s support.
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(The following case study will appear as a separate “pull out box” in the community section:
When we began to consider building the largest wind farm in Australia, we knew we could never undertake such a significant project alone. As soon as Western Power engineers selected Albany as the best wind farm site - with its powerful winds off the Southern Ocean - we immediately sought local people’s views on the project. The proposed 20 megawatt wind farm had the potential to create long-term environmental and financial benefits for the region. But it was vital to make sure Western Power’s plans reflected the community’s aspirations for its region’s development. As a result, we established a detailed community relations program to discuss the project with local people. Western Power staff met regularly with community groups and individuals, produced a monthly bulletin for stakeholders, organised displays in shopping centres and the town library, and constantly updated information on our website. We also formed a Community Advisory Group consisting of local government, businesses, environmental groups and government agencies. The City of Albany’s Environmental Officer Melanie Price said the group provided a vital avenue for community input into the wind farm’s development. “This forum brought together people with local expertise who were able to assist with community perceptions and avoid any misunderstandings that may arise in projects of this size,” she said. After consulting with a wide range of groups, Western Power engineers modified and adapted the wind farm design to satisfy their concerns. During a public open day in April, we conducted guided tours of the construction site for some 1000 people. We will continue to promote renewable energy options to local communities around Western Australia.
The Hotham-Williams Western Power Greening Challenge is Australia’s largest volunteer-based revegetation project of its kind. The Greening Challenge has attracted thousands of volunteers keen to plant trees on farms and reverse the tide of salinity across rural Western Australia.
Since 1996, volunteers have planted native seedlings each winter on degraded farmland in the Hotham-Williams Catchment, about 100km south-east of Perth.
Last winter, 810,000 seedlings were planted by 1200 people, including Western Power staff, local farmers and other Perth and country volunteers. The seedlings were distributed over 800ha of private land. Farmers built 213 kilometres of fencing to protect the seedlings.
So far, volunteers have planted some 2.4 million native seedlings in the Catchment area. The Hotham-Williams Western Power Greening Challenge will be completed at the end of the winter planting season in 2002.
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This successful partnership between business and community groups has been recognised by a number of State and national awards. The Greening Challenge is a State finalist in this year’s Prime Minister’s Awards for Excellence in Community Business Partnerships, winning the WA Large Business Category of the Awards in June 2001.
In Kalgoorlie-Boulder Western Power is working with the local community on a number of landcare initiatives through our sponsorship of the Kalgoorlie-Boulder Urban Landcare Group. Recent activities include the planting of 2000 trees and shrubs on degraded land, and the management of the Karlkurla Bushland Park near Kalgoorlie’s city centre, a showcase for rare Goldfields flora.
As a strong advocate of responsible energy use, Western Power has sponsored the Western Australian Energy Efficiency Awards since 1999. The awards recognise the efforts made by local industries, businesses, government agencies and community groups in energy efficiency, energy conservation and the use of renewable energy.
During the following community events, we discussed a range of landcare and energy issues with people who visited our displays:
?? Landcare Pavilion, Perth Royal Show - October 2000, ?? Dowerin Field Days - August 2000, ?? Darlington Arts Festival YouthFest – November 2000, ?? Western Power Ideal Home Show – March 2001, ?? Rockingham Environment Festival – March 2001, ?? Million Trees Program Earth Day Celebrations (student program) – April 2001, and ?? Garden Week – April 2001.
Community assistance
Western Power is dedicated to the safety and well-being of Western Australians. We have developed a number of community projects to enhance Western Australia’s reputation as a prosperous State with an enviable lifestyle. As part of our service to the community, we show people how they can save money on their electricity accounts, and repair customers’ electrical appliances free-of-charge.
From old kettles and irons to electric facial saunas, our customers’ household appliances can be repaired at no cost to them at the Safety Watchit Van. About 5000 people visited this mobile electrical repair and advice centre last year. The Safety Watchit Van’s team of qualified electrical fitters and mechanics visits shopping centres, retirement homes and community exhibitions across metropolitan and country regions.
We understand that some people, through no fault of their own, have difficulty paying their electricity accounts. To support our customers, we have developed the Western Power Assist Scheme. Our emergency relief fund is administered by the Western Australian Council of Social Service (WACOSS). Relief agencies access the emergency fund to help people facing disconnection because they cannot pay their electricity accounts.
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Pensioners, senior citizens and other eligible participants receive rebates on some electricity charges through a scheme administered by Western Power. Some 214,000 people benefit from the State Government Energy Rebate scheme. Financial assistance includes a daily supply charge rebate, dependent child rebate and reduced charges on some Western Power services.
Customers supplied by Western Power’s Pilbara branch include a significant proportion of indigenous people. Pilbara staff are actively promoting the rich culture of the region’s Bunjima, Yinhawangka and Kurrama people and in June 2000 we provided $20,000 for the development of a new visitor’s centre at Karijini National Park. The centre will assist Aboriginal people to develop tourism enterprises based on their culture and traditions. Western Power was the only business corporation to sponsor the $4 million project, with the remaining funding contributed by the Federal and State Governments.
We are also working with community groups in the Pilbara region to provide more recreational and employment opportunities for young people. To achieve this goal, Western Power has entered into community partnerships with the Pilbara Development Commission and the Police and Citizens’ Youth Clubs in Port Hedland and Roebourne.
The arts
Western Australia’s musicians, artists and dramatists have enriched our society, giving us a better understanding of other countries and cultures and of ourselves. We are committed to helping the arts thrive and flourish in Western Australia, from the stately concert halls of Perth to community festivals in rural towns.
We are working with the West Australian Symphony Orchestra to bring classical music to more Western Australians. Western Power sponsored this year’s summer series of concerts performed at Kings Park and Botanic Garden. We have also been the principal supporter of the annual Symphony under the Stars since 1996. This popular event is performed in the summer twilight at Kings Park, with families, students, seniors and businesspeople enjoying the opportunity to hear the music of the world’s greatest composers in a relaxed environment.
Bunbury community groups have built an outdoor concert shell with Western Power’s assistance. The concert shell was dedicated to the late Deputy Mayor Graham Bricknell, who was a respected musician from Bunbury. Opened in February 2001, the Graham Bricknell Memorial Music Shell is available for community groups and cultural events.
Western Power supported the following community and arts activities:
?? Bunbury Regional Entertainment Centre, ?? The Queen’s Cup Brass and Concert Band in Collie, ?? Handzon Theatre Company’s “lunchtime theatre” in Perth, ?? Festival of the Wind in Esperance, ?? Christmas Lights Competition in Perth, and ?? Pilbara Festival of Lights in Port Hedland and Karratha.
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Sports
We are proud to support this State’s many talented athletes, and encourage their pursuit of excellence. We are particularly pleased to be associated with another successful WA team, the Western Warriors, winners of the Mercantile Mutual Cup (1999/2000 season) and Sheffield Shield, now Pura Cup (1998/1999 season).
With 62 power stations and depots scattered across Western Australia, we actively promote and participate in many city and country sporting events.
Young cricket and netball players receive expert coaching with Western Power’s assistance. Hundreds of country children have benefited from the Western Power Regional Junior Cricket Program since 1997, and the Western Power Netball Talent Identification Clinics since 1995. Through the programs, country children receive the same access to quality coaching as city kids. Each year, professional coaches conduct sports clinics for young people throughout regional Western Australia.
We also supported the following sports associations and events:
?? Motoring South West, ?? The Western Power Goldfields Football League, ?? Cambridge Pro-am Golf Tournament in Perth, ?? The Western Power Chas Egan Memorial Bike Race in Menzies, ?? Eastern Goldfields Cricket Association, ?? Shire of Roebourne Olympic Torch Relay celebrations, ?? Perth Glory vs Sydney Olympic Game in Karratha, ?? North West Games in Karratha, ?? North West Netball Championships in Karratha and Port Hedland, and ?? 2001 Port Hedland Blackrock Stakes.
Western Power people in the community
Western Power people participate in community and charitable organisations throughout the State. They include voluntary rescue workers in the State Emergency Service, camp counsellors who help children with cancer, and members of the Australian Defence Force Reserves.
Every month for the past five years, staff have collected money for children with special needs and other disadvantaged groups in society, with the money raised during Western Power’s monthly casual dress days. Staff teams also compete in charity sporting events, such as the City to Surf Fun Run and the Corporate Cup in Perth. Every two years, we hold a staff sports carnival, the Western Power Games, in different locations around the State. Proceeds from the Games are donated to a local charity or community group.
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Industry
In 2000/2001 we supported the development of Western Australia’s diverse communities through sponsorships of Local Government Week, the Master Builders Association, the Urban Development Industry Association, the Gold Conference in Kalgoorlie, and Dowerin Field Days, a showcase of agricultural exhibits, working displays and demonstrations in the town of Dowerin, 165km north-east of Perth.
Our future community commitments
Western Power continues to support all levels of the Western Australian community, from families and pensioners to major businesses.
We are delighted to begin restoration work in a much-loved area of Kings Park and Botanic Garden. The new Western Power Parkland will offer fun, interactive activities focused on energy and the environment, while preserving the natural beauty of this popular play area.
This new venture builds on our strong partnership with the 129-year-old “people’s park”. Over the past four years, we have assisted Kings Park in saving 14 of the State’s most critically endangered native plants. Many international visitors have admired Western Power’s spectacular display of lights on the stately gum trees lining Kings Park on special occasions during the year.
We actively seek sponsorship applications from community groups and individuals across the State each year, and will always strive to develop a broad cross-section of initiatives to benefit the Western Australian community.
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We’re connected to our environment
Western Power recognises the value of the environment to the community and future generations. We will work towards sustainable development by the responsible production, distribution and use of energy. (Western Power Environmental Policy)
Environmental Policy
Western Power takes its environmental responsibilities seriously. We rigorously adhere to all State and Federal environmental requirements.
Environmental governance
Western Power’s environmental corporate governance framework is based on organisational structure, policies, practices and responsibilities. Included in this is a commitment to rigorous environmental management through community consultation, proactive planning, compliance, sustainable development and auditing for continuous improvement. Our environmental policy specifies the company’s environmental responsibilities. This policy can be found on the Western Power web site at www.westernpower.com.au/our_environment.
Environmental compliance
All our sites are subject to a range of State and Federal environmental legislation. Some sites also require State environmental licences. All performance obligations under these licences are monitored and reported, and can be subject to government agency audit or inspection. Table A provides a summary of licences held by Western Power facilities.
TABLE A: WESTERN POWER ENVIRONMENTAL LICENCES Environmental Licence Total
Department of Environmental Protection Operating Licence 14 Department of Environmental Protection Petrol & Oil Trap Licence or 7 Registration Department of Minerals & Energy Licence to Store Dangerous Goods 37 Water & Rivers Commission Groundwater Well Licence 7 Water & Rivers Commission Underground Water Pollution Control Area Permit 3 Licence Total 68
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How do we manage our impact on the environment?
A formalised management system, electronic documentation, environmental team leaders, regular training and performance audits are some of the ways Western Power is achieving continual improvements in environmental management.
Environmental Management System (EMS)
Western Power’s Environmental Management System is a structured approach to identifying and managing site environmental issues and impacts, with a commitment to continual improvement of environmental performance.
To ensure that our EMS is operating effectively the system is monitored and maintained throughout the year, with training initiated where necessary. Western Power’s EMS was stringently reviewed in line with the new corporate structure to ensure that it was capable of supporting our goal of environmental excellence.
Table B: EMS 2000/2001 Date Monitoring Activity July - August 2000 External EMS audit October 2000 External EMS audit reports released EMISWeb training courses conducted November 2000 ESAA environmental code of practice audit Environmental Network Forum Environmental executive committee meeting December 2000 EMISWeb released to Western Power April 2001 Internal environmental licence compliance audit May 2001 Internal environmental licence compliance audit reports released Environmental Network Forum June 2001 Environmental Executive Committee meeting
EMISWeb
Our EMS electronic documentation software was redesigned and placed on the company intranet in December 2000. Named EMISWeb, it is the tool employed by our staff to monitor and record our environmental activities and performance, legal compliance and continuous improvement initiatives. The software is used throughout the company to assist in the prevention, control and abatement of pollution and environmental harm, and to support the protection and management of the environment in which we operate.
Through EMISWeb, our environmental staff manage more than 250 sites including power stations, depots, wind farms, communication sites, substations, decommissioned properties, and more than 92,000 kilometres of line and cable. Currently we have 26 EMS Team Leaders who support and utilise the system across the company.
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Several workshops were held during October 2000 to train EMS Team Leaders in the application of EMISWeb and to provide an update on imminent environmental legislation changes.
Contaminated sites legislation
The Department of Environmental Protection (DEP) released the Draft Contaminated Sites Bill for public comment in June 2000. The draft Bill provides for the identification of contaminated sites, the creation of a register of contaminated sites, and processes for site restoration and liability determination.
The proposed Bill will provide a regulatory framework and a degree of certainty for the management of contaminated sites in Western Australia.
Environmental performance
How have we performed this year?
Measuring customer perceptions of Western Power’s environmental performance is one benchmark we use for determining the success of our environmental policies. In a recent survey, Western Power’s environmental performance rated as excellent when compared with other utilities.
Targets
Our customers expect us to achieve environmental excellence and lead in the development of sustainable energy resources. Our environmental performance is tracked annually, using three performance indicators, and provides data for efficient resource allocation. This information is detailed in the Strategic Result Areas section of this report.
Environmental auditing
Environmental audits are conducted to ascertain compliance to requirements, benchmark performance, and determine EMS implementation. It is an essential tool for monitoring and encouraging continuous improvement, identifying not only areas for improvement but also areas of excellence.
This year we have undertaken several environmental compliance and system audits, detailed below. Audit results and recommendations are presented to the Board and Executive on a regular basis.
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External Audits An independent environmental consultant audited our EMS in August 2000. A representative sample of 20 sites across all operating areas was selected. The purpose of the audit was to evaluate the structure and implementation of the system and to verify the results of previous internal audits.
The audit showed a strong desire at all employee levels to achieve the environmental objectives outlined in Western Power’s environmental policy. Significant improvements in coverage and implementation were demonstrated throughout the company since the 1999 audit.
External EMS Audit (August 2000) Compliance with EMS Criteria
100
80
60
40
20
0 Mgm Program Communication Emergency Env Overall compliance Legal Requirements Env Responsibilities Environmental Policy Environmental Aspects Preparedness/Response Env Doc/Records/Control
In October 2000 an audit of EMISWeb was conducted by an independent environmental consultant, to verify that the structure and content of the system software met the requirements and intent of AS/NZS ISO 14001:1996, Environmental Management Systems – Specification with guidance for use. The scope of the audit included an analysis of the templates and functions established within the EMISWeb software.
Internal Audit Qualified internal auditors conducted an environmental licence compliance audit in April 2001 in accordance with AS/NZS ISO 14010. To ascertain compliance, interviews were held with site management, local EMS Team Leaders and on-site personnel directly involved in meeting licence conditions.
The objective of this audit was to determine Western Power's level of compliance with environmental licence and permit conditions. Forty-two sites were audited with a total of 68 licences being comprehensively reviewed. A review of the action items resulting from the audit will be conducted in October 2001.
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ESAA Audit Western Power is a signatory to the Electricity Supply Association of Australia’s (ESAA) Environmental Code of Practice. As such we are committed to promoting sustainable development, social responsibility, community participation and environmental and resource management in the production and delivery of electricity.
Experienced internal auditors completed the audit of our application of the Code in November 2000. This was the second audit since the implementation of the Code in 1997 and the complete industry audit results were released in June 2001.
Western Power’s overall score was 3.9, based on a scale of zero to five. Western Power generally rated above average across all policies, with the overall score for all businesses averaging 3.6.
ESAA Code of Environmental Practice Audit scores by policy
Policy Overall Average Score Western Power Score Sustainable Development 3.8 3.8 Social Responsibility 3.7 4.0 Community Participation 3.8 4.0 Environmental Management 3.5 3.6 Resource Management 3.5 4.0 All Policies 3.6 3.9
Variation of average scores for ESAA energy businesses with or without AS/NZS ISO 14001 certification (international standard for EMS)
Average Score All businesses 3.6 Businesses with ISO 14001 3.8 Businesses without ISO 14001 3.5 Western Power 3.9
Environmental reputation – the way forward
Western Power places a strong emphasis on taking a leading role in the community to protect and care for the environment. We recognise that the need for practical environmental care today will protect the right of future generations to a sustainable and diverse natural environment.
Over the past five years, we have been tracking customer perceptions of the company’s environmental performance in annual surveys. The result of this year’s survey is detailed in the Strategic Result Areas section of this report. We also undertook a more detailed investigation of customer and stakeholder expectations about Western Power and our commitment to environmental excellence. This revealed a continuation of generally positive perceptions whilst highlighting areas for improvement. The sample surveyed in this investigation was statistically representative of our customer base.
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For the first time in an environmental survey, Western Power was compared with other utilities and generally performed very well. Forty-six percent of those surveyed delivered an excellent rating for Western Power when compared with other utilities on how well each was perceived to be environmentally innovative. Environmental innovation and leadership were identified as being essential for excellent environmental performance.
One area that we can improve however is in communicating what we are doing to protect the environment in which we operate. The survey revealed that only three in 10 West Australians (27%) were able to recall an environmental activity or initiative in which Western Power is involved.
Other survey results were: ?? The environmental issue of most concern to customers was the use of coal and the level of emissions from our operations. ?? Notably, 47% of those surveyed either have no concerns or cannot think of any with regard to our environmental performance. ?? Customers most want to hear about our efforts to utilise renewable energy sources and about ways to be energy-efficient in the household. ?? 88% of the public is interested in receiving information from Western Power about our environmental activities and initiatives.
An environmental communications strategy paper is currently being prepared to address the challenges presented in the survey, and to identify the best ways of communicating the company’s environmental initiatives to the community.
