New connections Annual Performance Report 2008–09 Front cover Pictured at our new $14.3 million technical training centre at Hoxton Park in Sydney’s west are, from left, Daren McMurray, 2009 Western Sydney Distribution Powerline Apprentice of the Year, Paul Knight, member of Integral Energy’s Customer Consultative Committee, and David Campbell, Manager Technical Training.

© Integral Energy 2009 This work is copyright. Material contained in this document may be reproduced for personal, in-house or non-commercial use without formal permission or charge provided there is due acknowledgement of Integral Energy as the source. Requests and enquiries concerning reproduction and rights for a purpose other than personal, in-house or non-commercial use should be addressed to the Manager, Corporate and Government Affairs, Integral Energy, PO Box 6366, Blacktown NSW 2148. ISSN 1834-0733

About this report This report provides a transparent and candid account of Integral Energy’s performance in the year under review, identifies areas for improvement and outlines our future direction and challenges. This year’s theme, ‘New Connections,’ highlights Integral Energy’s focus on safety, reliability, growth in customer numbers and the challenges of delivering the Strategic Asset Management Plan. It also highlights the way in which Integral Energy connects with people – through improved customer service and how we are seeking to better ‘connect’ with our customers, our community and our staff. This report complies with the requirements of the NSW Annual Reports legislation and the esaa Code of Sustainable Practice. Where practical, the report is based on the principles of the Global Reporting Initiative (GRI). Statutory accounts and financial information are verified by the NSW Auditor General. Starting this year, we have reported our emissions using the National Greenhouse and Energy Reporting Scheme methodologies where available. We use the National Greenhouse Accounts where such methodologies are unavailable and utilise relevant environmental key performance indicators developed by the Energy Supply Association of Australia. We printed 500 copies of the report on recycled paper. The report was produced at a total cost for external services of $48,265 (GST inclusive). Further information about Integral Energy is available at our website at www.integral.com.au or email [email protected].

Prepared by Corporate and Government Affairs, Integral Energy

Design Impress Design

Photography Penny Clay Neil Billington

Editing Businesswriters & Design

Printing Lilyfield Printing Contents Letter to shareholding Ministers Overview

30 October 2009 About us 2 Year at a glance 3

The Hon. Eric Roozendaal, MLC The Hon. Joseph Tripodi, MP Highlights/lowlights 4 Treasurer Minister for Finance, Chairman’s and CEO’s report 5 Level 36, Governor Macquarie Tower Minister for Infrastructure, 1 Farrer Place Minister for Regulatory Reform, Economic performance – keeping customers connected SYDNEY NSW 2000 and Minister for Ports and Waterways Economic indicators – did we meet our objectives? 9 Level 31, Governor Macquarie Tower Performance indicators 10 1 Farrer Place Connecting customers to our network 11 SYDNEY NSW 2000 Case study – smart grids, the way of the future 22 Retail – connecting customers to great service 23 Dear Ministers Case study – affinity deal and power bill discounts Report on performance for the year ended 30 June 2009 see seniors make the switch 25 This report details Integral Energy’s performance, operations and Creating connections within our operations 26 statement of accounts for the year ended 30 June 2009, in accordance with the provisions of the Annual Reports (Statutory Bodies) Act 1984 Environmental performance – and the principles of the Global Reporting Initiative. It is submitted on creating connections to a low-carbon future behalf of the Board of Integral Energy for tabling in Parliament. Environmental indicators – did we meet our objectives? 31 Copies are being sent to the Auditor-General, the Minister for Energy, Members of Parliament and key customer and stakeholder groups. Performance indicators 32 Connecting to the needs of future generations 33 Sincerely Case Study – air conditioner saver trial cuts power usage by 30% 37

Social performance – Michael McLeod Vince Graham connecting with people and communities Chairman Chief Executive Officer Social indicators – did we meet our objectives? 39 Performance indicators 40 Connecting with our people 41 Case Study – Hoxton Park centre – training the next generation of power workers 46 Connecting with customers 47 Connecting with communities 48

Corporate governance Governance and operational structure 51 Board of Directors 52 Corporate governance 54 Executive group 58 Ethics, risk management and compliance 60

Management discussion and analysis 62 Financials 66 Appendices 103

1 1 Overview About us

Integral Energy is a New South Wales state-owned energy corporation with a proud 50-year history serving some of Australia’s largest and fastest growing regional economies. Integral Energy manages a $3.8 billion electricity distribution network for 859,519 customers or 2.1 million people in households and businesses across a network franchise spanning 24,500 square kilometres in Sydney’s Greater West, the Illawarra, Blue Mountains and the Southern Highlands. Integral Energy is incorporated under the Energy Services Corporations Act 1995 and operates within the terms of the Electricity Supply Act 1995 on behalf of our shareholder, the New South Wales Government. Our retail business operates successfully in the National Electricity Market, with services focused in NSW and south-east Queensland. The focus of our 2,871 staff is to deliver a safe and reliable electricity supply valued by customers while delivering strong financial results for our shareholder. We also seek to minimise our environmental footprint and respect the unique heritage of the communities we serve.

Mission

Our mission is to provide safe, reliable and sustainable customer services.

Vision

To be a best-practice electricity network business.

Values

Our corporate values guide an ethical and responsible culture and underpin the way we work at Integral Energy. They include: • Safety excellence • Integrity • Management by fact • Enterprising spirit • Customer commitment • Respect for people • Accountability and responsibility • Sustainable outcomes

2 New connections Integral Energy Annual Performance Report 2008–09 Year at a glance

Items 2008–09 2007–08 % change

Economic

EBITDA (including capital contributions) $’000 492,817 496,761 (0.8)

Operating profit after tax $’000 142,190 172,377 (17.5)

Total retail sales of electricity GWh 12,099 11,785 2.7

Total network customer connections 859,519 853,328 0.7

Reliability (unplanned interruptions to supply) Min/lost/cust 89.3 97.8 8.7

Customer Service Indicator % 83 83 –

Sales revenue (excluding Community service $’000 1,852,002 1,705,953 8.6 obligations)

Capital expenditure $’000 442,876 373,497 18.6

Net assets $’000 910,980 1,038,258 (12.3)

Return on assets % 8.7 9.2 (6.0)

Return on equity % 14.6 14.6 (0.0)

Returns to NSW Government $’000 167,064 191,687 (12.8)

Dividend $’000 103,619 124,992 (17.1)

Income tax equivalents $’000 63,445 66,695 (4.9)

Qualified credit rating Fitch Ratings AA AA

Environmental

Energy purchased from alternative sources % 12.0 13.0 (7.7)

Transformer oil recycled litres 302,866 419,987 (27.9)

Greenhouse gas emissions – direct emissions t CO2e 29,889 27,271 9.6 Reportable environmental incidents No. 2 4 (50.0)

Social

Social programs $’000 23,962 21,056 13.8

Pensioner Rebates $’000 23,324 20,426 14.2

Life Support Equipment Rebate $’000 638 630 1.3

Energy Accounts Payment Assistance (EAPA) $’000 2,092 2,058 1.7

Total employees (full time equivalents) 2,871 2,760 4.0

Lost time incidents 17 19 10.5

To ensure consistency on an annual basis, prior year statistics may have changed in line with amendments to comparative financial statement disclosures and amended definitions. * As at 30 June 2009

3 1 Overview Highlights/lowlights

Economic

 Reliability – delivered SAIDI result of 89 minutes against a target of 93 minutes, the best result in 10 years.

 Earnings before interest, tax, depreciation and amortisation (including capital contributions) decreased slightly by 0.8% to $492.8 million, compared with $496.8 million in 2007–08.

 Returned $167.1 million in dividends and tax equivalents to our shareholder, the NSW Government.

 The Australian Energy Regulator approved our $4.2 billion network investment plans.

 Retail continued to meet and exceed targets in a highly competitive environment, a volatile wholesale electricity market and an evolving energy industry.

 Signed over 130,000 customers in Queensland in the first two years of operations against an initial target of 73,000 customers for the period.

 Opened the $14.3 million state-of-the-art Technical Training Centre at Hoxton Park, providing first class training facilities for our apprentices and technical employees.

 Completed the first stage of the $4.7 million Parramatta field support centre refurbishment to service customers in the Parramatta area.

× Delivered record capital expenditure of $442.9 million, but fell short of our target investment of $542.7 million.

Environmental

 Achieved our annual greenhouse reduction target to progress toward carbon neutrality for direct emissions by 2020.  Completed two innovative energy saving trials as part of the Blacktown Solar City program, a $75 million Australian Government initiative.  Completed an interactive training program of over 1,000 employees on environmental compliance.  Achieved water savings of 9% compared with 2007–08 as part of an employee engagement program designed to improve environmental performance and achieve cultural change in environmental values. × Two environmental incidents were reported to the NSW Department of Environment and Climate Change. See the Environmental Performance section for further details.

Social

 Improved employee safety results – 17 lost-time incidents were reported compared with 19 the previous year.

× While our safety result improved we did not meet our target of 14 lost-time incidents.

 Employed 75 first-year apprentices – a record number for Integral Energy.

 Achieved our target customer satisfaction of 83%.

 Reduced NSW customer disconnections in NSW by 27% compared with 2007–08.

 Launched a Wellness program to encourage and support employees to make safe and healthy lifestyle choices.

 Raised $148,226 for the Victorian Bushfire Relief Appeal through payroll donations and Integral Energy matching funds.

 Held inaugural staff volunteering event for the Nepean Youth Accommodation Service.

 Raised $238,654 through our employee workplace giving program I care! This includes Integral Energy matching funds.

4 New connections Integral Energy Annual Performance Report 2008–09 Chairman’s and The focus on safety was extended replace ageing network assets to encouraging and supporting and meet the NSW Government’s CEO’s report employees to make safe, healthy licence conditions requiring further lifestyle choices through the launch reliability improvements by 2014. We’re pleased to report Integral of Energise4Life, Integral Energy’s Energy made significant progress We completed a strategic wellness program. in meeting our 2008–09 strategic end-to-end process review, along objectives in a challenging year. with a strategic procurement review, to identify improvements Integral Energy serves 2.1 million Our safety needed to deliver this significantly people located across 24,500 square increased investment. kilometres in some of Australia’s performance largest and fastest growing Key outcomes included an extensive regional economies. has improved organisational realignment to give renewed focus on accountability, A safe, reliable and affordable by around 40% finalisation of a workforce plan electricity supply underpins the to ensure the necessary people economic prosperity and the over the past resources are available to deliver the social fabric of our geographically investment program on time, a new diverse region. five years. methodology for end-to-end project In the year under review, our most management and a new approach critical strategic goals included Connecting customers to to procuring strategic network boosting safety performance, our network assets across the NSW electricity improving reliability, securing We’re proud to report our best industry to secure the greatest adequate network investment to result in ten years for network benefit for customers. meet customer expectations and reliability as measured by the system Delivering our promised network growth, planning the transition of average interruption duration investment program for customers our retail business to a new owner, index (SAIDI). Against a target safely, on time and on budget driving efficiencies and transitioning of 93 minutes, we achieved 89 presents an ongoing challenge for to a low carbon economy. minutes and are targeting an 18% Integral Energy. improvement in SAIDI results to 80 Boosting safety performance minutes by 2013–14. Our safety performance has 2008–09 saw us embark on our 2008–09 saw improved by around 40% over the largest investment program in past five years, with the 2008–09 our history. We delivered capital us embark on our result again bettering all previous investment totalling $443 million, years. We recorded 17 lost-time falling slightly short of our target of largest network incidents compared with 19 in $543 million. Of this investment, an 2007–08, falling short of our amount of $381 million was invested investment target of 14 lost-time incidents. in the network. This was a 29% program in Our objective is to be recognised increase on the previous year. as a best practice organisation. A highlight of the year was the our history. To achieve this we continue energising of Integral Energy’s to focus our efforts on significantly largest transmission substation to Financial results reducing our avoidable date – the $64 million Springhill Integral Energy’s earnings workplace injuries. Substation near Wollongong. before income and tax (EBIT) of $356 million were $41 million We gave greater focus to the We welcomed the Australian better than target. This year’s total impact of our network on public Energy Regulator’s independent distributions to Government of safety in 2008–09 and developed assessment and approval of our $167 million were $47.3 million preventative programs to address record network investment program better than target. pole and car collision ‘black spots’, totalling $2.7 billion in capital aircraft striking overhead expenditure and $1.5 billion in Integral Energy sought to navigate powerlines and non-electrical operating expenditure for the five- its way through the global financial tradespeople injuring themselves year regulatory period commencing crisis through a renewed focus on while working on homes and 1 July 2009. This investment efficiency and targeted programs to construction sites. is necessary to meet customer improve safety and customer value. expectations and growth in energy Financial results are discussed in detail demand and customer connections, on pages 69 to 101 of the report.

5 1 Overview

Keeping customers connected Wales Government’s announced beyond 2.5% must be funded from As a consequence of the significant sale of our retail assets. employee related cost savings. To this end, Integral Energy has investment in our network, electricity The proposed sale of our retail identified $7.5 million in employee consumers, including Integral business will mark a fundamental savings to fund agreed award Energy’s customers, will experience change in Integral Energy’s increases above 2.5% in 2009–10. significant increases in the cost of operating structure. In preparing for energy over the next five years. the sale process and the challenges The award outlines our obligations We recognise this will pose difficulties and opportunities that go with to provide our customers with for some customers. In preparation it, we have developed thorough a high standard of service for this emerging issue, we are transition and separation plans. in the most efficient way designing a program of initiatives through more cooperative work that will provide our customers with arrangements, improvements in increased options to use electricity The proposed competitiveness, efficiency, flexibility more efficiently and help reduce their and productivity. overall energy costs. sale of our retail The implementation of the award We delivered impressive results savings program will involve changes through our hardship program, business will mark for many employees and deliver ‘INpower,’ and reduced customer a fundamental improved value for customers. disconnections by 27% in New South Wales this year. A recent change in Preparing for a low carbon Independent Pricing and Regulatory economy Tribunal report rated Integral Energy Integral Energy’s With climate change firmly on the best performing NSW distributor the corporate and public agenda, in managing customer hardship. operating Integral Energy has investigated greenhouse reduction initiatives Retail structure. across the business and we are We achieved our target customer prioritising a number of ways in satisfaction of 83%. People which we can genuinely make a The number of full-time equivalent difference. Cutting carbon emissions Our retail business met and staff grew by 4% in 2008–09 will be a major priority in 2009–10 exceeded all targets, thanks in large to 2,871. We thank them for so that we can achieve our goal part to our multi-channel sales their contribution to our success of carbon neutrality for direct and marketing strategy in New throughout the year. emissions by 2020. South Wales and Queensland. In our first two years of operations in We opened our state-of-the-art Short-term targets include reducing Queensland we have gained more $14.3 million technical training electricity consumption by 5% a than 130,000 customers against centre in Hoxton Park in Sydney’s year to 2011–12, boosting waste our initial target of 73,000. The west in March 2009, marking a recycling and cutting vehicle retail business sold 12,099 GWh of major milestone in Integral Energy’s emissions by transitioning to four- electricity, an increase of 2.7% over commitment to developing the next cylinder cars and increasing the last year. generation of electricity workers efficiency of our commercial fleet. and providing jobs close to home for Electricity trading saw less volatility many new recruits. in prices than the previous year as Innovation a result, inter alia, of lower-than- We welcomed another record An ongoing focus on innovation average temperatures over the intake of apprentices – 75 and technology is helping to drive summer which reduced demand. for the year and 230 in total. efficiency across the organisation. New generation capacity coming Among our new recruits this Plans to identify efficiency on line and higher rainfall relieved year were the first graduates of opportunities by working more supply-side constraints. This led to the adult apprenticeship support closely with other New South Wales the average spot price falling to program, designed to help distributors are well advanced. The $38.85 from the previous year’s mature age students transition to use of a shared services model can record of $41.66. an apprenticeship. directly benefit our bottom line and maximise benefits to customers A major focus for Integral Energy in Integral Energy negotiated a new as it offers us an opportunity to 2008–09 has been and remains the Enterprise Agreement Award for share the cost of transformational efficient delivery of retail services award employees in line with the information technology systems while preparing for the New South NSW Government’s wages policy. with other distributors. Under the policy, all award increases

6 New connections Integral Energy Annual Performance Report 2008–09 The Ministerial Council on Energy’s We’re seeking fundamental shifts in At the same time we will strive endorsement of a national performance to: to ensure we are flexible enough, smart meter initiative means the skilled enough and appropriately • Improve safety information systems supporting equipped to seize the opportunities these meters will become a critical • Deliver Integral’s Australian Energy that will present themselves. Our program of work within Integral Regulator (AER) determined stakeholders expect nothing less. Energy’s operations. capital program Finally, we would like to take Work continued to implement a • Improve customer value this opportunity to thank all the ‘smart grid’ roadmap to deliver dedicated employees of Integral • Manage business risks electricity using technology to save Energy including our Executive energy, reduce cost, increase the use • Leverage technology and seek Leadership Team and our colleagues of renewable power and increase smart grid opportunities. on the Board for their dedication reliability and transparency. and enthusiasm in their work to To support the plan, our priorities strengthen and grow our business in Smart grid preparations currently include further reduction in the past year. include the development of a employee, contractor and public communications network strategy safety incidents and injuries to A challenging – but exciting – future to support distribution monitoring achieve a ‘zero harm’ workplace awaits our organisation. With their and smart meters which can track and culture. continued commitment, we are how much electricity a consumer confident we will realise it. We recognise it is especially uses and when it is used. We will be important that we remain conducting further investigations in committed to improving services 2009–10 to guide the development Our priorities and programs to help customers of the smart grid roadmap. manage electricity price increases include further taking effect in 2009 and to The road ahead maintain the value of our retail reduction in safety While our achievements over business ahead of privatisation. the past year demonstrate incidents and improvements on many fronts, We will continue to review our we’re aware of the substantial environment strategy to reflect injuries to achieve challenges in the year ahead. key changes in the external environment and prepare for the a ’zero harm’ introduction of a Carbon Pollution Reduction Scheme. workplace and culture.

Michael McLeod Vince Graham Chairman Chief Executive Officer

7 Economic 2 Performance

keeping customers connected

Big connections – Project Director Greg Schafer and Project Manager Peter D’Angelo at the $64 million transmission substation in Springhill near Wollongong. Integral Energy’s largest substation to date was commissioned early in 2009. 8 New connections Integral Energy Annual Performance Report 2008–09 Economic indicators – did we meet our objectives?

2008–09 objective Progress to date Status 2009–10 objective Improve network reliability against Achieved our best result of 89 Reach target of unplanned an unplanned SAIDI target of minutes of unplanned SAIDI in SAIDI of 90 minutes. 93 minutes. ten years. Our capital investment Our aim is to improve   over the past five years has performance to 80 minutes delivered an overall 25% of unplanned SAIDI within improvement in reliability. the next five years.

Deliver our AER approved capital Achieved a record capital Deliver our approved program for a safe and reliable investment of $380.7 million. $2.7 billion 2009–14 customer network. While we did not meet our network plan on time and × target of $448 million it was still within budget. a 29% increase on the previous Establish a ‘safe on time’ year’s figure. delivery culture to provide The AER approved our $2.7 certainty in customer billion capital investment plan for outcomes. 2009–14 to provide a safe and   reliability electricity supply for customers.

Position Integral Energy Researched smart grid Develop a smart grid to leverage emerging and technology and what it means strategy, which integrates converging technologies. for the organisation. network automation, smart Evaluated results from smart metering and customer metering trials to determine interaction. customer responsiveness Identify options for the to peak pricing tariffs and p meter data management energy reduction. and network billing systems. Implement field force automation initiatives to provide productivity and service improvements.

Deliver strong financial Exceeded budgeted EBITDA Continue to deliver performance for our stakeholders. target by 4%. sustainable financial Returned a $167.1 million outcomes – EBITDA of   dividend and tax equivalents $530.6 million and NPAT of to our shareholder, the NSW $136.5 million. Government.

Maintain the value of the retail Acquired over 130,000 customers Ensure the necessary business. in Queensland, making Integral frameworks are in place for Energy the most successful new   the proposed sale of the market entrant. retail business, to enable a smooth transition of operations to new owners.

Key   Objective exceeded p Ongoing objective with targets met to date or positive progress shown  Objective achieved q Ongoing objective with targets not × Objective not achieved met to date 9 Economic 2 Performance Performance indicators

Network Capital management Public sector • Total network customer • Earnings before interest, tax, • Income tax equivalents were connections were 859,519, a depreciation and amortisation $63.4 million, a decrease of 0.7% increase over last year. (including capital contributions) 4.9% on the 2007–08 amount. decreased slightly by 0.8% • Reliability has continued to to $492.8 million, compared Retail improve with Integral Energy to $496.8. achieving a result of 89.3 minutes • Our retail business sold lost per customer (excluding • We returned a net profit after tax 12,099.09GWh of electricity, and major events) against a target of of $142.2 million, down 17.5% managed billing and customer 93 minutes per customer. This on last year’s figure. service for over 830,000 is Integral Energy’s best result customers in New South Wales • We returned a $103.6 million in 10 years. Through prudent and Queensland. dividend to our shareholder, investment and planning we a 17.1% decrease on the dividend are working towards a target of for 2007–08. 80 minutes lost per customer by 2013–14. • Interest on debt was $150.1 million.

Supply reliability – normalised unplanned SAIDI Operating profit after tax ($m)

ACTUAL FORECAST 99 98 172.4 94 93 90 89 88 86 84 153.2 80 142.2 138.6 132.7 GOOD 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14

Note: these SAIDI outcomes are normalised using the 2.5 Beta method. 2007–08 2008–09 This has slightly increased reliability results that were previously reported. 2004–05 2005–06 2006–07

Income tax equivalents ($m) Electricity sold (gigawatt hours) 86.0 12,099 11,785 66.7 65.2 9,741 63.4 9,503 9,436 34.2 2004–05 2005–06 2006–07 2007–08 2008–09 2006–07 2007–08 2008–09 2004–05 2005–06

10 New connections Integral Energy Annual Performance Report 2008–09 Connecting customers • Implementing demand management service. From 1 January 2008, the programs where feasible to defer economic regulation of NSW electricity to our network augmenting the network to meet distribution networks moved from growth and security requirements a state-based regime to a national Integral Energy is committed to managing framework regulated by the Australian its network assets in a structured and • Ensuring security standards are met Energy Regulator (AER). systematic manner to meet customers’ by conducting annual reviews of expectations, fulfil the organisation’s available capacity on the network On 30 April 2009, the AER approved business needs and satisfy obligations Integral Energy’s $2.7-billion capital • Understanding the factors that to stakeholders, the regulator and the and $1.5-billion operating investment will influence future electricity use community. We are also committed to programs for the period 2009-14. by customers to plan for efficient making specific network improvements development of the network. Accounting for growth and attrition, that customers require, depending on this investment will generate 600 jobs the feasibility of those improvements and Meet customers’ reliability needs over the next five years, including 300 customers’ willingness to pay. Integral Energy is focused on new apprenticeships. Productivity The three most significant challenges maintaining the continuity and quality improvements equalling $76 million have currently facing the network business are: of supply to existing customers by been built into the proposed operating expenditure program to ensure that • Servicing growth in demand in preventing faults, efficiently restoring customers pay only for the costs of Integral Energy’s network area supply after faults and minimising scheduled outages for maintenance. delivering essential network services. • Renewing ageing network assets to Where reliability is below acceptable maintain network reliability levels, improvements can be achieved Reliability of supply • Meeting the NSW Government’s by capital investment and operating The reliability of the electricity supply is initiatives to improve the security and expenditure projects targeted at the an important customer service measure reliability of electricity supply across poorly performing parts of the network. for electricity network operators. A common measurement of reliability is the state. Provide value for money the system average interruption duration Integral Energy’s network strategy is The network strategy ensures customers index (SAIDI), which measures the summarised below in Figure 1. receive value for money by continually number of minutes that customers, on improving the effectiveness and efficiency average, are without electricity each year. Optimising network capacity of capital and operating programs. Integral Energy’s network reliability Integral Energy must ensure there continued its improving trend is sufficient capacity available in the 2009 network determination (measured as normalised SAIDI) network to meet load and security As Integral Energy’s network is in 2008–09 with an average of requirements in a sustainable and a natural monopoly, charges to 89.3 unplanned minutes without cost-effective manner. Integral customers are independently regulated supply per customer, against a target Energy’s strategy to achieve this to ensure that customers get a fair of 93 minutes. It should be noted that outcome involves: deal for a safe and reliable electricity normalised interruptions are measured

Figure 1: Integral Energy’s network strategy

Network business objective

Provide long term customer service by developing and operating a sustainable and reliable network

Network business target outcomes and strategies

Optimise network Meet customers’ Provide customers with capacity reliability needs value for money through effective through better over the long term by demand management management improving the effectiveness and investment for of planned and and efficiency for capital security and growth unplanned outages and operating programs

11 Economic 2 Performance

to exclude interruptions caused contribution of weather-related • Customers’ use of electricity has by events beyond the control of outage events also coincides with changed rapidly over the last distribution management practices. the interruptions outlined above. ten years. Eighty-one per cent Total interruptions may be higher of households in the Greater Over the next five years, the successful than the sum of planned and Western Sydney region now have implementation of our network plans unplanned interruptions because air conditioning units, compared approved by the AER is forecast to they include outages that were with 51% in the Illawarra and yield a normalised unplanned SAIDI of actually caused within the network. 50% in the Blue Mountains. This 80 minutes by 2013–14. has resulted in a ‘peakier’ load This pleasing result represents pattern for Integral Energy in hot a 25% improvement in overall Growth weather requiring more assets to network reliability since 2003–04. Integral Energy takes account service demand that only exists In 2009–10 our target for overall of a range of regional, climatic, for a short time each year. network reliability is 90 minutes. customer, asset and licence • The uptake of other appliances Events that had a significant impact on requirement issues in delivering such as plasma televisions, the overall reliability result included: network services to customers. in-home computers and • 23 interruptions to zone and sub- • Integral Energy’s network contains entertainment systems has also transmission substations throughout some of Australia’s fastest growing increased. This trend is also the year contributed approximately communities. Population in the changing consumption patterns, three minutes to SAIDI region is forecast to grow by 6% resulting in heightened customer by 2013–14, while maximum expectations and awareness about • 36 sub-transmission feeder demand for electricity is forecast to reliability and security of supply. interruptions contributed 4.9 increase by 33% by 2013–14. minutes to SAIDI, including the • Many network assets were built loss of feeders from Hawkesbury • Land use continues to shift from in the infrastructure boom of Transmission Substation on 6 rural and semi-rural to urban the 1960s and 1970s and are February 2009 which contributed and light commercial. As a result, now nearing the end of their one minute to SAIDI customers now expect improved useful lives. For example, 45% reliability performance in of Integral Energy’s major power • Approximately 900 distribution these areas. transformers have been in service feeder interruptions contributed for 36 years or more. As a result, approximately 64 minutes to SAIDI • Peak temperatures across the network are typically higher and asset renewal is an important • Adverse weather and minor more sustained than those of component of our AER approved storms also contributed central Sydney and other coastal capital program. approximately 55 minutes to areas, meaning extreme weather SAIDI. It should be noted that the events are more likely.

