Horizon Power – Financial Report (2012-2013)
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ANNU AL REPORT 2012/13 ANNU AL REPORT 2012/13 CONTENTS OUR PROFILE 2 Value 28 DIRECTORS’ REPORT 48 Supply area and fast facts 2 Managing our assets 28 Corporate governance 48 Pilbara Power 29 Board of directors 48 Aboriginal and Remote Community EXECUTIVE SUMMARY 4 Power Supply Project 29 Audit and risk management committee 51 SPOTLIGHT Corporate affairs and CHAIRMAN’S REPORT 6 Renewable energy 30 communications committee 53 Regularisation of town-based communities 31 Governance and corporate MANAGING DIRECTOR’S REPORT 8 Remote Indigenous Energy Program 31 compliance disclosures 53 Mungullah Power Station 31 Operations during the 2012/13 financial year 57 Square Kilometre Array 32 STRUCTURE AND STRATEGY 12 Financial performance 57 Fuel procurement strategy 32 Organisation structure 12 Significant changes in Horizon Power’s affairs 58 Changes to Horizon Power’s Contractor Strategy 13 Connect Schemes 32 Tariff Equalisation Contribution 58 Pilbara Power Procurement Board 59 Strategic and corporate objectives 14 Manage business risk 32 SPOTLIGHT Gas supply 59 Business Transformation 33 OPERATIONAL PERFORMANCE REPORT 16 Efficiency dividend report 59 Community 34 Efficiency dividend performance 59 Performance overview 16 Aboriginal engagement 34 Operational performance 18 Community Investment Program 34 Electricity generation and sales 20 DIRECTORS’ DECLARATION 60 SPOTLIGHT Safety 22 School education program 36 Pole management program 22 Industry collaboration 37 SPOTLIGHT Customer service 40 Esperance network upgrades 23 Our People 40 Conductor management 24 SPOTLIGHT Broome CBD asset replacement program 24 Customer service 41 Pilbara Underground Power Project 24 Aboriginal employment 42 SPOTLIGHT Energy infrastructure in Onslow 42 Responding to cyclones and emergencies 25 Works to improve reliability Advertising campaigns 26 in Kununurra and Wyndham 43 Safety within Horizon Power 27 Environment and heritage 44 OUR PROFILE FAST FACTS Horizon Power is a State Government-owned, commercially-focused CUSTOMER 45,164 customer Corporation that provides high quality, safe and reliable power to CONNECTIONS connections supplying approximately 100,000 residents and 10,000 businesses, including more than 100,000 residents and 10,000 major industry, across regional and remote Western Australia. 45,164 businesses Horizon Power is responsible for generating, procuring, District teams understand their community’s CUSTOMER distributing and retailing electricity supplies. needs, aspirations and their unique characteristics. CALLS Thus Horizon Power strikes a balance between As at 30 June 2013, Horizon Power services 45,164 centralising systems, standards and processes customer connections in the Pilbara, Kimberley, 96,708 customer and optimised local delivery of services. Gascoyne, Mid West and southern Goldfields (Esperance) 96,708 calls in 2012/13 regions, dispersed across an area of approximately Horizon Power’s strategy has regional communities 2.3 million square kilometres – about 10 times the size of and enterprises at its centre. The organisation is NEW CUSTOMER the state of Victoria. differentiated by the fact its offices and staff are CONNECTIONS Horizon Power manages 38 systems: the North West located in the regional communities it serves. Interconnected System (NWIS) in the Pilbara and the This offers real benefits to communities through 2,401 new customer connected network between Kununurra, Wyndham on-the-ground response to cyclones, storms and connections in and Lake Argyle, and 34 stand-alone systems in regional other natural disasters; an ability to manage services 2,401 2012/13 towns and remote communities. at a local level in growing regional communities; and a coordinated approach to regional development. ASSETS Horizon Power’s value proposition is unique among organisations delivering regional services in that it is led Horizon Power operates under the Electricity from the regions. Horizon Power has a decentralised Corporations Act 2005 and is led by a Board of $1.5 billion management structure with senior decision-making Directors accountable to the Minister for Energy, $1.5B in assets staff located in six regional centres: Karratha (Head representing all Western Australians. Office), Port Hedland, Broome, Kununurra, Carnarvon and Esperance. An administration centre in Bentley provides support to the the regional offices. 