National Pollutant Inventory
The National Pollutant Inventory (NPI) is a national database designed to provide the community with information on types and amounts of pollutant emissions to the environment. This is the second year of reporting to the NPI. The information on emissions included in the database is for the period 1 July 1999 to 30 June 2000, based on reports from 67 industry sectors. Information on aggregated emissions from major airsheds and water catchments is also included.
Western Power submitted pollution emissions information for the 28 facilities required to report for 1999/2000. This information is now available on the Environment Australia NPI website at http://www.environment.gov.au/epg/npi/database/index.html.
The following tables provide information on the main atmospheric emissions from our major power stations. These figures were determined using NPI methodology. The graphs show the atmospheric emissions for all of our power stations in comparison to the previous year.
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WHAT ARE OUR ATMOSPHERIC EMISSIONS?
Sulfur Dioxide emissions (kilograms emitted per megawatt hour of electricity sent out)
2000-2001 1999-2000 1998-1999 Collie 6.1 6.0 - Muja 6.9 6.8 7.0 Kwinana 1.6 2.0 1.8
Pinjar Gas Turbine 0.0 0.00 0.00 Mungarra Gas Turbine 0.0 0.00 0.00 Regional Power Stations 1.3 1.4 1.5 Total – all power 4.9 5.2 N/A stations
Nitrogen Oxides emissions (kilograms emitted per megawatt hour of electricity sent out)
2000-2001 1999-2000 1998-1999 Collie 4.7 4.6 - Muja 3.9 3.8 3.9 Kwinana 3.0 3.2 3.2
Pinjar Gas Turbine 2.9 2.9 2.8 Mungarra Gas Turbine 3.0 2.9 - Regional Power Stations 15.0 15.7 13.7 Total – all power 3.8 4.0 N/A stations
Particulate (coal only) emissions (kilograms emitted per megawatt hour of electricity sent out)
2000-2001 1999-2000 1998-1999 Collie 0.2 0.2 - Muja 7.1 6.5 7.96 Kwinana 0.0 0.1 0.1
Pinjar Gas Turbine 0.0 0.00 0.00 Mungarra Gas Turbine 0.0 0.00 0.00
Total – all power 3.7 3.8 N/A stations
(Total figures will not be included in the table in final document, they will only be show graphically illustrating the trend in our emissions)
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Greenhouse – What are we doing to address our impact on the Greenhouse Effect?
Despite an apparent faltering of international negotiations on the application of the Kyoto Protocol for developed nations (including Australia) to abate greenhouse gas emissions, world attention continues to focus on greenhouse response. We are participating in the development of abatement initiatives for the Australian energy sector under the National Greenhouse Strategy, and remain committed to the Greenhouse Challenge. Highlights of our response to the greenhouse issue during 2000/2001 included:
?? Construction of the 21.6 MW Albany wind farm that will produce about 75 GWh of electricity per year with an annual greenhouse gas emission saving of about 77,000 tonnes of CO2 equivalent. ?? Environmental referral and call for tenders for the 240 MW Kwinana combined cycle gas turbine project. When commissioned, this generator will be one of the most efficient in Australia, emitting significantly less greenhouse gas per unit of electricity produced than our existing power stations. ?? Completion of the Albany Greenhouse Allies project. With support from the Australian Greenhouse Office, we worked with a group of Albany businesses to better manage their energy consumption and so reduce the associated greenhouse gas emissions. ?? Action to advance renewable energy projects using wind, biomass and waste to contribute to the Commonwealth Government’s mandatory renewable energy targets.
Greenhouse gas emission statistics for Western Power’s operations in 2000/2001 are shown in Table X. Although demand for electricity increased by 3.1% on the previous year, the carbon intensity of electricity sold by Western Power continued to improve to 0.96 kilograms of CO2 emitted per kilowatt hour. This was largely due to greater use of gas fired plant for electricity generation. Total greenhouse gas emissions from Western Power operations in 2000/2001 were 10,830 kilotonnes. Trends over the past three years are shown in Figure Y.
Table X: Electricity production and greenhouse statistics, Western Power 2000-2001 2000-2001 1999-2000 1998-1999 Electricity generated (GWh) 12,308 12,345 12,158 Electricity purchased (GWh) 1,574 1,135 1,073 Electricity sold (GWh) 11,997 11,636 11,407 Electricity used in works (%) 6.8 6.8 6.6 Transmission and distribution losses (%) 8.1 8.0 8.2 Net greenhouse gas emissions generated 10,830 10,911 10,860 (kilotonnes CO2 equivalent) Carbon intensity of electricity sold 0.96 0.97 0.98 (kilograms CO2 equivalent / kWh electricity sold)
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Figure Y Trends, Western Power 1998-2001
13,000 1.05 Net CO2 equivalent emitted by
e 12,000 2 1.00 Western Power (kt) 11,000 Electricity sold / kWh) 0.95 2 (GWh) 10,000 GWh and
0.90 (kg CO Carbon Intensity Carbon intensity of Kilotonnes CO 9,000 electricity sold (kg 8,000 0.85 CO2 / kWh) 1997-1998 1998-1999 1999-2000 2000-2001 Year
Operational environmental management
What are we doing on site?
Every Western Power site across the State is unique when it comes to addressing environmental concerns. Their location, purpose, complexity and even the prevailing weather conditions can all play a part in determining their environmental management.
Collie Power Station Collie Power Station, operated by Pacific Western, received accreditation of its environmental management system to AS/NZS ISO 14001 in June 2001. Accreditation to AS/NZS ISO 14001 is a demonstration of commitment to compliance with applicable legislation and regulations, and to continual improvement in environmental performance. Collie Power Station is the second thermal power station in Australia to be accredited.
Kwinana Power Station Western Power commenced a process to replace old generation equipment at Kwinana Power Station with a new high efficiency gas fired combined cycle plant at the south end of the power station. This initiative will enable us to cease burning coal at Kwinana Power Station, which will result in the cessation of SO2 emissions from the station.
Our people at Kwinana proactively manage the station’s impact on the environment. They have recently established a comprehensive management plan to deal with oil leaks and spills and are reviewing and upgrading current emission monitoring systems in line with the new environmental protection regulations. The systems monitor water and air emissions.
The station’s recycling program continued with a major scrap metal clean-up being undertaken. Since January 2001 all empty oil drums are sold to an external contractor who cleans them for recycling.
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Since an on-site waste facility was commissioned in April 2000 approximately 20,000 litres of waste oil have been reclaimed and sent off for recycling. The facility also reclaims coal fines (dust), which is returned to the coal fuel system for burning.
Muja Power Station Muja Power Station is currently seeking accreditation of its Environmental Management System to AS/NZS ISO 14001. An initial preliminary audit by an independent auditing body has been successfully completed.
We have continued with the biomass co-firing trial at Muja Power Station, which commenced in April 2000. The trial will determine whether the power station can successfully integrate plantation forest waste and green waste into the coal stream. While co-firing at 5% wood presents no major problems for the boilers, handling of fuel stock appears to be the critical issue. This will be addressed as the trial progresses. Native forest waste will not be used in any co-firing.
We have rehabilitated approximately six hectares of disused gravel pits associated with the construction of Muja Power Station, and the disused DELTA coal handling plant and associated rail infrastructure were demolished. These areas, covering 30 hectares, have since been revegetated with native seed and seedlings.
The success of the Muja Power Station's Endangered Wildlife Program, initiated in 1998 with the release of several woylies, has continued. Monitoring surveys conducted by the Department of Conservation and Land Management (CALM) with the assistance of our people from Muja Power Station, have revealed the continued survival and growth of native animal populations relocated adjacent to the power station.
Surveillance of dust levels in and around the Collie Basin was increased this year. A mobile dust monitor was moved to a location at the Cardiff town site, and a new monitoring station was located on farm land adjacent to Collie Power Station.
Ash management Western Power continues to investigate recycling opportunities for fly ash, through its association with the University of Western Australia’s research into agricultural applications. The fly ash used in the study is supplied from Kwinana Power Station.
Kwinana Power Station was approached in August 2000 with a proposal to investigate the use of fly ash in the manufacture of clay bricks. Initial laboratory feasibility tests were positive and successful production evaluation trials followed in December. Approval from the Water and Rivers Commission (WRC) and the Department of Environmental Protection (DEP) for the storage of fly ash on the manufacturer’s premises was obtained and contractual arrangements for supply are currently being prepared. The initial proposal is for 30,000 tonnes to be supplied over the 2001/2002 summer, increasing to 120,000 tonnes annually in later years.
Investigation of other commercial applications of fly ash resulted in 1,970 tonnes from Muja Power Station being recycled for the following projects:
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?? Canning Dam Refurbishment, ?? Harvey Dam Spillway, ?? Kalgoorlie Hazardous Waste Co-disposal, and ?? Drainage pipes in the Kwinana Freeway upgrade.
Approximately 18,000 tonnes of bottom ash from Muja Power Station were also recycled. The ash was used as a base for the new water pipeline being constructed between the Harris River Dam and the new Harvey Dam. As this pipeline traverses sensitive Jarrah forrest areas, the contractor needed a product that was free of dieback. The Department of Conservation and Land Management (CALM) approved the use of the bottom ash as a clean, dieback free sand.
Fauna and flora management In response to an identified need in the Kimberley region, a brochure was produced and distributed to Kimberley residents advising on appropriate, native vegetation for planting in the vicinity of powerlines. This document mirrors an existing brochure for the Perth Metropolitan and South-West regions.
Line management Western Power initiated a study to evaluate the construction of a transmission line from Pinjar Gas Turbine Station to Cataby Substation. As part of the environmental management process, the project was referred to the Environmental Protection Authority which set a level of assessment at Public Environmental Review (PER).
The transmission line route selection process involved extensive consultation with CALM, DEP, WRC, relevant local shires, potentially affected land owners and other interested parties. The PER was released for public comment on 11 June 2001, with the document made publicly available on the Internet and at relevant libraries.
Waste management
Low Level PCB Wastes Western Power has approximately 350 tonnes of waste material containing low concentrations of PCB stored at a licensed storage facility. The waste is mainly contaminated soil and concrete recovered from power stations and substations during the 1980s. An independent waste disposal company has been contracted to destroy and dispose of these low-level PCB wastes.
Chemical Management An environmental audit conducted in 2000 identified concerns with the long-term storage of old herbicides, pesticides and other chemicals at Western Power depots. Under the CHEMCOLLECT program run by the DEP, all of these have been removed from the depots and disposed of with the DEP’s approval.
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Sustainable energy
A change is blowing in the wind.
Western Power is at the forefront in developing new renewable energy generation, using wind, bio-energy and solar technologies to counter concerns about greenhouse gas emissions and to meet government targets.
Significant new government legislation
In December 2000 the Federal Government passed the Renewable Energy (Electricity) Act. The Act establishes a scheme to encourage additional electricity generation from renewable energy sources.
It sets a Mandated Renewable Energy Target (MRET) for new renewable energy in Australia, rising each year from 300 GWh in 2001 to 9500 GWh in 2010, and then maintained at that level until 2020. It also establishes a Regulator to administer the Act.
Renewable energy power stations, accredited by the Regulator, are able to create Renewable Energy Certificates (RECs) for each MWh of electricity they produce. Electricity retailers and other wholesale purchasers (liable entities) are required to have sufficient RECs to cover their liabilities. Western Power’s liability is estimated to be about 700 GWh per year by 2010.
Renewable energy to meet the MRET is additional to that required to serve NaturalPower customers.
Company restructure
The importance of renewable energy to the future of Western Power was highlighted in our recent company restructure, when the Sustainable Energy branch was moved into the new, Emerging Business Unit. The branch is responsible for identifying, developing, constructing and operating Western Power’s renewable electricity generating projects.
Wind energy
Albany Wind Farm Construction of the 21.6 MW Albany Wind Farm, was nearing completion at 30 June 2001. 12 x 1.8 MW Enercon Power Corporation variable speed wind turbines on 65m towers will make this the largest wind farm in Australia, using the largest wind turbines in the Southern Hemisphere. Commissioning of the wind farm has already begun with electricity first generated in June 2001.
Agreements made with the Albany City Council to care for the environment have received close attention during construction. Western Power is building a tourism facility near the wind farm to cater for thousands of expected sight-seers, and is also funding a spectacular re-alignment of the Bibbulmun Track, which runs to the coast adjacent to the wind farm.
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This is being undertaken in conjunction with the Department of Conservation and Land Management.
The output from this wind farm will contribute to meeting Western Power’s renewable energy requirements.
Denham Wind/Flywheel/Diesel Power system In September 2000 two flywheel type energy storage units were installed at the Denham Diesel Power Station to support the 690 kW wind farm. With all the new plant installed, the former WA Minister for Energy officially opened the wind farm, new control system and flywheels in October 2000. The Australian Greenhouse Office provided a $1 million Renewable Energy Showcase Grant towards the project.
The wind farm operated to expectations during 2000/2001 and commissioning of the automatic operation of the flywheels to allow maximum use of the wind energy is expected to be completed early in 2001/2002.
Exmouth Wind Turbines Western Power is installing at Exmouth three 25 kW Australian designed and manufactured Westwind turbines with the assistance of an Australian Greenhouse Office grant. Due to be installed in early 2002, this “mini” wind farm has received most of the required approvals, and the turbines are currently being tested in Perth. The tilt-down design of the turbines’ towers is specially suited to Exmouth, which can experience strong winds during the summer cyclone season.
The future of wind energy at Western Power The passing of the Renewable Energy (Electricity) Act 2000 has given a significant boost to the wind energy industry in Australia.
Wind Energy Corporation, a new, incorporated joint venture involving Western Power was formed in response to this opportunity. Wind Energy Corporation brings together Western Power and Enercon Power Corporation, an Australian company that combines the skills of Enercon GMBH of Germany (one of the world’s leading wind turbine manufacturers), and PowerCorp (Australia’s leading developer of intelligent control systems for remote power stations). Wind Energy Corporation is presently developing several opportunities for grid connected wind farms within Australia.
Western Power is also investigating several sites for future wind farms, including Geraldton and Esperance. We currently have two 65m monitoring masts recording wind data to assist with the evaluation of potential sites.
Bio-energy - energy crops to tackle wheatbelt salinity problems
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The engineering design phase of the Integrated Wood Processing demonstration plant, Australia’s first dedicated plantation based bio-energy plant, is nearing completion and the plant will be commissioned in mid 2002 in Narrogin.
In addition to direct products of renewable energy, activated carbon and eucalyptus oil, the plant will address two of Australia’s most pressing environmental concerns - farmland salinity and global warming. The plant will use the wood and leaves from the mallee tree energy crop grown on farms. The trees are grown on a sustainable basis integrated with current farm practices, and will regrow (coppice) every time they are harvested.
The project has received support from the Australian Greenhouse Office and AusIndustry, through the Department of Industry Science and Resources. Industry collaboration with the Oil Mallee Company of Australia, CSIRO, CALM and Enecon Pty Ltd has continued.
Solar
The former Minister for Energy officially opened the Rockingham Photovoltaic (PV) Trough Concentrator System on 31 August 2000. This solar system is a pre-production model designed by the Australian National University (ANU) and installed by Solahart with financial support from Western Power, the Australian Greenhouse Office, the Australian Centre for Renewable Energy Research (ACRE), and the Alternative Energy Development Board (AEDB).
Electrical production has been compromised this year due to downtime associated with a significant design upgrade, implemented following the initial field testing. The design has been modified and improved and the project is due to move into the commercial evaluation stage by July 2001.
The energy generated from this system and the Kalbarri PV System, which is entering its seventh year of operation, is included in the quota of renewable energy supplied through NaturalPower.
Fuel cells
Western Power has maintained its investment in Ceramic Fuel Cells Limited (CFCL). CFCL is developing products based on Solid Oxide Fuel Cell (SOFC) technology. In June 2000, CFCL completed its first complete system experiment with the construction and operation of a 25 kW SOFC system. This experiment required CFCL to complete the first phase in scaling-up its cell fabrication process and positioned the company to commence a development program for its market entry product, a 40 kW power generation unit.
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CFCL is now working towards completing initial prototypes of this unit, which will be fuelled by natural gas. Operating in parallel with the grid, the unit will reduce greenhouse gas emissions and should improve reliability of supply. The unit will be targeted at small to medium commercial customers such as fast-food outlets, petrol stations and small supermarkets.
Working with our customers to reduce the impact of electricity usage on the environment
NaturalPower Support continues to grow for our renewable energy product among customers seeking to contribute to environmental protection. NaturalPower supplies electricity from hydro, wind, bio-energy and solar generation. More than 550 customers have purchased NaturalPower since it was launched in March 2000.
Albany Greenhouse Allies Western Power, in the role of manager and mentor in the Albany Greenhouse Allies project, worked with Albany businesses to achieve improved energy efficiency and reduced greenhouse gas emissions. Twenty-four businesses from a wide range of industry groups were offered energy audits to identify opportunities for energy and greenhouse gas savings. Some outstanding examples of greenhouse gas reductions include:
?? The Esplanade Hotel, which will see a reduction of 69 tonnes of greenhouse gas a year, through improved air conditioning efficiency, and ?? Panorama Caravan Park, which has reduced its greenhouse gas emissions by more than 12 tonnes a year through addressing energy efficiency in hot water, cooking and lighting.
The Australian Greenhouse Office and Western Power jointly funded the project, with the Albany Chamber of Commerce and Industry and City of Albany providing valuable support.
Renewable Energy Buyback Scheme The Renewable Energy Buyback Scheme (REBS) was due to finish at the end of December 2000. In response to customer demand and the likelihood of the Australian Greenhouse Office’s Photovoltaic Rebate Program rebate being made available until 2002, the Scheme was extended until August 2002, at which point we will review its status.