Integral Energy’s network reliability continued its improving trend in 2008–09 with an average of 89.3 unplanned minutes without supply per customer, against a target of

Scott Rogers and Simon Kellett, Live Line workers. 93 minutes.

12 New connections Integral Energy Annual Performance Report 2008–09 Meeting demand In response to increasing peak electricity demand, Integral Energy has significantly ramped up network investment. Six new projects to maintain reliable network capacity, worth $122.9 million, were approved during 2008–09. These projects are scheduled for construction over the coming years. Table 1: Growth projects approved in 2008–09

Total estimated Project cost ($m) Schofields 132/11kV ZS establishment with 132kV supply from Rouse Hill 34.5

Establish East Richmond ZS to service growing load in the Richmond area 27.3

Establish Nepean ZS to meet growing demand in Elderslie and Springs Farm areas 19.9

Connection works associated with Macarthur BSP 16.5

South Nowra ZS transformer augment 7.5

Line works associated with Oran Park ZS 17.2

Capital program Arising from this review, an • Developing staff to ensure that While we fell short of our network organisational realignment and a the organisation has the correct capital investment target of range of business reforms were skills mix to meet program $448.4 million in 2008–09, we adopted by Integral Energy to ensure requirements effective and efficient delivery of delivered a record network capital • Adapting business systems and our Strategic Asset Management investment of $380.7 million, processes to ensure the capital Plan. The initiatives adopted from representing a significant 29% program is delivered in the most the review included: growth in the network capital efficient manner program compared with 2007–08. • Realigning the corporate structure • Standardising network design to to meet the upcoming growth in To meet this challenge, an end-to- achieve efficient delivery end process review of the network the capital program • Putting in place governance and capital program was undertaken in • Increasing our workforce reporting structures to ensure we 2008–09 to improve our capability to a sustainable level with have the right controls to manage to deliver an expanded program supplementation from external the capital program. over the coming five years. service providers to deliver the peak of the capital program

Network CAPEX delivery ($m) In response to

585 increasing peak 507 483 448 439

415 electricity demand, 317 296

249 Integral Energy 203 381 has significantly ramped up network 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 investment. CAPEX Actual CAPEX Budget

Figure 2: Total capital expenditure 2004–2014 Demand curve includes $68 million of carryover from 2008–09.

13 Economic 2 Performance

Table 2: Major works in progress 2008–09:

Description Cost to date ($) Total Practical Comments Cost ($) Completion date Before 2008–09 2008–09

Quakers Hill ZS 7,264,115 809,383 8,073,498 Complete Install new 132/11kV augmentation transformer and prepare site to be converted to full 132kV in the future.

Wetherill Park 19,386,797 10,857,277 30,244,074 Complete Develop new 132/33/11 kV West TS (includes transmission/zone substation. land)

Tower painting 14,072,788 822,835 15,844,613 Ongoing Paint all steel transmission towers.

Security fence 37,119,822 7,566,463 44,686,285 Ongoing Replacement of all replacement transmission/zone substation program security fences with new high- security construction.

Bund wall 15,257,326 698,046 15,955,372 Ongoing Construct oil containment installation bunds around all transformers in program transmission/zone substations.

Springhill TS 45,290,185 11,718,396 57,008,581 Jan 2010 Construct a new 132/33kV rebuild GIS substation consisting of eight power transformers, eight 132kV feeders and 14 33kV feeders, as well as three capacitor banks.

Narellan ZS 7,488,578 219,909 7,708,487 Complete Replace two 66/11kV augmentation existing power transformers with higher capacity units and install a third power transformer and associated switchgear.

Eastern Creek ZS 13,424,559 179,365 13,603,924 Complete Develop a new 132/11kV zone substation.

Lawson TS 4,919,825 2,452,480 7,372,305 Nov 2010 Replace existing 132/66/11kV redevelopment substation and build new control building, new indoor 66kV GIS and 132kV outdoor switchgear.

Guildford TS 2,009,948 42,375 2,052,323 Complete Install new 132kV outdoor 132kV switchgear switchgear. renewal

Jasper Rd ZS 3,123,641 1,520,068 4,643,709 Oct 2010 Extend control building, install redevelopment new 11kV indoor switchboard.

Plumpton ZS 3,079,824 308,508 3,388,332 Complete Install a new third power augmentation transformer with associated switchgear.

14 New connections Integral Energy Annual Performance Report 2008–09 Description Cost to date ($) Total Practical Comments Cost ($) Completion date Before 2008–09 2008–09

Emu Plains ZS 5,216,624 897,396 6,114,020 Complete Install a third transformer and augmentation 11 & 33kV switchboards in a new control building.

Penrith TS 12,550,133 9,026,965 21,577,098 Nov 2011 Construction of a new augmentation 132/33kV indoor substation.

Berry ZS 2,530,740 1,462,363 3,993,103 April 2010 Replacing two existing power augmentation transformers with higher capacity units and associated switchgear.

Glossodia ZS 1,600,171 3,031,030 4,631,201 April 2010 Replacing two existing power augmentation transformers with higher capacity units and associated switchgear.

Anzac Village ZS 1,690,001 4,008,189 5,698,190 Nov 2009 Install a new third power augmentation transformer and associated 11kV switchgear.

Russell Vale ZS 1,052,521 3,206,171 4,258,692 June 2010 Augment existing 33/11kV augmentation substation replacing two transformers with higher capacity ones.

Campbelltown ZS 5,220,693 4,568,256 9,788,949 Oct 2009 Install a new third transformer augmentation and build a new control building with new 11kV switchboard.

Rouse Hill SS 1,421,245 8,251,419 9,672,664 Jan 2010 Develop a new indoor 132kV establishment GIS switching station.

Mungerie Park ZS 2,782,660 17,631,133 20,413,793 April 2010 Develop a new indoor establishment 132/22kV substation.

North Eastern 846,309 8,129,724 8,976,033 Dec 2010 Develop a new 132/11kV Creek ZS substation. establishment

Redevelopment of 974,177 3,135,727 4,109,904 March 2010 Rebuild existing S/S with new Evans Lane SS control building and outdoor switchgear.

Fairfield ZS 3,523,426 5,270,712 8,794,138 Aug 2009 Replace existing substation augmentation with a new higher capacity 33/11kV indoor substation.

West Liverpool ZS 72,654 1,828,905 1,901,559 March 2011 Rebuild existing substation establishment with a higher capacity.

Liverpool TS 2,749,451 7,974,506 10,723,957 Dec 2010 Construct a new 132/33kV establishment GIS substation with provision for three power transformers, three 132kV feeders and 16 33kV feeders.

Claremont 221,373 1,966,842 2,188,215 May 2011 Construct a new 33/11kV Meadows ZS indoor substation. establishment

15 Economic 2 Performance

Description Cost to date ($) Total Practical Comments Cost ($) Completion date Before 2008–09 2008–09

Doonside 93,674 6,364,271 6,457,945 Sept 2011 Rebuild existing substation with 132kV/11kV ZS a higher capacity 132/11kV GIS establishment indoor substation.

West Parramatta 1,512,274 1,512,274 Dec 2012 Construct a new 132/11kV GIS ZS and East substation and a new 132kV Parramatta SS GIS switching station and establishment associated feeder works.

Augment feeders 439,323 2,072,890 2,512,213 Feb 2010 Augment existing 33kV 477 and 466 to feeders. Westmead

Augment Nowra 20,652 778,258 798,910 Dec 2010 Augment existing 33/11kV ZS substation replacing two transformers with higher capacity ones.

Nepean ZS 699 20,569 21,268 June 2012 Rebuild existing substation with establishment a higher capacity and at 66kV.

Sherwood ZS 1,282,212 3,502,537 4,784,749 Oct 2009 Replace existing transformers augmentation with low noise units.

Dapto ZS 180,232 4,004,121 4,184,353 Nov 2010 Replace two existing power augmentation transformers with three higher capacity units and replace 33kV outdoor switchgear with indoor units.

Gerringong ZS 53,767 640,963 694,730 July 2010 Replace two existing augment transformers with higher capacity units and replace all switchgear.

South Nowra ZS 28,290 388,065 416,355 Nov 2010 Replace existing transformer augment with higher capacity unit. Construct a new control room to house new 11kV switchboard.

Cheriton Ave ZS 173,491 11,863,058 12,036,549 Oct 2011 Construct a new 132/11kV GIS establishment substation.

Schofields ZS 23,405 361,978 385,383 July 2011 Construct a new 132/11kV GIS establishment substation.

Cawdor ZS 26,924 74,951 101,875 Aug 2011 Construct a new 33/11kV establishment substation.

Oran Park 2,242 33,648 35,890 June 2010 Construct two new 132kV establishment – feeders to supply temporary Line Works Oran Park ZS.

Wilton ZS 119,831 145,296 265,127 June 2011 Construct a new 66/11kV establishment substation.

16 New connections Integral Energy Annual Performance Report 2008–09 Description Cost to date ($) Total Practical Comments Cost ($) Completion date Before 2008–09 2008–09

Mittagong ZS 5,500 51,860 57,360 Aug 2011 Install a new third transformer augmentation and associated switchgear.

Granville ZS 575,916 8,576,905 9,152,821 Aug 2011 Rebuild existing substation rebuild with a higher capacity 132/11kV GIS indoor substation.

Douglas Park SS 1,318,022 1,058,918 2,376,940 Dec 09 Extend 66kV bar and replace augmentation three circuit breakers.

Warragamba ZS 73,000 1,733,438 1,806,438 Feb 2010 Install a new power augmentation transformer and associated switchgear.

Wetherill ZS 15,844 578,459 594,303 June 2010 Extend existing control room Augmentation to accommodate the 11kV switchboard extension.

Mobile zone 0 488,180 488,180 Feb 2010 Establish new 132/11kV substations and 66/11kV mobile zone substation.

Windsor ZS 38,575 676,689 715,264 Oct 2011 Rebuild existing substation augmentation with a higher capacity indoor substation.

Whalan ZS 129,005 2,044,543 2,173,548 Sept 2010 Install a new third power augmentation transformer and associated 11kV switchgear.

Connection 45,532 2,576,383 2,621,915 Dec 2010 Connection works associated works for the with the new TransGrid establishment of Macarthur BSP. Macarthur BSP

Berrima Junction 0 1,396,567 1,396,567 Complete Construct a new single ZS transformer 33/11kV substation.

Rosehill ZS 50,623 539,650 590,273 Oct 2011 Rebuild existing substation renewal with a higher capacity indoor substation.

Holroyd ZS 52,010 384,084 436,094 April 2011 Rebuild existing substation redevelopment with a higher capacity indoor substation.

Rydalmere ZS 82,101 1,067,616 1,149,717 Jan 2013 Rebuild existing substation redevelopment with a higher capacity 66kV GIS indoor substation.

Kemps Creek ZS 8,876 67,222 76,098 Feb 2011 Extend control room to augmentation accommodate new 11kV switchboard.

Smithfield ZS 346,571 1,420,035 1,766,606 Complete Rebuild existing substation rebuilding following fire damage.

17 Economic 2 Performance

Demand management network upgrades to allow for invites interested stakeholders NSW electricity distributors are the development of demand to make submissions for system required to investigate demand management and other system support options, to be evaluated management alternatives to support options. against network options. network augmentation for specific The DM Code stipulates that a Table 3 below outlines the capital expenditure projects. The ‘reasonableness test’ is to be Network Demand Management NSW Code of Practice – Demand conducted to determine whether a Plan projects undertaken by Integral Management for Electricity ‘request for proposals’ (RFP) is to be Energy in 2008–09. Distributors (the DM Code) requires issued or some other investigation electricity distributors to facilitate process used. An RFP is a public input into the planning of major process in which the distributor

Table 3: Demand management projects implemented during current year

Description Peak CO2 reduction PV of costs PV of total of demand of Demand capital expenditure reduction Management deferment Project plus operating (kVA) expenditure savings

Chipping Customer 3,300 Estimated to be $390,000 $457,000

Norton demand reduction 1,160 T CO2e pa over 3 years (Avoided distribution industrial & identified and (greater than cost) surrounding implemented 10 years) area

Windsor/ Customer & local 1,500 Estimated to be $282,000 $328,000

Richmond council demand 530 T CO2e pa over 3 years (Avoided distribution supply area reduction (greater than 10 cost) identified and years) implemented

Parramatta Customer 2,000 Estimated to be $200,000 $370,000

commercial demand reduction 704 T CO2e pa over 3 years (Avoided distribution area identified and (greater than cost) implemented 10 years)

Subtotals 6,800 Est. 2,394Tpa $872,000 $1,155,000

The Network Demand Management Plan also details the major projects planned in the next three years and as listed in the 2009 Electricity System Development Review. Where the DM Code reasonableness test indicates that a public RFP process is not warranted, Integral Energy may still perform an in‑house investigation with specific major customers to identify the potential for demand reduction. Current investigation areas are detailed in Tables 4 and 5.

Table 4: RFP projects and target dates

Project Fin year RFP issue RFP results Decision

Granville ZS 2009–10 Sep 2009 Feb 2010 July 2010

Riverstone ZS 2010 –11 Sep 2010 Feb 2011 July 2011

Prospect ZS 2011–12 Sep 2011 Feb 2012 July 2012

Huntingwood ZS 2011–12 Sep 2011 Feb 2012 July 2012

18 New connections Integral Energy Annual Performance Report 2008–09 Table 5: Planned in-house demand management investigations

Project Completion date

Abbotsbury ZS June 2010

South Granville ZS June 2010

The items that have been identified for in‑house investigation have not passed the DM Code reasonableness test, but may involve a possible non‑network demand management alternative for one or more major customers (generally those responsible for creating the peak demand).

Maintenance program and updated annually to identify the Our maintenance Integral Energy’s Strategic Network network maintenance activities over Maintenance Plan (SNMP) analyses the ensuing 12-month period. performance maintenance needs against In 2008–09, Integral Energy achieved business objectives and details a record level of expenditure on contributed the maintenance strategies the maintenance of $206.9 million, organisation has adopted for compared with our 2007–08 to continued particular assets to meet the expenditure of $198.9 million, network strategy. and achieved 99% compliance improvement in The SNMP provides a high-level with our maintenance target. functional performance review of Our maintenance performance system reliability. Integral Energy’s network assets contributed to Integral Energy’s and establishes the framework by continued improvement in system which the maintenance programs reliability at 89.3 minutes lost per fulfil Integral Energy’s performance customer (excluding major clients). requirements. This plan is reviewed

Crusaders for improved performance – Han Duo from Parsons Brickerhoff and Frank Bucca, Demand Management Manager at the Chipping Norton demand management project launch.

19 Economic 2 Performance

New connections While connections for new installations showed a slight downturn on previous years, Integral Energy still connected more than 9,000 new customers to its network in 2008–09. Table 6: New customer connections 2004–09 Year New customer site connections We completed 2004–05 11,377 9,111 new 2005–06 11,408

2006–07 10,053 network 2007–08 11,013 connections 2008–09 9,111 during the year.

We have continued to exceed our To better manage connection In 2009–10, we will initiate a target of certifying contestable applications with unique and performance monitoring and works designs, with 97% of designs complex requirements, we reporting system to provide being certified within the target of continued to use the project ASPs with valuable information 14 days. management framework to about improvements that can be enable the connection of those made within their operations. We issued 94% of all design briefs projects with special technical A number of strategic initiatives within 14 days, against our target requirements. For example, the are under development that will of 85%. Federal Government has committed provide enhanced electronic To ensure that Accredited Service $1.41 billion of grants to provide contact between Integral Energy Providers (ASPs) have the latest new buildings and upgrades to and ASPs, allowing remote information to comply with schools in the Integral Energy access to data and submission of relevant network standards and franchise area under the Building application information and process processes, we maintained open the Education Revolution package. documentation electronically. This communications through industry Six hundred and ninety schools will include availability of GIS data seminars and a dedicated website. in Integral Energy’s network direct to the ASP’s place of business, The website provides access to a full have received grants of up to automation of data transfer range of technical data, standards $3 million of which Integral Energy from GIS to CAD, and electronic and safety and hazard notices has processed 487 applications submission of design drawings produced by Integral Energy. to connect additional loads in between ASPs and Integral Energy. 2008–09. As all construction Significant development of ASP Access to the Geographic works must be completed by auditing, performance management Information System (GIS) and 31 March 2011, Integral Energy and inspections is planned during manuals covering the full range has streamlined arrangements and the next reporting period. of overhead and underground dedicated project management construction requirements is resources to ensure connection currently available to ASPs at major issues do not cause delays for organisational locations. Field schools in using their new facilities access to in-service equipment by when building works are completed. ASPs has also been enhanced by the provision of a loan key system We enhanced Integral Energy’s managed at the local field support Customer Application Management centre level, or by accompanied System (CAMS) in 2008–09 to access as required. During the year, provide more accurate data to 54 postings (including 20 safety monitor and report on the progress bulletins) were placed on the ASP of projects. Investment in these website. In addition, six technical systems will eventually lead to information seminars and a training web-enabled tracking tools to seminar to cover the introduction of allow ASPs to monitor progress the Level 1 ASP Quality Assurance and performance relating to their initiative were held. individual projects.

20 New connections Integral Energy Annual Performance Report 2008–09 Street lighting This customer relationship We provide regular feedback to We manage 186,000 streetlights management program aims to guide manufacturers in developing on behalf of 29 public lighting meet with all customers at least new energy efficient luminaires with customers, including 23 local twice a year. longer life and less deterioration councils. As a public lighting of light output over time. Integral service provider, Integral Energy Energy efficient lighting Energy also plays a proactive role recognises that well-designed Integral Energy has been a pioneer in the industry and with suppliers and maintained public lighting in the introduction of energy to keep abreast of public lighting contributes to public safety. efficient luminaires for public developments. Customers benefit lighting. The concept of using T5 from shortened lead times for new The NSW Public Lighting Code has fluorescent technology for minor lighting products. provided Integral Energy with an road lighting was developed by opportunity to work closely with an Integral Energy staff member its customers to maintain and Integral Energy has and, as a result, we were the first improve public lighting services. in the industry to introduce this This is achieved partly through been a pioneer in technology, in 2003. a Public Lighting Management Plan, developed to align with the Integral Energy has recently the introduction regulatory period 2009 to 2014 set introduced compact fluorescent by the Australian Energy Regulator technology. Public lighting of energy efficient (AER). The revised plan will be sent customers now have the option of to customers for their endorsement. two energy efficient luminaires for luminaires for It includes revised information on minor road lighting. tariffs, contestable works, and public lighting. Integral Energy’s search for capital contributions. Much has energy-efficient, environmentally been achieved in the past three sustainable, reliable and long-life years through regular meetings with luminaires on its public lighting customers at which public lighting network is ongoing. matters are discussed.

The $6 million upgrade of the Emu Plains zone substation increased the facility’s capacity by a third. Pictured from left are some of the team who made it possible: Michael Costigan (Technologist), Michael Ross (Project Manager – Transmission Major Projects), Michael Pilch (Project Manager – Transmission Mains) and Brian Stockman (Technologist).

21 Economic 2 Performance Case study Smart grids, the way of the future

As environmental concerns grow We explored the benefits achieved along with demand for electricity, the by utilities in Europe and the USA We plan to term ‘smart grid’ is being used more in 2009 and plan to develop a and more in the electricity industry. smart grid strategy which quantifies develop a smart future benefits and identifies key What does it mean? The best smart technology platforms. grid strategy grid concepts seek to integrate the operation of the electricity grid with The integration of meters, grid which quantifies renewable generation. The resulting sensors, communications across new type of grid has multi-directional the network and within building future benefits power flow, customers who respond and homes, and IT systems is the to network and pricing events, and primary challenge facing smart and identifies electric vehicles to help balance grid development. The lack of network demands with supply, as standards that allow ‘plug and key technology shown in the figure below. play’ by consumers and utilities means that a cautious approach platforms. We expect smart grids to is preferred. For this reason, once fundamentally change the nature our strategy is completed, planning of electricity supply over the next for a large scale pilot will focus five to ten years. While smart grid on the integration of the various technology offers the opportunity technologies and the end-to-end to change our interaction with demonstration of the strategic customers, improve reliability and benefits. This will allow standards efficiency and defer investment in to mature and for a franchise-wide network, it needs to be carefully rollout to be planned from 2013. assessed to maximise gains for customers at an efficient cost.

Figure 3: A smart grid electricity network

22 New connections Integral Energy Annual Performance Report 2008–09 Retail – connecting We continued to offer our Several research projects were INrewards discount card for some commissioned to help us make customers to great contract customers. The card has decisions about new strategies for service proved to be the most cost-effective residential and business segments. value-add for the mass market These included ongoing customer The retail business is responsible segment. This year we developed satisfaction tracking, determining for Integral Energy’s sales and the concept further to target customers’ value perceptions marketing and forms a critical link the business and ‘green’ market of energy contracts, measuring to our customers in over 830,000 segments – we now offer INgreen customer loyalty and understanding homes and businesses across rural Rewards and INbusiness Rewards customer perceptions of value-adds, and metropolitan New South Wales discount cards. carbon off-set product offers and and southeast Queensland. new sales channels. Several new third-party partnerships Our multi-channel sales and were trialled during the year as We introduced a ‘test-and-learn’ marketing strategy helped us to potential new channels for acquiring methodology to gain a deeper meet and exceed targets during the customers. An affinity partnership understanding of significant drivers year, despite operating in a highly with National Seniors Australia (see in buying behaviour from new competitive environment, a volatile page 25 for more details) aims to and existing customers. This was wholesale electricity market and an secure new customers from the used to test various ideas including evolving energy industry. growing seniors’ segment, while telemarketing campaigns, product a collaboration with a residential initiatives and direct-mail programs. NSW energy reform energy broker seeks to gain ‘move- Coupled with this, we have used the The New South Wales Government in’ clients in southeast Queensland. propensity to switch and customer has announced plans to sell its Integral Energy also established analytic models to manage customer electricity retailers. In preparation partnerships with a number of targeting. This approach increases for privatisation and the business energy brokers to test the our marketing efficiency and accompanying challenges and viability of acquiring new SME and lowers the cost per sale by driving opportunities, we have updated our corporate customers through this improved response rates transition and separation plans. emerging channel. in marketing campaigns.

How we trade Integral Energy does not generate electricity. We buy it from the National Electricity Market (NEM) and sell it to customers at a regulated price or under contract arrangements. Integral Energy actively manages its exposure to spot electricity prices in the NEM. The year saw reduced volatility compared with last year thanks to lower-than-average temperatures over the summer which helped reduce demand, and new plant commissioning and higher rainfall, which relieved supply-side constraints. This led to average spot prices falling to $38.85 from the previous year’s record of $41.66.

Sales and marketing initiatives In New South Wales and Queensland, door-to-door activity again proved to be the most effective way to acquire customers, boosted by shopping-centre kiosks and outbound telesales, which generated more sales than in previous years.