4 Kalumburu FAST facTS SRupply A EA Wyndham Kununurra Ardyaloon Lake Argyle Djarindjin/Lombadina Beagle Bay Derby Warmun Broome Camballin/ Looma TRANSMISSION TRANSMISSION Fitzroy Crossing Halls Creek 7,377 kilometres Bidyadanga & DISTRIBUTION of overhead and & DISTRIBUTION Yungngora KIMBERLEY underground transmission and 2 Port Hedland distribution lines 1 Point Samson 7,37 7KM 2.3MKM Karratha South Hedland Marble Bar Roebourne 2.3 million square kilometres Nullagine PILBARA POLES & service area, which includes Onslow Exmouth TOWERS 59,144 distribution poles, the Kimberley, Pilbara, 240 transmission poles Gascoyne, Mid West Coral Bay and 862 transmission and Southern Goldfields 60,246 towers in service (Esperance, Hopetoun and Norseman) Carnarvon Gascoyne Junction HOURS OF GASCOYNE/MIDWEST 4,480,000 kilowatt hours Denham RENEWABLE Meekatharra Wiluna ENERGY of renewable energy imported into Cue Horizon Power’s Mt Magnet Sandstone network 4,480,000 Yalgoo Laverton Leonora ISOLATED 38 isolated networks Menzies NETWORKS and two interconnected systems, including the North West Interconnected ESPERANCE 38 System (NWIS) in the Pilbara and the East SERVICED Norseman BY SOUTH WEST INTERCONNECTED Kimberley Interconnected INTERCONNECTED SYSTEMS System, a transmission 1 The carrier kilometre data was obtained from Horizon Power’s SYSTEM Esperance network including Geographical Information Services (GIS) program on 28 November 2012, before upgrading GIS. Horizon Power is making adjustments Hopetoun Kununurra, Wyndham to its current GIS to ensure this information is accurate and 2 and Lake Argyle available for the next annual report. 5 HORIZON POWER ExEcuTivE Summary Reliability performance Horizon Power has achieved consistent SAIDI (using normalised data) over four year period 350 reliability of supply over the past four years 300 by effectively managing our assets. 250 200 The number of systems meeting reliability targets 150 increased in 2012/13 to 31 out of our 38 systems, compared SAIDI (minutes) 100 to 29 in 2011/12, in spite of a reduction in capital funding 50 received for asset management program delivery. 0 2009 2010 2011 2012 2013 Customers experienced an average 3.4 interruptions during the year, well below the regulated limit of 6.6 interruptions per annum (System Average Interruption Frequency Index for GTEs were approved as part of the 2012/13 State Budget and Community Service Obligations (CSO) which were – SAIFI). The average length of an interruption to power and this requirement is additional to that approved by partly offset by a net decrease in the Tariff Equalisation supplies in Horizon Power’s service area (the System Cabinet during the 2011/12 State Budget process. Contribution (TEC), the subsidy provided by the State Average Interruption Duration Index – SAIDI) was 202 Government that compensates Horizon Power for the In 2012/13, we achieved the combined efficiency targets of minutes in 2012/13 compared with the regulated limit additional costs associated with operating in a regional 7.5 per cent or $10.4 million. We continue to identify and of 290 minutes. service area. evaluate activities throughout all areas of the business to We achieved ‘below target results’ for notifiable public continue meeting this target. During the year, Horizon Power declared and paid dividends of $41.1 million to the State Government in safety incidents, five of which occurred throughout 2012/13. Horizon Power recorded a net profit after tax in 2012/13 of respect of the 2010/11 and 2011/12 financial years. All these incidents resulted from small fires, attributed to $51.2 million, an increase from $33.3 million in 2011/12. The severe weather events, and were considered low risk. There key drivers behind this positive result include higher sales Horizon Power’s net contributions from the State were no injuries to the public or Horizon Power personnel of electricity and cost savings. Cost savings were achieved Government, representing payments received in as a consequence of these incidents. through efficiency initiatives and tight fiscal measures respect of CSO and TEC less income tax and dividend, During the 2011/12 State Budget process, Cabinet agreed which, in an environment of rising cost pressures, was a were down by almost $60 million from to the introduction of the Minister for Energy’s five per pleasing outcome resulting in a lower overall operating $200.7 million in 2011/12. expenditure than the previous year. cent efficiency dividend on the discretionary operating The TEC payment to Horizon Power was $154.0 million in expenditure of Government Trading Enterprises (GTEs) Sales revenue was up by $41.8 million, mainly from an 2012/13, a decrease from $181.2 million in the previous year. which was to be applied in the 2011/12 financial year and increase in electricity tariffs in July 2012. Increases were each year thereafter to 2014/15. Further efficiency dividends also recorded for developer and customer contributions 6 ANNU AL REPORT 2012/13 HORIZON POWER ChairmaN’S REPORT Horizon Power launched its new strategy YOUR LOCAL ENERGY PARTNER RENEWABLE ENERGY, SMART GRID in October 2012. With this clearly defined