REBS currently has 38 residential customers generating renewable energy and selling their surplus electricity to Western Power. We also have eight educational and community customers signed up, three of whom generate surplus electricity, which they sell to Western Power. Noranda Primary School, one of our REBS customers, was the
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winner of the prestigious Energy Efficiency Award for its ongoing achievements in this area.
Sustainable energy research – finding a better way
Australian Cooperative Research Centre for Renewable Energy (ACRE) As a member of ACRE we continue to support the development of renewable energy. In addition to financial support, we conducted an energy audit of ACRE facilities, are assisting ACRELab in achieving NATA (National Association of Testing Authorities) accreditation, and provided lecturing support and supervision of postgraduate students.
Western Power Chair of Renewable Energy Engineering We were privileged to have Professor Stuart Wenham, winner of the Australia Prize in Science for his contribution to photovoltaic research, as the first visiting Chair of Renewable Energy Engineering. Professor Wenham assisted Murdoch University staff in developing the curriculum for a new Renewable Energy Engineering degree in the School of Engineering at Murdoch University Rockingham Campus.
Assisted by funding from the Alternative Energy Development Board, our sponsorship also facilitated the visiting appointments of Associate Professor Hugh Outhred and Associate Professor Ralph Sims. Both are world leaders in their fields.
Of the 35 Engineering students enrolled at Rockingham, five have chosen the Renewable Energy degree program in its first year of operation.
Renewable energy history project Western Power, with part funding from the Alternative Energy Development Board, employed an historian to interview people in WA involved in renewable energy research and development over the last 25 years. Tapes and transcripts of the interviews were deposited in the Battye Library and an information brochure produced.
Environmental incidents
What environmental incidents occurred this year?
Even with the most stringent protection measures in place, incidents may occur that pose possible threats to the environment. Swift and effective action ensures these will not have any short or long term effects.
Oil leak at Jandakot (Hope Road) depot In June 2000 heavy rainfall resulted in the overflow of a triple interceptor oil trap attached to a bunded area containing old transformers. An environmental study by an independent environmental consultant was immediately carried out and hydrocarbon was detected both in soil and groundwater adjacent to the site of the spill. The Water and Rivers
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Commission (WRC) and the Department of Environmental Protection (DEP) were informed immediately.
The extent of groundwater contamination was found to be localised and determined not to be a threat to the Jandakot Mound. We are presently working closely with WRC to manage the contamination. A new larger oil interceptor was installed and the old one removed in spring 2000.
Wind blown dust from Perron Quarry (Kwinana Power Station’s fly ash disposal site)
In January 2001 the DEP served an “Environmental Field Notice” on Kwinana Power Station under the Environmental Protection Act. The field notice related to excessive dust emissions from Perron Quarry.
Upon investigation it was found that the dust suppression spray system had failed. Immediate action was taken to reinstate the bore water supply pump and dust suppression sprays. Mulch and a permanent sprinkler system were installed on Perron Quarry within a week of the notice being served.
Pinjar lubricating oil leak In February 2001 between 100 and 200 litres of turbine lubricating oil leaked from Pinjar Unit 9 jacking oil pump due to a seal failure. The system designed to collect oil leakage from around the gas turbine was blocked causing oil to spill on to the hard stand surrounding the generator. The oil reached a stormwater pit but did not enter the stormwater drainage system or reach the environment. Turbine alarms alerted our control centre, which was able to initiate an immediate response.
The spillage was contained; contaminated concrete and bitumen were either cleaned or removed and replaced, and the oil leakage collection system was unblocked. Soil from under the area of the spill was tested and found not to be contaminated. The DEP was notified according to the requirements of the Pinjar station’s operating licence. Recommendations have been made to prevent a recurrence of a similar incident.
Broome Power Station fuel leak In February 2001 approximately 4,000 litres of fuel leaked from a filter bleed valve, overflowed the oil interceptor trap and collected in a ditch outside the power station site. It was found that failure to close the bleed valve after the last filter service was the cause of the leak.
Approximately 3,000 litres of fuel were recovered immediately. All contaminated soil was excavated and transported to a local disposal site according to the advice of the Shire Environmental Officer. Sand spread on spill-affected bitumen to absorb surface contamination was similarly disposed of. The DEP was advised of the spill and actions to prevent a recurrence have been initiated.
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Strategic Result Areas
Western Power measures its performance against the targets set out in its Statement of Corporate Intent, which is tabled in State Parliament each year.
The targets, while taking into account Western Power’s commitments, are deliberately set higher than expected performance levels to challenge the company’s staff.
Financial
Operating profit after tax of $188.2 million was up 22% on last year’s figure.
The company’s improved debt to equity ratio was achieved through debt repayments of $70.9 million as well as savings in interest expenses from completion of Western Power’s $1 billion debt refinancing program.
Dividend and tax equivalent payments to the State Government totalled $149.8 million; an increase of more than 22% on the previous year.
Actual Target Financial 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Return on Assets (%) 17.7 16.7 18.2 - (EBITDA* / non current assets) Debt/Equity Ratio 65/35 66/34 68/32 71/29 (Capital structure geared to debt) Return on Equity (%) 15.0 13.0 13.3 13.5 (Profit after tax/ total equity) * EBITDA: Earnings before interest, tax, depreciation and amortisation.
People – Safety
Safety continues to be Western Power’s overriding value. Following a tragic helicopter crash at Bencubbin in January 2001, safety procedures have been further reviewed and training upgraded.
Pleasingly, in 2000-2001 there was a slight decrease in the company’s Lost Time Injury Frequency Rate and there was a discernible decrease in the total number of medical treatment cases.
The introduction of Contractor Safety and Health Management Guidelines in January 2001 and the ongoing successful implementation of the company’s Safety and Health Plan are serving to further strengthen the company’s relentless drive to keep our people safe at work and at home.
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Actual Target Safety 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Lost Time Injury Frequency Rate 8.0 5.0 8.2 10.5 (LTIs/ one million hours worked) All medicals 30.3 31.0 31.2 41.5 (All medicals/ one million hours worked) Operational business units Overall average audit (%) 72.0 75.0 - - Audit compliance (%) 100.0 98.0 Non-operational business units Overall average audit (%) 70.0 70.0 - - Audit compliance (%) 100.0 70.0 - -
People – Organisational culture
National market comparison shows that Western Power is the highest performer in four benchmarked cultural areas. The Quantum Management International external report also indicates that Western Power occupies the highest industrial quartile position (that is, the top 25%) in four other benchmarked cultural areas.
From an internal perspective, improved scores were recorded in 17 of the 22 cultural areas covered in the 2001 annual staff survey, building on previous improvements in workplace culture for the fourth consecutive year. Previous improvements in workplace attitudes and perceptions were consolidated in the five remaining cultural areas, giving clear indication of opportunities for further improvement.
Although the overall result shows only minor improvement, there has been a discernible increase in the proportion of favourable ratings and a decrease in the unfavourable ratings.
Actual Target Organisational Culture 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Total organisation survey result 4.7 4.9 4.7 4.6 (Score out of six)
People – Productivity
The company’s productivity performance was maintained at a similar level to the previous year. Operating expenditure on labour, materials and services in 2000/2001 was contained at acceptable levels whilst electricity sold increased by 3.1%.
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Against targeted performance, savings on labour, materials and services were the key factors driving improved productivity.
Actual Target Productivity 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Electricity Sold/ Operating Expenditure 31.6 30.4 31.8 31.6 (GWh/$M)
Customers – Customer satisfaction
The customer satisfaction score for 2000/01 was comparable with its level from the previous year. Research suggests that continued support for Western Australian enterprises such as Kings Park and the Western Warriors has been well received by customers. The new call centre answering system has also had a positive impact.
Actual Target Customer Satisfaction 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Average Satisfaction Value 4.0 4.1 4.0 4.0 (Score out of five)
Customers – Reliability and quality
Customers enjoyed increased power supply reliability with a significant improvement on the previous year’s outage duration within the South West Interconnected System. The introduction of maintenance and operations work-streaming of field resources, and the installation of fault indicators and line reclosers on the distribution network is now having a positive impact on the reliability of customers’ power supplies.
Although voltage complaints increased, technology solutions are being developed to further analyse the company’s network and identify problems prior to affecting customers.
Actual Target Reliability and Quality 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Outage Duration - SWIS (mins) 133.0 125.0 228.0 134.0 (Total duration of interruptions/ customer per year) (131)* Voltage Complaints (number) 30.6 20.0 27.4 29.1 (Complaints/ 10,000 customers) CAIDI – SWIS average duration of incident 86.0 93.0 - - (Total minutes/average number of customers) SAIFI – SWIS average number of incidents 1.55 1.35 - - (Total customers interrupted/average number of customers) * Actual figure, minus impact of industrial action and severe storms.
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Business development
Growth in electricity sales within the South West Interconnected System was above target for 2000-2001, and an increase of 1.3% on the previous year. This growth reflects the company’s focus on attracting and maintaining South West Interconnected System customers through innovative products and services, and competitive pricing.
Actual Target Business Development 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Growth in Revenue – SWIS* (%) 1.3 0.9 3.0 3.3 * South West Interconnected System
Community – Corporate
Western Power achieved a significant improvement in its Corporate Image Index rating for 2000/2001. This result reflects customers’ increased recognition of our performance in areas including emergency management, safety, customer focus and social responsibility.
While the decline in our Stakeholder Opinion Index was disappointing, independent market research showed that Western Power was favourably rated against similar sized companies, with 51% of stakeholders reporting that Western Power has an ‘excellent’ or ‘good’ reputation.
It is pleasing to report that balanced media coverage exceeded last year’s result and the 2000/2001 target figure.
Actual Target Corporate Reputation 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Corporate Image Index (% acceptance rating) 71.2 64.0 64.0 62.0
Stakeholder Opinion Index 62.2 82.0 67.0 81.0 (% acceptance rating) Balanced Media Reports (% of total media 82.0 71.0 75.0 69.0 reports)
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Community – Environment
Western Power’s commitment to environmental excellence through practical care has been demonstrated by the company’s progress on its Greenhouse Response Strategy and renewable energy projects. The wind farm at Denham has operated to expectations and with the automation of the flywheel energy storage system, the generated wind energy will be fully used in the coming year. Albany Wind Farm generated its first electricity in June 2001 and though its commissioning will be completed later than scheduled, it is expected that Western Power’s 2001/2002 renewable energy targets will be met.
Actual Target Environment 2000- 2000- 1999- 1998- 2001 2001 2000 1999 Greenhouse Response Strategy 0.96 0.96 0.97 0.98 Carbon intensity of electricity sold – kilograms CO2/kWh
New Renewable Energy 1.2 20.0 - - (GWh) Public Environmental Image 55.0 68.0 41.0 61.0 Acceptance rating (%)
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Corporate Governance
This statement outlines the main corporate governance practices that were in place throughout the 2000/2001 year.
Board of Directors and its committees
The Board of Directors is the governing body of Western Power and is responsible to the Minister for Energy (the Minister) for the performance of the company. Subject to the Electricity Corporation Act 1994 (the Act), the Board has the authority to perform the functions, determine policies and control the affairs of Western Power.
The Board has established a number of Board Committees to assist in the execution of its responsibilities. These are the Governance and Remuneration Committee, Audit Committee and Finance Committee. In addition, the Board has established a framework for Western Power management. It includes Ethical Standards and systems of Internal Control and Risk Management.
Composition of the Board
The Western Power Board of Directors comprises: ?? no less than four and no more than six non-executive directors appointed by the Governor of Western Australia (the Governor) on the nomination of the Minister, and ?? the Managing Director who may not hold the positions of Chairman or Deputy Chairman.
The directors at the date of this statement are identified in the Directors’ Report. The Board generally meets bi-monthly and as required.
When a non-executive director position is vacant, the Board may recommend a candidate to the Minister. If the Minister chooses to make a nomination to the Governor, the Minister must ensure that: ?? each nomination is made only after consultation with the Board (except where the nominee was recommended by the Board), and ?? the nominee is not a member of Western Power's staff.
Non-executive directors are appointed for periods of up to three years and are eligible for reappointment. The Governor may, at any time, remove a director from office. The Governor need not give any reason for doing so. The Governor appoints a non-executive director as Chairman and another as Deputy Chairman. Appointments in each case are made on the nomination of the Minister.
The Act prohibits directors from: ?? making improper use of information or their position, ?? voting in matters where they have a material personal interest, and ?? furnishing false information.
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The Act also prevents directors and their relations from receiving loans from Western Power.
Governance & Remuneration Committee
The Governance and Remuneration Committee’s role is to develop and implement policies relating to: ?? the remuneration and other terms and conditions of service of the Managing Director. This policy is approved by the Board and agreed by the Minister. ?? senior executive remuneration, and ?? the remuneration and other terms and conditions of service for staff.
The Governance and Remuneration Committee’s role includes overseeing the application of the senior executive and Managing Director remuneration policies. It also: ?? approves Western Power’s remuneration budget, with particular emphasis on the remuneration of senior executives, ?? reviews succession planning for non-executive directors, including nomination of candidates for vacancies, and ?? ensures that all remuneration policies are lawful.
The Governance and Remuneration Committee is made up of three non-executive directors appointed by the Board (one as Chairman) and the Managing Director. The Managing Director leaves committee meetings when matters relating to his remuneration and conditions of service are discussed.
Members of the Governance and Remuneration Committee are: ?? Chairman - Mr Hector Stebbins ?? Members - Mrs Carol Devitt - Mr Warren Murphy - Mr David Eiszele (Managing Director)
Audit Committee
The Audit Committee has the responsibility to assess and report on: ?? the effectiveness of the systems and standards of internal control, ?? the quality of management controls, ?? the management of business risk, ?? compliance with legislation, standards, policies and procedures, ?? the reliability of management reporting and other management information, and ?? environmental and other due diligence requirements.
The Committee has unhindered access to management. Whenever the Audit Committee considers it necessary, it may consult any independent expert. Combined meetings are held as required with the Finance Committee.
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The Audit Committee consists of three non-executive directors appointed by the Board, (one as Chairman) and the Managing Director. Members of the Audit Committee are: ?? Chairman - Mr Ian Warner ?? Members - Mrs Carol Devitt - Mr David Eiszele (Managing Director) - Hon. K. Richard Lewis (term completed 31/03/01)
Finance Committee
The Finance Committee’s role is to: ?? oversee the Treasury function including debt/equity, cash flow, interest and foreign currency management, ?? review and develop accounting policies, ?? review quarterly and annual financial statements, ?? liaise as appropriate with the Auditor General (or his designates), and ?? approve Treasury related matters that would normally be put before the Board of Directors, but due to their urgency, cannot be held over until the next scheduled Board Meeting.
The Finance Committee comprises three non-executive directors appointed by the Board, (one as Chairman) and the Managing Director.
Members of the Finance Committee are: ?? Chairman - Mr Dan Smetana ?? Members - Mr Warren Murphy - Mr David Eiszele (Managing Director) - Hon. K. Richard Lewis (term completed 31/03/01)
Internal control framework
The Board is responsible for the overall internal control framework. It has a formal, self- assessment review process to evaluate the performance of directors and the company. While recognising that no cost effective internal control system can preclude all errors and irregularities, the rigour of regular assessment ensures performance is kept under review.
To monitor the performance and management of the company, the Board has instigated an internal control framework covering financial reporting, quality of personnel, business unit controls and expenditure guidelines.
Western Power’s internal control system is based on: ?? written procedures, policies and guidelines, ?? organisational structures that provide an appropriate division of responsibility, ?? a program of internal audit, and ?? the careful selection and training of qualified personnel.
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Financial reporting
Actual financial results are reviewed against budget each month. Reports on performance, including financial statements, are produced quarterly and submitted to the Minister. Revised forecasts for the year are also prepared each quarter.
A five-year budget is produced annually from a comprehensive budgeting system and approved by directors. This is included in the five-year Strategic Development Plan produced by Western Power each year.
Quality of personnel
Employee performance is managed through a framework which links managerial leadership and interpersonal skills with strong people skills. This framework and the systems drive quality and consistency of leadership across Western Power. These systems include The Employee Achievement Measure (T.E.A.M.) performance management system, in which performance is monitored regularly against agreed targets. Recruitment, employment agreements, remuneration review, employee development and succession systems are also being integrated to support stronger leadership and employee performance.
Business unit controls
On a quarterly basis, business unit managers confirm the reasonableness and accuracy of their financial records. Annually, business unit managers confirm compliance with financial controls and procedures to support the Board’s certification of the accounts.
Expenditure guidelines
Western Power has clearly defined guidelines for operating and capital expenditure. These include annual budgets, detailed appraisal and review procedures as well as formally stated levels of delegated financial authority approved by the Board. The company must obtain the approval of the Minister for major strategic initiatives and any project involving expenditure greater than one percent of the written down value of Western Power’s fixed assets.
Ethical and environmental standards
The Act sets out the duties of directors, the Managing Director, executive officers and members of staff. Within Western Power, a set of behavioural standards incorporating leadership principles and minimum standards applicable to the management of the staff has been developed as has a code of conduct setting out minimum standards of conduct for all staff.
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Western Power recognises that appropriate environmental practices are important to being a good corporate citizen and that rigorous environmental management is critical to Western Power's business success. Corporate policies and strategies are in place encompassing environmental management principles administered through a formal Environmental Management System. These require community consultation, proactive planning, compliance, sustainable development and auditing for continuous improvement. Adherence to environmental policies is audited. Meeting or exceeding environmental standards and promoting the use of sustainable energy are included in Western Power's performance targets.
Risk management
Processes and systems are in place to manage Western Power’s operational, environmental and business risks. Business Unit Management is responsible for the identification of risk to its operations and for implementing appropriate risk management measures.