23 Economic 2 Performance

Integral Energy again took part In addition to achieving successful generation of energy through solar in events with industry groups to sales, we have been pleased to see panels. Customers will be paid a broaden relationships and acquire good satisfaction levels with our tariff for the electricity produced at and retain corporate and SME connections process. Ninety-two the premises. customers. The relationship with per cent of customers surveyed Ongoing and proposed changes the Illawarra Business Chamber has over the past six months said the to the various national and state strengthened further throughout connections service met or exceeded environmental schemes create a the year, with Integral Energy their expectations. (We work with dynamic, challenging regulatory sponsoring a number of business the electricity distributor Energex to environment for market participants. networking activities in the improve connection services That said, Integral Energy is ready to Illawarra region. for customers.) meet all challenges, including those The INhome bi-annual residential Our customer hardship program posed by the national emissions customer newsletter was INpower, created for the New South trading system – the Carbon reintroduced to provide information Wales market, was extended to Pollution Reduction Scheme (CPRS) about energy efficiency and southeast Queensland this year. The – though the proposed legislation updates on changes in the energy program’s goal is to help customers has been delayed for a year and is industry. Each issue includes energy in financial difficulties who are now due to take effect in July 2011. saving advice, energy news and having problems paying their competitions. electricity bills. After introducing our mid-range Finally we worked on building 20% and 50% green products, relationships with key Queensland We met and we repositioned our green product stakeholders and held regular range with the aim of demystifying meetings with the Energy exceeded targets ‘green’ to make the customer’s Ombudsman, the Queensland choice easier. Our green collateral Competition Authority and the during the was updated to support these new Department of Mines and Energy to year, despite green products. ensure we met our regulatory and customer obligations. operating in a Queensland – our sunshine state Environmental compliance highly competitive The Queensland market has enjoyed Integral Energy complies with continued strong growth. In our the mandatory environmental environment, a first two years in the state we have requirements of the: acquired over 130,000 customers, • NSW Greenhouse Gas Reduction volatile wholesale well above our target of 73,000, Scheme (GGAS) making us the most successful electricity market new market entrant in Queensland • Australian Government’s history. We supply around 10% of Mandatory Renewable Energy and an evolving residential customers in southeast Target (MRET) Queensland and generate an energy industry. • Queensland Government’s 13% average of 10,000 bills each week. Gas Scheme (GEC) This is an impressive achievement • Victorian Government’s Victorian in what’s considered to be one of Renewable Energy Target (VRET) the most exciting electricity markets in the world. According to global • NSW Energy Savings Scheme research company VaasaEtt, Victoria (which began on 1 July 2009). and South Australia are the world’s The retail business is preparing most competitive energy markets for the introduction of the NSW and New South Wales is number Solar Feed-in-Tariff program. This five. After just two years of energy program will support small retail market competition, Queensland is customers contributing to the ranked seventh. energy needs of NSW through the

24 New connections Integral Energy Annual Performance Report 2008–09 Case study Affinity deal and power bill discounts see seniors make the switch

An ‘affinity marketing’ campaign By signing up to a contract, National Next, building on these results, to co-brand electricity offers for Seniors members get a discount the campaign was extended for seniors has gained momentum this off standard regulated rates for members in southeast Queensland year, demonstrating that jointly run the next two years and a free until June 2009, after which the promotional initiatives can deliver 12-month membership renewal to same deal was offered to customers good results when they’re well the association. in New South Wales. designed and the partners’ goals are These and several other projects closely aligned. Growing membership have achieved both organisations’ and sales Integral Energy has collaborated original objectives, with the with National Seniors Australia At the outset, Integral Energy NSA and Integral Energy actively (NSA) – a not-for-profit and the NSA had clear objectives. promoting the partnership membership-based community Offering more money-saving in their internal and external organisation for the over 50s – to benefits to members would help the communications. offer its members a discount on association retain its membership their electricity bills. base. Integral Energy in turn Timely for retirees was keen to collaborate with a “The offer has been especially body which had a strong, trusted timely for people on pensions and affiliation with its members to give self-funded retirees, because tough its own sales initiatives a boost. economic conditions have impacted The first activity was a direct mailing them significantly,” says Michael to all NSA members in southeast O’Neill, National Seniors Australia Queensland detailing the offer. This Chief Executive Officer. was a success for both parties, with “With the collapse of the share all targets met. market, many self-funded retirees have seen their investment value and dividends drop by around 50%,” Michael says. Moreover households of people aged over 55 spend a bigger proportion of their budget on fuel and power than others.1 “Some self-funded retirees must now rely on the pension,” he says, “and surviving on $281 per week is extremely difficult.” The success of the initiative was the result of a huge team effort with several Integral Energy teams helping provide a seamless, ‘end-to-end’ customer experience, says Channel Manager Anne Whitehouse. “Channel, Mass Market, Sales Operations and of course the Queensland team all played their part,” Anne says.

The team behind the successful campaign: from left, Sharon Simpson, Marketing Campaign Manager, Felicity Clark, Sales and Operations Manager 1 *Household Expenditure Survey 2003-04, and Jenene Robertson, Affinity/Direct Mail Channel Co-ordinator. Australian Bureau of Statistics (6530.0)

25 Economic 2 Performance Creating connections within our operations

In 2008–09 as part of a corporate planning process led by the Board, Integral Energy developed a strategy map to illustrate the connections between our strategic business outcomes, our business processes and business enablers. In view of the expected future separation of our retail business, this map focused primarily on a network-only business operation, as shown here:

Meet State Plan & State Owned Corporation (SOC) obligations

Customer/Community outcomes Financial outcomes Balance commercial, social, environmental Ensure finical sustainability through investments and customer expectations and efficient operations

Business Protect public Reliable & outcomes Valued by Financial Effective Efficient safety & sustainable Desired outcomes our community sustainability investment operations for our business environment network

Business Safety Effective Strategic Asset Stakeholder & Governance, processes Retail management customer Management regulatory control & risk Implement processes separation to support core system support Plan management management business

Business Safe, capable Innovation enablers Values driven Integrated Organisational motivated within core Develop a competent, culture technology alignment capable and motivated employees business workforce

The 2008–09 corporate planning process also identified Integral Energy’s contribution to the New South Wales State Plan. The plan sets out priorities for the state over the next 10 years, as shown below:

NSW State Plan goals NSW Government priorities Relevant scorecard measure for Integral Energy Delivering better S8 – Increased customer satisfaction Achieve customer satisfaction of services with Government services 82–84% Growing prosperity P2 – Maintain and invest in Deliver approved capital and operating across NSW infrastructure programs P4 – More people participating in Achieve apprentice and graduate education and training throughout recruitment targets, as per Integral their life Energy’s Human Resources Plan P5 – AAA rating maintained Meet SCI financial targets Environment for living E2 – A reliable electricity supply Achieve electricity reliability of 99.98% with increased use of renewable by 2016 energy Integral Energy to be carbon neutral by 2020 for direct emissions

In addition, the corporate planning process identified five objectives for our business for the 2009–10 financial year. These objectives reflect the priority we will give to improving safety performance as well as the obligations we have to our customers, shareholders, the New South Wales Government and citizens of the state.

26 New connections Integral Energy Annual Performance Report 2008–09 Connecting with suppliers Most expenditure during the year Innovation and technology Integral Energy values its relationship on goods and services was covered (including smart grid) with suppliers and recognises that by Integral Energy or State Contracts Integral Energy’s 2008–09 corporate an efficient supply chain is critical Control Board contracts or supplier planning process identified for delivering safe, reliable energy panels which generally have a life of ‘innovation within core business’ to customers. three years. The 40 new contracts or as a key business enabler to aid supplier panels established included ongoing development. In particular In March 2009 we commenced those for the supply of power it highlighted the need for an a strategic review of our transformers and switchgear for increased focus on efficiency across procurement operations. Integral Energy’s capital program, the business and the need for One of the catalysts of this review fuel, network protection hardware, better-targeted use of innovation (in is the major growth in capital and cable, protection panels, facilities people, processes and technology) operating expenditure from 2009 to management services and various to drive improved performance. 2014 across the New South Wales major civil and construction services. To position the organisation to take electricity industry as shown below. In line with our plans to streamline advantage of new and emerging The review’s recommendations will procurement and improve the way we technologies and to achieve industry improve the speed, quality and cost interact with suppliers, we continued best practice in targeted areas, we of goods and services procured. to implement initiatives started in the set up an innovation branch. Its Importantly the revised framework previous year. These included: purpose is to manage the project will reinforce governance in the • Improved reporting teams who will identify and facilitate procurement process, facilitate and strengthening of business improvements and ensure investment in capability, expertise information security all such initiatives are coordinated and leadership, as well as give and aligned. The branch comprises us tools for better reporting and • A regular newsletter to the project teams seconded from across documentation. supplier community to update the organisation. them on relevant initiatives at We are also committed to buying Integral Energy Three projects are already underway goods and services through or complete: improving productivity, established systems wherever • The rollout of the master supply identifying opportunities for shared practical, to promoting open and agreement that streamlines services and developing a smart effective competition and to getting the engagement of significant grid strategy. value for money. engineering suppliers for major work The productivity project consisted Typically we seek competitive quotes • A revamped statement of business of a payroll analysis to identify in the open market and advertise ethics to clearly and consistently opportunities for improvement. tenders in the press and on our outline the key business principles This work was a catalyst for change website. Our requirements are applied in dealings with suppliers. across a number of areas of our largely met by businesses competing business and involved decisions in the open market in response to around overtime levels, overtime calls for expressions of interest or distribution and equity outcomes, requests for tender. and managing working hours to improve safety. 20 CAPEX OPEX The shared services project involves

18 TransGrid identifying opportunities to improve Integral Energy efficiencies at an industry level by 16 EnergyAustralia 14 Country Energy working more closely with other New South Wales distributors. This work 12 will continue in the coming year. 10 8 The smart grid strategy development 6 project will allow Integral Energy Expenditure ($ billion) Expenditure 4 to prepare for the significant technology changes happening in 2 the electricity sector. These include 0 greater convergence of business and network technologies for managing

Actual Actual distribution networks. This work will Forecast Forecast 2004–09 2009–14 2004–09 2009–14 also continue in the coming year.

Figure 4: NSW energy forecast and actual 5-year capex and opex spend (2004–14)

27 Economic 2 Performance

Information and Finance developed plans to strengthen communications Disciplined business processes lie relevant internal controls. We expect technology (ICT) at the heart of Integral Energy’s further improvements to flow from ICT’s role is to provide an assured performance and are fundamental the outcomes of a procurement business platform, help maintain to delivering strong results. strategy review. cost-effective operations, achieve In another important step to compliance, boost organisational Preparing for the sale of the mitigate risk, Integral Energy productivity and enable and drive retail business entered a GST annual compliance change in our organisation. In preparation for a potential sale arrangement with the Australian During the year we implemented a of our retail assets we realigned the Taxation Office (ATO). A prerequisite number of technology roadmaps to Chart of Accounts and the General for the ATO to enter such an integrate systems, allow workforce Ledger to isolate retail transactions, arrangement is that the taxpaying mobility, aid business intelligence completed the vendor due-diligence organisation involved demonstrates and reporting, provide desktop, process and created a transition a high standard of self-regulation server and storage infrastructure and services costing model. and governance. information security architecture. In addition we established a The ATO conducted due diligence A number of these initiatives are customer service branch in our to assess our suitability for the already underway: finance division to provide services program. In its review of our broad to the retail business and to enact a governance, risk management and • Field force mobility. This involves Transition Services Agreement (TSA) assurance processes it concluded the fit-out of crew vehicles with which would be required by any that Integral Energy had “established mobile computing equipment purchaser. This internal agreement a strong commitment to achieving to replace existing paper-based provides training and overall high levels of compliance and systems and processes preparation for an eventual sale. ensuring that risk management and compliance are high level priorities • Business intelligence and We also established a TSA operating in managing exposure to risk”. reporting. A data warehouse will committee to oversee the delivery Advantages of the program include give us a data store to produce of services to agreed levels of reduced compliance costs, reduced an integrated, common view of performance. Monthly reporting penalties in the case of errors or data accumulated in the course of key performance indicators for omissions and a closer relationship of business operations. Bringing the new customer service branch with the ATO. data across the systems to a single is reviewed by the committee for source will allow us to access it compliance, and any necessary Building for the future more efficiently and productively changes are assessed. The customer During the year we further • Metering and market operations. service branch provides shared developed our workforce plan. Over a number of years we services for the retail and network The scheduled 45% increase in have built systems which have businesses including call centre, network investment requires an largely remained the same credit services, billing and customer increase in employee numbers and since the introduction of retail care and is working towards being the development of master plans to contestability. As the technology able to separately account for the ensure appropriate support facilities employed for these has expired, services provided. This was necessary are available to house them. we have initiated projects to to enable New South Wales upgrade and replace core systems Government advisers to conduct a Our new state-of-the-art, detailed analysis and appraisal of $14.3 million Hoxton Park Technical • Intranet and Internet. A number the financial, legal and operational Training Facility was officially of projects were initiated to performance of our retail business. opened in March 2009. This unique improve the ability of employees, centre provides theoretical and business partners and customers Managing risk practical training for apprentices and to find information, collaborate on To update and strengthen our ongoing training for field staff (see projects and communicate online management of fraud risk we page 46). • Disaster recovery. We are building undertook an organisation- In June 2009, we completed our capability into every system wide assessment of risk factors oil-handling facility for the Central initiative to ensure that a standby as well as a procurement audit Region. This specialised building is established, maintained and this year. After reviewing ICAC is located at Narellan and handles tested regularly in the event of a recommendations from recent up to 80,000 litres of recyclable main site failure. inquiries we incorporated additional transformer oil. measures to mitigate risk and have

28 New connections Integral Energy Annual Performance Report 2008–09 Design for the redevelopment of Security • Improving customer value our Springhill field support centre Integral Energy continues to by limiting unplanned supply commenced in 2008–09, with upgrade its security to ensure the interruptions for our average construction due to start in late safety of the community, our power customer to less than 90 minutes 2010. This is an important facility supplies and electrical assets. We • Delivering on our Strategic Asset to support our network operations sprayed power cables and other Management Plan (SAMP) by in the Illawarra region and will network hardware with microdot delivering our approved network accommodate one of our customer identification and used security tape investment plan safely, on time interaction centres and network and warning signs to alert the public and within budget control rooms. The refurbishment that property has been marked of Springhill field support centre for police identification. This has • Managing business risks across represents the final stage in the reduced the theft of copper and the our business that could potentially relocation of critical operations into subsequent danger for staff and the affect the performance and facilities that we own. public, and reduced loss-of-power reputation of our business The first stage of the refurbishment incidents to customers. • Leveraging technology effectively of the Parramatta Field support Integral Energy continued to raise by developing a comprehensive centre was completed this awareness of copper theft through 10-year plan to prepare for the year at a cost of $4.7 million. an extensive local media campaign. Federal Government’s proposal The refurbishment involved to roll out smart meters to all our extensive civil works, demolition Security fences around field support network customers over the next of old buildings and the major centres and substations were eight years. refurbishment of an existing building completed this year and security and the yard to provide a facility systems were upgraded. to effectively service the important Parramatta CBD and surrounding The scheduled areas over the coming decades. The Future challenges larger, refurbished building now Over the next 12 months Integral 45% increase in contains a new storm centre, state- Energy has identified five key of-the-art energy saving devices and objectives detailed in our corporate network investment a new 13,500-litre rainwater tank to plan. These are: flush toilets and water the gardens. requires an increase Stage two of the refurbishment, • Improving safety performance to be completed in late 2010, will by reducing employee lost time in employee include an upgrade to the vehicle injuries and reportable electrical workshop, covered parking, and incidents by 20% compared with numbers and the covered stores areas. last year development of master plans to ensure appropriate support facilities are available to house them.

Setting strategy: Ty Christopher (left), General Manager Network Development, and John Kruger, Manager Project Management Office, discuss the Strategic Asset Management Plan (SAMP), which underpins Integral Energy’s network investment plans.

29 Environmental 3 Performance

creating connections to a low-carbon future

30 New connections Integral Energy Annual Performance Report 2008–09 Environmental indicators – did we meet our objectives?

2008–09 objective Progress to date Status 2009–10 objective

Capitalise on the Our improved performance Undertake a comprehensive opportunities presented reflected the implementation of review of the environment through an integrated key cross-business initiatives. p strategy to accommodate environment strategy. changes in the external environment.

Pursue greenhouse reduction Achieved our annual greenhouse Continue to implement the target by focusing on energy reduction target to progress organisation’s target of carbon p efficiency, fleet improvements towards carbon neutrality for neutrality of direct emissions by and waste minimisation. direct emissions by 2020. 2020.

Align environmental risk Complete. Environmental risk Develop strategic initiatives to assessment process with assessment process fully aligned. reduce significant risks.   the organisation’s strategic risk profile.

Implement the Waste data project started and Continue to implement the recommendations of the reductions in key waste streams waste data project and waste p waste data project and waste achieved. minimisation plan. minimisation plan.

Continue to implement the Eco Depots program was Establish an annual Eco Depots program and implemented in 50% of field environmental compliance environmental guidelines support centres. Environmental   training program, reinforced training program. guidelines training program through communication completed. initiatives.

Align the environment Environment strategy continues Continue to engage with strategy with stakeholder to evolve in response to external stakeholders to p expectations. stakeholder feedback and understand expectations. performance improvements.

Key   Objective exceeded p Ongoing objective with targets met to date or positive progress shown  Objective achieved q Ongoing objective with targets not × Objective not achieved met to date

31 Environmental 3 Performance Performance indicators

Regulatory compliance Greenhouse gas emissions The remaining oil was recycled Integral Energy’s focus on • Total emissions directly attributed to through energy recovery. environment regulatory compliance our activities meet our greenhouse resulted in us having no fines or target of 29,889 tonnes of carbon Waste management and recycling prosecutions in 2008–09. dioxide equivalent (CO2e). • Total waste disposed increased by • Total emissions relating to losses Expenditure 21% compared with 2007–08, from our network increased by reflecting the success of the waste • Environmental expenditure 25% to 781,755 tonnes of CO e. 2 data capture which has improved exceeded $6.1 million, up 37% This reflects a significant change data accuracy and completeness. from last year and partly attributable in the reporting methodology to the Eco Depots program, which from the adoption of the Water consumption resulted in increased energy National Greenhouse and Energy efficiency and water conservation Reporting Scheme. • Water consumption per full time initiatives such as rainwater tanks for equivalent employee decreased vehicle wash bays. Oil regeneration by one kilolitre per year, reflecting the use of water-saving devices, • A total of 729,607 litres of oil installation of rain water tanks and was removed from the network, behavioural change programs. 41% of which was recycled.

Number of notifiable environmental incidents Water consumption per full time equivalent employee (kilolitres) 11 17 16 13 12 11 4 3 2 0 2004–05 2005–06 2006–07 2007–08 2008–09 2004–05 2005–06 2006–07 2007–08 2008–09

Distribution network line losses (TCO2e) Waste (tonnes) 31,780 Recycled Landfill 870,845 781,755 661,325 627,461 11,551 599,538 8,015 8,039 6,734 7,155 5,597 5,712 5,809 4,606 3,375 2,723 2004–05 2005–06 2006–07 2007–08 2008–09 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09

Note: Changes in National Greenhouse Gas Reporting methodologies from Note: 2006-07 result reflects a focus on the remediation of contaminated 2008-09 mean that emission levels have increased compared with previous years. land and improved data capture methods during the reporting period.

32 New connections Integral Energy Annual Performance Report 2008–09 Connecting to the component of our environmental (HFCs), our zero-emissions target, needs of future strategy therefore is to drive an established in 2008, will result in organisational response to our over 180,000 tonnes of CO2e being generations own carbon footprint. We have abated or offset by 2020. developed action plans focused Initiatives to reduce greenhouse Integral Energy’s environment policy is on achieving carbon neutrality for gas were investigated across the based on respect for the environment our direct emissions by 2020 and business this year: in fleet, facilities and community in which we operate achieving sustained reductions in management, infrastructure and defence of the needs of future network losses. generations. We appreciate that this construction and information will require a culture of environmental Climate change is expected to result technology. Implementing them will excellence to be embedded in more erratic weather conditions. be a priority in the coming year. throughout the organisation as we Analysis by the CSIRO predicts that build new connections to a more NSW is likely to become warmer, Preparing our network sustainable future. with more hot days and fewer cold assets for the impacts of nights. For Integral Energy, this climate change Our environment strategy has been means increased peak summer An employee sustainability program, developed to achieve performance energy demand for cooling is likely, Eco Depots, was implemented improvements while driving cultural with reduced demand in winter for at five of our 16 field support change. It embodies four initiatives: heating. In managing a network centres. Energy audits were that spans urban centres, rural areas • Responding to climate change conducted in partnership with and coastal regions, we expect to employees to identify energy • Improving our performance face significant asset management efficiency improvements without challenges across our supply area. • Continuing to learn and driving compromising site operations. cultural change Wherever possible, we have taken Recommendations from the audits account of these scenarios in were implemented and we expect to • Engaging with stakeholders. developing our network strategy, see resulting improvements over the which incorporates capital and coming year. Responding to climate operating programs planned over change We also monitored and adjusted the next decade as well as specific the energy efficiency program at As a socially responsible business, asset management strategies. our Kings Park field support centre. Integral Energy is mindful of its This successful trial reduced the obligation to achieve sustained Government climate change building’s energy consumption by reductions in direct and indirect policies can be grouped into 26% – or the equivalent of 133 greenhouse gas emissions. We also four types: those designed to tonnes of carbon dioxide. We plan recognise that customers expect reduce high emissions generation, to roll out the program to other energy companies to demonstrate those promoting investment in high consuming buildings in a bid to leadership in this area. A key low emissions generation, those targeting improved energy efficiency achieve our target of being carbon and those offering targeted neutral for direct emissions by 2020. As a socially assistance to affected stakeholders. Our vehicle fleet travelled Integral Energy’s response to these approximately 25 million kilometres responsible and other developments is focused in 2008–09, consuming 4,100 in three key areas: kilolitres of fuel (diesel, petrol business, Integral and LPG) and generating 11,988 • Reducing our direct carbon tonnes of CO2e. Greenhouse Energy is mindful footprint to zero by 2020 emissions attributed to the use of of its obligation to • Preparing our network assets for petroleum products accounted the impacts of climate change for 38% of our direct emissions. We have investigated a range of achieve sustained • Helping customers to manage initiatives to reduce fleet emissions, their energy consumption better. including leasing of light vehicles reductions in and replacing six-cylinder vehicles Reducing our direct carbon with four-cylinder versions that direct and indirect footprint to zero by 2020 will reduce direct emissions by an Including emissions from electricity estimated 22%. Recommendations greenhouse gas consumption, petroleum products, will be implemented as part of the emissions. waste, sulphur hexafluoride 2009–10 fleet improvement plan. (SF6) and hydrofluorocarbons

33 Environmental 3 Performance

Changes in National Greenhouse Making meaningful customer – Dynamic peak pricing. A Gas Reporting methodologies connections premium tariff applies during Since 1996, we have participated The Blacktown Solar City project is selected peak demand periods. in the Greenhouse Challenge Plus an innovative example of how to Most participants changed program, adopting its emissions influence customer behaviour and their energy use behaviour and reporting boundaries and reduce energy demand. saved money on bills. methodologies. In 2009, greenhouse The project has resulted in the – Seasonal time of use. gas emissions reporting will change abatement of 24,000 tonnes of Participants paid higher for many organisations including greenhouse gas emissions and tariffs during the warmer Integral Energy with the introduction savings of $3 million to customers months when demand was of the National Greenhouse and in their electricity bills. Launched higher and a reduced rate at Energy Reporting Scheme. on 28 July 2007 by Integral Energy other times. Results indicated The scheme requires companies to and its consortium partners, customers respond positively report scope-one and scope-two Blacktown Solar City is an Australian to price signals. emissions. Scope-one emissions Government initiative. – Pool pump control. Some include direct emissions from sources Our role in the project has been pool pumps were remotely that are owned or controlled by the to deliver energy efficiency packs, switched off between peak company. Scope-two emissions are consult on home energy and run hours on ten hot days and those generated as a result of an energy saver trials. During the timers on some pools were organisation’s operations, such as project Integral Energy: adjusted to operate out of emissions from electricity purchased peak hours to achieve a similar and consumed by customers. They • Distributed over 77,000 compact reduction in peak demand. include network losses. fluorescent light bulbs and 500 water-saving showerheads to – Air conditioning cycling. Air Starting this year, we have reported Blacktown residents conditioners were remotely our emissions using the National switched off for up to Greenhouse and Energy Reporting • Completed over 1,500 home 20 minutes each hour on ten Scheme methodologies where energy consultations. The program hot days. See page 37. available, and using the National has resulted in an estimated Greenhouse Accounts where such average annual cost saving per Education about peak demand methodologies are unavailable. household of $176 and emissions was an important component of Changes in reporting methodologies these trials. Seventy-one per cent of savings of 1.2 tonnes of CO2 mean that our emission levels, as residents surveyed in 2009 said they • Conducted four energy saver reported in this annual report, have would be likely to change the way trials, two pricing trials and two increased significantly compared they use electricity if it cost more load control trials to encourage with previous years. during times of heavy demand. change in the way householders use electricity during periods of Western Sydney pricing trial higher demand: For the third year running, our western Sydney pricing trial tested customer responses to dynamic peak pricing (when energy is most Figure5: Direct* greenhouse gas emissions expensive) and seasonal peak pricing. More than 1,200 customers Petroleum Products t CO2e

12,139 Electricity (consumption) t CO e

11,988 2 participated, including a control Solid Waste (t CO e) 11,211

11,028 2

10,690 SF6 t CO e 10,345 2 group of 340 customers. The energy 9,800 Hydro fluorocarbons (HFC) t CO2e 8,945 8,859 8,554 Offsets purchased t CO2e consumed by dynamic peak pricing * Direct emissions include scope participants decreased by over 25% 1 and 2 emissions (as described

5,752 in paragraph two above) and some

5,116 during peak events and remained 5,030 4,555 4,502 scope 3 emissions, including waste. responsive even when peak pricing 2,155 1,981 1,994 events occurred on consecutive days. 1,594 1,209 801 627 562 382 306

-1003 The findings will help us develop new generation tariffs which will contribute to more sustainable energy delivery and consumption. 2004–05 2005–06 2006–07 2007–08 2008–09

Our greenhouse reduction target was higher in 2008–09 compared to 2007–08 to allow for planned emission increases in 2008–09 as a result of the changes in reporting methodologies, significant buildings being commissioned and our growing workforce.