Treasury Branch provides advice to Business Unit Management and coordinates the findings of the various risk reviews undertaken. It makes recommendations to the Board on the appropriate level of insurance cover for Western Power. Financial risk issues are managed through a Treasury Policy Statement that requires regular reporting to the Finance Committee on treasury activities.
Other accountability measures
It is a requirement under the Act that Western Power produces, annually, both a Strategic Development Plan (SDP) and a Statement of Corporate Intent (SCI). These are to be agreed between the Minister and the Board with the concurrence of the Treasurer.
Strategic Development Plan
The SDP is a confidential document. It sets out Western Power’s five-year economic and financial objectives, Strategic Result Areas and associated performance targets as well as strategies. The Board must ensure that the SDP reflects prudent commercial principles and is consistent with maximising the long-term value of the company.
Statement of Corporate Intent
The SCI sets out Western Power’s scope of activities, objectives and performance targets for the financial year ahead and is consistent with the SDP. The SCI is tabled in Parliament after agreement with the Minister and the Treasurer’s concurrence. The 2000/2001 Statement of Corporate Intent is available from Western Power.
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The Future
Western Power’s vision for the future is to be the supplier of choice for energy and complementary services, providing value to our customers, communities and shareholders.
In a market undergoing sustained deregulation, there is increasing pressure on prices and on Western Power’s performance to provide the level of service customers demand while maintaining our commitment to the environment and the communities in which we operate.
People
We are working in an era where competitive, legislative and community pressures have created an environment of constant change. Western Power people will be the company’s driving force as we meet the challenges of new rules and new markets. We will be supported and empowered to make the decisions needed for Western Power to achieve its goals in the face of growing competition.
We will continue to provide a rewarding and supportive workplace in order to attract and retain people of the highest quality. We will continue our commitment to a safe working environment.
Changing energy market
The Government has announced the establishment of an electricity reform taskforce to investigate the structure of the electricity market and to consider further measures for enhancing competition in the energy industry. The benefits flowing from a vertically integrated organisation, as well as the unique features of the Western Australian market including its small size, geographic isolation and high fuel prices need to considered in any reform of the electricity market.
Further deregulation from 1 July 2001 lowering the contestability threshold from 1 MW to 230 kW will intensify the competitive challenges faced by Western Power. Electricity prices will remain unchanged for 2001/2002.
The complexity of the electricity industry – and the multitude of problems accompanying reform experiments elsewhere in Australia and the world – demonstrate the paramount necessity for a thorough, impartial analysis of market and structural reform before making sweeping changes. A restructured Western Power will only benefit our customers if the savings resulting from the increased competitive pressures are greater than the total costs involved in establishing and administering the new market and structure. Western Power is committed to building on our strong position in the Western Australian market, and adding value to the business.
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As a result of increased deregulation, Western Power does not anticipate the profit growth it has experienced in the last few years.
To offset the likely effects of increased deregulation on Western Power’s revenue base, focus will need to continue on relentless cost management, efficiency and productivity improvements to build on the platform that has been created. Western Power is presently embarking on a program to reduce its fuel costs incurred in regional areas by sourcing power from independent power producers (IPPs), and plans to replace obsolete generating plant at Muja and Kwinana power stations with more efficient plant.
The company will continue to pursue initiatives to diversify its revenue sources. These include e-business initiatives, leveraging Western Power’s investment in the World Class Customer Satisfaction systems, and new business opportunities in both core and non-core areas.
Western Power is in a sound financial position and well placed to take on the challenges of the future. Our excellent results in a competitive environment, in a year where difficult decisions were made to lay the foundations of a sound financial structure, represent a company that is poised to take on the dynamic energy market of Western Australia in the 21st century.
Our success in retaining market-share is proof of the value the organisation delivers to its customers all over Western Australia. This success demonstrates clearly that Western Power, as an integrated generator and supplier of energy, is the benchmark performer. We welcome change that will deliver lower prices to our customers and improved services to the communities in which we operate.
Community partnerships
Western Power is an active and influential member of the Western Australian community. Our informal contract with the community provides the impetus for delivering high quality products and services, and is the key element in determining the future direction of the company.
We will continue to build on our reputation for open communication, with programs to provide timely information to stakeholders about our future operations. We will encourage dialogue and be accessible to community groups, welcoming and acting on their feedback to guide our operations.
We are proud of what we have achieved in regional and rural Western Australia, much of it through listening to our customers and working with them to provide solutions to their individual needs.
We will continue to build on one of Australia’s largest community partnership programs with an emphasis on education, safety and the environment.
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Sustainable energy and environmental excellence
Western Power prides itself on being a leader in the development of sustainable energy sources in Western Australia. The introduction of the Renewable Energy (Electricity) Act in December 2000 has highlighted the need for our ongoing commitment to sustainable energy. The Act sets a Mandated Renewable Energy Target (MRET) for new renewable energy in Australia, rising each year from 300 GWh in 2001 to 9500 GWh for 2010.
Western Power’s goal is to meet our share of this target in a way that delivers maximum benefits to our customers. Western Power will source Renewable Energy Certificates (used to verify compliance) from local renewable energy projects, owned either by Western Power or by independent power producers, wherever possible.
Western Power is constructing a bio-energy pilot plant at Narrogin in Western Australia’s wheatbelt, which will become operational from mid-2002. Using this renewable source of electricity will not only reduce carbon dioxide emissions, playing a part in care of the global environment but will also help fight land degradation and salinity in Western Australia.
Our commitment to the environment also includes the use of more efficient conventional technologies. The new generating plant to be used in the Kwinana Combined Cycle Project will see a marked increase in Kwinana Power Station’s generating efficiency.
We will also work with customers across the State to reduce their energy consumption, thus helping to lower energy costs and greenhouse gas emissions for a sustainable future. Western Power’s award winning revegetation project, the Greening Challenge, seeks to reverse the effects of 100 years of farming on areas of the wheatbelt and to help limit the greenhouse effect.
Our commitment to working with the community, exploiting more efficient conventional technologies and providing energy products and services that contribute to a growth in sustainable energy will drive Western Power’s future direction.
Business growth
Western Power’s restructure and introduction of the Emerging Business business unit, clearly demonstrates its willingness to look beyond traditional business to explore new markets and new challenges.
The Fibre to the Curb venture aims to provide a high-speed telecommunications network to residents of Perth. Conduits to carry fibre-optic cables are being laid as part of the Retrospective Underground Power Project being carried out in some of Perth’s older suburbs. While the project is drawing on Western Power’s vast experience as an expert network manager, it is a sensible anticipation of community needs. In a similar way, a Virtual Internet Service Provider (VISP) service could provide some Western Power customers with an expanded product range.
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The high-speed telecommunications network pilot project currently underway in South Perth will provide us with an excellent insight into how different services and initiatives are received by our customers. In time, the Fibre to the Curb project may grow from a fibre-optic network into one offering a range of specific bundled services such as high- speed data, video and telephony. Western Power will then be able to provide to customers with a home-grown alternative for telecommunication services.
Notwithstanding Western Power’s acceptance of new business ventures and new challenges, the company is continuing to expand its traditional areas of business like the network and new energy products.
New energy products such as Super Off-peak Power are providing industry with incentives to increase energy consumption at times of the day that will help even out the daily peaks and troughs of electricity demand.
Work on new transmission lines to expand capacity in northern and southern areas of the SWIS will create the potential for new industry and more business opportunities for Western Power.
New opportunities are being explored and our competitive strength is being rewarded with success.
Valuable business partners
Successful partnerships built on the individual strengths of Western Power and its business partners will provide compounded benefits to our traditional customer base, and to a growing band of new customers as we move into new ventures in new markets.
Western Power is looking beyond the generation and supply of electricity in our home State to the construction of clean, renewable energy plant in other areas. One example of this is a new enterprise called Wind Energy Corporation, set up to design and construct wind farms. The enterprise capitalises on the knowledge Western Power has gained through the construction of the Denham, Esperance and Albany wind farms and utilises the skills of partners Enercon Power Corporation and Powercorp.
Similarly, Western Power is taking the lead role in the development of the CSIRO technology for producing electricity and by-products from oil mallee trees. Assisting Western Power with this development are Enecon Pty Ltd and The Oil Mallee Corporation. The new technology will be applicable to projects throughout the whole of the Australian wheatbelt.
Western Power continues to look beyond its traditional areas of business. Joint venture partners bring the skills and knowledge that help us to move into new markets with great success.
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Business value
Western Power has continued to focus on cost management to deliver significantly lower prices to our customers.
Since its creation in 1995, the company has delivered only one small price increase to residential customers and has kept prices to business customers at the 1994 level.
The Regional Power Procurement Process (RPP) was instituted to introduce lower cost generation in regional and remote areas of the State, reducing the costs incurred by Western Power as the company meets community service obligations in those parts of Western Australia.
The competitive tendering process attracted significant interest in the West Kimberley, Mid West and Esperance regions. Western Power’s role in regional generation is expected to diminish if a wide range of private sector generating businesses take on the generating role.
Western Power is planning for the anticipated energy requirements of our customers over the next decade and beyond. A program of generation acquisition and asset replacement based on technological innovation and environmental awareness will continue to drive down generating costs, enabling the company to pass on savings to our customers.
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Facts and figures
Statistical summary
GENERATING Fuel Capacity Acquired or Energy PLANT (kW) Commissioned Generated 1999–2000 (GWh) South West Interconnected System Collie Coal 330,000 1999 2,285.6 Muja A & B Coal & Heavy Fuel Oil 240,000 1965 1,118.2 Muja C Coal & Heavy Fuel Oil 400,000 1981 2,407.0 Muja D Coal & Heavy Fuel Oil 400,000 1985 - 86 2,725.3 Kwinana A & C Coal, Gas & Fuel Oil 640,000 1970 - 76 1,640.6 Kwinana B Gas & Fuel Oil 240,000 1970 450.6 Kwinana Gas Gas & Distillate 21,000 1972 0.6 Turbine Geraldton Gas Gas & Distillate 21,000 1973 - Turbine Kalgoorlie Gas Distillate 62,000 1984 - 90 1.9 Turbines Mungarra Gas Gas 112,000 1990 - 91 242.1 Turbines Pinjar Gas Turbines Gas & Distillate 586,000 1990 - 96 400.8 Wellington Dam Hydro 2,000 1992 1.7 Worsley (50% Joint Gas 60,000 2000 406.1 Venture Share) Tiwest Gas 36,000 1999 234.2 3,150,000 11,914.7
Pilbara Interconnected System
Dampier * Distillate - - - -
* Dampier was decommissioned in January 2001
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GENERATING Fuel Capacity Acquired or Energy PLANT (kW) Commissioned Generated 1999–2000 (GWh) Non-Interconnected System
Broome Distillate 18,860 1976 57.8 Broome 12 Mile Distillate 260 1995 0.8 Camballin Distillate 888 1976 1.6 Carnarvon Gas or Distillate 15,265 1981 41.1 Cue Distillate 1,152 1973 1.7 Denham Wind & 690 1998 1.1 Distillate 1,736 1973 2.9 Derby Distillate 10,180 1973 26.8 Esperance Wind & 2,025 1993 4.9 Distillate 17,182 1970 55.1 Exmouth Distillate 6,024 1977 17.8 Fitzroy Crossing Distillate 2,564 1976 8.8 Gascoyne Junction Distillate 280 1973 0.4 Halls Creek Distillate 2,624 1970 6.9 Hopetoun Distillate 936 1976 2.8 Kununurra Distillate 12,400 1970 0.3 Lake Argyle Distillate 180 1985 0.0 Laverton Distillate 1,724 1994 2.9 Marble Bar Distillate 950 1973 2.0 Meekatharra Distillate 3,740 1973 7.7 Menzies Distillate 350 1977 0.5 Mount Magnet Distillate 2,504 1976 5.2 Nullagine Distillate 618 1973 0.8 Onslow * Gas or Distillate - - 0 Sandstone Distillate 300 1975 0.4 Wiluna Distillate 1,014 1973 1.6 Wittenoom Distillate 350 1975 0.2 Yalgoo Distillate 285 1973 0.5
105,096 252.6
Total 3,255,096 12,167.3
* Onslow Power Station decommissioned in April 2001
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Production and Distribution 2000-01 1999-00 1998-99 1997-98 1996 - 97
Electricity Generation
Generation (thermal, diesel, wind) - GWh 12,167.3 12,344.9 12,158.1 11,810.3 11,784.4 Used in works - GWh 828.5 853.6 803.8 776.6 752.8 Purchased - GWh 1,698.9 1,134.7 1,072.7 1,109.0 829.0 Sent out - GWh 13,037.7 12,626.0 12,427.0 12,142.7 11,860.6 Cold weather maximum demand - MW generated 2,243 2,156 2,126 2,186 2,091 Hot weather maximum demand - MW generated 2,538 2,508 2,331 2,268 2,358 Peak load interconnected system - MW generated 2,538 2,508 2,331 2,268 2,358 Interconnected generation capacity winter 3,150 3,150 3,210 2,844 2,880 capability – MW Thermal efficiency for kWh generated - % 31.3 31.6 32.4 30.1 31.9
Fuel Consumption Used for Generation:
Coal - '000 tonnes 4,605 4,729 4,365 4,389 4,481 Distillate and other fuel oils - tonnes 60,647 62,807 69,913 65,813 69,023 Gas - TJ 38,284 36,061 41,039 43,750 40,257
Distribution - Interconnected System
Sent out - GWh 12,438.8 12,047.1 11,835.8 11,542.7 11,313.0 Line loss - GWh 1,000.0 956.6 968.1 1,021.8 1,004.0 Sold to customers - GWh 11,438.8 11,090.5 10,867.7 10,520.9 10,309.0
Distribution - Non Interconnected System and Pilbara
Sent out - GWh 598.9 578.9 591 600 548 Line loss - GWh 41.0 34.2 52 58 58 Sold to customers - GWh 557.9 544.7 539 543 490
Customer Accounts at 30 June 810,568 794,746 775,602 758,792 742,150
Please note: Sales to customers include electricity generated by Western Power and electricity purchased from independent generators.
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OTHER ASSETS
South West Interconnected System Overhead Underground Transmission Lines 330 kV 777 km 220 kV 664 km 132 kV 3,661 km 9 km 66 kV 1,153 km 24 km
South West Interconnected System Distribution Network High voltage overhead mains 58349 km Low voltage overhead mains 10148 km High voltage underground mains 2723 km Low voltage underground mains 6417 km Total transformer capacity 4491 MVA Streetlights 172,168
Pilbara Interconnected System Overhead Transmission Lines 220 kV 197 km 132 kV 71 km 66 kV 152 km 33 kV 27 km
Pilbara Distribution System High voltage overhead mains 368 km Low voltage overhead mains 171 km High voltage underground mains 47 km Low voltage underground mains 87 km Streetlights 3617
Regional Distribution System High voltage overhead mains 4369 km Low voltage overhead mains 528 km High voltage underground mains 45 km Low voltage underground mains 113 km Streetlights 6635
Western Power Workforce* At 30 June 2001 At 30 June 2000 At 30 June 1999 Management Executive 5 4 5 Internal Audit 7 6 6 General Counsel 3 3 3 Finance and Administration 160 151 162 Human Resources 43 43 34 Corporate Strategy 52 51 44 Network Services 999 1,009 1,224 Transmission 485 482 516 Generation 472 545 839 Pilbara Power 37 35 39 Regional Power 122 117 122 Retail 187 174 148 Externally seconded 1 - -
Total 2,573 2,620 3,142 * For reporting consistency, Western Power workforce figures detailed above reflect the former company structure. The Western Power Annual Report and Environment Review 2002/2003 will include workforce figures under the new company structure.
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Electoral Act 1907
In accordance with the requirements of Section 175ZE of the Western Australian Electoral Act 1907, the following information in respect to expenditures incurred by, or on behalf of Western Power Corporation during the financial year ended 30 June 2001 is disclosed as follows:
Advertising Agencies $845, 874 - The Brand Agency Pty Ltd and TMP Worldwide
Market Research Organisations $612, 525 - Market Equity Pty Ltd
Media Advertising Organisations $1,964,455 - Media Decisions WA
There was no expenditure in the Direct Mail and Polling Areas by the Corporation. Total expenditure was $3,422,854.
Five Year Financial Summary
30/06/2001 30/06/2000 30/06/1999 30/06/1998 30/06/1997
$'000 $'000 $'000 $'000 $'000
Total Revenue 1,573,833 1,575,202 1,603,750 1,412,989 1,335,715
Net Profit 188,191 154,030 141,096 141,634 98,772
Total Assets 4,101,794 4,026,302 4,018,229 3,993,472 3,692,391
Total Liabilities 2,846,376 2,865,992 2,970,692 3,151,458 2,962,011
Total Equity 1,255,418 1,160,310 1,047,537 842,014 730,380
Payments to 149,774 122,273 107,738 86,986 86,644 Government
Glossary kV Kilovolt One kV = 1000 volts. A volt is the unit of potential of electric pressure. kW Kilowatt One kW = 1000 watts. A watt is the rate at which electrical energy is produced or used.
MVA Megavolts-ampere
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The product of the voltage rating (kV) and the current rating (kA). Used to represent the rating of electrical equipment such as transformers.
MW Megawatt One MW = 1000 kW or one million watts. kWh Kilowatt-hour The standard unit of energy, equivalent to the consumption rate of one kilowatt for one hour. Commonly used as the ‘unit’ of electrical energy.
MWh Megawatt-hour One MWh = 1000 kWh
GWh Gigawatt-hour One GWh = 1000 MWh or one million kilowatt-hours.
TJ Terajoule One TJ = one million, million joules, or 1012 joules. Used to indicate the energy content of gas.
CO2 Carbon Dioxide
EMIS Environmental Management Information System
EMS Environmental Management System
GW Gigawatt A measure of electrical power. Equivalent to one million kilowatts.
ISO 14001 International Standards Organisation 14001 The international standard for environmental management systems.
NOx A term used for a mixture of nitrogen oxides.
SO2 Sulfur Dioxide
info on paper stock used (on inside back cover) Western Power contact details (on back cover) UA 1354 (order number – on back cover, lower right-hand side)
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Annual report – Extended picture captions to support photography in report
NaturalPower
Primary school children from Perth’s hills region are learning that renewable energy can reduce greenhouse gas emissions. The five government schools in Serpentine-Jarrahdale are the first schools in the State to use Western Power’s renewable energy product, NaturalPower. “We are starting to talk about renewable energy and how it helps to protect our environment,” said Mundijong Primary School Principal Allan Hope. “This is particularly important as children become leaders in the community.”
Police Service Western Power is helping the Western Australian Police Service reduce its power costs. The Police Service has saved $96,000 on electricity this year. Western Power’s Rani-Jane Muir, centre, has been working with the Police Service’s Energy Coordinator Greg Bordin, left, and Cannington District Office Superintendent Murray Lampard. “We’re thinking a lot smarter,” said Superintendent Lampard. “With the energy savings we have made, we can invest in much-needed equipment like police vehicles.”
Safety Watchit Van
For a quarter of a century, the Safety Watchit Van has fixed battered heaters, ancient kettles and even precious family heirlooms free of charge. The two-man team, Bill Horsewell and Richard Francis, travels to shopping centres and retirement homes around the State to make sure that people are using their electrical appliances safely. “As a senior widow, I would like to thank Western Power for the lovely service they are providing with the Safety Watchit Van. The team was very friendly and caring to me in repairing my old toaster,” said Mrs Mattner of Kenwick.
Above, Bill Horsewell chats to three-year-old customer Sarah Harris and her mum Nicole at the Safety Watchit Van.
Stuart Morgan Scholarship
Engineering student Michael Evans, from Brookton, was this year’s recipient of the Stuart Morgan Scholarship. Western Power awards the scholarship to a country student each year to assist with the costs of gaining an undergraduate degree at a Perth university. “Country students often do not have the opportunity to realise their full potential,” Michael said. “This scholarship means a great deal to my family and me.”
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Solar Car Challenge
Some 2,500 secondary students have enjoyed participating in the Western Power Solar Model Car Challenge since it began nine years ago. Student teams design solar model cars in class and race them at Forrest Chase, Perth. “The Challenge works well with other learning areas, such as science and maths,” said Andreas Powell, a science teacher at Jerramungup District High School. Above, the Jerramungup team – Jarrod Smith, left, Bryce Lee, Drew Laslett and Markus Karjanc - take a break at the Solar Model Car Challenge.
World of Energy
Students are discovering the joy of learning at Western Power’s World of Energy. Curriculum-linked interactive programs teach students about energy, science and the environment. “Our students thoroughly enjoyed their visit to the World of Energy,” said Peta Scrimgeour, a Grade 7 teacher at Ballajura Primary School. “The instructors made sure the activities were meaningful and relevant to their experience and the children could ‘see’ the things we had been discussing in class.” Above, primary school children built and tested their own solar cookers during the Western Power Solar Cook-off, held at World of Energy.
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Directors’ report
The Board of Directors submits the financial accounts of the Corporation for the year ended 30 June 2001 and reports as follows:
Directors The names and details of the Directors in office at the date of this Report are:
Hector Ivon Stebbins BComm, MSc(Econ), FAIB - Chairman Hector Stebbins retired in 1993 after a distinguished banking career during which he was Deputy Representative of the Reserve Bank of Australia in Europe and State Manager of the Reserve Bank in Western Australia and Victoria. He is a Director of Keystart Bonds Ltd and charitable bodies.
Daniel Alexander Smetana Dip Comm, FCPA, FAIM, FAICD – Deputy Chairman Since 1984 Dan Smetana has been Chairman of Joyce Corporation Ltd. He is President of the Industrial Foundation for Accident Prevention, Director of the West Australian Symphony Orchestra, Director of Edge Employment Solutions Incorporated, WA Chairman of the Defence Reserves Support Committee, Vice President and a Councillor of the Federation of WA Police & Citizens Youth Clubs (Inc), Deputy Chairman Youth Charities Trust Inc, Chairman Department of Training and Employment Science & Technology Advisory Group, and Chairman Bedshed Franchisors (WA) Pty Ltd.
David Russell Eiszele MBus, Dip Civ Eng, CP Eng, FlEAust, FAIM, FAICD - Managing Director After joining the State Electricity Commission of Western Australia in 1964 as a civil engineer, David Eiszele held a number of senior positions in the organisation before being appointed Commissioner in 1993. On 1 January 1995, he became Managing Director of Western Power Corporation and is a past Chairman of the Electricity Supply Association of Australia. He also serves on the Boards of the Industrial Foundation for Accident Prevention and WA Treasury Corporation, and is a member of Business Council of Australia.
Carol Anne Devitt BComm(Hons), MPhil(Oxon), MAICD - Director Carol Devitt is a former Rhodes Scholar who read in management studies at Oxford University. She is Deputy Chair of the South West Development Commission and a board member of Edith Cowan University South West Campus (Bunbury).
Ian Keith Warner RFD, LLM, FAICD - Director Ian Warner, a lawyer and former senior partner of Jackson McDonald is Deputy Chairman of Amcom Telecommunications Ltd, Chairman of Rivaknar Properties (WA) Pty Ltd (a wholly owned subsidiary of two public companies), a director of Franchise Investments Ltd and Australia Post.
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Warren John Murphy, BSc (Chem), Grad Dip Ed, Grad Dip Adv Management (Harvard) FAICD - Director Warren Murphy was appointed to the Board of Directors in July 2000. Warren has recently retired from Wesfarmers Limited where he was Executive Director of Corporate Affairs, and Managing Director of Wesfarmers Bunnings Ltd. He serves on the board of the Industrial Foundation for Accident Prevention.
Committees
At the date of this Report, the Corporation had Finance, Audit, and Governance and Remuneration Committees consisting of the following Directors:
Finance: Dan Smetana (Chairman), Warren Murphy, David Eiszele
Audit: Ian Warner (Chairman), Carol Devitt, David Eiszele
Remuneration: Hector Stebbins (Chairman), Warren Murphy, Carol Devitt, David Eiszele
Meetings of Directors The number of Directors’ meetings (including meetings of committees) and number of meetings attended by each of the Directors during the financial year ended 30 June 2001 are:
Directors’ Meetings Committee Meetings
No. eligible No. No. eligible No. to attend attended to attend attended
Hector Stebbins 9 9 6 6
Dan Smetana 9 8 8 8
David Eiszele 9 9 20 19
Carol Devitt 9 9 12 12
Ian Warner 9 9 6 6
Warren Murphy 9 9 11 10
Richard Lewis 7 6 8 7
Note: Richard Lewis retired as Director of the Board in March 2001
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Principal activities
Western Power Corporation:
?? generates, acquires, exchanges, transports, distributes, markets and otherwise supplies electricity to commercial, industrial and residential customers throughout Western Australia, ?? undertakes, maintains and operates the facilities and equipment required for such purposes, ?? develops and turns to account, technology, software or other intellectual property that relates to activities referred to above, ?? manufactures and markets products that relate to these activities, and ?? uses its expertise and resources to provide consultative and other advisory services for profit.
There have been no significant changes in the nature of the principal activities during the financial year.
Operating results For the year ended 30 June 2001, the Corporation achieved a profit after tax of $188.2 million.
Dividends paid or recommended Dividends paid or recommended by the Corporation since the end of the previous financial year were:
?? an interim dividend of $47.1 million in respect of the period ended 31 December 2000, paid on 29 June 2001, and ?? a final dividend of a further $47.0 million in respect of the year ended 30 June 2001, recommended to be paid during December 2001.
Review of operations The operations of the Corporation during the financial year and the result of those operations are discussed in the Chairman’s and Managing Director’s Review, Financial Performance section and Review of Operations section of the Annual Report.
Likely developments and expected results of operations In the opinion of the Directors, all appropriate information concerning likely developments in, and the likely results of, the operations of the Corporation is contained in the Western Power Corporation Report for the 2000/2001 financial year.
The Directors have excluded from this Report any further information on the likely developments in the operations of the Corporation and the expected results of those operations in future years as the Directors have reasonable grounds to believe that it would be likely to result in unreasonable prejudice to the Corporation.
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Derivatives The Corporation uses derivative contracts for hedging purposes only and not for speculative purposes. The Board of Directors is responsible for the operation of the system of internal controls, which includes monitoring and controlling the use of derivative financial instruments. The principal areas of risk are:
Liquidity risk Liquidity risk arises from the possibility that, because of market conditions prevailing at some point in the future, the Corporation may either be forced to sell derivative positions at a value which is below their underlying worth or be unable to exit the positions at all. To counter the risk, the Corporation only uses derivatives in highly liquid markets.
Liquidity risk also arises from the possibility that the Corporation may be unable to settle on a transaction on the due date. The Corporation has in place standby facilities to ensure adequate liquidity is available for its operations.
Risk management policies All internal controls and hedge activities are conducted within Board approved policy. Comprehensive systems are in place and compliance is monitored closely. The risk management process is subject to regular internal audit visits and close senior management scrutiny including regular Board reporting.
Credit risk Credit risk represents the loss that would be incurred if counterparties failed completely to perform as contracted. The Corporation does not have a significant exposure to any individual counterparty and it is the Corporation's policy to deal only in derivatives with major banks that are highly rated by Standard & Poor’s or Moody’s Investor Services and are regulated by the Australian Prudential Regulation Authority.
The Board is satisfied that proper controls are in place in relation to derivatives.
Change in state of affairs There were no significant changes in the state of affairs of the Corporation during the financial year, except as noted below:
?? On 1 July 2000 the Goods and Services Tax was introduced. ?? During August 2000 an associated company, Wind Energy Corporation was formed between Western Power and Enercon Power Corporation to focus on business opportunities relating to large-scale wind farms operating in parallel with an interconnected electricity grid, and hybrid power systems for remote and regional applications that utilise renewable energy technologies. ?? During November 2000 the Worsley 120 MW Cogeneration facility, a joint venture between Western Power and Fletcher Challenge South West Cogeneration Ltd, commenced full operations. The output of thermal energy and electricity is supplied to the Worsley Alumina Refinery and other energy customers.
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?? During December 2000, Western Power signed a contract with the Energy Equity Corporation and Woodside Energy Ltd consortium for the supply of power to the towns of Broome, Halls Creek, Fitzroy Crossing, and Camballin/Looma for the next 18 years. ?? During December 2000, details of a comprehensive plant replacement program were announced. Tenders were invited for 240 MW of new high efficiency combined cycle gas plant to replace two ageing natural-gas and oil-fired 120 MW generating units at Kwinana Power Station. The Kwinana Combined Cycle Project will result in a significant efficiency improvement in electricity generation. It is planned to have the plant operating by December 2003. ?? During March 2001 a new company organisation structure was implemented to drive Western Power’s strategic direction and support improvements in overall business performance. ?? As of 1 April 2001, the Renewable Energy Act requires electricity wholesale purchasers in Australia to source specific amounts of electricity from new Renewable Energy sources. The Act imposes an annual liability that can be extinguished by the surrender of Renewable Energy Certificates (RECs). RECs can be self-produced or purchased in the open market. The Corporation is confident it will meet the requirements under the Renewable legislation.
After balance date events There has not arisen in the interval between the end of the financial year and the date of this Report any matter or circumstance likely, in the opinion of the Directors, to affect significantly the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation in subsequent financial years.
Environmental regulation performance All Western Power sites are subject to a range of environmental regulations, both State and Federal, and some are also covered by specific environmental operating licences issued by the State. All performance obligations under these licences are monitored and reported, and may be subject to Government agency audit or inspection from time to time. Western Power received an Environmental Field Notice from the Department of Environmental Protection regarding excess dust emissions from Perry Quarry. Western Power corrected the issue within one week of receiving the notice. No other breaches of environmental licences were notified by any Government agency and no actions have been taken against Western Power in the year to 30 June 2001.
Directors' benefits During the financial year, no Director has received or become entitled to receive a benefit, other than benefits disclosed in the financial statements as emoluments or the fixed salary of a full-time employee of the Corporation, by reason of a contract made by the Corporation with the Director or with a firm of which he/she is a member, or with an entity in which he/she has a substantial financial interest.
Directors' interest in contracts During the financial year, the Corporation did not enter into any contracts with entities in which Directors declared an interest, except as set out in Note 29 to the financial statements, that forms an integral part of this Report.
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Indemnification of Directors and officers During the financial year the Directors' and Officers' Liability Insurance Policy was renewed to ensure that the Directors and Officers of the Corporation had adequate coverage. The cover will pay on behalf of the Corporation, or Directors and Officers of the Corporation, losses arising from a claim or claims made against them jointly or severally during the period of insurance by reason of any wrongful act in the capacity of Director or Officer of the Corporation.
The Directors’ and Officers’ Liability Insurance Policy forms part of the Corporation’s Third Party Liability Policy, and it is therefore not possible to determine the premium applicable.
At the date of this Report no claims have been made against the policy.
Rounding of amounts The Corporation satisfies the requirements of clause 32 of Schedule 3 contained in the Electricity Corporation Act 1994 and accordingly, amounts in the financial statements and Directors’ Report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise.
Signed in accordance with a resolution of the Board of Directors.
H I STEBBINS D R EISZELE Chairman Managing Director
18 July 2001
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Directors’ declaration
In accordance with a resolution of the Directors of Western Power, we declare that -
In the opinion of the Directors:
(a) the financial statements and associated notes comply with the accounting standards and Urgent Issues Group Consensus Views;
(b) the statement of financial performance is drawn up so as to give a true and fair view of the net profit from ordinary activities of the Corporation for the financial year ended 30 June 2001;
(c) the statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Corporation as at 30 June 2001, and;
(d) at the date of this statement there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they fall due.
For and on behalf of the Board,
H I STEBBINS D R EISZELE Chairman Managing Director
18 July 2001
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INDEPENDENT AUDIT REPORT ON WESTERN POWER CORPORATION
To the Parliament of Western Australia
Scope I have audited the financial statements of Western Power Corporation for the year ended June 30, 2001 comprising the Statement of Financial Performance, Statement of Financial Position, Statement of Cash Flows, accompanying Notes and Statement by Directors. The Corporation’s Directors are responsible for the financial statements. I have conducted an independent audit of the financial statements in order to express an opinion on them as required by the Electricity Corporation Act 1994.
My audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial statements are free of material misstatement. My procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial statements are presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements and statutory requirements so as to present a view which is consistent with my understanding of the Corporation’s financial position, and performance as represented by the results of its operations and cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion In my opinion, the financial statements of Western Power Corporation are properly drawn up: (a) so as to give a true and fair view of:
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2001
NOTES 30/06/01 30/06/00 $’000 $’000
Sales of Electricity 1,415,685 1,426,431 Less : Cost of Sales 2 997,467 990,875
Gross Profit 418,218 435,556
Plus : Other Revenue from Ordinary Activities 3 158,148 148,771
Less : Other Expenditure from Ordinary Activities 4 128,997 116,385
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Profit Before Borrowing Costs and Income Tax Expense 447,369 467,942
Less : Borrowing Costs 5 161,057 230,084
Profit Before Income Tax Expense 6 286,312 237,858
Less : Income Tax Expense 7 98,121 83,828
Net Profit 188,191 154,030
This statement should be read in conjunction with the attached Notes to the Financial Statements set out on pages xx to xx.
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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2001
NOTES 30/06/01 30/06/00 $’000 $’000 CURRENT ASSETS Cash Assets 9 5,857 10,834 Receivables 10 190,030 160,849 Inventories 11 115,290 114,039 Other Financial Assets 12 411 387 Other 13 25,895 21,359
Total Current Assets 337,483 307,468
NON-CURRENT ASSETS Property, Plant and Equipment 14 3,705,944 3,656,294 Future Income Tax Benefit 44,879 43,290 Other Financial Assets 12 3,431 1,322 Other 13 10,057 17,928
Total Non-Current Assets 3,764,311 3,718,834
Total Assets 4,101,794 4,026,302
CURRENT LIABILITIES Payables 15 93,336 76,613 Interest Bearing Liabilities 16 - 60,000 Tax Liabilities 17 53,967 34,945 Provisions 18 93,950 82,783 Other 11,537 13,346
Total Current Liabilities 252,790 267,687
NON-CURRENT LIABILITIES Payables 15 37,399 38,125 Interest Bearing Liabilities 16 2,363,884 2,374,761 Tax Liabilities 17 94,979 82,648 Provisions 18 85,318 88,353 Other 12,006 14,418
Total Non-Current Liabilities 2,593,586 2,598,305
Total Liabilities 2,846,376 2,865,992
NET ASSETS 1,255,418 1,160,310
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EQUITY Contributed Equity 19 6,177 5,164 Retained Profits 19 1,249,241 1,155,146
TOTAL EQUITY 1,255,418 1,160,310 This statement should be read in conjunction with the attached Notes to the Financial Statements set out on pages xx to xx.