34 New connections Integral Energy Annual Performance Report 2008–09 North West Sector Demand Lend Lease/GPT the New Rouse Improving our performance Management Fund Hill, Steplight and Dusseldorp The strategic direction of our This fund was established in Skills Forum environmental performance and accordance with the conditions of • Energy efficiency schools opportunities presented by an approval for the Vineyard to Rouse program. The project aims to integrated strategy remained Hill electricity upgrade in September reduce energy use in schools by the focus of the Executive 2006. It provides $500,000 to educating staff and students environmental steering committee. support a program of demand Chaired by the CEO, the committee management and energy minimising • Energy efficiency awareness tracks our performance in reducing activities targeting customers in campaign. Currently under environmental risks. the sector. development, this campaign will include an online energy reporting Our environmental management Projects currently being delivered tool, mobile educational displays system and environment strategy to connect meaningfully with and a discount voucher booklet. are key tools to guide our customers include: performance improvements. Developed in accordance with the • Home energy consultations. Free Business energy efficiency ISO 14001 international standard, home sustainability assessments Seven demand-side management the environmental management are provided to residents, with programs operated through system continues to evolve. more than 350 completed this 2008–09. These aim to reduce large year. These assessments made use energy consumers’ peak demand to Compliance of a community based initiative, allow the deferral of major network the ‘Y Green program,’ where upgrades. Current programs Despite two environmental incidents young people are trained and include Parramatta, Blacktown, reported under the Protection of the employed to conduct home Campbelltown, Liverpool, Environment Operations Act 1997, sustainability assessments in their Unanderra, Minto and Chipping our performance was a significant local communities. The program Norton. To date the programs have improvement on the previous year. is a collaboration between the achieved a demand reduction of The two incidents involved: Hills Shire Council, TAFE NSW 23.96 MVA. – Western Sydney Institute, the • An Integral Energy civil University of Western Sydney, contractor inappropriately storing spoil on a Sydney Water Corporation site, which resulted Adrian Woodford, Manager Construction Program, and Chris Buscall, Regional Environmental in localised damage to Specialist, inspect the Kings Park FSC rainwater tank supplying a vehicle washbay. Integral Energy Cumberland Plain woodland is progressively introducing a range of energy, water and recycling initiatives at our depot sites to improve our overall resource efficiency. • A padmount transformer catching fire, causing the burning or release of approximately 300 litres of oil to the adjacent stormwater system. The incident was investigated by the Parramatta Police and vandalism was determined as being the cause of the incident. The cause of the fire was determined as having been started by unknown persons.

Site investigation and remediation Our proactive approach is evident in the completion of the third year of our contaminated land program. We are modifying the program with a view to investigating contamination that may pose a risk to workers excavating in substation sites. A program of supplementary investigations will be conducted at selected field support centres in the coming year.

35 Environmental 3 Performance

Waste management Water resources Our customer consultative In addition to maintaining our focus In the year under review Integral committee also continues to on diverting waste from landfill, we Energy continued to participate in provide a forum for presenting key improved the accuracy of our waste Sydney Water’s Every Drop Counts initiatives and communicating our data and increased waste awareness business program which aims to environmental performance to a through employee education promote and drive sustainable wider audience. programs this year. improvements in water efficiency and reduce costs. Heritage management We conducted a review of all major Achievements this year included external waste and recycling facilities Rainwater tanks with a combined further research to confirm used by staff. Procedures are in place capacity of 158,000 litres were the heritage significance and to capture and report on the amount installed in early 2008. Our water preparation of conservation of waste coming from these facilities, use decreased by 9% compared management strategies for sites allowing us to set more informed with last year. This reflects facility identified in the draft Heritage & waste reduction and recycling targets. improvements and the development Conservation (s170) Register. Work of a conservation culture. Key targets of the waste continued on the development minimisation plan for 2008–2009 of a movable heritage policy Continuing to learn and were achieved, including: (covering portable items of heritage driving cultural change significance) and the collection • A 10% increase in timber Staff engagement and cultural change and cataloguing of potentially pole recycling remain a key focus for Integral Energy. significant items. See page 115 for • A 10% increase in timber The roll-out of the Eco Depots program more detail. pallet recycling to our field support centres continued this year. The program’s launch site, • 5,000 litres of waste oil diverted Kings Park field support centre, Future challenges from landfill through a capture showcased how innovative control and recycling program in all systems and cultural change can deliver In 2009–10 we will: major depots. exceptional efficiencies. Kings Park • Undertake a review of the Figure 6: Waste, by type electricity consumption has decreased by an average of 26% a month since environment strategy to the program was introduced. accommodate changes in the external environment We revised our approach to environmental learning and • Complete the Blacktown Solar awareness and developed an City energy saver trials with our environmental guidelines handbook. consortium partners and the More than 1,000 employees were community Recycled Disposed trained in the environmental • Work towards our target of 58% 42% principles outlined in the handbook. carbon neutrality of direct emissions by 2020 Creating new connections with stakeholders • Capitalise on the organisation’s emerging environmental culture Stakeholder engagement to improve through programs such as understanding of expectations and Eco Depots and Sustainable recognise potential opportunities Huntingwood in the wider business remains Integral Energy’s a key element of the network • Establish an annual environmental capital program. As part of this compliance training program focus on regulatory process, Integral Energy prepares that will be reinforced through environmental assessments, which communication initiatives. compliance are conducted in consultation with the community and key resulted in us stakeholders. (See page 48 for additional information on having no fines stakeholder engagement.) or prosecutions in 2008–09.

36 New connections Integral Energy Annual Performance Report 2008–09 Case study Air conditioner saver trial cuts power usage by 30%

Peak demand in Integral Energy’s The rapid growth in the use of air The trial offered a financial incentive network area has grown conditioners poses a potentially to home owners who took part significantly over the past decade, intractable problem because it in return for allowing their air reflecting the transformation of rural means peak demand has been conditioners to be cycled off for 20 and semi-rural land into new urban growing at a faster rate than overall minutes each hour during selected developments and a sharp increase energy consumption. occasions of high electrical demand. in the use of air conditioners, most Integral Energy is investing The two-year trial had over 500 notably in Western Sydney. significantly to ensure our energy participants and resulted in a Contributing to the steep demand infrastructure has high levels reduction of over 30% in energy is the fact that peak temperatures of reliability and sustainability. use during the peak consumption in the Integral Energy franchise However we know that if we do period – with very little impact on area are typically higher and more nothing to limit growth in demand residential comfort or air conditioner sustained than those of coastal the investment we’ll need to make cooling performance. areas. This results in a significant in network capacity will continue to This important exercise has not probability of extreme weather increase along with the associated only given Integral Energy valuable events in any given year. ongoing environmental impacts. insights into new and residential In response, Integral Energy demand management, it has created promoted a voluntary Air an increased awareness among Conditioner Saver Trial under the consumers of the network’s demand flagship Blacktown Solar City limits and the environmental impact program which encouraged the use of energy consumption. of solar power, energy efficiency and new approaches to electricity pricing and financing.

Figure 7: Average Load Profiles on 14 March 2008 with temperature 29.4oC

1.8

1.6 AC ControlGroup_AC 1.4

1.2

1

kW 0.8

0.6

0.4

0.2

0 00:30 01:00 01:30 02:00 02:30 03:00 03:30 04:00 04:30 05:00 05:30 06:00 06:30 07:00 07:30 08:00 08:30 09:00 09:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 15:00 15:30 16:00 16:30 17:00 17:30 18:00 18:30 19:00 19:30 20:00 20:30 21:00 21:30 22:00 22:30 23:00 23:30 24:00 Time The rapid growth in the use of air conditioners poses a potentially intractable problem because it means peak demand has been growing at a faster rate than overall energy consumption. Social 4 Performance

connecting with people and communities

Russell Walsh, Mass Market Manager, and Jill Bynon, Marketing Campaign Manager, who were responsible for the successful win-back campaign for Integral Energy customers. The value proposition was ‘come home to Integral and save’. 38 New connections Integral Energy Annual Performance Report 2008–09 Social indicators – did we meet our objectives?

2008–09 objective Progress to date Status 2009–10 objective

Drive Integral Energy’s 17 lost time incidents for 2008–09, p Restructure and benchmark safety performance to best- an 11% reduction. Best-practice performance to deliver practice benchmarks. organisations in our industry show we further improvements in the can significantly improve our performance year ahead. towards our target of zero harm. Increase value for Negotiated the new Integral Energy  Initiate a customer value customers by identifying Award 2008 in line with NSW improvement program to opportunities to improve Government’s Wages Policy to deliver improve efficiency productivity and enhance improvements in safety for employees efficiencies at an industry and increased value for our customers. level by working more closely with other NSW Developed a joint public awareness p Continue to identify distributors. safety program with Energy Australia. opportunities to work with other NSW distributors. Implement the public safety awareness campaign. Promote Integral Energy as Achieved an engagement score of 63 in  Incorporate learnings an employer of choice. the Hewitt’s employee survey – a 3% and drivers of employee improvement from the previous survey engagement into our Human conducted in 2006. This score was higher Resources Strategic Plan. than the average engagement score for the utilities industry in Australia.

Launched a staff wellness program to p Implement phase two of the encourage employees to make safe and wellness program – planning healthy lifestyle choices. for change. Develop a high- More than 200 senior employees have  Introduce new reporting performance culture. been coached to facilitate development structure for individual key planning and career discussions with performance indicators, which their direct employees. is aligned to our corporate strategy and strategic priorities.

Deliver better outcomes 6,421 new customers were enrolled in the   Design a program of initiatives for customers experiencing INpower customer assistance program. to provide customers with financial hardship. increased options to use Disconnection rates were further reduced electricity more efficiently and by 27% from the previous year. help reduce energy costs.

Improve stakeholder Community engagement principles q Support project managers to engagement to support agreed and all plans delivered on time. deliver effective community the delivery of our network engagement through training capital program. programs. Review our community Updated the community partnerships  Further align our partnership partnership program strategy to align with the organisations strategies to support our corporate objectives. network capital program.

Align Integral Energy’s New structure approved by the Board p Implement the approved organisational structure to in February 2009 and progressively succession plan and workforce business and succession implemented through to 1 July 2009. plan to deliver the network strategies. capital program. Key   Objective exceeded p Ongoing objective with targets met to date or positive progress shown  Objective achieved q Ongoing objective with targets not × Objective not achieved met to date 39 Social 4 Performance Performance indicators

Employees Customer relations This improvement in disconnections • Integral Energy’s workforce Integral Energy continued to work is a result of culture change grew by 4% to 2,871 full with New South Wales customers driven by management, improved time equivalents. experiencing financial hardship and processes and IT systems to benefit as a result reduced disconnection customers. Payment plans and • Integral Energy welcomed rates by 27% over the past year strong partnerships with welfare a record intake of first year from 3,794 in 2007–08 to 2,778 groups have increased referrals to apprentices. We plan to recruit a in 2008–09. We achieved the best the INpower program. further 300 apprentices over the results for a NSW distributor in the next five years. • Integral Energy’s INpower recent electricity retail businesses’ program offered 6,421 new performance against customer customers long-term payment service indicators in a report plans and by year-end 4,379 produced by IPART, the independent customers were enrolled in economic regulator for NSW. the program.

Total Staffa Number of new apprentices employed

ACTUAL FORECAST 75 2,871 2,760 2,593 2,457 62 63 2,298 60 60 60 60 60 45 37 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2004–05 2005–06 2006–07 2007–08 2008–09

a – staff numbers are based on full time equivalents

Disconnections for non payment INpower customers 4,379 13,066 3,682 11,401 3,552 3,196 7,931 GOOD 5,693 1,095 3,794 2,778 2005 2006 2007 2008 2009 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 Customers enrolled as at 30 June

40 New connections Integral Energy Annual Performance Report 2008–09 Connecting with The development of leadership Our workforce capability is particularly important. Our workforce grew from our people Central to our success in this area 2,760 to 2,871 full-time equivalent is a clear articulation of the We aim to build a capable, staff. Accounting for growth and leadership competencies required innovative and motivated workforce attrition, over the next five years at all levels of the business to to enable us to achieve our we expect to recruit approximately improve performance management business outcomes. To this end, our 600 new employees, including and identify and develop high strategic Human Resources plan 300 new apprenticeships to potential employees. focused on three areas: engaging support our $2.7 billion electricity employees, building capability and To deliver this new Human network investment. aligning culture. These guide the Resources (HR) plan and support We ran successful development development of all initiatives existing key areas of training and programs to ensure adequately and projects. safety, we restructured the HR trained staff are available to meet division into three new teams: To engage and motivate employees, future needs. An additional 75 employee relations, HR strategy and we introduced initiatives that create apprentices and 10 engineering HR services. a greater level of understanding of graduates joined Integral Energy this our business and improve leadership We developed a workforce plan to year and a trainee engineering officer capabilities and senior managers’ support the delivery of our strategic program was reintroduced. As part of communication with employees. asset management program. the two-year engineering program, six trainees will rotate through the network business. Recruitment into these development programs is set to continue in coming years.

Table 8: Employee numbers

Employees 2004–05 2005–06 2006–07 2007–08 2008–09

Total staffª 2,298 2,457 2,593 2,760 2,871

Increase (%) 5.3 6.9 5.5 6.4 4.0

Cumulative reduction (%)b 26.5 21.4 17.1 11.7 8.2 a staff numbers are based on full time equivalents b base in 1995 was 3,127 Over the next five years we expect to recruit approximately 600 new employees, including 300 new apprenticeships to support our $2.7 billion electricity network investment.

Integral Energy employed another 75 apprentices in 2009. Among them was this first-year trio from Baulkham Hills – Nathaniel Brew, Morgan Evans and Gavin Nixon. 41 Social 4 Performance

The next generation Learning on the job Health and safety In 2008-2009 we employed another To build organisational capability, Our Integral Energy Health and 75 apprentices – 45 in the system we recognised that we needed Safety Policy Statement commits electrician trade (including for the to improve access to employee us to providing a safe workplace first time 15 transmission electricians) development programs. To this and network for our employees and 30 in the distribution powerline end, we introduced an individual and the public. Safety excellence trade. These apprentices were the development planning process and is a leading organisational value. first group to start their training at coaching for managers. More than We integrate safety policies and our new Hoxton Park training centre. 200 senior staff members have procedures into all our business and See page 46. now been coached. The plans give management processes. individuals specific, measurable Among recruits this year were Our commitment is to zero incidents, development goals. The information the first graduates of the adult injuries and occupational illnesses. will also help us to analyse apprenticeship support program. This is supported by a set of safety organisational development needs This program, run for the first time principles: making safety our first and plan for succession. in 2008, is designed to help existing priority, a belief that all incidents staff transition to an apprenticeship. Twenty-eight new and aspiring are preventable and ensuring that It gives them an insight into field-based team leaders attended employees understand that working electrical theory and provides our Leading Hands Leadership safely is a condition of employment, literacy and numeracy support to development program this year. This that we take no shortcuts, do not those who have been away from brings the total number of people accept unsafe behaviour and expect formal studies for some time. who have attended the program to personal accountability for safety 276. It focuses on the people side from everyone. This year’s intake brings the total of managing field work, helping us number of apprentices at Integral Integral Energy’s safety performance ensure field staff and apprentices are Energy to 230. has improved significantly over the effectively coached and mentored. last decade as demonstrated by Our apprenticeships are keenly sought Thirty-nine transmission the graph below. However, current and so attract the best and brightest. technologists attended our in-house performance does not represent Daren McMurray claimed best leadership and business program industry best practice and falls short distribution powerline apprentice in which started in February 2008. of our target of zero incidents. the 2009 Western Sydney Apprentice of the Year program.

Figure 8: Number of lost time incidents Safety excellence is a leading 51 49

48 organisational 43 value. Our 32 32 commitment is 28 26 24 to zero incidents, 19 17 injuries and occupational illnesses. 1998–99 1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09

42 New connections Integral Energy Annual Performance Report 2008–09 Our safety plan encompasses three For the first time, a joint annual inspection and testing of equipment approaches. These are: public awareness safety program for compliance purposes. was developed at an industry level in • Improving safety culture so collaboration with EnergyAustralia. Energy Industry field days all employees willingly take This program will be implemented in responsibility for safe behaviours Energy Industry field days are the coming year. Further information an opportunity for people in the • Integrating safety into our can be found on our website: industry to share knowledge, best business by ensuring safety www.integral.com.au. practice and experiences. They is fundamental in all policies include trade displays, seminars and processes, supported by Workers compensation and competitions between energy clear accountabilities, and Workers compensation claims providers around first aid, hazard systematically assessed lodged during the year increased and risk assessments and fire • Providing safety training, by 40% from an average of 10 management. a month in 2007–08 to 14 a development and education The 2009 field days were hosted month in 2008–09. This reflects to employees, contractors and by EnergyAustralia at Sydney a greater level of reporting. general public workers to maintain Showground, Homebush, attracting Changing attitudes to safety are improvements already underway over 3,000 electricity workers. through established programs. also reflected in our workers compensation statistics, which show Over 50 Integral Energy staff, Public safety awareness a measurable reduction in the total including 30 apprentices, competed cost of claims from $1,413,815 in in 10 competitions. Our teams Integral Energy’s 2008-2009 Public 2007–08 to $1,130,664 in 2008–09, won eight awards in the first aid, Electrical Safety Awareness Plan as a result of earlier and more hazard and risk assessment, cable identifies the key safety issues, effective intervention. jointing, manual handling and fire target markets and communication fighting contests. strategy to be implemented over A new service delivery case the next 12 months to increase management model has enabled Safe Work Awards awareness of safety hazards our team of case managers to associated with electricity. help individuals return to pre-injury Integral Energy entered the 2008 function with early interventions WorkCover NSW SafeWork Awards The plan has been developed in and rehabilitation. Increased and for the first time and was a finalist accordance with the requirements early reporting of claims has also in Category 2 – best solution to an of the Electrical Supply (Safety and seen a significant reduction in the identified workplace health and Network Management) Regulation rehabilitation employees have required. safety issue. Our submission focused 2002. However it extends beyond on our Safety Day program which these requirements to demonstrate Safety training evolved from the incorporation by our commitment to public safety, some transmission work groups Safety excellence has been position us as experts in the safe of mandatory safety checks into supported throughout the year use of electricity and build a positive regular team meetings, to an entire through workplace safety training association for our brand. day dedicated to safety, equipment programs. One example is a tool – testing, health, training and The plan targets: the Incident Cause Analysis Method education for field support – that enables users to conduct a 1. General public safety centre staff. thorough, systematic analysis of 2. General public workers safety an incident and more accurately Protecting the health of our 3. Asset management safety identify its cause. Another tool, workforce 4. Agricultural safety. safety observations, involves staff identifying potential incidents and To protect the health and safety The main messages to be finding and implementing solutions. of employees during the swine flu communicated to target audiences are: outbreak, we established an incident • Look up and live Safety days management team to monitor developments and evaluate impacts, The Safety Day program has • Dial before you dig coordinate any necessary action and provided Integral Energy with support the NSW Government’s • Safety in and around the home a great opportunity to grow plan. As a precaution, employees – specifically electric shocks from and reinforce our safety culture. were given regular updates taps/appliances Presentations by staff and external promoting appropriate personal providers are delivered at all field • Vandalism and unauthorised entry hygiene procedures. support centres twice a year. The • Farm safety – look up and live. Safety Day program includes a trade show, operational training and

43 Social 4 Performance

Employee engagement density lipoprotein levels (HDL or today and provides different forms good cholesterol). of support. We have continued Wellness program our partnership with Davidson Integral Energy’s Energise4Life Reward and recognition program Trahaire Corpsych, as our Employee program aims to encourage We reviewed our reward and Assistance Program provider, to employees to make safe, healthy recognition program ‘Leading Lights give employees and their families lifestyle choices through wellness Rewards’ and devolved decision- professional counselling on general initiatives, education and self-help making from General Managers to lifestyle management and issues opportunities. Branch Managers. As a result the that impact on work. Family friendly policies include carers’ leave, paid Phase One was designed to provide turnaround time from nomination to maternity and paternity leave and a platform for change and support acknowledgement and reward has study assistance. healthy choices. Activities during been significantly improved. February-June 2009 included offsite The Leading Lights Rewards program Our fully accredited childcare centre skin cancer checks (attended by seeks to formally recognise and at our Huntingwood office has been 446 employees), onsite personal acknowledge employees who strive in operation for 15 years and caters health checks (1,214 employees) to achieve outstanding results by for up to 39 children a day, aged and personalised health and exerting extra effort and engaging from six weeks to five years, who lifestyle questionnaires, completed in work that contributes significantly attend in a full-time or part-time by 881 employees. to business success. Over the year capacity. All enrolled are children of Integral Energy employees. Set against Australian norms, data 151 employees were nominated for collected indicates that 25% of rewards and 109 received a branch Integral Energy’s employee employees are categorised at high level reward (gift vouchers to the engagement survey results are risk of developing health issues. value of $100 for an individual or $50 discussed on page 39. The survey The main contributing factors are for a team member). provided valuable information on excess body weight, poor nutritional the drivers of employee engagement balance, lack of regular physical Staff support which has been used to help activity, poor stress management Integral Energy is conscious of develop the Human Resource and below normal levels of high the challenges facing employees Strategic Plan.

The focus on safety was extended to encouragement and support for employees to make safe, healthy lifestyle choices through the launch of Energise4Life, Integral Energy’s wellness program. Champions of the program from left, Joel Manning, Gayle Wilson, Amanda Azzopardi, Tracey Simmons and Michael Johansen.

44 New connections Integral Energy Annual Performance Report 2008–09 EEO (statistics) Table 9: Trends in the representation of equal employment opportunity groups (% of total staff, excluding casual staff)

Benchmark Representation or targeta 2004–05 2005–06 2006–07 2007–08 2008–09

Women 50 22 22 22 22 21

Aboriginal people & Torres Strait Islanders 2 0.9 1 0.9 1 0.9 People whose language first spoken as a child was not English 20 7 8 8 8 8

People with a disability 12 5 5 4 4 4 People with a disability requiring work-related adjustment 7 0.6 0.5 0.5 0.3 0.3

Note: Staff numbers are as at 30 June a Set by NSW Government

Table 10: Trends in the distribution of equal employment opportunity groups (Distribution Index)

Distribution Index Benchmark 2004–05 2005–06 2006–07 2007–08 2008–09

Women 100 97 98 100 103 105

Aboriginal people & Torres Strait Islanders 100 91 96 96 97 100 People whose language first spoken as a child was not English 100 109 110 112 115 116

People with a disability 100 96 97 99 101 103 People with a disability requiring work-related adjustment 100 32 n/aa n/aa n/aa n/a

Note: A Distribution Index of 100 indicates that the centre of the distribution of the EEO group across salary levels is equivalent to that of other staff. Values less than 100 mean that the EEO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency, the lower the index will be. In some cases the index may be more than 100, indicating that the EEO group is less concentrated at lower salary levels. a The Distribution index is not calculated where the EEO group or non-EEO group numbers are less than 20.

Employee relations the NSW Government’s Wages The new award outlines the On 24 December 2008 the Integral Policy. It also establishes the obligations we and our employees Energy Enterprise Agreement expired. consultation processes needed to have to provide customers with After 12 months of negotiations, the achieve targeted savings totalling a high standard of service in the new Integral Energy Award 2008 $7.5 million in 2009–10 that are most efficient way through more was certified on 30 June 2009. The important to our customers and cooperative work arrangements, two-year award provides for wage required under the policy. improvements in competitiveness, efficiency, flexibility and productivity. increases totalling 7% plus 2% in Another award outcome is a new employer-sponsored superannuation. and stronger safety standard In the past year total hours lost due The award represents the first established through policies around to industrial action were 114 hours negotiation between Integral occupational health and safety, and 56 minutes. Energy and the unions under fatigue management and drug and alcohol testing.

45 Social 4 Performance Case study Hoxton Park centre training the next generation of power workers

When Integral Energy’s Apprentices have easy access to the “The Hoxton Park centre will equip $14.3 million state-of-the-art nearby Hoxton Park field support electrical workers with the skills to Technical Training Centre opened centre and Miller TAFE, giving them think safely, work safely and deliver at Hoxton Park in Sydney’s west in additional opportunities to apply reliable electricity to our customers,” March 2009, it represented a major classroom learnings in an on-the-job says Michael McLeod. commitment to developing the next situation, and to learn from those in “Nowhere is the need for committed generation of New South Wales the field. and hard-working young people electricity workers. greater than in the electricity sector, Energy-efficient design Even more importantly it provided and this will give them the skills graphic evidence of Integral Energy’s The building itself incorporates they need for life-long employment. determination to invest in the safety energy and water-efficient design, It will also give them jobs close of its people. with a 180,000-litre tank to store to home in a hands-on training rain water for use in bathrooms and environment to complement “Safety is our number-one priority gardens and sensor-controlled air their TAFE studies – preparing in delivering an efficient, reliable conditioning and lighting. them for a rewarding career supply of electricity to customers,” at Integral Energy.” explains Chief Executive Officer The opening by Chairman Michael Vince Graham. “This facility will McLeod coincided with a formal help our technical training group welcome for 75 apprentices to reinforce the importance of who joined the organisation this safety to all who enter its doors year, taking the total number of while delivering up-to-date apprentices to 230. Many are fresh training techniques.” out of school though some signed up for the program to change their Over the next five years the Hoxton career direction and learn new skills. Park centre will train more than 300 (One member of the 2009 class is new apprentices while delivering 47 years old.) training in technical skills to many experienced staff as well.

Simulated substation What makes this centre special? Among other features it showcases a simulated substation with electrical boards and switch gear as well as 30 outdoor electrical poles that can be safely energised to give apprentices an understanding of working on live equipment. Covered all-weather cable jointing pits allow trainers to simulate work in underground ducts, while four poles are in a covered area with a high-level balcony integrated into the building to allow trainers to instruct on working safely at heights. There are four workshops and seven lecture rooms with interactive visual teaching systems. There was a big turn-out at the official opening of the state-of-the-art Hoxton Park technical training centre in 2009. Pictured at the event are Chairman Michael McLeod, Board Members Paul Sinclair and John Fahey, Chief Executive Officer Vince Graham and former Chief Executive Officer Richard Powis with the first-year apprentices. 46 New connections Integral Energy Annual Performance Report 2008–09 Connecting with In NSW and Queensland we Managing hardship received 292 and 209 compliments We continued to work with customers respectively, generally about staff New South Wales customers in in the field and in our Western financial difficulties and by doing Quick responses, Sydney, Wollongong and Brisbane so reduced our disconnection rates satisfied customers call centres. by 27% compared with last year. Our customer interaction centres at The Energy and Water Ombudsman This followed a 33% reduction in Huntingwood and Coniston manage NSW and the Energy Ombudsman the previous financial year. Our retail and network customer calls. QLD provide independent advice to disconnection rates represent 0.35% This year our centre staff took resolve customers’ concerns. During of small retail customers. 1,054,862 inbound calls. The the year our customer care group Our hardship program, INpower, average call answer time was 48 managed 682 matters forwarded by works with NSW and Queensland seconds for retail-related calls and the New South Wales ombudsman customers in longer-term financial 20 seconds for network contacts. and 359 matters forwarded by the hardship by offering them In Queensland, call centre staff Queensland ombudsman. affordable payment plans and took 175,484 calls with an average individual case management. answer time of 53 seconds. Customer consultative The program offered 6,421 new The outage management system committee customers long-term payment plans implemented last year continues to Integral Energy’s customer during the year and by year end benefit the centres by allowing them consultative committee comprises 4,379 customers were enrolled. to manage major network outage important stakeholder groups: Integral Energy also provided situations and ensure customers business customers, general customers with $26.1 million in are well informed and their consumers, senior citizens, rebates and payment assistance expectations managed. community organisations and under the Pensioner Rebates multicultural groups. It provides The Customer Satisfaction Index for Scheme and the Energy Accounts us with valuable information and the year showed 83% of customers Payment Assistance Scheme, a insights into issues that impact were ‘satisfied or very satisfied’ with 12.7% increase over the previous customers and the the service they received. year. The New South Wales wider community. Government reimburses this cost. Customer issues The committee’s work is jointly We received 16,242 comments, determined at the beginning compliments and complaints, an of each calendar year and increase of 11% over last year. documented in an annual work Engaging The increase primarily related to plan. In 2008–2009, it contributed comments, particularly in the area to important discussions including the community of energy audits, which were up by our capital program, our greenhouse 20%, and more complaints from action plan, Blacktown Solar City and other Queensland. Seventy-one percent and smart metering, the 2009 of complaints received across New network determination submission stakeholders in South Wales and Queensland were and pricing and customer hardship resolved within 10 days. and disconnections. open, honest In NSW, the top issues were billing To help develop the committee’s and marketing while in Queensland understanding of the industry dialogue is they were predominantly marketing and support its work, we make related. Most billing-related available senior managers and critical to the complaints were from customers industry experts at various success of disputing bills or complaining about meetings and organise an annual high consumption. In response, our field trip. In September 2008 the Integral Energy’s customer care group conducted committee travelled to Narellan 1,128 home energy audits and 163 for a field support centre Safety operations. phone audits. These included advice Day. It also toured the new for customers experiencing financial $64 million Springhill transmission hardship on how to reduce their zone substation. electricity usage.

47 Social 4 Performance Connecting with in 1961. Apart from local media, We held our inaugural family we briefed the nearby school, day at the centre in early 2009, communities Member of Parliament, council, attended by 600 people. A number local environment group and wrote of activities were scheduled Integral Energy has a complex to residents. throughout the day for people of all and diverse stakeholder base, ages to explore and find out more including government, regulators, Parramatta West zone substation about Australian history. Family shareholders, customers, employees days give staff and their families a and suppliers. In June 2009 Integral Energy hosted a public open day at 15 Macquarie unique opportunity to interact with We conduct an independent survey Street, the site of the new colleagues in an informal setting of critical stakeholders every two Parramatta West zone substation. and, importantly, see first-hand years to identify issues of most Archaeological excavations at this the benefits of Integral Energy’s concern and to assist in identifying site are uncovering evidence of community support. reputational risks. This survey helps Aboriginal and colonial occupation to prioritise stakeholder engagement before it is redeveloped. Helping cities meet energy needs programs. In 2008–09, we focused Integral Energy was the principal our efforts on those stakeholders Community engagement plans partner and the exclusive energy impacted by Integral Energy’s Integral Energy developed partner of the Metropolis Congress $4.2 billion capital and operating and implemented community 2008, held on 22-25 October 2008 program. These stakeholders engagement plans for Wetherill at the Sydney Convention and included local media, regional Park, Holroyd, Windsor, Guildford, Exhibition Centre. chambers of commerce, state and Kemps Creek substations and local government representatives, Metropolis is an association Cheriton Avenue, Blaxland and Oran regulators, community interest comprising 100 cities around the Park line works. groups and residents. world, including Sydney, each with populations greater than one million Community partnerships Public consultation on people. The congress is held every key projects Integral Energy builds strong, three years in a different city. valuable partnerships with local Over 800 delegates from some Engaging the community and communities by engaging with of the world’s biggest cities other stakeholders in open, honest and investing in them through along with local and global dialogue is critical to the success sponsorship initiatives. organisations from a range of of Integral Energy’s operations. industry sectors attended. To this end, when planning major In 2008–09 we undertook a review capital works we undertake of our sponsorship framework to Integral Energy hosted the comprehensive stakeholder impact ensure it reflected our obligations as energy workshop which centres assessments. In 2008–09 we a state-owned corporation and was on best-practice case studies engaged with local communities on aligned to our revised corporate plan. showcasing how cities can the following projects: sustainably meet basic energy As a result of this review, a needs from diminishing resources. community partnership framework Liverpool transmission substation was developed which comprises and 132kV line Supporting visual arts students new criteria across six categories To inform the local community – health and safety, community, Integral Energy has sponsored the about the new Liverpool youth and education, environmental NSW Department of Education transmission substation and responsibility, business excellence and Training’s ARTEXPRESS for associated line works, we briefed and regional investment, and twelve years. ARTEXPRESS is a local parliamentary representatives, innovation and technology. popular annual exhibition with council and media and delivered a high public profile featuring more than 300 newsletters to local Highlights during 2008–09 included: outstanding works selected from residents and businesses. thousands of pieces submitted by Discovering history with NSW Higher School Certificate visual Doonside zone substation Integral Energy families arts students. For the first time, a Integral Energy is investing $55 Integral Energy has been a principal new digital art exhibition, on display million to provide a safe and reliable sponsor of the Powerhouse at the Wollongong City Gallery, electricity supply to the residents Discovery Centre at Castle Hill since was developed: ARTEXPRESS 4D. and businesses of Doonside. We 2006. The centre offers public It featured works in video, animation plan to establish a new indoor access to a variety of items that have and documented expressive forms by Doonside zone substation to never or rarely been exhibited by the 21 students from across the state. replace the existing substation built Powerhouse Museum.

48 New connections Integral Energy Annual Performance Report 2008–09 Promoting industry research Bushfire appeal Integral Energy Staff Corporate into power quality To support families and communities Volunteering event To support and promote industry affected by the Victorian bushfires Fifty employees along with research into power quality and Integral Energy set up a pre-tax staff from the Nepean Youth its impact on customers, the payroll deduction for staff to make Accommodation Service (NYAS) Integral Energy Power Quality and a one-off donation to The Salvation took part in the inaugural I care! Reliability Centre at the University Army’s Victoria Bushfire Relief Appeal. staff volunteering event in of Wollongong hosted the 13th (The Salvation Army is one of our November 2008. NYAS helps at-risk IEEE International Conference on workplace giving charity partners.) youth by providing safe, secure Harmonics and Quality of Power. accommodation options, restoring Through the generosity of 726 family relationships and promoting A non-profit organisation, IEEE is employees and an agreed dollar- self reliance. The volunteering the world’s leading professional for-dollar corporate matching fund, event involved a make-over for two association for the advancement $148,226, was donated to the homes: Penrith Youth Refuge and of technology. The IEEE name Salvos’ appeal. Dulkara House in Emu Plains. was originally an acronym for the Institute of Electrical and Electronics Learn to stop burns CD – The Engineers. Today, its scope of Children’s Hospital at Westmead Future challenges interest has expanded into many Integral Energy has been a long-term related fields. supporter of The Children’s Hospital • Reduce employee lost-time injuries There is a recognised shortage at Westmead and was the inaugural and reportable electrical incidents of qualified power engineers. founder of its Kids Health Unit. by 20% on last year Integral Energy’s involvement in the Donations through the program • Implement initiatives to conference is one of a number of support the work of Kids Health, provide further assistance to initiatives to promote the education which promotes and protects customers who are experiencing of trained engineers for our industry. the health and safety of children financial hardship Further information on Integral and young people in New South • Improve community engagement Energy’s community partnership Wales. Most recently funds from programs program can be found on the our workplace giving program website www.integral.com.au. were used to fund its ‘Learn to • Deliver employee savings to Stop Burns’ program, an interactive fund employee wage increases Investment in the community project for students and parents. in accordance with the NSW Government’s wages policy In 2009 Integral Energy was Workplace giving presented with The Children’s • Develop a performance Since its launch in July 2004, Hospital at Westmead Benefactors management culture our workplace giving program Award, one of the highest levels • Prepare the next generation Integral’s concerned and responsive of recognition the hospital has to of electrical workers through employees (I care!), has donated thank supporters. more than $800,000 to 11 staff- excellent induction and selected charities. Staff donations training programs. are matched dollar–for-dollar by Integral Energy up to a total of $100,000 per year. Currently 9% of our staff participate in I care!

A fire-fighting team at an energy industry field day at the Sydney Showground. The field days provide an opportunity for people in the industry to share knowledge, best practice and experiences.

49 Corporate 5 Governance

50 New connections Integral Energy Annual Performance Report 2008–09 Governance and operational structure

NSW Parliament

Shareholding Ministers Portfolio Minister

Board of Directors Chairman: Michael McLeod

Directors: Terry Downing (Deputy Chairman), John Fahey, Paul Sinclair, Penny Le Couteur, Vince Graham

Audit and Business Risk Board Committee Chief Executive Officer

Vince Graham Human Resources and Remuneration Board Committee

Retail Risk Board Committee

Transaction Approval Committee

Group Group Group General General Manager General Manager Manager Corporate General Manager Chief Financial Company Network Corporate Services Development Retail Officer Secretary

Rod Howard Liz Schenke Daniel Lucas Bruce Rowley Joseph Pizzinga Irina White

Head of Audit & Risk

Integrated suite of ethical principles

Board Code of Conduct Code of Ethics Statement of Business Ethics

Outlines the unique obligations Sets out the principles and values Outlines Integral Energy’s expectations and responsibilities of the Board by which employees of of private sector service providers in and expectations as to the conduct Integral Energy are expected to act. conducting business with of Directors. Integral Energy.

51 Corporate 5 Governance Board of Directors

Michael McLeod Terry Downing John Fahey AC FAICD BComm, MMgmt, DipL DipBusStudies (Insurance), FAICD Chairman Non-Executive Director Non-Executive Director Deputy Chairman Non-Executive Director John Fahey was appointed a non- Michael McLeod was appointed a executive director in March 2002. A non-executive director in March 2000, Terry Downing was appointed former Premier of NSW and member and Chairman in March 2002. a non-executive director in of the NSW Parliament for 12 years Michael was previously the Chief March 2000, and Deputy Chairman (1984–96), John was elected to Executive Officer of Australian Health in March 2002. Terry is a Certified the Commonwealth Parliament in Management, Australia’s seventh Practising Accountant, a Fellow of 1996, serving as Minister for Finance largest private health insurance the Australian Institute of Company and Administration from 1996 until company. He was previously Chief Directors and holds a number of 2001. He brings a commercial focus Executive Officer of Australia’s largest non-executive director roles across to the Board and a close insight into medical indemnity insurance company a range of organisations. Previously, the needs and interests of Integral and the Chief Executive Officer of an Terry held a number of senior Energy’s customers gained from his Australian-owned risk management executive positions in the financial experience representing residents consultancy with operations in five services sector. in our franchise area during his countries. He is a Fellow of the Term (including re-appointments): state and federal parliamentary Australian Institute of Company 1 March 2000 – 31 August 2010 career. John holds the position of Directors, Director of the Australian chairman and director on a number Health Insurance Association, Member • Deputy Chairman of the Board of commercial boards as well as of the Commerce Faculty Advisory from 1 March 2002 being an advisor in the financial Board, University of Wollongong, a • Chair, Human Resources and services sector. In 2007, John was past director of the National Insurance Remuneration Board Committee elected President of the World Anti- Brokers Association of Australia Doping Agency. John was made a and a founding Board member • Member, Retail Risk Companion of the Order of Australia of the Medical Indemnity Insurers Board Committee in January 2002 and awarded the Association of Australia. • Member, Audit and Business Risk Federation Medal in 2003. Term (including re-appointments): Board Committee Term (including re-appointments): 1 March 2000 – 31 August 2010 1 March 2002 – 29 February 2012 • Chairman of the Board from • Chair, Audit and Business Risk 1 March 2002 Board Committee • Member, Audit and Business Risk • Re-appointed 1 March 2009 Board Committee • Member, Retail Risk Board Committee • Invitee, Human Resources and Remuneration Board Committee

52 New connections Integral Energy Annual Performance Report 2008–09 Penny Le Couteur Paul Sinclair Vince Graham BSc (Hon), AICD DipIR, DipHRM BE(Civil), Grad Dip Mgmt, FAICD

Non-Executive Director Non-Executive Director Chief Executive Officer and Unions NSW Nominee Executive Director Penny Le Couteur was appointed a non-executive director in May 2008. Paul Sinclair was appointed a non- Vince Graham was appointed Chief Penny has over ten years’ experience executive director in January 1999. Executive Officer and Executive as a non-executive director on a Paul is the Assistant Secretary of Director on 7 April 2008 for a term range of boards and her positions the Electrical Trades Union (NSW of three years. Vince’s biographical currently include Chair, Employers Branch) and is also a director details are given in the Executive Mutual Limited; Director, WorkCover on the boards of the National group section on page 58. Tasmania, and Uniting Financial Electricity Superannuation Scheme, • Member, Human Resources and Services; and a member of the Fair Electrotech Skill Centre, and Electro Remuneration Board Committee Trading Advisory Council. Previously Group Training. Paul is the Unions Penny has held a number of senior NSW nominee to the TAFE NSW • Member, Retail Risk executive positions in the financial Consultation Committee. Board Committee services, insurance and banking Term (including re-appointments): • Member, Transaction sectors as well as various positions 1 January 1999 – 15 October 2010 Approval Committee with the Commonwealth Public Service. She is a member of the • Member, Audit and Business Risk • Invitee, Audit and Business Australian Institute of Company Board Committee Risk Board Committee Directors and Women Chiefs of • Member, Human Resources and Enterprise International. Remuneration Board Committee Term: 14 May 2008 – 30 May 2011 • Reappointed 13 October 2008 • Chair, Retail Risk Board Committee • Member, Human Resources and Remuneration Board Committee

53 Corporate 5 Governance Corporate Role and responsibilities as a minimum, every six months of the Board to ensure the information held governance The Board of Directors operates by the organisation is up to date. The complete register is provided Integral Energy is a statutory at all times in accordance with to the full Board every six months state-owned corporation, its charter which is designed to for review. This was undertaken in established under the Energy complement the Constitution 2008–09. Services Corporations Act 1995 of Integral Energy Australia, the (NSW) and the State Owned Director’s Manual, and the Board’s Further to the declarations Corporations Act 1989 (NSW). Code of Conduct. contained in the Register of It is governed, principally, by the The Board is responsible for the Disclosures, directors are required two statutes mentioned and its corporate governance of Integral to declare any real or perceived constitution. Integral Energy’s Board Energy including setting the conflicts of interest in relation to and Executive believe that good strategic direction, establishing the matters before the Board governance is a critical prerequisite performance targets as set out in or Board committee that would for a high-performance organisation the Statement of Corporate Intent, interfere with their exercise of with a sustainable future and share and monitoring the achievement independent judgment as a director. a commitment to high standards of those targets. In carrying out Any such declarations will be added of business integrity, ethics and its responsibilities, the Board to the register. professionalism across all activities. undertakes to serve the interests of Non-executive directors are entitled Our Code of Ethics sets out the the voting shareholders as well as its to accept positions with other expectations for the staff behaviour employees, suppliers and customers companies. However, directors must that is fundamental to our business and the broader community, observe their duties as set out in success and encourages a culture of honestly, fairly, diligently and in the Energy Services Corporations responsibility and accountability that accordance with all applicable laws. Act 1995, the State Owned promotes ethical and responsible Corporations Act 1989, the Board decision making. The Board delegates to the Chief Executive Officer responsibility for Code of Conduct, the Code of Ethics Good governance ensures the implementing the strategic direction and general law, in accepting any delivery of outcomes sought by our and for managing the day-to-day position with another company and shareholders, supports our people operations of Integral Energy. in particular, those duties relating to and business operations and ensures conflicts of interest. sound ethical, financial and risk Board Code of Conduct management practices and effective Board Charter The Board adopts a ‘lead-by- compliance and auditing programs. example’ approach to promoting the The Board Charter has been Integral Energy has complied with practice of high ethical standards, adopted by the Board of Directors the NSW Treasury Guidelines for including compliance with the to assist the Board and its Boards of Government businesses directors’ own Code of Conduct as committees in the exercise of which provide a platform for good well as Integral Energy’s Code of their responsibilities. The Board corporate governance practices. Ethics. The Board Code of Conduct reviews its charter on an annual is provided on page 105. basis and such other time as Shareholders considered necessary. The Board has incorporated the requirements The Board is accountable to Conflicts of interest of the NSW Treasury Guidelines for the voting shareholders for the In order to ensure their independent Boards of Government Businesses in performance of Integral Energy. The status, all directors of Integral its charter. voting shareholders each hold one Energy are subject to the statutory share carrying the same rights, for duties and prohibitions regarding Membership of the Board and on behalf of the New South conflicts of interest. Integral Energy Wales Government. relies on the integrity of the Board In accordance with the Energy of Directors to identify and disclose Services Corporations Act There are two voting shareholders at any issues which may give rise to a 1995 (NSW), the State Owned any one time each holding the same conflict of interest. The Company Corporations Act 1989 (NSW), and number of shares and the same Secretary maintains the Register the Constitution of Integral Energy rights. The shareholders hold their of Disclosures. Australia, the Board of Integral shares on behalf of the state. As Energy consists of: at 30 June 2009, the shareholders Each director is required to complete were the Treasurer and the Minister a Director’s Disclosure of Interest • The Chief Executive Officer for Finance. The Portfolio Minister is form on appointment to the (Executive Director) the Minister for Energy. Board and to review that form, • One Unions NSW nominee

54 New connections Integral Energy Annual Performance Report 2008–09 • At least two and not more than • Two persons nominated by the See page 101 for further details five other directors. Portfolio Minister about remuneration. • Two persons nominated by Appointment and office of Board meetings Unions NSW. Board members Board meetings will normally be All members of Integral Energy’s The Unions NSW nominee must be held 11 times per year at venues, Board of Directors, with the selected by the committee from a dates and times agreed in advance. exception of the Chief Executive panel of three persons nominated Additional meetings may be Officer, are appointed by the voting by Unions NSW. scheduled as required. Urgent shareholders for terms of up to The voting shareholders may matters requiring the approval five years. Appointments may be appoint the other directors at of the Board that arise between renewed by the voting shareholders. their discretion. scheduled meetings can be dealt A vacancy in the office of director with by way of circulating resolution (with the exception of the Chief Each non-executive director’s or by the Transaction Approval Executive Officer and Unions NSW remuneration is determined by the Committee in accordance with its nominee) is filled by a nominee of voting shareholders and is paid out Charter. The table below provides the voting shareholders. of Integral Energy’s funds. The Chief details of director attendance at Executive Officer is not entitled to those meetings. The voting shareholders are to additional remuneration for being appoint the Unions NSW nominee an executive director. on the recommendation of a selection committee comprising:

Table 11: Directors’ meetings, 2008–09

Integral Audit and Human Retail Risk Transaction Energy Business Resources and Board Approval Australia Risk Board Remuneration Committeeb Committee board of Committee Board directors Committee

Eligiblea Meetings Eligiblea Meetings Eligiblea Meetings Eligiblea Meetings Eligiblea Meetings Name attended attended attended attended attended

Michael McLeod 12 12 4 4 6 6 9 9 2 2

Terry Downing 12 12 4 4 6 6 9 8 1 1

John Fahey 12 12 4 4 3 3 – – – –

Penny Le Couteur 12 12 2 2 6 6 9 8 1 1

Paul Sinclair 12 11c 4 4c 6 6 – – – –

Vince Graham 12 12 4 4 6 6 9 6 2 2

a Reflects the number of meetings the directors were eligible to attend during the director’s term of office in 2008–09. b The July and August 2008 meetings of the Retail Risk Board Committee were not held due to Retail separation. c Paul Sinclair attended the Board and Audit and Business Risk Board Committee meetings held in September and October 2008 as an invitee pending his reappointment as a director in October 2008.

55 Corporate 5 Governance

Board performance Director induction The Board and evaluation and education undertakes a The Board undertakes a review Board members are assisted by of its performance annually, with Integral Energy to fulfil their roles and review of its particular attention being paid responsibilities in ways which include: to the extent to which it has met • The provision of induction its responsibilities in terms of its performance materials for new directors in charter. The Board will approve a order to gain an understanding framework and process to assess annually, with of Integral Energy’s financial, the effectiveness of the Board, its strategic, operational and risk committees and directors, with a particular position, their rights, duties view to ensuring that performance and responsibilities, the roles accords with best practice. attention being and responsibility of senior The Board undertook a self- management and the role of paid to the assessment of its performance Board committees in October 2008 with the findings • Professional development extent to which of the review of performance, opportunities to update and outcomes, discussed at the and enhance their skills and it has met its Board planning workshop in knowledge. In 2008–09, a November 2008. responsibilities number of sessions were provided to the Board on a range of issues Board planning workshops in terms of its concerning key developments in The Board meets at least once per Integral Energy and in the industry charter. year without senior management and environment within which present to discuss Board and Integral Energy operates management performance, as well as strategic themes and the • The opportunity to visit Integral corporate planning process. The Energy’s facilities and meet with Board participated in a planning management to gain a better workshop in November 2008 and understanding of business a combined Board and Executive operations. In 2008–09, the workshop in June 2009. Board held three off-site meetings and conducted site inspections.

Access to management The Board has access to the Chief Executive Officer and/or the Executive as needed. The Board encourages, where appropriate, the involvement of senior management or other employees who can provide expertise on and insight into the matters being considered by the Board. Directors regularly contact the Company Secretary prior to Board meetings regarding any matters that require clarification.

Access to independent professional advice The Board may retain such outside counsel, experts and other advisors, The Board visiting the Springhill Transmission Zone Substation. at the expense of Integral Energy, as it determines appropriate to assist it in the performance of its functions, subject to the prior approval of the Chairman. No such advice was sought in 2008–09.

56 New connections Integral Energy Annual Performance Report 2008–09 Board committees Audit and Business Risk Transaction Approval Board Committee Committee The role of Integral Energy’s Board is to provide overall strategic guidance The Audit and Business Risk Board The Transaction Approval for the organisation and effective Committee meets four times per year Committee has a rotating oversight of its management. In and ensures that audit and business membership consisting of at least undertaking this role, the Board may risk matters, including compliance, two and no more than three non- establish committees to assist it and are dealt with in an independent executive directors and includes may delegate responsibility to those manner. The Head of Audit and the Chief Executive Officer or committees to consider certain Risk retains a direct reporting line to his delegate. The committee is issues in further detail and to report the Audit and Business Risk Board authorised by the Board to approve back to and advise the Board. Committee and the Chief Executive urgent business expenditure or Officer for audit matters. The revenue up to $10 million that might The Board committees in 2008–09 committee’s responsibilities cover be required between meetings were as follows: matters relating to the financial of the Board and that is outside • Audit and Business Risk affairs and business risks of Integral the standing delegations to the Board Committee Energy, internal and external audits, Chief Executive Officer under risk management, compliance and Board policy. The Board may also • Human Resources and fraud prevention. In addition, the authorise the Transaction Approval Remuneration Board Committee committee examines any other Committee to approve urgent • Retail Risk Board Committee matters referred to it by the Board. business expenditure or revenue above $10 million. In 2008–09 the • Transaction Approval Committee. Human Resources and committee met on two occasions. The Board may establish other Remuneration Board committees from time to time Committee Senior management to consider matters of special The Human Resources and committees importance. No other committees Remuneration Board Committee Senior management committees were established in 2008–09. meets, as a minimum, four times per integrate organisational initiatives year, and reviews the development, and provide specialist advice. The The duties and responsibilities of the implementation and effectiveness committees operate according Board committees are more fully set of Board policy in relation to human to charters set out by the Chief out in their charters (approved by resources, OHS and safety. The Executive Officer. They include: the the Board and reviewed annually) committee considers remuneration Executive Occupational Health and and include matters relevant to policies, principles and guidelines Safety Committee, the Contract the composition, responsibilities, applicable to contract staff Review Committee, the Executive authorities, reporting, review and (including senior executives), and Environmental Steering Committee, such other matters as the Board award-based staff. In addition, the the Enterprise Information considers appropriate. As part of Committee examines any other Technology Committee, the an annual process of review, each matters referred to it by the Board. Capital Governance Committee, Board committee reviewed its the Executive Audit, Risk and charter in 2008–09. Retail Risk Board Committee Compliance Committee, the The committees meet at least The Retail Risk Board Committee Business Risk and Compliance four times a year, except for the meets monthly, with a minimum of Committee and the Executive Transaction Approval Committee, 11 meetings per year. It: Network Asset Management which meets when required. These Committee. committees assist in the good • Reviews the financial performance The Financial Services Governance governance of Integral Energy by of Retail and recommends policy Committee operates under a charter allowing for detailed consideration and strategy changes to the Board approved by the Board with a of major issues, and providing advice • Considers any policy mandate to oversee matters relating to the Board on sensitive matters. All modifications or implications to the organisation’s Australian directors receive a copy of the agenda and monitors compliance financial services licence obligations, and minutes of Board committee and Anti-Money Laundering meetings, as well as copies of papers • Reviews a summary of previous and Counter Terrorism Financing for all committee meetings. month’s trades and sales as they occurred, notes the future month’s obligations. trades and sales strategy and reviews the monthly report from the Financial Services Governance Committee. In addition, the committee examines any other matters referred to it by the Board.