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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2001
NOTES 30/06/01 30/06/00 $’000 $’000 CASH FLOWS FROM OPERATING ACTIVITIES
Receipts in the Course of Operations 1,533,895 1,384,066 Other Revenue from Ordinary Activities 67,905 90,715 Interest Received 1,201 3,524 Payments to Employees and Suppliers (974,910) (918,023) Borrowing Costs Paid (160,781) (228,750) Lease Expenses (4,389) (1,373) Income Tax Paid (72,906) (72,937) Goods & Services Tax Paid (54,110) -
NET CASH INFLOWS FROM OPERATING ACTIVITIES 24 335,905 257,222
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for Investment in Other Entities (1,890) (735) Payment for Property, Plant and Equipment (268,912) (212,830) Proceeds from Sale of Property, Plant and Equipment 11,325 5,423
NET CASH OUTFLOWS FROM INVESTING ACTIVITIES (259,477) (208,142)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid (73,922) (37,094) Proceeds from Interest Bearing Liabilities 1,240,596 1,686,591 Repayment of Interest Bearing Liabilities (1,310,501) (1,788,450) CES, Customers' and Contractors' Deposits (1,242) (1,396) Non-Refundable Customer Contributions to Capital Works 63,627 58,003 Proceeds from Contributed Equity 1,013 4,739
NET CASH OUTFLOWS FROM FINANCING ACTIVITIES (80,429) (77,607)
NET DECREASE IN CASH ASSETS HELD (4,001) (28,527)
CASH ASSETS AT BEGINNING OF FINANCIAL YEAR 10,834 38,916
Effects of Exchange Rate Changes on Cash (976) 445
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CASH ASSETS AT END OF FINANCIAL YEAR 24 5,857 10,834
This statement should be read in conjunction with the attached Notes to the Financial Statements set out on pages xx to xx.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis of Preparation
1.1.1 Basis of Preparation
The financial statements are a general purpose financial report which has been prepared in accordance with relevant Accounting Standards, Urgent Issues Group Consensus Views and the disclosure requirements of Schedule 3 of the Electricity Corporation Act 1994.
These financial statements have been prepared on the basis of historical costs and, except where stated, do not take into account changing money values or current valuations of non-current assets.
These accounting policies have been applied consistently with the previous year.
1.1.2 Reclassification of Financial Information
Some line items and sub-totals reported in the previous financial year have been reclassified and repositioned in the financial statements as a result of the first time application on 1 July 2000 of the revised standards AASB 1018 Statement of Financial Performance, AASB 1034 Financial Report Presentation and Disclosures and the new AASB 1040 Statement of Financial Position.
Adoption of these standards has resulted in: ?? Expenditure items previously classified by nature have been reclassified and are disclosed by function in the statement of financial performance. ?? Revenue and expenditure items previously disclosed as abnormal have been reclassified and are now disclosed as individually significant items in Note 6. These items are no longer identified separately on the face of the statement of financial performance. ?? Material Stores of $28.643 million previously classified as Non Current Inventory have been reclassified and are now disclosed as Current Inventory in Note 11. ?? Interest Bearing Liabilities of $397.377 million previously classified as Current Interest Bearing Liabilities have been reclassified and are now disclosed as Non-Current Interest Bearing Liabilities in Note 16.
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The following assets and liabilities have been removed from previous classifications and are now disclosed as separate line items on the face of the statement of financial position: ?? Future Income Tax Benefit, previously presented within Other Non- Current Assets. ?? Current Tax Liabilities, previously presented within Current Payables and Current Provisions. ?? Non-Current Tax Liabilities previously presented within Non-Current Provisions.
1.2 Revenue Recognition
1.2.1 Sales of Electricity
Sales of Electricity comprises revenue earned from the provision of electricity to entities outside the economic entity and is recognised when the electricity is provided. As at each balance date, Sales and Trade Debtors incorporate amounts attributable to ‘unread sales’, which are an estimate of electricity delivered to customers, which has not been billed at balance date.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.2 Revenue Recognition (continued)
1.2.2 Other Revenue from Ordinary Activities
Other revenue from ordinary activities includes: ?? Account Fees ?? Business Ventures ?? Developer and Customer Contributions ?? External Chargeable Works ?? Generation Fuel Sales ?? Information Technology Services ?? Interest ?? Network Access Charges, and ?? Proceeds on Sale of Non-Current Assets
1.3 Goods and Services Tax
Revenues, expenses and assets are recognised net of amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
1.4 Receivables
Trade debtors to be settled within 30 days are carried at amounts due. A provision for doubtful debts is raised where some doubt as to collection exists. The provision for doubtful debts is based on an analysis of bad debts experience and current economic conditions.
Collectability of trade debtors is reviewed on an ongoing basis. Debts, which are known to be irrecoverable, are written off.
1.5 Cost of Sales
Cost of sales is those costs attributable to the integrated manufacturing process involved in the generation and transformation of electricity into a saleable good.
1.5.1 Fuel Costs
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Costs for coal are assigned on the basis of weighted average cost. Gas costs comprise payments made under the contract for minimum take or pay and the drawdown of prepaid gas. Prepaid gas is assigned at its holding cost.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.6 Borrowing Costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets as described in Note 1.9.1.
Borrowing costs are capitalised at the weighted average interest rate applicable to the Corporation’s outstanding borrowings during the period of capitalisation. The weighted average interest rate used during the year was 6.8%. Capitalisation ceases when the activities necessary to prepare the asset for use are substantially completed.
Borrowing costs include: ?? Interest on bank overdrafts, short-term and long-term borrowings ?? Amortisation of discounts relating to borrowings ?? Amortisation of ancillary costs incurred in connection with the arrangement of borrowings ?? Finance lease charges ?? Exchange differences arising from foreign currency borrowings ?? Unrealised and realised gains and losses on bond futures contracts ?? Amortisation of realised gains and losses on forward rate agreements.
1.7 Current Assets and Current Liabilities
Current assets and current liabilities are recognised on the basis of assets expected to be realised or consumed and liabilities expected to be settled within the next twelve months.
1.8 Cash Assets
For purposes of the statement of cash flows, cash assets include deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdraft.
1.9 Property, Plant and Equipment
1.9.1 Capitalisation of Borrowing Costs
Borrowing costs are capitalised during the construction of major capital projects that have construction periods extending beyond one year. Capitalised borrowing costs are broadly determined as the amount of borrowing costs that would have been avoided, but for the construction of the asset.
1.9.2 Acquisition of Assets
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The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the asset given at the date of acquisition plus costs incidental to the acquisition.
The Corporation is a statutory corporation subject to the requirements of the Electricity Corporation Act 1994 and came into existence on 1 January 1995. The electricity functions and assets of the State Energy Commission of Western Australia (SECWA) were transferred to the Corporation on this date. The assets acquired were brought to account at their written down accounting value in the books as at 31 December 1994.
Direct costs together with associated indirect costs in respect of assets being constructed, are capitalised.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.9 Property, Plant and Equipment (continued)
1.9.2 Recoverable Amount of Non-Current Assets
The carrying amounts of non-current assets are reviewed annually to determine whether they are in excess of their recoverable amount. If the carrying amounts of non-current assets exceed the recoverable amount, the assets are written down to the lower amount. The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal.
In assessing recoverable amount of non-current assets the relevant cash flows have been based on projected financial results for the next five years and an assumed terminal value. These cashflows have been discounted at a rate of 7.0% to their present value.
The carrying amounts of non-current assets, as reviewed, are not in excess of their recoverable amount, nor in excess of their value to the business as a going concern.
1.9.3 Depreciation
Discrete assets that are not subject to continual extension and modification are depreciated using the straight-line method. Such assets include power stations, gas turbines, the transmission network, buildings and motor vehicles.
Other assets, primarily the electricity distribution network, which are continually extended and modified, are depreciated using the reducing balance method.
The useful lives of the Corporation’s major asset classes are as follows:
Life Span (months)
Buildings 480 Plant and Equipment 240-540
Depreciation rates are reviewed annually, and if necessary adjusted so they reflect the most recent assessment of the useful lives of the assets. For the financial year ended 30 June 2000 revisions of assets’ useful lives resulted in an additional depreciation expense of $20.1 million.
1.9.4 Leased Assets
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Leases of plant and equipment under which the Corporation assumes substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.
Finance leases are brought to account by recording an initial asset and liability equal to the present value of the minimum lease payments including any guaranteed residual values. Leased assets are amortised over their expected useful lives. Lease payments are allocated between interest expense in the statement of financial performance and reduction of lease liability in the statement of financial position.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.9 Property, Plant and Equipment (continued)
1.9.5 Leased Assets (continued)
Operating lease payments are representative of the pattern of benefits derived from the leased assets and accordingly are charged to the statement of financial performance in the periods in which they are incurred.
1.10 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is assigned on the basis of weighted average cost.
1.11 Joint Venture Operations
1.11.1 Joint Venture Operations
The Corporation’s interests in unincorporated joint ventures are brought to account by including amounts in the following categories in the statement of financial performance and the statement of financial position:
?? Each of the individual assets employed in the joint ventures ?? Liabilities incurred by the Corporation in relation to the joint ventures ?? Expenses incurred in relation to the joint ventures ?? Revenue from the sale of output.
1.11.2 Associates
The investment in associates is carried at the lower of cost and recoverable amount. Dividend income is brought to account at the time it is declared.
1.12 Trade and Other Creditors
These amounts represent liabilities for goods and services provided to the Corporation prior to the end of the financial year, which are unpaid. The amounts are unsecured and are settled within prescribed periods.
1.13 Provisions
1.13.1 Employee Entitlements
Provision has been made in the financial statements for employee entitlements in relation to annual leave and long service leave including relevant on-costs. The annual leave provision and the current portion of the long service leave provision are measured at their nominal amount. Past experience has shown the nominal calculation of the current portion of the long service leave provision is not materially different from the
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estimate determined by using the present value basis of measurement. The non-current portion of the provision for long service leave is measured at the present value of estimated future cash flows.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.13 Provisions (continued)
1.13.2 Superannuation
The Corporation has a liability in respect to employees who are members of the Superannuation and Family Benefits Act Scheme. This scheme is closed to new members. The Corporation’s liability is in respect of the employer portion of any amounts that are payable to scheme members in their retirement.
The balance of the provision is actuarially reviewed every three years; PriceWaterhouseCoopers performed an actuarial review as at 30 June 2001.
1.13.3 Decommissioning Costs
As generation plant nears the end of its useful life a provision is made for anticipated costs of restoration and rehabilitation. Restoration and rehabilitation costs are calculated and spread over the remaining life of the asset on a straight-line method.
1.14 Foreign Exchange
As a policy objective, the Corporation has eliminated its exposure to foreign currencies, except for minor exposures arising through the normal course of business.
Foreign exchange transactions are brought to account to conform to Accounting Standard AASB 1012 Foreign Currency Translation. Specific treatment of these transactions is stated below:
1.14.1 Transactions
Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date of the transaction. At balance date, amounts payable and receivable in foreign currencies are translated into Australian currency at rates of exchange current at that date and the resulting exchange differences are brought to account in determining the profit or loss for the year.
1.14.2 Specific Commitments
Gains or losses arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods or services, together with subsequent exchange gains or losses resulting from those transactions are deferred and included in the measurement of the purchase or sale. In the case of hedges of monetary items, exchange gains or losses are brought to account in the financial period in which the exchange rate changes.
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1.14.3 General Commitments
Exchange gains or losses on hedge transactions, other than those covered above, are brought to account in the statement of financial performance in the financial period in which exchange rates change.
1.14.4 Speculative Commitments
The Corporation does not undertake speculative transactions.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.15 Derivative Financial Instruments
Through its operations, the Corporation is exposed to changes in foreign exchange rates, interest rates and commodity prices. These risks are managed with the prudent use of derivative products. The Corporation uses derivatives solely for hedging and not for speculative purposes.
Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they are hedging. Accordingly, hedge gains and losses are included in the statement of financial performance when the gains and losses arising on the related primary exposures are recognised.
Gains and losses related to hedges for qualifying assets in respect of firm commitments are deferred and recognised as adjustments of carrying amounts when the hedged transaction occurs.
The Corporation uses the following derivative financial instruments to hedge risks - interest rate swaps, cross currency swaps, commodity swaps, forward foreign exchange contracts, forward rate agreements, foreign currency options and bond futures contracts.
1.15.1 Interest Rate Swaps
Interest payments and receipts under interest rate swap contracts are recognised on an accrual basis in the statement of financial performance as an adjustment to interest expenses during the period.
1.15.2 Cross Currency Swaps
Interest payments and receipts under cross currency swaps are recognised on an accrual basis in the statement of financial performance. The carrying amounts of cross currency swaps, which comprise net receivables and payables are included in the statement of financial position.
1.15.3 Commodity Swaps
Gains or losses arising upon entering into commodity swaps intended to hedge the purchase of commodities are recognised as adjustments to the carrying amount of the asset.
1.15.4 Forward Foreign Exchange Contracts
The accounting for forward foreign exchange contracts is set out in Note 1.14.
1.15.5 Forward Rate Agreements
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Realised gains or losses on forward rate agreements are deferred in the statement of financial position and amortised to the statement of financial performance over the underlying term of the agreement.
1.15.6 Foreign Currency Options
The premium paid on foreign currency options is amortised over the period of the contracts and together with any realised gains or losses on exercising the options, is included in the measurement of the purchase.
DMS#: 950673v1 Appendix Page 97
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.15 Derivative Financial Instruments (continued)
1.15.7 Bond Futures Contracts
Unrealised and realised gains and losses arising from entering into bond futures contracts are recognised in the statement of financial performance as an adjustment to borrowing costs in the period they arise.
1.16 Taxation Equivalent Regime (TER)
The Corporation operates within a tax equivalent regime whereby equivalent amounts in respect of income tax are payable to State Treasury. TER guidelines and directions approved by Government govern the calculation of this liability, which are comparable to those in Federal legislation currently in operation.
Upon entering the TER, the Corporation has adopted the liability method of tax effect accounting procedures whereby the income tax expense shown in the statement of financial performance is based on the net profit before income tax adjusted for permanent differences.
Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of net profit before income tax and taxable income, are brought to account as either a Provision for Deferred Income Tax or as an asset described as Future Income Tax Benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future tax benefits in relation to tax losses are not brought to account unless the benefit can be regarded as being virtually certain of realisation.
1.17 Prepayments
Current and non-current prepayments comprise fuel for generation, interest, insurance and lease payments. Prepaid expenses are charged to the statement of financial performance in the period in which the associated benefit is consumed. A significant proportion of prepayments relates to prepaid gas purchases from the North West Shelf.
1.18 Community Service Obligations
Non-commercial activities performed on behalf of the State Government are collectively referred to as Community Service Obligations (CSO’s). Where the Government agrees to reimburse the Corporation for the cost of CSO’s, the entitlement to reimbursement is recognised in the statement of financial performance on a basis consistent with the associated CSO expenses. For the year
DMS#: 950673v1 Appendix Page 98
ended 30 June 2001, $28.7 million (2000: $27.0 million) has been reimbursed with respect to supply charge rebates provided to customers.
1.19 Repairs and Maintenance
Maintenance, repair costs and minor renewals are charged as expenses as incurred.
1.20 Comparatives
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1.21 Renewable Energy Certificates
The Renewable Energy (Electricity) Act which took effect on 1 April 2001, requires electricity wholesale purchasers to source specified amounts of electricity from Renewable Energy (RE) sources. The Act imposes an annual liability, on a calender year basis, by applying the specified Renewable Power Percentage to relevant wholesale acquisitions.
The RE liability is extinguished by annual surrender of an equivalent number of Renewable Energy Certificates (REC’s), with a penalty applying for any shortfall. The Corporation’s liability is recognised at a value equivalent to the REC penalty.
The Corporation extinguishes its REC liability by the surrender of REC’s that are either self produced or purchased in the open market. Self-produced REC’s are recognised as an asset at a value equivalent to the REC penalty. REC’s purchased from external sources are recognised as an asset at their purchase price.
DMS#: 950673v1 Appendix Page 100
NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
2. COST OF SALES
Fuel and Electricity Purchases 487,469 448,201 Labour, Materials and Services 303,078 331,216 Depreciation 206,920 203,458 Other - 8,000
997,467 990,875
3. OTHER REVENUE FROM ORDINARY ACTIVITIES
Revenue from Operating Activities –
Developer and Customer Contributions 66,997 66,545 External Chargeable Works 13,699 13,795 Network Access Charges 8,653 11,543 Account Fees 7,396 7,737
Revenue from Non Operating Activities –
Generation Fuel Sales 20,599 19,960 Business Ventures 12,743 2,277 Proceeds on Sale of Non-Current Assets 11,094 5,409 Interest 1,057 3,584 Information Technology Services 723 3,283 Other 15,187 14,638
158,148 148,771
4. OTHER EXPENDITURE FROM ORDINARY ACTIVITIES
Labour, Materials and Services 79,667 69,754 Depreciation 4,251 9,079 Other 45,079 37,552
128,997 116,385
5. BORROWING COSTS
Domestic Currency Loans 152,917 202,552 Foreign Currency Loans 4,085 21,303 Forward Rate Agreement 115 - Currency and Interest Rate Swaps (43) 1,749 Finance Lease - 255 Other 8 9
157,082 225,868
DMS#: 950673v1 Appendix Page 101
Government Loan Guarantee Charge 4,005 4,216
161,087 230,084 Less : Capitalised Borrowing Costs 30 -
161,057 230,084
DMS#: 950673v1 Appendix Page 102
NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
6. PROFIT BEFORE INCOME TAX EXPENSE
Profit Before Income Tax Expense is arrived at after:
Crediting the following items –
Net Profit on Sale of Non-Current Assets 3,005 1,243
Charging the following items –
Bad Debts - Written off to the Statement of Financial Performance 2,954 3,749 - Increase (Decrease) in Provision for Doubtful Debts 514 (691)
Depreciation - Plant and Equipment 202,916 202,865 - Buildings 9,340 9,672 - Capitalised (1,085) -
Leasing Costs - Finance Lease Residual Costs - 64 - Operating Lease Rentals 4,389 3,920 - Amortisation of Leased Assets - 546
Auditors’ Remuneration Audit Services - Auditors of the Corporation 198 190
Significant Items –
Adjustment of Unread Debtors During the financial year ended 30 June 2000 sales of electricity was increased by $28.1 million for the under accrual of unread debtors. The applicable income tax credit was $10.1 million.