57 Corporate 5 Governance

Executive Group

Vince Graham Liz Schenke Daniel Lucas BE (Civil), Grad Dip Management, B.Ed, Grad.Dip.Com BBus, CA FAICD Liz Schenke was appointed Group Daniel Lucas was appointed Group Vince Graham was appointed General Manager Corporate Services General Manager Corporate Chief Executive Officer of Integral in June 2009. Before joining Integral Development in March 2009. Energy in April 2008. Prior to joining Energy, Liz held the roles of Group Prior to this role, Daniel held the Integral Energy, Vince has had General Manager Human Resources position of Chief Financial Officer over 20 years’ experience in chief and Human Resources Executive from December 2006. Daniel is a executive roles in large organisations Pacific National with Asciano Chartered Accountant with more both at a federal and state level Limited. Prior to joining Asciano, than 25 years’ experience as a across a number of industries, Liz held senior line management, finance executive with a number including the Grain Handling marketing and human resources of major organisations, including Authority, National Rail Corporation roles within Citigroup Australia. Westpac, Deloitte, Foster’s Brewing and RailCorp. The balance of Liz’s professional Group, Unilever, National Foods and experience has been in local and Australian Pharmaceutical Industries. Vince has extensive experience in global organisations and extends He has worked in Australia and developing and leading reform across the education, retail, overseas and his senior management and in the management of major transport, logistics and financial career has covered a broad range of infrastructure maintenance and services industries. areas such as financial management, capital programs. Consistent IT, supply chain, investor relations, elements of these reform programs strategy development and mergers have been improving safety and and acquisitions. risk management, customer service quality and organisation productivity, targeted capital investment, cultural change and work practice reform.

58 New connections Integral Energy Annual Performance Report 2008–09 integrity and long-term value. Rod’s Integral Energy’s Executive team previous responsibilities at Integral was restructured following Board Energy have been diverse and have approval of an organisation included general management restructure in February 2009 which roles in Network Development was progressively implemented and Control, Capital Solutions, Full through to 1 July 2009. Retail Contestability, Corporate Changes included: Development, Company Secretary, • Joseph Pizzinga was appointed Business Development and Integral Chief Financial Officer in February Energy Contracting. He is also 2009, after acting in this position Deputy Chairperson of Energy and for 12 months Water Ombudsman NSW (EWON). • Liz Schenke was appointed Group Irina White General Manager Corporate DipT, GradDipCommMan, Services in June 2009 MAdmin, MAICD • Alan Flett concluded Irina White was appointed Company employment as General Manager Secretary in February 2006. Before Network Asset Operations on joining Integral Energy, Irina was 31 March 2009. From this period employed in a number of the state’s until 30 June 2009, Scott Ryan, largest agencies. She has served as Manager Northern Region acted Company Secretary to the Boards in this capacity. On 1 July 2009 of Rail Services Australia, Rail the Network was consolidated Infrastructure Corporation, the State into a single division Rail Authority and RailCorp and as General Manager Corporate Services • Karen Waldman concluded in Rail Services Australia and Rail employment as General Manager Infrastructure Corporation. Her past Regulatory and Corporate Affairs experience has also included senior on 6 March 2009 policy and management positions in • Drew Ferguson was the acting the NSW Department of Education General Manager Human Joseph Pizzinga and Training. Resources until 22 June 2009. He BCom, AssocDipAcc, CPA is now General Manager Network Bruce Rowley Joseph Pizzinga was appointed Chief Operations responsible for the day- BBus, AssDipLG Financial Officer in February 2009, to-day operations of the network. after acting in this position for 12 Bruce Rowley was appointed General months. During Joe’s 15-year tenure Manager Retail in September 2008. at Integral Energy, he has held a Bruce’s previous responsibilities number of senior finance positions at Integral Energy have included both in the business operations area General Manager Retail and as a key business adviser and in the Customer Services and General financial control areas responsible Manager Sales and Marketing. Bruce for the overall financial governance also has had wide experience in of a number of key finance a number of senior management functions. Prior to joining Integral roles in marketing, corporate Energy, Joseph worked at a number communication, strategic planning of accounting firms. and customer service. He is a director of the Energy Retailers Association Rod Howard PSM of Australia and is a member of the BE (Hons), MEngSc, BBus, Council of the Energy and Water MBA, GAICD Ombudsman of NSW. Rod Howard was appointed Group General Manager Network in July 2009. Rod is responsible for overall management of the electrical network, including the delivery of the associated capital program to ensure its capacity, sustained

59 Corporate 5 Governance Ethics, risk The Code of Ethics and the Risk management Statement of Business Ethics are Integral Energy is committed to management both available to the public on implementing a risk management and compliance our website. Both documents framework that facilitates the provide information on how to identification and management of Integral Energy’s governance report inappropriate behaviour. In risks that could affect our people, requirements are supported by addition, Integral Energy provides a the community, the environment, strategies that encourage an ethical number of well-publicised methods, our customers, our assets and and values-based culture and a including a confidential ethics line, our financial and legal status. comprehensive risk management, where fraud or corrupt conduct The management of risks is a compliance and assurance systems. can be reported by staff. Integral fundamental component of business Transparent and well-communicated Energy’s website also provides an management. All planning and governance mechanisms like the avenue for the public to report fraud subsequent decisions must take Code of Ethics, risk management or corrupt conduct. account of the factors that may plans and compliance programs During 2008–09, fraud and inhibit the achievement of the exist. Similarly, internal and external organisation’s objectives. audits are important tools for corruption prevention continued to identifying risks and monitoring be a priority across the organisation. Integral Energy’s risk management the organisation’s risk management, The Audit and Business Risk Board methodology utilises the Australian internal control framework and Committee endorsed Integral standard AS/NZS 4360–Risk compliance responsibilities. Energy’s updated Fraud and Management as the basis of its risk A range of senior Executive Corruption Control Plan 2009- management approach. Business committees oversee the effective 2011. Strategically, the plan’s risks were identified and assessed implementation and monitoring direction is to maintain systematic across eight broad risk categories of the organisation-wide risk review of controls, consultation which include safety, network, retail, management and with key stakeholders, and to financial, compliance, reputation, compliance programs. develop and implement revised environment and business strategy. control measures. The Audit and Business Risk Board Committee was Integral Energy maintains a risk Ethics and conduct provided with regular status reports management strategy covering a Integral Energy’s Code of Ethics is against initiatives in the Fraud and three-year period and a business pivotal throughout the organisation Corruption Control Plan. risk plan covering the current in setting out the corporate values financial year. The risk management and principles required by staff A major activity across Integral strategy (2009–2012) focuses on in performing their duties and Energy was the update and strengthening the elements of the responsibilities. Supporting the Code strengthening of the organisation’s risk management framework. The is the Statement of Business Ethics Fraud Risk Register. This involved business risk plan (2009–2010) that outlines our values, business workshops and discussions with provides a summary of the results of principles and behaviours with the business unit representatives the risk assessment process, analysis suppliers and contractors. to identify, assess and validate of key risk indicators and a summary relevant fraud risks. In addition, We developed a new integrated of the treatment action plans that assessment of the relevance of the organisation is working towards. Ethics Communication and ICAC recommendations from recent Engagement Strategy promoting The risk management strategy and inquiries has been undertaken and, business risk plan are reviewed and awareness and understanding of where applicable, incorporated as the organisation’s ethical framework approved by the Audit and Business fraud risks in specific business unit Risk Board Committee. amongst all employees and to registers as well as the development instil in employees a personal of appropriate treatment plans. Middle Office manages the responsibility for acting with monitoring and reporting of integrity at all times. Other initiatives have included the financial risk undertaken daily introduction of the E-Learning Tool by Integral Energy’s trading unit. All new employees attend orientation for educating staff about Integral programs where the importance Financial risk is measured using Energy’s purchasing procedures, various risk metrics generated from of the Code of Ethics and ethical strengthening the Gifts and Benefits behaviour is reinforced by the the Middle Office risk system such Policy to be clearer and more as cash flow at risk, earnings at risk, Chief Executive Officer. In addition, relevant to the operations of the employees receive regular information potential credit exposure and mark organisation, and the provision of to market. on the standards and principles ‘once removed’ requirements for outlined in the Code of Ethics. purchase requisitions and approvals.

60 New connections Integral Energy Annual Performance Report 2008–09 Integral Energy recognises that • Implementation and completion The appointment or termination of we have a responsibility to the of initiatives in the strategic the Head of Audit and Risk must be community we serve to have in compliance program 2008–2010 endorsed by the Audit and Business place a comprehensive incident Risk Board Committee. • Workplace safety and the electricity management plan and business licensing compliance plans In 2008–09, a number of internal continuity plans and to review and audit projects were carried out test those plans regularly. • Implementation of an Internet- across a range of operations and based compliance monitoring and The Audit and Business Risk Board activities in line with the annual reporting system to facilitate the Committee monitors the progress audit plan approved by the Audit rollout of compliance plans into of mitigating actions in place to and Business Risk Board Committee. the business manage the business risks through In addition, a number of special bi-monthly reports. The operational • Development of a program reviews requested by management risk around trading activities is to improve the compliance and the Board were also completed. monitored by monthly reports from knowledge of business risk To encourage continuous Middle Office to the Retail Risk and compliance committee improvement of the internal Board Committee. representatives audit function, an annual client • Awareness, training and satisfaction survey is conducted. Insurance education of employees in their The independent external quality Integral Energy reviews the adequacy legal obligations, including assurance review of the internal of insurance policy coverage and limits privacy, freedom of information, audit function conducted in May during each annual insurance renewal trade practices, occupational 2009 concluded that Internal Audit process and ensures all participating health and safety, ISDAs and anti- at Integral Energy conforms with markets meet acceptable insurer discrimination legislation the standards of the Institute of security requirements. Internal Auditors. • Reviewed and updated the organisation’s trade practices Business continuity External audit management manual, privacy manual and privacy statement The Auditor-General of New Integral Energy is committed to South Wales provides independent being adequately prepared for • Continuous management of external audit services through the incidents to ensure that there the Australian Financial Services Audit Office of New South Wales, is an effective response during Licence compliance obligations and provides no other services to business interruptions and crises. • Maintained corporate Integral Energy. A framework and an incident membership of the Australasian management plan is maintained for Compliance Institute. the mobilisation of resources and processes to manage operational Internal audit The objective of incidents, communicate with stakeholders and instigate actions The Board and the Executive are the internal audit for recovery of business processes. committed to supporting the operation of an objective and function is to In addition, business continuity plans independent internal audit function. and disaster recovery plans for all The Internal Audit charter, which add value to the critical business processes and systems outlines the objectives, roles, are maintained. These plans are responsibilities and standards organisation and regularly reviewed and exercised in of the internal audit function, is line with the annual exercise program. reviewed annually. The objective improve its control of the internal audit function is to Compliance add value to the organisation and environment and Integral Energy is committed to the improve its control environment and development and implementation operations. Internal Audit supports operations. of a fully integrated compliance management in achieving Integral management framework using Energy’s statutory and business Australian Standard AS 3806– objectives by bringing a disciplined 2006: Compliance Programs as approach to evaluating and its foundation. In 2008–09, the improving risk management, control following significant compliance and governance processes. activities were undertaken to build and implement this framework:

61 Management Discussion 6 and Analysis Management strategies and obligations by which Integral Energy’s 2008–09 SCI was the business will operate over the prepared assuming a network-only discussion and next 12 months and following years. structure effective 1 August 2008, analysis In particular, the SCI sets financial on the assumption that Integral targets and clear limits on the Energy’s retail business would be scope of activities the business transitioned by this date. Integral Overview may undertake. Energy’s retail operations did not Our obligations as a state-owned transition and the financial results corporation require Integral Energy Summary are a reflection of business-as- to submit an annual Statement usual activities, including the of Corporate Intent (SCI) to NSW For the 2008–09 financial year, Integral Energy maintained a strong purchase, distribution and sale of Treasury, as financial agent for the electricity, meter data provision and Government. The SCI represents an performance, achieved through continued focus on business maintenance, and the construction agreement with the Government and management of electricity which documents the objectives, fundamentals, appropriate discipline and corporate governance. distribution assets.

Table 12: Financial results

2008–09 2008–09 Variation 2007–08 Result SCI to SCI Result

Earnings before interest, tax, depreciation & amortisation 492.8 454.2 38.6 496.8 (EBITDA) ($m)

Earnings before interest and tax (EBIT) ($m) 355.7 314.8 40.9 367.3

Operating profit before tax ($m) 205.6 151.6 54.0 239.1

Operating profit after tax ($m) 142.2 106.1 36.1 172.4

Dividend ($m) 103.6 74.3 29.3 125.0

Total distribution (Dividend + income tax expense) ($m) 167.1 119.8 47.3 191.7

Return on assets (%) 8.7 7.9 0.8 9.2

Return on equity (%) 14.6 10.9 3.7 14.6

Capital expenditure 442.9 542.7 99.8 373.5

Total revenue and other income increased by $150.3 million, primarily due to an increase in electricity sales and network use of system income driven by tariff increases in line with regulatory allowances.

62 New connections Integral Energy Annual Performance Report 2008–09 Profit results In addition, impairments relating to of discounts/premiums) of Integral Energy’s profit before NSW Greenhouse Gas Abatement $363.9 million primarily due to the tax result was $205.6 million, Certificates and Emission Rights need to fund the capital expenditure exceeding the 2008–09 SCI target (recorded at the lower of cost program. Provisions increased by of $151.6 million. Gross margin and and net realisable value) totalling $83.5 million with the defined other revenue from retail operations $10.5 million, and losses on benefits superannuation fund contributed to the favourable profit derivative financial instruments in moving from an asset of $7.1 million before tax result compared to the the amount of $8.3 million, were to a liability of $61.5 million, and SCI target, together with favourable recorded in the financial statements. employee benefits increasing by $24.8 million. results from network operations and Operating profit after tax was savings in finance costs. $142.2 million, a 17.5% reduction Trade/other payables and derivative Total revenue and other income compared to the 2007–08 result financial liabilities increased by increased by $150.3 million, of $172.4 million, but $36.1 million $104.3 million and $42.4 million primarily due to an increase in or 34.0% favourable to the respectively compared with electricity sales and network use SCI target (with contributions the prior year, in part driven of system income driven by tariff from the retail business a major by a change in accounting for increases in line with regulatory contributor to the favourable result option premiums payable. These allowances. Retail sales volumes compared with the SCI target). Total movements were partly offset by a increased marginally by 2.7% noting distribution, consisting of income decrease in deferred tax liabilities a 5.6% growth in retail customer tax expense and dividends, totalled of $49.3 million driven by the numbers. Network volumes were in $167.1 million and was $47.3 million reduction in the fair value of net line with the prior year with network higher than the SCI target of derivate assets and liabilities and the customer numbers increasing by $119.8 million. defined benefits superannuation less than 1%, a reflection of the fund, and a reduction in the current economic environment. Balance sheet provision for dividend of Expenses from operating activities Total assets increased by $21.4 million. increased by $161.8 million, in line $387 million compared to the Return on equity, calculated as with increased electricity sales and previous year. Contributing factors profit after tax divided by average network use of system income, include an increase of $323.2 million equity, was 14.4%. This result plus additional costs as noted in the written-down value of is consistent with the 2007–08 below. Finance costs increased by property, plant and equipment and outcome, with the reduction in $21.8 million with rate reductions intangible assets, an increase of profit after tax being offset by an offset by increased borrowings to $30.4 million in trade and other increase in average equity. fund the capital program. receivables, an increase in emission rights of $25.1 million, an increase Like many organisations, Integral in cash and cash equivalents of Energy felt the impacts of the global $11.8 million, and an increase financial crisis. Included in the result in inventories of $10.2 million. are increased employee benefit Integral Energy’s This movement was partly offset costs of $15.9 million resulting from by a decrease in the fair value increased headcount and the impact profit before of derivative financial assets of of the decrease in the discount $20.3 million. Return on assets, rate on the employee benefits tax result was calculated as EBIT divided by the actuarial assessment, and land and average asset base, decreased building revaluation decrements $205.6 million, slightly from 9.2% in 2007–08 totalling $10.4 million, A defined to 8.7% at 30 June 2009. EBIT benefits superannuation actuarial exceeding the decreased by 3.2% as outlined loss of $70.9 million was recognised above, whilst average assets directly in equity in accordance with 2008–09 SCI increased by 3.0%. NSW Treasury policy which requires defined benefits superannuation Total liabilities increased by target of actuarial gains and losses to be $514.3 million compared with recognised outside of profit or loss the previous year, driven by an $151.6 million. as opposed to through profit or loss. increase in borrowings (inclusive

63 Management Discussion 6 and Analysis

Cash flows Cash and cash equivalents at the end of the financial year increased by $17.8 million over the prior year.

Cash flow statement summary 2008–09 2007–08 Variance $m $m $m

Net cash provided by/(used in) operating activities 228.4 62.0 166.4

Net cash provided by/(used in) investing activities (438.6) (363.9) (74.7)

Net cash flows from/(used in) financing activities 228.0 250.4 (22.4)

Net increase/(decrease) in cash and cash equivalents 17.8 (51.5) 69.3

Cash and cash equivalents at beginning of the financial year (6.0) 45.5 (51.5)

Cash and cash equivalents at end of the financial year 11.8 (6.0) 17.8

Net cash flows provided by driven by a 19.1% increase in debt operating activities for the year compared with a 8.1% increase in Net cash flows were $228.4 million, an increase of debt plus equity, noting a reduction $166.4 million on 2007–08. This in equity driven by the hedge reserve. provided by increase was primarily driven by Integral Energy’s weighted average future margin hedge payments in operating activities cost of debt (excluding the 2007–08 which were significantly Government Guarantee fee) for higher than in the current year, for the year were 2008–09 was 0.3% favourable and lower income tax payments compared with the prior year. The in the current year. Offsetting $228.4 million, impact of the global financial crisis these reductions were higher net forced a reduction in interest rates. interest payments due to additional an increase of Integral Energy took advantage borrowings during the year to fund of lower interest rates by locking the capital expenditure program. $166.4 million in long-term debt requirements. Net cash flows used in investing This, coupled with a strategy of on 2007–08. activities for the year were temporarily increasing short-term $438.6 million, an increase of borrowings, yielded a reduction in $74.7 million, driven by the the weighted average cost of debt. increased capital expenditure program. Net cash flows provided Shareholder return by financing activities for the Integral Energy is committed to year were $228.0 million, a slight delivering sustainable and attractive decrease of $22.4 million compared returns to its shareholder, the with the 2007–08 result, mostly due NSW Government. The directors to the payment of higher dividends declared a first and final dividend in 2008–09 compared to the of $103.6 million, representing an previous year. increase of $29.3 million or 39.4% Unused credit facilities as at compared with the 2008–09 SCI 30 June 2009 were $479.0 million. target. Dividend distribution is based on 70% of profit after tax, adjusted Debt for non-cash movements relating to fair value movements in financial Balance sheet debt increased by instruments. Defined benefits $363.9 million compared with superannuation actuarial gains/ the prior year, primarily due to losses are now recognised outside the need to fund the capital of profit or loss as opposed to expenditure program. The gearing through profit or loss, and no longer ratio, calculated as debt divided by require adjustment in calculating the debt plus equity, increased from dividend distribution. 64.7% at 30 June 2008 to 71.3% at 30 June 2009. This result was

64 New connections Integral Energy Annual Performance Report 2008–09 Capital expenditure Credit rating The directors Capital expenditure for the Fitch Ratings affirmed Integral 2008–09 financial year was Energy’s long-term foreign currency declared a first $442.9 million. While capital Issuer Default Rating of ‘AA’ and expenditure was $99.8 million less short-term foreign currency rating and final dividend than the SCI target it represents a of ‘F1+’. record level of expenditure and was Definitions of these ratings are of $103.6 million, $69.4 million higher than the previous as follows: year. The underspend compared representing an with the SCI target was driven by • AA: Very high credit quality. AA network spend of $380.7 million ratings denote expectations of increase of $29.3 which was $67.7 million below target. very low credit risk. They indicate Contributing factors to this variance very strong capacity for payment million or 39.4% were continued pressure on suppliers of financial commitments. This in meeting increased demand from capacity is not significantly compared with the NSW electricity industry generally. vulnerable to foreseeable events. The capital program continues to • F1+: Highest credit quality. the 2008–09 target asset renewals as well as Indicates the strongest capacity growth-related projects. The capital for timely payment of financial SCI target. program is underpinned by Integral commitments; may have an added Energy’s Strategic Asset Management ‘+’ to denote any exceptionally Plan (SAMP). The SAMP reflects plans strong credit feature. and strategies which are aligned These ratings reflect NSW Government to customer and technical drivers, ownership of Integral Energy. improve long-term network asset values and produce optimal returns to shareholders. The plan sets priorities and summarises the investment in the network required to maintain ongoing network capability, consistent with a ‘best-in-class’ network asset manager.

The Board and Executive team take a tour of the Hoxton Park Technical Training Centre.

65 Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

7CONTENTS Page Directors’ Report 67 Independent Audit Report 68 Income Statement 69 Statement of Recognised Income and Expense 70 Balance Sheet 71 Cash Flow Statement 72 Notes to the Financial Statements 73 Statement by Directors 102

66 Integral Energy Annual Performance Report 2008–09 Directors’ Report For the year ended 30 June 2009

Annual Performance Report 2008–09

The Board of Directors of Integral (b) Events Subsequent (d) Directors’ Benefits Energy (the Corporation) have to Balance Date During the period no Director of pleasure in submitting the accounts There has not arisen, in the interval the Corporation has received, or of the economic entity for the period between the end of the financial become entitled to receive, any 1 July 2008 to 30 June 2009, and the period and the date of this report, benefits by reason of a contract independent audit report thereon. an event of a material and unusual made by the Corporation or a nature likely, in the opinion of the related body corporate with a 1. General information Directors of the Corporation, to Director, or with a firm of which affect significantly the operations a Director is a member, or with (a) Directors of the economic entity, the results an entity in which a Director has The names of Directors in office at of those operations, or the state of a substantial interest. any time during the year are shown affairs of the economic entity, in on page 52–53. subsequent financial years. (e) Environmental Regulation Details of meetings and attendance Performance by Directors are shown in the (c) Likely Developments The Corporation’s environmental Corporate governance section The Corporation’s mission is and waste discharge obligations on page 55. to provide a safe, reliable and are regulated under both State sustainable network. Our vision and Federal Law. All environmental (b) Principal Activities is to be a best practice electricity performance obligations are The principal activities of the network business. While monitored by the Environmental Corporation during the course of considerable changes are likely Steering Committee and subjected, the period ended 30 June 2009 in the operating environment from time to time, to Government were the purchase, distribution during 2009–10, particularly in agency audits and site inspections. and sale of electricity, meter data relation to the Retail operation, The Corporation has a policy of provision and maintenance, and Integral Energy remains focussed at least complying, but in most the construction and management on its key strategic objectives, cases exceeding, its environment of electricity distribution assets. namely to operate profitably by performance obligations. maintaining a strong commercial 2. Business review focus, balance commercial outcomes (f) Rounding of amounts whilst managing stakeholder and Amounts in the financial statements (a) Operating Results community expectations, excel have been rounded to the nearest The after tax profit of the Corporation within the core business processes thousand dollars unless specifically for the year was $142.2m. that drive the business, and fully stated to be otherwise. harness the skills and capabilities Signed in accordance with a 3. Other items of our people through a clear focus on organisational alignment resolution of the Directors: (a) State of Affairs underpinned by the values of the Corporation. The Corporation operates in the New South Wales, Victoria, ACT, Further information about likely Queensland, South Australia and developments in the operations of Tasmanian electricity industry in its the Corporation and the expected Vince Graham own right under the provisions of results of those operations in Director the Electricity Supply Act 1995, and subsequent financial years has not 2 September 2009 in the national electricity market. been included in this report as the Directors believe, on reasonable The financial statements for the grounds, that to include such Corporation for the period ending information would be likely to 30 June 2009 are presented on result in unreasonable prejudice pages 69 to 101 inclusive. to the Corporation. Michael McLeod Director 2 September 2009

67 Independent Audit Report For the year ended 30 June 2009 Annual Performance Report 2007–08 7 Annual Performance Report 2008–09

68 Integral Energy Annual Performance Report 2008–09 Income Statement For the year ended 30 June 2009

Annual Performance Report 2008–09

2009 2008 Notes $’000 $’000

Revenue 4 1,875,964 1,727,009 Other income 4 122,410 121,112 Expenses excluding finance costs 5 (1,642,664) (1,480,816) Finance costs 5 (150,075) (128,233)

Profit before income tax 205,635 239,072 Income tax expense 6 (63,445) (66,695)

Profit for the year 142,190 172,377

The above statement should be read in conjunction with the accompanying notes.

69 Statement of Recognised Income and Expense For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

7 2009 2008 Notes $’000 $’000

Asset revaluation reserve (21,202) (5,478) Swap hedge revaluation (144,826) (454,228) Superannuation actuarial gains/(losses) (70,901) (27,065) Income tax on items taken directly to equity 71,080 146,033

Net income/(loss) recognised directly in equity 23 (165,849) (340,738) Profit for the year 142,190 172,377

Total recognised income and expense for the year (23,659) (168,361)

Effect of change in accounting policy Profit for the year as reported in 2007–08 – 150,538 Change of policy – defined benefits superannuation actuarial loss – 18,945 Change of policy – deferred income – 2,894

Restated profit for the year – 172,377

The above statement should be read in conjunction with the accompanying notes.

70 Integral Energy Annual Performance Report 2008–09 Balance Sheet As at 30 June 2009

Annual Performance Report 2008–09

2009 2008 Notes $’000 $’000

ASSETS Current assets Cash and cash equivalents 9 11,825 32 Trade and other receivables 10 259,938 229,563 Inventories 11 41,843 31,648 Derivative financial assets 22 95,169 68,895 Current tax receivable 4,481 3,291 Estimated revenue from unread meters 2(k) 121,674 114,130 Emission rights 2(ab) 39,283 14,228

574,213 461,787 Non-current assets classified as held for sale 12 9,183 11,180

Total current assets 583,396 472,967

Non-current assets Property, plant and equipment 13 3,669,490 3,355,096 Intangible assets 14 49,098 40,319 Derivative financial assets 22 3,731 50,331

Total non-current assets 3,722,319 3,445,746

TOTAL ASSETS 4,305,715 3,918,713

LIABILITIES Current liabilities Bank overdraft – 6,037 Trade and other payables 16 290,803 233,119 Borrowings 18 566,561 406,510 Provisions 19 127,802 111,236 Provision for dividend 2(aa) 103,619 124,992 Derivative financial liabilities 22 42,828 10,508 Other 17 28,281 30,015

Total current liabilities 1,159,894 922,417 Non-current liabilities Trade and other payables 16 46,627 – Borrowings 18 1,697,865 1,494,008 Deferred tax liabilities 7 306,056 355,353 Derivative financial liabilities 22 25,739 15,624 Provisions 19 154,286 87,394 Other 20 4,268 5,659

Total non-current liabilities 2,234,841 1,958,038

TOTAL LIABILITIES 3,394,735 2,880,455

NET ASSETS 910,980 1,038,258

EQUITY Contributed equity 335,046 335,046 Reserves 407,572 523,795 Retained earnings 168,362 179,417

TOTAL EQUITY 910,980 1,038,258

The above statement should be read in conjunction with the accompanying notes.

71 Cash Flow Statement For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

7 2009 2008 Notes $’000 $’000

Cash flows from operating activities: Receipts from customers 2,085,689 1,950,980 Payments to suppliers and employees (1,684,530) (1,727,000) Interest received 537 753 Interest paid (130,404) (111,203) Income taxes paid (42,853) (51,525)

Net cash provided by/(used in) operating activities 8(a) 228,439 62,005

Cash flows from investing activities: Proceeds from sale of plant and equipment 4,086 9,605 Purchase of property, plant and equipment (442,670) (373,499)

Net cash provided by/(used in) investing activities (438,584) (363,894)

Cash flows from financing activities: Proceeds from borrowings 353,986 368,962 Repayment of borrowings (1,019) (11,505) Dividends paid (124,992) (107,033)

Net cash flows from/(used in) financing activities 227,975 250,424

Net increase/(decrease) in cash and cash equivalents 17,830 (51,465) Cash and cash equivalents at beginning of the financial year (6,005) 45,460

Cash and cash equivalents at end of the financial year 9 11,825 (6,005)

The above statement should be read in conjunction with the accompanying notes.

72 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

1 Corporate Information Amounts in the financial report are necessarily reflect the ultimate cost The financial report of Integral Energy rounded to the nearest thousand of providing superannuation. dollars. The financial report is Australia for the year ended 30 June Recognition outside profit or loss presented in Australian dollars. 2009 was authorised for issue in also harmonises better with the accordance with a resolution of the Government Finance Statistics/ (b) Statement of compliance Directors on 2 September 2009. GAAP comprehensive income The financial report complies with Integral Energy Australia is a presentation for the whole of Australian Accounting Standards, state-owned energy Corporation, government and general government which include Australian equivalents incorporated in New South sector, required under AASB 1049 to International Financial Reporting Wales under the Energy Services Whole of Government and General Standards (AIFRS). Compliance with Corporations Act 1995. Integral Government Sector Financial AIFRS ensures that the financial Energy Australia’s registered Reporting. A comprehensive income report, comprising the financial office is 51 Huntingwood Drive, presentation will also be available statements and notes thereto, Huntingwood NSW 2148. at the entity level from 2009–10 complies with International Financial under AASB101 Presentation of The nature of the operations Reporting Standards (IFRS). Financial Statements. and principal activities of the Integral Energy has assessed new Corporation are described in the The change in accounting policy Australian Accounting Standards Directors’ Report. increases 2008–09 ‘profit for the that have recently been issued or year’ from $92.6m to $142.2m amended but are not yet effective or 2 Statement of Significant (2007–08 from $153.4m to applied. It has been determined that Accounting Policies $172.4m), by excluding from these new accounting standards profit the superannuation (defined (a) Basis of preparation will have no material impact on the benefits) actuarial loss line item financial statements in the period of The financial report is a general- (2008–09 $70.9m, 2007–08 initial application. purpose financial report which has $27.1m), along with the associated been prepared in accordance with and offsetting income tax revenue (c) Comparative Figures the requirements of applicable (2008–09 $21.3m, 2007–08 Australian Accounting Standards, When the presentation or $8.1m). Both these items are now the State Owned Corporations Act classification of items in the financial recognised in the Statement of 1989, the Public Finance and Audit report are amended, comparative Recognised Income and Expense Act 1983 and the Regulation 2005 amounts are reclassified unless the rather than the Income Statement. and Accounting Interpretations. reclassification is impracticable. No material amounts have been Revenue recognition from This report has been prepared on a reclassified. rendering of services going concern basis which assumes The entity has changed its policy that Integral Energy will be able to (d) Change in accounting policy on revenue from Retail electricity pay its debts as and when they fall supply contracts which is now Superannuation actuarial due, and continue operation without recognised upon delivery of energy gains and losses any intention or necessity to liquidate to customers as a sale of goods or otherwise wind up its operation. According with NSW Treasury policy, in accordance with AASB 118 the entity has changed its policy on The Corporation is classified as a for- Revenue. Previously, revenue from the recognition of superannuation profit entity for the purposes of the Retail electricity supply contracts actuarial gains and losses. Such application of Australian Accounting was recognised by reference to actuarial gains and losses are now Standards and after consideration of the stage of completion of the recognised outside of profit or loss all factors contained in New South contract, measured by reference to in the Statement of Recognised Wales Treasury Policy TPP 05-4 the proportion that costs incurred Income and Expense. Previously, Distinguishing For-Profit from Not- to date bear to the estimated total actuarial gains and losses were For-Profit Entities. costs of the contract, except where recognised through profit or loss. this would not be representative of The financial report has been Both options are permissible under the stage of completion. prepared on a historical cost basis AASB 119 Employee Benefits. with the exception of property, plant The change in policy has resulted The change in policy has been and equipment, derivative financial from a review of recognition criteria adopted on the basis that instruments and provisions which under AASB 118 Revenue with recognition outside profit or loss have been measured at fair value and, respect to the various revenue provides reliable and more relevant except where stated, does not take streams, and a review of industry information as it better reflects into account changing money values. interpretation and application of the nature of actuarial gains and the standard. When electricity losses. This is because actuarial is purchased from wholesale gains/losses are re-measurements, electricity providers it is considered based on assumptions that do not by all parties to be a commodity.

73 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

72 Statement of Significant Whilst there was a legal transfer of end balance date even though Accounting Policies Integral Energy’s retail business on the maturity date may be greater continued 1 August 2008, in substance control than three months from year end Energy is purchased with the of the retail business was not passed balance date. from Integral Energy to the Eraring intention that it will be on sold Cash and cash equivalents exclude Energy subsidiary. Accounting for a to a customer base. The fact that the outstanding bank overdraft business transfer on 1 August 2008 electricity is not purchased and which is classified as a current has not been effected as to do stored in a similar manner to liability within the Balance Sheet. so would not result in a true inventory for example is due to the However, for the purposes of the representation of the transaction physical nature of the commodity, Cash Flow Statement, cash includes and events that actually occurred. however this does not preclude it cash on hand and cash equivalents from being considered a good in including the bank overdraft. (f) Contributed equity the context of AASB 118 Revenue. Bank overdrafts are carried at the Based on current industry views, The State Owned Corporations principal amount and interest is recognising revenue from Retail Act 1989 (as amended) required charged as an expense as it accrues. electricity supply contracts based on Integral Energy to have two voting delivery of energy to customers as shareholders. Current shareholders (i) Trade and other receivables a sale of goods is the most relevant are the New South Wales Treasurer Trade receivables are recognised and and reliable way of recognising and and the Minister for Finance who carried at original invoice amount less bringing revenue to account. hold the shares on behalf of the an allowance for any uncollectible NSW Government. Each shareholder The change in accounting policy amounts. Allowance for impairment holds one $1 share. increases 2008–09 ‘profit for the is based on an estimate of probable year’ from an estimated $133.5m to non-payment. Bad debts are written (g) Foreign currency translation $142.2m (2007–08 increases from off when identified. $169.5m to $172.4m), by excluding Both the functional and presentation from profit the deferred revenue currency of Integral Energy Australia (j) Inventories is Australian dollars (A$). previously included within metered Inventories are valued at the lower sales of electricity (2008–09 estimate Transactions in foreign currencies are of cost or net realisable value. Costs $12.4m, 2007–08 $4.1m), along with initially recorded in the functional incurred in bringing each product the associated and offsetting income currency at the exchange rates at to its present location and condition tax expense (2008–09 $3.7m, the date of the transaction. At each are accounted for as follows: 2007–08 $1.2m). Other current balance sheet date, monetary items (i) Raw materials – purchase cost liabilities decrease accordingly from denominated in foreign currencies on weighted average cost; and $55.8m to $28.3m (2007–08 $45.1m are retranslated at the rates prevailing to $30.0m). on the balance sheet date. (ii) Finished goods and work-in- progress – cost of direct material, Any foreign currency income or (e) Significant judgements labour and a proportion of expense items are translated at In the process of applying manufacturing overheads based exchange rates as at the date of the accounting policies, the Corporation on normal operating capacity. transaction, with resulting exchange has made certain judgements that differences recognised as income or Net realisable value represents significantly impact on the amounts expense in the Income Statement. the estimated selling price for recognised in the financial report. Any foreign currency assets or inventories less all estimated costs of On 1 August 2008 Integral Energy’s liabilities are translated at exchange completion and costs necessary to retail business was transferred to rates prevailing on the balance make the sale. a new subsidiary of Eraring Energy sheet date, with resulting exchange following receipt of a Ministerial differences classified as equity and (k) Unread meters Direction issued under section 20P transferred to the foreign currency of the State Owned Corporations At reporting date, Integral Energy translation reserve. Act 1989 (NSW) and the approval accrues an estimate of electricity of the voting shareholders under consumed where the meter has (h) Cash and cash equivalents section 20Y of the State Owned not been read. The accounting Corporations Act 1989 (NSW). Cash and cash equivalents in the estimating methodology for On 1 September 2008 Integration Balance Sheet comprise cash at calculating the unbilled revenue Agreements were terminated bank and in hand, short-term accrual calculates unbilled revenue with Eraring Energy with effect deposits readily convertible to cash, volume where energy imports from 1 August 2008, thereby investments for a fixed term where relating to basic meters are phased placing each party in the position the maturity date is three months or over the current month and future they would have been in had the less from year end balance date, and months in order to estimate the Agreements not been executed. readily tradeable investments which likely billing pattern relating to are likely to be converted to cash consumption. This calculation is within three months of year recognised as revenue on unread meters in the Income Statement.

74 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

2 Statement of Significant this optimised system configuration, cash inflows, the recoverable Accounting Policies such capacity is valued at zero. amount is determined for the continued cash-generating unit to which the System land and non-system land asset belongs. If any such indication and building assets are valued at the (l) Recoverable amount exists and where the carrying values latest market valuation based on fair of assets exceed the estimated recoverable value of the asset. Other property, At each reporting date, Integral amount, the assets or cash- plant and equipment are stated at Energy assess assets for an generating units are written down cost less accumulated depreciation indication of impairment. Where to their recoverable amount. and any impairment in value. an indicator of impairment exists, Impairment losses are recognised in the Corporation makes a formal Capital assets in the course of the Income Statement, where there estimate of recoverable amount. construction are carried at cost, is no corresponding entry in the Where the carrying amount of less any recognised impairment Asset Revaluation Reserve. an asset exceeds its recoverable loss. Depreciation of these assets amount the asset is considered commences when the assets are Revaluation impaired and is written down to its ready for their intended use. Following initial recognition at cost, recoverable amount. Depreciation is calculated on a system and non-system land and Recoverable amount is the greater straight-line basis over the estimated buildings are carried at a revalued of fair value less costs to sell and useful life of the asset. Depreciation is amount which is the fair value at value in use. It is determined for an charged on a pro-rata basis for assets the date of the revaluation less individual asset, unless the assets’ purchased or sold during the year. any subsequent accumulated value in use cannot be estimated to Depreciation rates are shown below. depreciation on buildings and be close to its fair value less costs to accumulated impairment losses. sell, and it does not generate cash Fair value In respect of classes of assets for inflows that are largely independent Property, plant and equipment are which there exists an active market, of those from other assets or valued at fair value in accordance fair value is determined by reference corporations of assets, in which with NSW Treasury Policy and to market-based evidence, which case, the recoverable amount is Guidelines Paper TPP 07-1 Valuation is the amount for which the assets determined for the cash-generating of Physical Non-Current Assets at could be exchanged between a unit to which the asset belongs. Fair Value, and reviewed annually knowledgeable willing buyer and a for impairment in accordance with In assessing value in use, the knowledgeable willing seller in an AASB 136 Impairment of Assets. estimated future cash flows are arm’s length transaction as at the discounted to their present value Land and buildings are revalued at valuation date. In respect of classes using a pre-tax discount rate that least every three years and network for which there is no active market reflects current market assessments assets are revalued at least every five due to the specialised nature of the of the time value of money and the years. The frequency of revaluations assets, fair value is determined as risks specific to the asset. is considered appropriate given the lower of the estimated written the nature, size and geographical down current replacement cost of (m) Property, plant spread of property, plant and the assets and their recoverable and equipment equipment held. amount as determined using the cash generating unit test, being the System assets have been valued Previously recognised impairment discounted present value of the net at the lower of the Optimised losses have not been reversed as cash inflows that the corporation Depreciated Replacement Cost the change in the value in use expects to be generated from those (ODRC) or recoverable amount cannot be specifically attributed to assets, operating as a single cash in accordance with Australian changes in the estimates used to generating operation over their Accounting Standard AASB 116 determine the value in use on which expected useful lives. Property, Plant and Equipment and the impairment was based. It is NSW Treasury Policy and Guidelines noted that the previous impairment Any revaluation increment is Paper TPP 07-1 Valuation of Physical represents approximately 3.5% of credited to the asset revaluation Non-Current Assets at Fair Value. the current electricity network and is reserve included in the equity The ODRC valuation approach not considered material. section of the Balance Sheet, unless assumes an altered electrical it reverses a revaluation decrement distribution system configuration. Impairment of the same asset previously This is achieved by valuing the The carrying values of plant and recognised in the Income Statement. network distribution system assets equipment are reviewed for Any revaluation decrement is on the basis that the system is built impairment annually or when events recognised in the Income Statement to assumed engineering standards or changes in circumstances indicate unless it directly offsets a previous above that required to support the the carrying value may not be increment of the same asset in the maximum possible electrical load. recoverable. For an asset that does asset revaluation reserve. If excess capacity remains within not generate largely independent

75 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

72 Statement of Significant The impairment decrement resulting The system asset revaluation Accounting Policies from the recognition of the new carried out at 1 July 2005 resulted continued values has been recognised in the in an impairment of assets and a Valuations are undertaken in revaluation reserve. significant increase in the average effective lives of assets. accordance with NSW Treasury System land and non-system Policy and Guidelines Paper TPP 07-1 land and buildings are subject to (n) Non current assets Valuation of Physical Non-Current independent valuation on a cyclical held for sale Assets at Fair Value. basis over a three year period. The valuation of system land and Non current assets held for sale are Disposal of assets non-system land and buildings measured at the lower of carrying Upon disposal, any revaluation in 2008–09 was conducted by amount or fair value less costs to sell. reserve relating to the particular Edward Rushton Australia Pty Ltd. asset being sold is transferred In addition to the cyclical valuation, (o) Intangible assets to retained earnings. An item of Edward Rushton Australia Pty Ltd Intangible assets acquired separately property, plant and equipment also performed a desktop review of are capitalised at cost. Following is derecognised upon disposal or properties valued over the previous initial recognition, the cost model when no future economic benefits two years in light of the current is applied to the class of intangible are expected to arise from the depressed property market. assets. The useful lives of these continued use of the asset. Any intangible assets are assessed to gain or loss arising on derecognition Capitalisation threshold be either finite or indefinite. Where of the asset (calculated as the Property, plant and equipment amortisation is charged on assets difference between the net disposal assets purchased below $1,000 are with finite lives, this expense is taken proceeds and the carrying amount expensed in the year of acquisition. to the Income Statement. Intangible of the item) is included in the The $1,000 capitalisation threshold assets, excluding development costs, Income Statement in the year the became effective 1 July 2008, created within the business are item is derecognised. and compares to a previous not capitalised and expenditure is capitalisation threshold of $500. charged against profits in the year in Independent valuations which the expenditure is incurred. Between independent valuations, Depreciation rates the Directors review the carrying Intangible assets are tested for amount of assets at each reporting % impairment where an indicator of impairment exists, and in the case of date to ensure they do not differ Buildings 2.50% – 6.67% materially from the asset’s fair value indefinite lived intangibles annually, at that date. System plant and 1.67% – 14.29% either individually or at the cash equipment generating unit level. Useful lives are In June 2002, Sinclair Knight Mertz EDP equipment 10.00% – 25.00% also examined on an annual basis (SKM) carried out a valuation Motor vehicles, 10.00% and adjustments, where applicable, of system property, plant and mobile plant, are made on a prospective basis. equipment, which was adopted as unregistered plant of 1 July 2005. An impairment test was then applied as per AASB 136 Radio 14.29% communication Impairment of Assets, and the equipment impaired value was adopted as of 1 July 2005, with necessary Other non-system 10.00% – 14.29% entries made to asset values. plant and equipment

A summary of the policies applied to the Corporation’s intangible assets is as follows:

Software Easements

Useful lives Finite Indefinite Amortisation method used 4 to 9 years – straight line Not depreciated or revalued Internally generated/acquired Internally generated/acquired Acquired Impairment test/recoverable Annually and where an indicator Annually and where an indicator amount testing of impairment exists of impairment exists

76 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

2 Statement of Significant Gains and losses are recognised Developer or customer contributions Accounting Policies in the Income Statement when of non-current assets are recognised continued the liabilities are derecognised, or as revenue and an asset when Easements are an interest in land through the amortisation process. Integral Energy gains control of allowing access for transmission such contributions. The amount lines. As no time period is attached (s) Provisions recognised is the fair value of to the easements, they are Provisions are recognised when the the contributed asset at the date considered to have an indefinite Corporation has a present obligation on which control of such assets life and are not amortised. (legal or constructive) as a result of is gained. a past event, it is probable that an Gains or losses arising from Other revenue, outside the provision outflow of resources embodying derecognition of an intangible asset of energy products, is recognised on economic benefits will be required are measured as the difference an accrual basis and in accordance to settle the obligation, and a between the net disposal proceeds with the substance of the agreement reliable estimate can be made of the and the carrying amount of the covering such transactions. amount of the obligation. asset and are recognised in the (ii) Other income outside Income Statement when the asset (t) Revenue ordinary activities is derecognised. Revenue is recognised to the extent Revenue arising from the sale of (p) Leases that it is probable that the economic assets is recognised when the entity benefits will flow to the Corporation has passed control of the goods, Leases where the lessor retains and the revenue can be reliably and the amount of revenue can substantially all the risks and measured. The following specific be measured reliably. benefits of ownership of the asset recognition criteria must also be met are classified as operating leases. before revenue is recognised: (u) Income tax Operating lease payments are Deferred tax is accounted for using recognised as an expense in the (i) Revenue from ordinary the balance sheet liability method. Income Statement on a straight activities line basis over the lease term, Temporary differences are differences Revenue from ordinary activities except where another systematic between the tax bases of assets and comprises revenue earned from the basis is more representative of liabilities and their carrying amounts provision of energy products and the time pattern in which the in the balance sheet. The tax base other ancillary services to entities economic benefits from lease of an asset or liability is the amount outside the Corporation. Revenue is assets are consumed. attributed to that asset or liability for recognised when energy products tax purposes. and services are provided to the (q) Finance costs consumer. Metered energy supply Deferred tax liabilities are recognised Borrowing costs include interest, is recognised when the meters are for all taxable temporary differences amortisation of discounts or read, and an estimate is brought except where the deferred tax liability premiums relating to borrowings, to account where meters have not arises from the initial recognition of amortisation of ancillary costs been read (refer note 2(k)). Network an asset or liability in a transaction incurred in connection with use of system charges are invoiced that is not a business combination arrangement of borrowings and to out-of-area retailers following and, at the time of the transaction, Government guarantee fee. the reading of meters of customers affects neither the accounting profit Borrowing costs are recognised in within the franchise area who are nor taxable profit or loss. the income statement in the period contracted to external retailers. Deferred tax assets are recognised in which they are incurred. Network use of system income is for all deductible temporary recognised on an accrual basis, as differences, carry-forward of unused (r) Borrowing costs revenue is accrued for consumption tax assets and unused tax losses, to All borrowings are initially recognised which is not invoiced at month end. the extent that it is probable that at cost, being the fair value of the Interest receivable and other taxable profit will be available against consideration received net of issue revenue from operating activities is which the deductible temporary costs associated with the borrowing. brought to account as it is earned, differences, and the carry-forward After initial recognition, borrowings and is recognised when goods and of unused tax assets and unused tax are subsequently measured at services are provided. losses can be utilised, except where amortised cost using the effective the deferred tax asset relating to interest method, with interest the deductible temporary difference expense recognised on an effective arises from the initial recognition of yield basis. Amortised cost is an asset or liability in a transaction calculated by taking into account that is not a business combination any issue costs, and any discount or and, at the time of the transaction, premium on settlement. affects neither the accounting profit nor taxable profit or loss.