Debt Re-financing During the financial year ended 30 June 2000 the Corporation refinanced a portion of its long-term debt to take advantage of the favourable interest rate environment. This resulted in an increase to borrowing costs of $47.3 million representing the premium paid to ensure lower borrowing costs in the future. The applicable income tax charge was $17.0 million.
Redundancy Costs During the financial year ended 30 June 2000 the Corporation incurred $26.6 million of redundancy
DMS#: 950673v1 Appendix Page 103
payments. The applicable income tax charge was $9.6 million.
Decommissioning Costs for Bunbury Power Station During the financial year ended 30 June 2000 a provision for $8.0 million was raised for the demolition and site clean up of the decommissioned Bunbury Power Station. This includes the costs for the removal of asbestos and plant, and the subsequent demolition of the buildings. The Corporation decommissioned the Bunbury Power Station site in September 1999. The Power Station will not be sold and the Corporation has an obligation to make the site safe. There was no income tax effect.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
7. INCOME TAX EXPENSE
The prima facie tax on profit is reconciled to the income tax provided in the accounts as follows:
Profit Before Income Tax Expense 286,312 237,858
Income Tax calculated at 34% (June 2000: 36%) 97,346 85,629
Tax Effect of Permanent Differences - Provision for Decommissioning Costs 1,904 4,824 - Non-deductible Depreciation of Plant 1,407 1,600 - Research and Development Costs (1,832) - - Non-assessable Profit on Sale of Plant (680) (586) - Other (24) 179
Total Tax Effect of Permanent Differences 775 6,017
Restatement of tax balances due to a change in company tax rate - (7,818)
Income Tax Expense 98,121 83,828
Total income tax comprises the following: Additions to : Provision for Income Tax 87,379 67,846 Provision for Deferred Income Tax 12,331 16,208 Future Income Tax Benefit (1,589) - Reductions to : Future Income Tax Benefit - 7,592
Changes in the Provisions due to Change in Tax Rates Reductions to Future Income Tax Benefit - 8,172 Provision for Deferred Income Tax - (15,990)
98,121 83,828
DMS#: 950673v1 Appendix Page 105
NOTES TO THE FINANCIAL STATEMENTScontinued) ( 8. SEGMENT INFORMATION
DISTRIBUTION PILBARA REGIONAL GENERATION TRANSMISSION and SALES POWER POWER CONSOLIDATED 30/06/01 30/06/00 30/06/01 30/06/00 30/06/01 30/06/00 30/06/01 30/06/00 30/06/01 30/06/00 30/06/01 30/06/00 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 STATEMENT OF FINANCIAL PERFORMANCE External Revenue 38,788 30,649 11,235 11,3371,417,184 1,436,302 41,621 38,736 65,005 58,178 1,573,833 1,575,202 Inter-segment Revenue 765,205 782,038 155,821 168,301 ------921,026 950,339 External Expenses (632,851) (645,566) (85,128) (90,360)(277,219) (255,679) (24,043) (24,333)(107,223) (91,322) (1,126,46 (1,107,26 4) 0) Inter-segment Expenses (30,387) (30,646) (2,182) (4,223) (883,758) (912,754) (1,152) (1,106) (3,547) (1,610) (921,026) (950,339) Profit Before Borrowing Costs and Income Tax Expense 140,755 136,475 79,746 85,055 256,207 267,869 16,426 13,297 (45,765) (34,754) 447,369 467,942 Borrowing Costs (161,057) (230,084) Income Tax Expense (98,121) (83,828)
Net Profit 188,191 154,030
STATEMENT OF FINANCIAL POSITION Segment Assets 1,726,235 1,851,016 758,848 710,6081,282,625 1,160,396 103,832 105,249 144,374 144,517 4,015,914 3,971,786 Unallocated Assets 85,880 54,516 Segment Liabilities (185,977) (188,115) (61,754) (51,302)(191,241) (171,647) (7,155) (5,058) (195) (4,825) (446,322) (420,947) Unallocated Liabilities (36,170) (10,284) Net Assets Before Borrowings 1,540,2581,662,901 697,094 659,306 1,091,384 988,749 96,677 100,191 144,179 139,692 3,619,3023,595,071
Appendix Page 106
Borrowings (2,363,88 (2,434,76 4) 1) Net Assets 1,255,4181,160,310 Industry Segment The major products/services from which the above segments derive revenue are: Generation - Generates and sells electricity to the Distribution and Sales segment; Transmission- Transports electricity from generators to the Distribution and Sales segment and thirdrty pa users; Distribution and Sales- Purchases, distributes and sells electricity to customers in the South West Interconnected System; Pilbara Power - Purchases, transports, distributes and sells electricity in Western Australia’s Pilbara System; and Regional Power - Generates, purchases, distributes and sells electricity in Western Australia’s remote areas.
Geographical Segments The Corporation operates entirely in Australia.
Significant inter-segment revenues are earned by the Generation and Transmission segments. Inter-segment Generation revenues are based on competitive market assumptions and inter-segment Transmission and Distribution revenues are based on published network access price schedules.
Appendix Page 107
NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
9. CASH ASSETS
Cash at Bank 1,003 666 Domestic Currency Deposits 4,800 10,100 Foreign Currency Deposits 54 68
5,857 10,834
10. RECEIVABLES
Trade Debtors 186,249 160,637 Less : Provision for Doubtful Debts 3,286 2,772
182,963 157,865
Other Debtors 7,067 2,984
190,030 160,849
11. INVENTORIES
Power Station Fuels – at cost 60,388 55,793 Material Stores – at cost * 54,460 57,605 Work in Progress– at cost 442 641
115,290 114,039
* These include amounts previously classified as non-current material stores.
12. OTHER FINANCIAL ASSETS
Current Monies Held in Trust 411 387
Non-Current Investment in Associated Companies 1,075 606 Other 2,356 716
3,431 1,322
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
13. OTHER ASSETS
Current Prepayments 25,895 21,328 Other - 31
25,895 21,359
Non-Current Prepayments 9,090 17,622 Other 967 306
10,057 17,928
14. PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment– at cost Cost Opening Balance 4,836,026 4,621,613 Additions 223,886 223,644 Disposals (24,596) (9,231)
Closing Balance 5,035,316 4,836,026
Less : Accumulated Depreciation Opening Balance 1,545,109 1,348,328 Depreciation 202,916 202,865 Disposals (17,377) (6,084)
Closing Balance 1,730,648 1,545,109
Plant and Equipment– Net Book Value 3,304,668 3,290,917
Land – at cost Cost Opening Balance 21,918 17,322 Additions 2,019 4,986 Disposals (380) (390)
Land – Net Book Value 23,557 21,918
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
14. PROPERTY, PLANT AND EQUIPMENT (continued)
Buildings – at cost Cost Opening Balance 247,871 198,965 Additions 1,199 49,835 Disposals (1,096) (929)
Closing Balance 247,974 247,871
Less : Accumulated Depreciation Opening Balance 90,121 80,749 Depreciation 9,340 9,672 Disposals (605) (300)
Closing Balance 98,856 90,121
Buildings – Net Book Value 149,118 157,750
Works Under Construction 228,601 185,709
Total Property, Plant and Equipment 3,705,944 3,656,294
Valuations The Valuer General’s Office conducted an independent valuation of land and buildings on the basis of current use for land and market value for buildings. The independent valuation valued land and buildingsat $295.5 million as at 30 June 1998.
15. PAYABLES
Current Trade Creditors 85,575 64,330 Other Creditors 7,761 12,283
93,336 76,613
Non-Current Contributory Extension Scheme (CES) * 37,399 38,125
* This represents contributions received from consumers to extend specific electricity supplies. These deposits are progressively refunded to customers as other consumers are connected to existing supply extension schemes.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
16. INTEREST BEARING LIABILITIES
Current Domestic Currency Loans - 60,000
- 60,000
Non-Current Foreign Currency Loans Principal - 88,550 Add : Unrealised Foreign Exchange Losses - 5 Less : Unrealised Foreign Exchange Gains on Hedges - 12,535
- 76,020
Domestic Currency Loans 2,363,884 2,298,741
2,363,884 2,374,761
The following interest bearing liabilities, which are included in the above liabilities, are ultimately secured by Government Guarantee.
Foreign Currency Loans - 88,555 Domestic Currency Loans 2,363,884 2,358,741
2,363,884 2,447,296
All interest-bearing liabilities are governed by a facility agreement, which provides the Corporation with the full discretion to refinance all or any part of maturing debt. The amount of current interest bearing liabilities therefore, represents the total debt expected to be repaid within twelve months, with all remaining debt classified as non-current. For interest bearing liabilities maturing over the next twelve months it is the intention of the Corporation to refinance all maturing debt under the facility agreement.
The Corporation has used cross currency swaps to eliminate risk associated with foreign currency denominated interest bearing liabilities. Refer note 25 for details.
17. TAX LIABILITIES
Current Income Tax Provision 48,033 33,560 Goods and Services Tax 5,603 - Other 331 1,385
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53,967 34,945
Non-Current Deferred Income Tax Provision 94,979 82,648
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
18. PROVISIONS
Current Provision for Dividends 47,021 26,847 Employee Entitlements 36,108 38,573 Decommissioning Costs 10,821 17,363
93,950 82,783
Non-Current Provision for Employee Entitlements 12,948 14,608 Superannuation 45,386 49,745 Decommissioning Costs 26,984 24,000
85,318 88,353
19. EQUITY
Retained Profits at the Beginning of the Financial 1,155,146 1,047,325 Year
Net Profit After Income Tax Expense 188,191 154,030 Less : Dividends Provided for or Paid 94,096 46,209
Retained Profits at the End of the Financial Year 1,249,241 1,155,146
Contributed Equity(1) 6,177 5,164
Total Equity 1,255,418 1,160,310
(1) This amount represents the State Government’s equity contribution to the Corporation in support of the Mid West Gas Lateral and Tubridgi to Onslow Gas Pipeline projects, and the undergrounding of a 132kV transmission line ot Burswood. No shares have been allotted or issued in respect to the Equity Contribution.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
20. LEASE LIABILITIES AND LEASE COMMITMENTS
Future Lease Commitments Operating Leases: Not later than one year 5,050 4,746 Later than one year and not later than five years 17,089 15,669 Later than five years 2,380 2,872
24,519 23,287
The future operating lease commitments reported above represent lease payments determined at the inception of the lease.
Future operating lease commitments however, are largely contingent on the level of short term interest rates at the time the lease payment is due. Using the short-term interest rates applicable at 30 June 2001, future operating lease commitments are estimated to be $23.7 million (2000: $20.9 million).
21. CONTINGENT LIABILITIES
The Corporation’s policy is to disclose as acontingency any material future obligation that may arise due to special circumstances or events. At the date of this report the Corporation other than as disclosed below, is not aware of any such material future obligations in respect of the Corporation or its associates.
An action in the federal court against Western Power Corporation has been undertaken by Normandy Power Pty Ltd for unspecified damages in relation to alleged breaches of the Trade Practices Act by Western Power Corporation.
The allegations are strongly denied and the action is being vigorously defended.
22. CAPITAL EXPENDITURE COMMITMENTS
Total capital expenditure contracted for at balance date, including the retrospective underground project and other major apitalc expenditure programs, but not provided for in the accounts is as follows:
Future Capital Commitments Not later than one year 50,949 70,403 Later than one year and not later than five years 6,409 - Later than five years - -
57,358 70,403
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
23. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Minister for Energy determines remuneration of non-executive Directors. The Board oversees the remuneration policy for the Managing Director and senior executives. Directors receive no income from the Corporation other than revealed below.
The total income received or due and receivable by Directors from the 856 590 Corporation and related parties.
The total income received or due and receivable from the Corporation 7,446 7,996 and related parties by Executive Officers, including the Managing Director, whose remuneration was at least $100,000.
NUMBER NUMBER The number of Directors whose total income received or due and receivable for the financial year falls within the following bands:
$30,001 – $40,000 5 4 $90,001 – $100,000 1 1 $330,001 – $340,000 - 1 $570,001 – $580,000 1 * - * The income of one position has increased by the payout of accrued leave.
The number of Executive Officers whose total income, including motor vehicles, superannuation and associated taxes, received or receivable for the financial year falls within the following bands:
$100,001 – $110,000 2 5 $110,001 – $120,000 6 * 11 * $120,001 – $130,000 7 12 * $130,001 – $140,000 14 * 10 * $140,001 – $150,000 5 2 * $150,001 – $160,000 2 * 2 $160,001 – $170,000 3 * 2 * $170,001 – $180,000 - 3 * $180,001 – $190,000 1 1 $190,001 – $200,000 1 * 4 $200,001 – $210,000 1 1 * $210,001 – $220,000 3 2 $220,001 – $230,000 1 - $230,001 – $240,000 1 * - $240,001 – $250,000 - 1 * $330,001 – $340,000 - 1 $570,001 – $580,000 1 * -
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* The income of eleven positions (2000: eleven positions) has increased by the payout of accrued leave whilst five other positions (2000: seven positions) have increased by termination payouts. The remuneration ranges containing these positions are indicated.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
30/06/01 30/06/00 $’000 $’000
24. RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Profit 188,191 154,030
Depreciation 211,171 212,537 Written Down Value of Non-Current Assets Sold 8,090 4,166 Proceeds on Sale of Non-Current Assets (11,095) (5,409) Share of Associates’ Net (Profit)/Loss (244) (187) Amortisation– Leased Assets - 546 Developer and Customer Contributions (62,936) (59,523) Foreign Exchange (Gains)/Losses 64 301 Capitalised Borrowing Costs (30) - (Increase)/Decrease in Debtors (31,530) (40,381) (Increase)/Decrease in Prepayments 3,968 12,997 Increase/(Decrease) in Payables 20,919 (10,927) (Increase)/Decrease in Inventories (1,251) (11,488) Increase/(Decrease) in Employee Provisions (7,172) (32,849) Increase/(Decrease) in Other Provisions (3,558) 7,862 (Increase)/Decrease in Other Deferred Expenses (4) (30) (Increase)/Decrease in Accrued Interest Receivable 144 (59) Increase/(Decrease) in Deferred Income (4,037) 14,745 Increase/(Decrease) in Income Taxes Payable 25,215 10,891
Net Cash Provided by Operating Activities 335,905 257,222
RECONCILIATION OF CASH ASSETS AT THE END OF THE FINANCIAL YEAR Cash at Bank 1,003 666 Domestic Currency Deposits 4,800 10,100 Foreign Currency Deposits 54 68
Cash Assets at End of Financial Year 5,857 10,834
CREDIT STANDBY FACILITIES
The Corporation has in place arrangements for Western Australian Treasury Corporation (WATC) to provide finance for the repayment of maturing debt, ongoing capital expenditure and short-term liquidity needs. The type, currency and term of any new finance is determined at the time of draw-down between the Corporation and WATC.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS
(a) Interest Rate Risk
The Corporation is exposed to interest rate risk through primary financial assets and liabilities, modified through derivative financial instruments such as interest rate swaps, forward rate agreements and cross currency swaps.
Interest rate swap contracts are used to manage interest rate exposures. Under an interest rate swap contract, the Corporation agrees to exchange at specified intervals, the differences between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount. These contracts convert a portion of floating interest rate exposures to fixed interest rate exposures to reduce the volatility of interest costs between reporting periods.
Forward rate agreements are used to manage interest rate exposureson Domestic Currency Loans. Under a forward rate agreement, the Corporation agrees to exchange on a specified settlement date, the difference between an agreed interest rate and a floating interest rate calculated by reference to an agreed notional principal amount. These agreements fix interest rates on Domestic Currency Loans to provide protection against increasing interest rates. No Forward Rate Agreements were outstanding at 30 June 2001.
Bond futures contracts are used to manage the strategic positioning of the Domestic Currency Loans portfolio. Under a bond futures transaction, the Corporation agrees to buy or sell a specific quantity of bond futures contracts at an agreed price on a fixed settlement date. The Corporation only transacts in financial bond futures through the Sydney Futures Exchange. These contracts allow a physical debt position to be replicated at a lower cost than is possible by buying and selling physical bonds. No Bond Futures Contracts were outstanding at 30 June 2001.
Cross currency swap contracts are used to hedge Foreign Currency Loans. Under cross currency swaps, the Corporation initially exchanges a principal amount in foreign currency for a principal amount in Australian dollars. At specified intervals the Corporation pays interest amounts in Australian dollars and receives interest in foreign currency. The principal and interest exchanges are matched to the exchanges on Foreign Currency Loans. Cross currency swaps allow the Corporation to borrow offshore and minimise exposure to foreign interest rates and exchange rate fluctuations. Cross currency swaps are normally arranged for a period of three years. No Cross Currency Swaps were outstanding at 30 June 2001.
The following tables summarise the Corporation’s posureex to interest rate risk, and the weighted average interest rates on financial instruments at balance date.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(a) Interest Rate Risk (continued)
30/06/01 Weighted Floating Fixed Interest Rate Maturing Average Interest Within One to Five Over Interest Rate One year years Five years Total Rate1 $’000 $’000 $’000 $’000 $’000 Financial Assets
Bank 4.75% 1,003 - - - 1,003 Domestic Currency Deposits 4.90% 4,800 - - - 4,800 Investments 4.95% 411 - - - 411 Foreign Currency Deposits 2.50% 54 - - - 54 Interest Rate Swaps2 5.14% 108,300 - - - 108,300 Cross Currency Swaps3 ------TOTAL ASSETS 114,568 - - - 114,568
Financial Liabilities Domestic Currency Loans Short Term 5.29% 237,800 - - - 237,800 Long Term4 6.84% - 191,607 923,326 1,011,151 2,126,084 Foreign Currency Loans Short Term ------Interest Rate Swaps2 6.62% - - - 108,300 108,300 Cross Currency Swaps3 ------TOTAL LIABILITIES 237,800 191,607 923,326 1,119,451 2,472,184
30/06/00 Weighted Floating Fixed Interest Rate Maturing Average Interest Within One to Five Over Interest Rate One year years Five years Total Rate1 $’000 $’000 $’000 $’000 $’000 Financial Assets
Bank 6.16% 666 - - - 666 Domestic Currency Deposits 5.95% 10,100 - - - 10,100 Investments 6.18% 387 - - - 387 Foreign Currency Deposits 2.50% 68 - - - 68 Interest Rate Swaps2 6.32% 83,300 - - - 83,300 Cross Currency Swaps3 6.60% 88,221 - - - 88,221 TOTAL ASSETS 182,742 - - - 182,742
Financial Liabilities Domestic Currency Loans Short Term 6.12% 248,300 - - - 248,300 Long Term4 6.92% - 176,357 836,815 1,097,269 2,110,441 Foreign Currency Loans Short Term 6.50% 88,555 - - - 88,555 Interest Rate Swaps2 8.03% - 40,000 - 43,300 83,300 Cross Currency Swaps3 6.27% 75,686 - - - 75,686
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TOTAL LIABILITIES 412,541 216,357 836,815 1,140,569 2,606,282
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(a) Interest Rate Risk (continued)
1 For floating interest rates this represents the most recent determined rate converted to the effective annual rate. The frequency of renegotiation for floating rates varies from daily to half yearlyepending d on the instrument. For fixed interest rates this represents the effective annual interest rate. 2 Notional principal. 3 Cross currency swaps are presented on a net basis in the statement of financial position. Refer to Note 16. 4 Long term debt has an initial maturity period of greater than one year.
(b) Foreign Exchange Risk
The Corporation is exposed to foreign exchange risk through Foreign Currency Loans and anticipated future transactions.
Foreign Currency Loans
Foreign Currency Loans are used by the Corporation as an additional source of finance. A combination of cross currency swaps and sinking funds is used to manage foreign currency exposure on Foreign Currency Loans. No Foreign Currency Loans were outstanding at 30 June 2001.
The following table summarises the foreign currency exposures, in Australian dollar equivalents using rates current at reporting date.
30/06/00 United States Australian Dollars Dollars Total $000 $000 $000 Foreign Currency Loans 88,555 - 88,555 Cross Currency Swaps (88,221) 75,686 (12,535) Total 334 75,686 76,020
Hedges of Anticipated Future Transactions
The purpose of the Corporation’s foreign currency hedging activities is to protect against the risk that the eventual Australian dollar outflows for purchases of equipment and services will be adversely affected by changes in exchange rates.
The Corporation hedges this risk by purchasing foreign currency and holding it on deposit or by entering into forward foreign exchange agreements.
The following table summarises the foreign currency amounts held on deposit, in Australian dollar equivalents using rates current at reporting date.
30/06/01 30/06/00 Currency $’000 $’000 French Francs 54 68
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Total Foreign Currency Deposits 54 68
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(b) Foreign Exchange Risk (continued)
The foreign currency deposits are utilised to pay invoices from foreign suppliers. The deposits are replenished when a firm order has been placed with thesupplier or the future commitment can be reliably measured. In line with Note 1.14.2, any gain or loss on these hedges has been deferred and will be recognised in the financial statements at the time the underlying transaction occurs. The net deferred loss on these hedges at balance date was $0.002 million (2000: loss of $0.005 million).
The following tables summarise, by currency, the Australian dollar value of forward foreign exchange agreements. Foreign currency amounts are translated at rates current at reporting date. The ‘Buy’ amount represents the Australian dollar equivalent of commitments to purchase foreign currencies, and the ‘Sell’ amount represents the Australian dollar equivalent of commitments to sell foreign currencies.
30/06/01 Weighted Average Exchange Rate Buy Sell Buy $’000 Sell $’000 Within one year: Swiss Franc 0.8895 - 652 - Deutsche Mark 1.1795 - 8,593 - Europe Euro 0.6109 - 443 - United States Dollar 0.6077 0.6123 1,707 (1,836) French Franc 3.8651 - 636 - Netherlands Guilder 1.3804 - 79 - Canadian Dollar 0.7846 - 100 - Great British Pound 0.3552 - 52,836 - Within two years: Europe Euro 0.6090 - 702 - Total 65,748 (1,836)
30/06/00 Weighted Average Exchange Rate Buy Sell Buy $’000 Sell $’000 Within one year: Austrian Schilling 8.8110 - 150 - Swiss Franc 1.0051 - 1,561 - Deutsche Mark 1.2210 - 1,250 - Swedish Krona 5.4338 - 261 - Europe Euro 0.5961 - 325 - United States Dollar 0.6269 0.6564 6,644 (1,640) French Franc 3.8704 - 2,171 - Within two years: Europe Euro 0.6097 - 940 - Total 13,302 (1,640)
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In line with Note 1.14.2, any gain or loss on these hedges has been deferred and will be recognised in the financial statements at the time the underlying transaction occurs.The net deferred loss on these hedges at balance date was $0.6 million (2000: gain of $0.02 million).
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(b) Foreign Exchange Risk (continued)
Commodity Price Exposures
The Corporation is exposed to fluctuations in the price of commodities associated with the purchase of materials. In addition, as these prices are quoted in a foreign currency, a foreign exchange risk also exists. The Corporation manages these risks by the use fo commodity swap contracts and foreign currency options.
Under a commodity swap contract, the Corporation agrees to exchange at specific intervals in a foreign currency or Australian dollars, the difference between the fixed and floating monthly average official settlement price of the commodity, by reference to an agreed notional principal. These contracts convert a portion of the floating price exposure to a fixed price exposure and thereby reduce the exposure to price movements. The commodity swap contracts are for a period not exceeding one year and are settled in Australian dollars.
With a foreign currency option, the Corporation sets the foreign currency commodity price while still allowing the Corporation to benefit from any appreciation in the ustralianA dollar. No Foreign Currency Options were outstanding at 30 June 2001.
The notional amounts and maturity dates for the commodity swap contracts are as follows:
30/06/01 30/06/00 Hedging of Commodity Purchases $’000 $’000 3 months or less 1,158 1,011 Over 3 to 12 months 2,316 1,011 Total 3,474 2,022
In line with note 1.14.2, any gain or loss on these hedges has been deferred and will be recognised in the financial statements at the time the underlying transaction occurs. The net deferredoss lon the commodity hedges at balance date was $0.3 million (2000: loss of $0.06 million).
(c) Credit Risk
Credit risk represents the extent of credit related losses that the Corporation may be subject to on amounts to be received from financial assets orxchanged e under derivative financial instruments.
Financial Assets
The Corporation’s maximum credit risk on current receivables is the carrying amount net of the provision for doubtful debts. The Corporation’s electricity customer base consists of customers who are billed on a tariff based system, and customers billed under specific contract terms. Tariff customers include both domestic and commercial customers who are billed either monthly or every two months, and are required to settle accounts within21 days. Contract customers are billed monthly and are required to settle their accounts in the time period specified by the individual contract, with most customers on 14 day terms.
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To minimise credit risk on large contract customers, collateral ine thform of a bank guarantee or a security deposit equivalent to one electricity consumption period is obtained. Due to the Corporation’s large customer base of over 800,000 customers, the Corporation is not materially exposed to any individual customer orgroup of customers.
In respect of investments, credit risk is minimised by the Corporation’s practice to deal only with major banks that are highly rated by Standard & Poor’s or Moody’s Investor Services and are regulated by the Australian Prudential Regulation Authority.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(c) Credit Risk (continued)
Derivative Financial Instruments
The credit risk on derivative financial instruments is represented by the net fair value of tractscon with a positive fair value at balance date. The notional amounts of derivatives are not a measure of this exposure.
The following table summarises the Corporation’s credit risk on derivative financial instruments at balance date.
30/06/01 30/06/00 $’000 $’000 Commodity Swaps - 5 Cross Currency Swaps - 12,682 Foreign Currency Options - 102 Foreign Exchange Contracts 652 393 Bond Futures Contracts1 - - Interest Rate Swaps 2,027 657 Total 2,679 13,839
1 The credit risk associated with bond futures contracts is negligible as contracts are collateralised by cash, with any changes in the market value of contracts being settled on a daily basis with the clearing house.
The Corporation does not expect any counterparty to fail given the policyto deal in derivatives only with counterparties that are recognised financial intermediaries and possess a credit rating of A (Standard & Poor’s) or A2 (Moody’s Investor Services) or better.
(d) Net Fair Value of Financial Instruments
The net fair value ofa financial asset or a financial liability is the amount at which the asset could be exchanged, or liability settled in a current transaction between willing parties after allowing for transaction costs. The carrying amounts and estimated net fair valuesof financial assets and financial liabilities, including derivative contracts, held at balance date are provided in the next table. The following financial instruments, where carrying amounts approximate net fair values, are omitted: Cash at Bank, Bank Overdraft, Domestic and Foreign Currency Deposits, Receivables, Accounts Payable and Employee Entitlements.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
25. FINANCIAL INSTRUMENTS (continued)
(d) Net Fair Value of Financial Instruments (continued)
Carrying Carrying Amount Net Fair Value Amount Net Fair Value 30/06/01 30/06/01 30/06/00 30/06/00 $’000 $’000 $’000 $’000 Financial Assets Cross Currency Swaps - - 12,535 12,682 Interest Rate Swaps - 2,027 - 657 Foreign Currency Options - - 116 102 Foreign Exchange Contracts - - 20 34 TOTAL ASSETS - 2,027 12,671 13,475
Financial Liabilities Contributory Extension Scheme 38,527 20,501 38,745 16,953 Foreign Exchange Contracts 629 845 - - Domestic Currency Loans Short Term 237,800 240,486 248,300 251,404 Long Term 2,126,084 2,196,492 2,110,441 2,125,123 Foreign Currency Loans Short Term - - 88,555 87,661 Interest Rate Swaps - 989 - 1,755 Commodity Swaps 276 218 63 10 TOTAL LIABILITIES 2,403,316 2,459,531 2,486,104 2,482,906
The Corporation has not written its financial liabilities up or financial assets down, to their estimated fair value as it expects to realise the carrying amount fully, by holding them to maturity.
Net fair values of financial instruments are determined on the following basis:
Foreign Exchange Contracts and Forward Borrowing Agreements are valued at quoted market prices.
The net fair value of Interest Rate Swaps, Cross Currency Swaps, Commodity Swaps, Forward Rate Agreements and Foreign Currency Options has been calculated by discounting future cash flows at market rates applicable at the reporting date.
The Contributory Extension Scheme consists of a large number of non-interest bearing 30 year refundable deposits, the last of which is due to expire in 2021. The net fair value of the scheme has been calculated by discounting the expected future payment at the same interest rates used to value Domestic Currency Loans.
Domestic Currency Loans are arranged through Western Australian Treasury Corporation (WATC). The net fair value of these loans has been calculated by discounting future cash flows using interest rates currently offered to the Corporation for debt of the same remaining maturities plus costs expected to be incurred were the liabilityo bet settled.
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The net fair value of the short-term Foreign Currency Loans has been determined by discounting future cash flows using the London Inter Bank Offer Rate.
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NOTES TO THE FINANCIAL STATEMENTS (continued)
26. OWNERSHIP INTEREST IN RELATED PARTIES
At balance date the Corporation has entered into business arrangements with external organisations. Interests held in the various classes of related parties are shown in the following notes:
(i) Joint Ventures - Note 27 (ii) Associate Entities - Note 28
27. INTEREST IN JOINT VENTURE OPERATIONS
The South West Cogeneration Joint Venture is a joint venture between the Corporation and Fletcher Challenge South West Cogeneration Ltd, who constructed, as equal tenants-in-common, a 120MW cogeneration facility on the site of the Worsley Alumina Refinery in the South West of Western Australia. The output of the facility, thermal energy and electricity, is sold to the refinery and other energy customers.
The Corporation and APT Pipelines (WA) tyP Ltd, own as equal tenants-in-common, and share in output (29.2% WPC/70.8% APT) a gas pipeline taking gas from the Dampier Bunbury Natural Gas Pipeline (DBNGP) to the power station at Vanadium Australia Pty Ltd's (VAPL) mine at Windimurra. The Corporation and AGL Power Generation (Mid West) Pty Ltd own and operate the power station at Windimurra, as equal tenants-in-common. The Corporation and AGL Gas Trading Pty Ltd formed a joint venture as equal tenants-in-common to facilitate the transportation of gas via the DBNGP to the Mid West pipeline, then sell the gas to VAPL.
Included in the assets and liabilities of the Corporation are the following items which represent the Corporation’s interest in the assets and liabilities employed in the joint ventures, recorded in accordance with the accounting policies described in Note 1.11.1.
30/06/01 30/06/00 $000 $000 Current Assets Cash Assets 203 176 Trade Debtors 953 631 Less : Provision for Doubtful Debts - - 953 631 Inventories 86 - Prepayments 1,319 16 Total Current Assets 2,561 823
Non-Current Assets Works Under Construction 1,227 36,601
Plant and Equipment- at cost 66,202 30,584 Less : Accumulated Depreciation (5,724) (681) 60,478 29,903 Total Non Current Assets 61,705 66,504 TOTAL ASSETS 64,266 67,327
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Current Liabilities Payables 1,777 2,577 Total Current Liabilities 1,777 2,577 TOTAL LIABILITIES 1,777 2,577
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NOTES TO THE FINANCIAL STATEMENTS (continued)
27. INTEREST IN JOINT VENTURE OPERATIONS (continued)
Details of contingent liabilities and capital expenditure commitments relating to the joint ventures are included in Note 21 and 22.
28. ASSOCIATED ENTITIES
The Corporation holds a 50% ownership in Wind Energy Corporation. The company was formed in August 2000 and will focus on business opportunities relating to large-scale wind farms operating in parallel with an interconnected electricity grid, and hybrid power systems for remote and regional applications that utilise renewable energy technologies.
As at 30 June 2001 the Corporation has invested $225,000 in Wind Energy Corporation however no adjustment has been made to reflect its financial performance to 30 June 2001 as the value is immaterial in relation to the Corporation’s operations.
The Corporation holds a 50% ownership interest in Integrated Power Services Pty Ltd (IPS). The company was formed in February 1998, and is a provider of energy services to the mining process industry, and utilities service sector. As at 30 June 2001 the Corporation has invested $350,000 in the company (2000: $350,000).
The equity method has not been adopted as, at balance date, the Corporation’s interest was immaterial in the context of the Corporation’s operations. The Corporation’s investment in IPS is measured at cost. Information relating to IPS is set out below.
Name of Company Principal Activity Ownership Interest Carrying Amount 30/06/01 30/06/00 30/06/01 30/06/00 $ $ Integrated Power Provider of energy services Services Pty Ltd to mining and process 50% 50% 849,710 605,868 industry
30/06/01 30/06/00 Share of Associate’s Results $ $ Net Profit Before Income Tax Expense 759,302 583,208 Income Tax Expense 258,162 209,955 Share of Net Profit of Associate 250,570 186,626
Total Retained Other Cost Carrying Profits Reserves Amount Aggregate Carrying Amount ofAssociate $ $ $ $ Balance at the Beginning of the Financial Year 255,868 - 350,000 605,868 Movements During the Financial Year Adjustment for Share of Net Profit 1999/2000 (6,728) - - (6,728) Share of Net Profit 250,570 - - 250,570 Investments Acquired - - - - Investments Sold - - - - Dividends Received and Receivable - - - -
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Balance at End of the Financial Year 499,710 - 350,000 849,710
30/06/01 30/06/00 Summary of Performance and Financial Summary of Associate $ $ Total Assets 3,110,871 2,489,952 Total Liabilities 1,411,451 1,278,217 Net Profit After Income Tax Expense 501,140 373,253
NOTES TO THE FINANCIAL STATEMENTS (continued)
29. RELATED PARTY DISCLOSURES
Directors
The following persons held the position of Director of the Corporation during the financial year: H. Stebbins (Chairman) D. Smetana (Deputy Chairman) D. Eiszele C. Devitt I. Warner W.Murphy R. Lewis (term expired 31/03/01)
Director Transactions
The Directors of the Corporation, or their Director-related entities, conduct transactions within normal employee, customer or supplier relationships. The terms and conditions of such transactions are no more favourable than those that it is reasonable to pectex the Corporation would have adopted if dealing with the Director or Director-related entity at arms length in similar circumstances.
Mr D Eiszele is a director of the Associate Company Wind Energy Corporation, but receives no fees for his services.
Transactions with Related Parties
For the purposes of these financial statements the following entities are deemed to be related parties:
Integrated Power Services Pty Ltd (IPS) Wind Energy Corporation
During the year the Corporation purchased maintenance services totalling $8,802,443 (2000: $7,294,729) from, and sold labour services of $362,160 (2000: $177,903) to Integrated Power Services Pty Ltd. The amounts receivable and payable in the Corporation’s financial statements to Integrated Power Services Pty Ltd are $11,429 (2000: $14,228) and $856,720 (2000: $1,207,321) respectively. No dividends have been received or are receivable from IPS.
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The value of transactions between Western Power Corporation and Wind Energy Corporation during the 30 June 2001 financial year is not disclosed because it is immaterial in relation to the Corporation’s operations.
Trading between the Corporation and related parties is undertaken on an arm’s length basis, on commercial terms and conditions.
(i) the Corporation’s financial position at June 30, 2001 and of its performance for the financial year ended on that date; and (ii) the other matters required by Schedule 3 of the Electricity Corporation Act 1994 to be dealt with in the financial statements; (b) in accordance with the provisions of the Electricity Corporation Act 1994; and (c) in accordance with applicable Accounting Standards and other mandatory professional reporting requirements.
D D R PEARSON Auditor General
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18 July 2001
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