77 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

72 Statement of Significant Contingencies are disclosed net of (x) Derecognition of financial Accounting Policies the amount of GST recoverable from, instruments continued or payable to, the taxation authority. The derecognition of a financial The carrying amount of deferred tax instrument takes place when the assets is reviewed at each balance (w) Employee benefits Corporation no longer controls the sheet date and reduced to the (i) General contractual rights that comprise extent that it is no longer probable the financial instrument, which Provision is made for employee that sufficient taxable profit will be is normally the case when the benefits accruing to employees available to allow all or part of the instrument is sold, or all the up to reporting date in respect of deferred tax asset to be utilised. cash flows attributable to the wages and salaries, annual leave, instrument are passed through Deferred tax assets and liabilities maturing allowance and long to an independent third party. are measured at the tax rates that service leave, when it is probable are expected to apply to the period that settlement will be required (y) Derivative financial when the asset is realised or the and they are capable of being instruments liability is settled, based on tax measured reliably. Long service rates (and tax laws) that have been leave and maturing allowance Integral Energy uses derivative enacted or substantively enacted provisions have been based on an financial instruments to hedge at the balance sheet date. actuarial assessment undertaken by its exposure to electricity price Cumpston Sarjeant Pty Limited as at risk, interest rate risk and foreign Current and deferred tax is 28 February 2009. exchange risk. Such derivative recognised as an expense or income financial instruments are initially in the Income Statement, except Cumpston Sarjeant Pty Limited recognised at fair value on the date when it relates to items recognised has based their assessment on the the derivative is entered into and directly in equity, in which case following assumptions: any gains or losses on subsequent the related tax effect is recognised (a) Rate of investment return remeasurement are recognised directly in equity. (after tax and investment in the Income Statement unless Since 1 July 2001, Integral Energy has related expenses) 5.5%; and the derivative is designated and been subject to the National Taxation effective as a hedging instrument, (b) Rate of general salary Equivalent Regime (NTER) based on in which case the timing of the increase 3.5%. the Income Tax Assessment Act 1936 recognition in profit or loss depends and the Income Tax Assessment Act Liability for employee benefits (long on the ongoing effectiveness of the 1997. Tax equivalents are payable to service leave and maturing allowance) hedge or maturity of the hedging the Office of State Revenue. which are not expected to be settled instrument. The fair value of any within twelve months are discounted forward exchange contracts is (v) Other taxes at 5.5% per annum, based on calculated by reference to current forward exchange rates for contracts FBT, payroll tax and land tax are 10 year Government bond rates. with similar maturity profiles. recognised in accordance with All other provisions have been relevant legislation. In relation to calculated at nominal amounts Hedge accounting GST, revenues, expenses and assets based on expected settlement rates. For the purposes of hedge are recognised net of the amount accounting, hedges are classified as of GST except: (ii) Superannuation either fair value hedges when they • where the GST incurred on a The Corporation’s contributions hedge the exposure to changes in purchase of goods and services is to employee superannuation are the fair value of a recognised asset not recoverable from the taxation expensed at the time of payment. or liability, or cash flow hedges authority, in which case the GST is An actuarial assessment of funds where they hedge exposure to recognised as part of the cost of held by the Energy Industries variability in cash flows that is acquisition of the asset or as part of Superannuation Scheme on behalf either attributable to a particular the expense item as applicable; and of Integral Energy Australia was risk associated with a recognised performed during the year by the asset or liability or a highly probable • receivables and payables are scheme’s actuary. forecast transaction. stated with the amount of GST included. Cash flows are included in the Cash The actuary adopted the following assumptions: Flow Statement on a gross basis and the GST component of cash flows 2007/08 2008/09 Thereafter arising from investing and financing % % % activities, which is recoverable from, Rate of investment return (9.3) (17.8) 7.5 or payable to, the taxation authority Rate of salary escalation 6.0 4.0 4.0 are classified as operating cash flows. Rate of CPI increase 2.5 2.5 2.5

78 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

2 Statement of Significant For all other cash flow hedges, the (aa) Dividend Accounting Policies gains or losses that are recognised in The dividend is calculated in continued equity are transferred to the Income accordance with TPP 02-3 Financial Statement in the same period in (i) Fair value hedges Distribution Policy for Government which the hedged firm commitment Businesses. The dividend payable In relation to fair value hedges affects the net profit and loss, of $103.6m (2007–08 $125.0m) is that are designated and meet for example when the future sale calculated based on profit adjusted the conditions for special hedge of electricity actually occurs. Fair for certain non-cash items. In the accounting, any gain or loss value has been determined at Income Statement, this is based from remeasuring the hedging year end by performing mark to on 70% of the line item ‘profit for instrument at fair value is market calculations on the cash the year’, adjusted for non-cash recognised immediately in the flow hedges using financial market adjustments relating to fair value Income Statement. Any gain or rates available. movements in financial instruments. loss attributable to the hedged As a result of the changed treatment risk on remeasurement of the Hedge accounting is discontinued of superannuation actuarial gains hedged item is adjusted against when the hedging instrument and losses (refer note 2(d)), there the carrying amount of the hedged expires or is sold, terminated or is no longer a need to adjust profit item and recognised in the Income exercised, or no longer qualifies to exclude these gains/losses in Statement. Where the adjustment is for hedge accounting. At that calculating the dividend, as they are to the carrying amount of a hedged point in time, any cumulative gain now recognised outside profit/loss. interest-bearing financial instrument, or loss on the hedging instrument the adjustment is amortised to the recognised in equity is kept in equity (ab) Greenhouse legislation Income Statement such that it is until the forecasted transaction fully amortised by maturity. As at occurs. If a hedged transaction is The Commonwealth Renewable 30 June 2009 (and the prior year), no longer expected to occur, the net Energy (Electricity) Act 2000 there were no fair value hedges cumulative gain or loss recognised imposes on electricity retailers the designated and, as a result, no gain in equity is transferred to net profit obligation to “surrender” sufficient or loss has been recognised in the or loss for the period. certificates each year to meet the Income Statement. Commonwealth Government’s Derivatives that do not qualify strategy to lift Australia’s use (ii) Cash flow hedges for hedge accounting of electricity generated from In relation to cash flow hedges to Derivatives that do not qualify for renewable sources. This imposes hedge firm commitments which hedge accounting are designated as an obligation on Integral Energy meet the conditions for special held for trading. Gains or losses on to purchase Renewable Energy hedge accounting, the portion of financial assets held for trading are Certificates (RECs) and surrender the gain or loss on the hedging recognised in the Income Statement them to the Office of the Renewable instrument that is determined to and the related assets or liabilities Energy Regulator in discharge of be an effective hedge is recognised are classified as Derivative Financial Integral Energy’s renewable energy directly in equity and the ineffective Assets in the Balance Sheet. obligations. These certificates are portion is recognised in the Income accounted for as “other assets” Statement. When the hedged (z) Workers compensation and, as such, are reviewed for firm commitment results in the insurance impairment and carried at the lower recognition of an asset or a liability, Integral Energy is a self-insurer of cost or net realisable value at the then, at the time the asset or liability through its insurance provision for close of the reporting period. is recognised, the associated gains workers compensation and meets The NSW Electricity Supply or losses that had previously been all liabilities under the Workers Amendment (Greenhouse Gas recognised in equity are included Compensation Act 1987. Emission Reduction) Act 2000 in the initial measurement of the During 2008–09 a consulting imposes on electricity retailers the acquisition cost or other carrying actuary, David A Zaman Pty Limited, obligation to “surrender” sufficient amount of the asset or liability. undertook the annual investigation certificates each year to satisfy the of Integral Energy’s estimated State Government’s strategy to liability for workers compensation reduce greenhouse gas per capita as at 30 June 2009. The liability is emissions from electricity purchases. measured as the present value of This imposes an obligation on Integral future payments and as at 30 June Energy to purchase or produce NSW 2009 was estimated to be $9.1m Greenhouse Abatement Certificates ($7.7m in 2007–08), including the (NGACs) and surrender them to the liability for dust related diseases. Independent Pricing and Regulatory Tribunal (IPART) in discharge of Integral Energy’s greenhouse gas emission reduction obligations.

79 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

72 Statement of Significant 3 Segment information Accounting Policies Business segments: continued The Corporation has one reportable Integral Energy accounts for NGAC business segment, that being the certificates under AASB 102 distribution and retail of energy. Inventories. Certificates which Revenue from sales to external are created and held for sale are customers with respect to the recognised initially at the point of distribution of energy (network use of registration and measured at the system income) as disclosed at note registration fee paid. Certificates 4 Revenue totalled $381.9m for the which are purchased and held for 2008–09 financial year (2007–08: sale are recognised initially at the $341.6m), and was 19.0% of total point of acquisition and measured entity revenue. Internal sales by at cost, being the fair value of distribution to retail totalled $413.5m the consideration paid. They are (2007–08: $396.8m). subsequently measured at the lower Geographical segments: of cost and net realisable value. The Corporation operates within a The profit on sale is recognised single geographical sector, Australia. when the entity delivers the certificates under an agreement or sells them. The surrender of these certificates will be recognised in the underlying purchase commitment as an element of electricity purchase costs.

4 Revenue

2009 2008 $’000 $’000

Revenues Metered sales of electricity 1,345,279 1,247,244 Estimated revenue on unread meters 121,673 114,130 Street lighting 3,110 3,012

Total electricity sales 1,470,062 1,364,386 Network use of system income 381,940 341,567 Reimbursement of community service obligations 23,962 21,056

Sales revenue 1,875,964 1,727,009

Net gain arising from ineffectiveness on cash flow hedges – 1,563 Interest income 537 753 Capital contributions 57,441 56,725 Other income 64,432 62,071

Other income 122,410 121,112

Total revenue and other income 1,998,374 1,848,121

80 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

5 Expenses

2009 2008 $’000 $’000

Amount set aside to provisions Allowance for impairment 6,392 6,345 Employee benefits 89,124 81,217 Other provisions 5,532 10,430

Total amount set aside to provisions 101,048 97,992

Other expenses relating to operating activities Bad debts written off 6,463 6,356 Consultants 1,556 2,317 Contractors 47,670 51,620 Employee benefits 125,969 117,983 Superannuation contributions 29,918 26,573 Superannuation (defined benefits) expense excluding actuarial gains or losses* 7,953 10,808 Operating lease rentals 184 627 Net loss on disposal of property, plant and equipment 1,670 2,378 Unrealised loss on held for trading assets 7,567 14,530 Net loss arising from ineffectiveness on cash flow hedges 770 – Retailing and distribution of electricity and other services 1,174,789 1,020,176

Total other expenses relating to operating activities 1,404,509 1,253,368

Depreciation of non-current assets Buildings 2,963 2,806 Electricity network assets 97,739 90,605 EDP equipment 7,173 7,062 Motor vehicle, mobile plant, unregistered plant 9,772 8,826 Radio communication equipment 281 226 Other non system equipment 4,553 4,285

Total depreciation of non-current assets 122,481 113,810

Amortisation of intangible assets Software 14,626 15,646

Total depreciation and amortisation expense 137,107 129,456

Total expenses from operating activities 1,642,664 1,480,816

Finance costs Gross interest expense 121,332 106,405 Net amortisation of discounts/premiums on loans 10,941 11,604 Other interest expense 17,802 10,224

Total finance costs 150,075 128,233

* Refer Note 15. Superannuation (defined benefits) actuarial losses of $70.9m (2007–08 $27.1m) are recognised in the Statement of Recognised Income and Expense. Total superannuation (defined benefits) expense, including actuarial losses recognised in the Statement of Recognised Income and Expense, is $78.854m (2007–08 $37.873m). Maintenance expenses included within other expenses relating to operating activities are as follows: (i) Employee related costs included in employee benefits expense $62.8m (2007–08 $64.1m) (ii) Contracted labour and other (non-employee related) expenses $41.1m (2007–08 $41.9m)

81 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

76 Income Tax (a) Income tax expense recognised in the Income Statement

2009 2008 $’000 $’000

Current tax expense Current year 41,333 48,601 Adjustments for prior years 329 (1,405)

41,662 47,196 Deferred tax expense Origination and reversal of temporary differences 20,858 22,072 Under/(over) provided in prior years 925 (2,573)

21,783 19,499

Total income tax expense in Income Statement 63,445 66,695

(b) Numerical reconciliation between tax expense and pre-tax net profit

Profit before tax 205,635 239,072 Income tax using the domestic Corporation tax rate of 30% (2007–08: 30%) 61,691 71,722 Increase in income tax expense due to: Tax concessions/non-deductible expenses 501 (1,049) Under/(over) provided in prior years 1,253 (3,978)

Income tax expense on pre-tax net profit 63,445 66,695

(c) Deferred tax recognised directly in equity

Relating to hedge revaluation reserve (43,448) (136,268) Relating to revaluation of property, plant and equipment and assets held for sale (6,361) (2,460) Relating to superannuation (defined benefits) actuarial gains/(losses) (21,271) (8,120) Adjustments for prior years – 815

(71,080) (146,033)

82 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

7 Deferred Tax (Assets)/Liabilities Deferred tax (assets)/liabilities are attributable to the following:

2009 2008 $’000 $’000

Assets subject to depreciation/amortisation/capital allowances 365,106 351,773 Assets held for sale 2,230 2,829 Deferred income and interest 1,592 2,413 EISS superannuation (18,445) 2,116 Unread meters 36,502 34,239 Provisions and accruals (71,953) (66,048) Emission rights and deductible prepayments 12,049 4,619 Derivatives (21,025) 23,412

Gross deferred tax (assets)/liabilities 306,056 355,353

Balance Recognised Recognised Balance 1 July 2008 in income in equity 30 June 2009 Movement in temporary differences $’000 $’000 $’000 $’000

Assets subject to depreciation/amortisation/capital allowances 351,773 19,095 (5,762) 365,106 Assets held for sale 2,829 – (599) 2,230 Deferred income & interest 2,413 (821) – 1,592 EISS superannuation 2,116 710 (21,271) (18,445) Unread meters 34,239 2,263 – 36,502 Provisions and accruals (66,048) (5,905) – (71,953) Emission rights and deductible prepayments 4,619 7,430 – 12,049 Derivatives 23,412 (989) (43,448) (21,025)

Tax (assets)/liabilities 355,353 21,783 (71,080) 306,056

83 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

78 Cash Flow Information (a) Reconciliation of Cash Flows from Operating Activities with Profit After Tax

2009 2008 $’000 $’000

Profit after tax 142,190 172,377 Adjustments for: Depreciation non-current assets 122,481 113,810 Amortisation non-current assets 14,626 15,646 Amortisation of discounts/premiums 10,941 11,604 Non cash capital contributions (56,032) (55,164) Net loss on disposal of property, plant and equipment 4,193 2,378 Provision for obsolete transformers – (19) Defined benefit superannuation adjustment 7,953 10,808 Asset revaluation reserve movements 10,377 789 Financial instruments fair value movements 8,336 12,966 Changes in assets and liabilities (Increase)/decrease in trade and other receivables (37,427) 42,295 (Increase)/decrease in unread meters (7,544) (52,507) (Increase)/decrease in derivative financial assets (132,836) (100,075) (Increase)/decrease in inventories (10,195) (10,994) (Increase)/decrease in other assets (25,055) 1,219 Increase/(decrease) in trade and other payables 104,312 (97,480 ) Increase/(decrease) in provisions 12,216 9,001 Increase/(decrease) in current tax balances (1,191) (3,510) Increase/(decrease) in deferred tax liabilities 21,784 18,681 Increase/(decrease) in derivative financial liabilities 42,435 (30,812) Increase/(decrease) in other liabilities (3,125) 992

Net cash flows from operating activities 228,439 62,005

84 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

8 Cash Flow Information continued

(b) Financing Facilities

2009 2008 $’000 $’000

Total facilities available The Corporation has access to the following lines of credit: Bank overdraft 2,000 2,000 T-Corp short term accommodation 150,000 150,000 T-Corp loans 2,590,000 2,175,000 Inscribed stock 1,417 2,436

Total facilities available 2,743,417 2,329,436

Facilities utilised at reporting date* Bank overdraft – 2,000 T-Corp short term accommodation – 3,500 T-Corp loans 2,263,009 1,894,582 Inscribed stock 1,417 2,436

Total facilities utilised at reporting date 2,264,426 1,902,518

Facilities unused at reporting date Bank overdraft 2,000 – T-Corp short term accommodation 150,000 146,500 T-Corp loans 326,991 280,418 Inscribed stock – –

Total facilities unused at reporting date 478,991 426,918

* Facilities utilised at reporting date reflect actual balances and do not account for unpresented cheques.

Bank overdrafts Interest on bank overdrafts is charged at prevailing market rates on any balance in excess of the approved overdraft on the Limit Facility of $2.0m. The total bank overdraft of the Corporation is unsecured. The bank overdraft is payable on demand and subject to annual review.

T-Corp short term accommodation Integral Energy has approval from the Public Authorities (Financial Arrangements) Act 1987 (“PAFA Act”) to obtain a $150 million short term accommodation (Come-and-Go facility) from NSW Treasury Corporation (T-Corp).

T-Corp loans Integral Energy has approval from the “PAFA Act” to obtain $2,590m loan funding from T-Corp. The loans are secured by a guarantee from the NSW Government and a government guarantee fee is payable by Integral Energy to NSW Treasury. The guarantee fee payable is calculated in accordance with NSW Treasury Accounting Policy TPP04-2 Government Guarantee Fee Policy for Government Businesses. The loan amounts in current liabilities include the portion of the Corporation’s T-Corp loans payable within one year of $566.6m (2007–08: $406.5m). Non-current T-Corp loans payable on or before 15 April 2039 total $1,697.9m (2007–08: $1,494.0m), with maturity dates ranging between one and thirty years from reporting date. All T-Corp debt is fully payable on maturity with the majority being fixed rate loans.

Inscribed stock Integral Energy has borrowings by the issue of inscribed stock to private individuals, companies and various government bodies. There have been no new debt issues for this type of borrowing since November 1994. The loan amount in current liabilities includes the Corporation’s inscribed stock principal repayments to be made within one year of $7 thousand (2007–08: $1.0m). The non current inscribed stock comprises principal repayments to be made on or before 14 February 2012, with repayment dates ranging between one and three years from reporting date. All inscribed stock are fixed rate loans and fully payable on maturity, with the exception of two loans which require half yearly principal repayments.

85 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

79 Cash and Cash Equivalents

2009 2008 $’000 $’000

Cash on hand 32 32 Cash in bank 11,793 –

Total cash and cash equivalents 11,825 32

Bank overdraft is classified as a current liability within the Balance Sheet. For the purposes of the Cash Flow Statement, cash includes cash on hand and cash equivalents including bank overdraft (2008–09: nil 2007–08: $6.037m).

10 Trade and Other Receivables

2009 2008 $’000 $’000

Trade receivables 144,767 124,615 Allowance for impairment (13,813) (13,885)

130,954 110,730 Other debtors 122,001 104,657 Prepayments – superannuation – 7,052 Prepayments – other 6,983 7,124

Total trade and other receivables 259,938 229,563

Trade receivables are non-interest bearing. The Days Sales Outstanding (DSO) as at 30 June 2009 is 21.4 (2007–08: 22.5). Movements in the allowance for impairment loss were as follows:

Opening balance 13,885 13,896 Charge for the year 6,151 6,159 Amounts written off (6,463) (6,356) Amounts recovered during the year 240 186

Closing balance 13,813 13,885

Past due but Considered Total not impaired impaired $’000 $’000 $’000

2009 < 3 months overdue 21,835 21,835 – 3 months – 6 months overdue 9,308 2,514 6,794 > 6 months overdue 7,019 – 7,019

2008 < 3 months overdue 20,036 18,015 2,021 3 months – 6 months overdue 6,872 1,088 5,784 > 6 months overdue 6,080 – 6,080

All trade debtors are recognised as amounts receivable at balance date. Collectibility of trade debtors is reviewed on an ongoing basis. Procedures as established in company policies and procedures are followed to recover outstanding amounts. Debts which are known to be uncollectible are written off. An allowance for impairment is raised when there is objective evidence that the entity will not be able to collect all amounts due. This evidence includes past experience, and current and expected changes in economic conditions, debtor credit ratings and company policy. No interest is earned on trade debtors. Sales are made on 21–30 day terms. Integral Energy is not materially exposed to concentrations of credit risk to a single trade debtor or group of debtors.

86 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

11 Inventories

2009 2008 $’000 $’000

Stores and materials 30,249 26,138 NSW Greenhouse Gas Abatement Certificates 11,594 5,510

Total inventories 41,843 31,648

12 Assets Classified as Held for Sale

2009 2008 $’000 $’000

Non-current assets held for sale 9,183 11,180

Total assets classified as held for sale 9,183 11,180

Non-current assets held for sale relate to under-utilised non-infrastructure land located at Schofields. A valuation of the site was performed by HillPDA in November 2007, and the asset is currently carried at the valued amount. An exchange of contracts with Landcom for the sale of Schofields is expected early in the 2009–10 financial year.

13 Property Plant and Equipment

Electricity Non-System Network Assets Total $’000 $’000 $’000

Year ended 30 June 2009 Net carrying amount at 1 July 2008 3,018,032 337,064 3,355,096 Additions 431,928 42,213 474,141 Disposals (1,969) (5,715) (7,684) Transfers (9,926) 9,926 – Revaluation (7,531) (22,051) (29,582) Depreciation charge for the period (97,739) (24,742) (122,481)

Net carrying amount at 30 June 2009 3,332,795 336,695 3,669,490

Year ended 30 June 2008 Net carrying amount at 1 July 2007 2,760,824 305,293 3,066,117 Additions 355,636 65,577 421,213 Disposals (2,809) (9,349) (12,158) Revaluation (5,014) (1,252) (6,266) Depreciation charge for the period (90,605) (23,205) (113,810)

Net carrying amount at 30 June 2008 3,018,032 337,064 3,355,096

At 30 June 2009 Fair value 3,700,410 457,486 4,157,896 Accumulated depreciation and impairment (367,615) (120,791) (488,406)

Net carrying amount at 30 June 2009 3,332,795 336,695 3,669,490

At 30 June 2008 Fair value 3,288,246 456,286 3,744,532 Accumulated depreciation and impairment (270,214) (119,222) (389,436)

Net carrying amount at 30 June 2008 3,018,032 337,064 3,355,096

87 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

713 Property Plant and Equipment continued Assets under construction At balance sheet date, expenditures recognised in the carrying amount of property, plant and equipment in the course of construction totalled: Electricity network assets $334.4m (2007–08: $271.1m) Non-system assets $42.5m (2007–08: $53.1m)

Historic cost of revalued assets If assets were measured using the cost model, the carrying amounts would be as follows:

2009 2008 $’000 $’000

Electricity network assets At cost 3,880,272 3,460,578 Less accumulated depreciation (940,671) (843,270)

Total electricity network assets 2,939,601 2,617,308

Non-system assets At cost 440,989 412,219 Less accumulated depreciation (144,469) (137,382)

Total non-system assets 296,520 274,837

Total property, plant and equipment 3,236,121 2,892,145

14 Intangible Assets

Software Easements Total $’000 $’000 $’000

Year ended 30 June 2009 Net carrying amount at 1 July 2008 30,327 9,992 40,319 Additions 22,758 653 23,411 Disposals (6) – (6) Amortisation (14,626) – (14,626)

Net carrying amount at 30 June 2009 38,453 10,645 49,098

Year ended 30 June 2008 Net carrying amount at 1 July 2007 38,729 9,180 47,909 Additions 7,24 4 812 8,056 Amortisation (15,646) – (15,646)

Net carrying amount at 30 June 2008 30,327 9,992 40,319

At 30 June 2009 Cost (gross carrying amount) 139,876 10,645 150,521 Accumulated amortisation and impairment (101,423) – (101,423)

Net carrying amount at 30 June 2009 38,453 10,645 49,098

At 30 June 2008 Cost (gross carrying amount) 139,693 9,992 149,685 Accumulated amortisation and impairment (109,366) – (109,366)

Net carrying amount at 30 June 2008 30,327 9,992 40,319

88 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

15 Employee Benefits – Superannuation

(a) Superannuation plans Integral Energy has a defined benefit superannuation plan covering a significant number of employees, which requires contributions to be made to a separately administered fund. The superannuation plan provides for defined benefits based on years of service and final average salary. Employees contribute to the plan at various percentages of their wages and salaries. Integral Energy also contributes to the plan, generally at the rate of twice the employees’ contributions. Contributions by Integral Energy of up to 9% of employees’ wages and salaries are legally enforceable in Australia. The following tables summarise the components of net benefit expense recognised in the Income Statement and the funded status and amounts recognised in the Balance Sheet for the plan.

Accounting policy for recognising actuarial gains/losses Actuarial gains and losses are recognised in profit or loss in the year they occur.

General description of the type of plan The Energy Industries Superannuation Scheme Division B Division C Division D These Divisions are all defined benefit schemes – at least a component of the final benefit is derived from a multiple of member salary and years of membership. All divisions are closed to new members.

(b) Amounts recognised in the Income Statement

2009 2008 $’000 $’000

Amounts recognised in the Income Statement are as follows: Net superannuation expense (7,953) (10,808)

Total included in employee benefits revenue/(expense) (7,953) (10,808)

Assets invested in entity or in property occupied by the entity All Scheme assets are invested by the trustee at arm’s length through independent Scheme managers.

(c) Amounts recognised in the Balance Sheet

Amounts recognised in the Balance Sheet are as follows: Present value of defined benefit obligation (294,602) (283,014) Fair value of plan assets 233,120 290,066

Net superannuation asset/(liability) (61,482) 7,052

(d) Reconciliation of the present value of defined benefit obligation

Changes in the present value of the defined benefit obligation are as follows: Opening present value of defined benefit obligation 283,014 287,875 Current service cost 11,522 16,405 Interest cost 18,765 18,486 Contributions by scheme participants 4,502 4,456 Actuarial (gains)/losses (3,467) (26,323) Benefits paid (19,734) (17,885)

Closing present value of defined benefit obligation 294,602 283,014

89 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

715 Employee Benefits – Superannuation continued (e) Reconciliation of the fair value of scheme assets

2009 2008 $’000 $’000

Changes in the fair value of plan assets are as follows: Opening fair value of plan assets 290,066 322,730 Expected return on fund assets 22,334 24,083 Actuarial gains/(losses) (74,369) (53,389) Employer contributions 10,320 10,071 Contributions by fund participants 4,502 4,456 Benefits paid (19,733) (17,885)

Closing fair value of plan assets 233,120 290,066

(f) Amounts recognised in Income Statement

Amounts recognised in profit or loss are as follows: Current service cost 11,522 16,405 Interest cost 18,765 18,486 Expected return on plan assets (22,334) (24,083)

Expense/(income) recognised in profit or loss 7,953 10,808

The superannuation expense recognised in the Income Statement is included in the line item ‘total other expenses relating to operating activities’. Superannuation actuarial losses of $70.9m (2007–08 $27.1m) are separately identified in the Statement of Recognised Income and Expense. The cumulative amount of actuarial gains and losses recognised in the Statement of Recognised Income and Expense since 1 July 2004 is a net loss totalling $80.0m. Prior to 1 July 2004 and the adoption of AEIFRS, it is not practical to determine the cumulative actuarial gain/loss as if the new policy had always been applied, given that actuarial gains and losses were not separately identified and accumulated, and the superannuation expense was calculated on a different basis.

(g) Actual return on plan assets

2009 2008 $’000 $’000

Actual return on plan assets (50,439) (29,802)

(50,439) (29,802)

(h) Valuation method and principal economic assumptions The Projected Unit Credit (PUC) valuation method was used to determine the present value of defined benefit obligations and related current service costs. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The principal actuarial assumptions used in determining pension and post-employment benefit obligations for the Corporation’s plans are shown below (expressed as weighted average):

2009 2008 % %

Discount rate 5.35 6.19 Anticipated return on plan assets 7.78 7.00 Expected future salary increases 4.00 6.00 Future CPI increases 2.50 2.50

90 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

15 Employee Benefits – Superannuation continued

(i) Arrangements for employer contributions for funding The following is a summary of the 30 June 2009 financial position of the Scheme, calculated in accordance with AAS25 Financial Reporting by Superannuation Plans.

2009 2008 $’000 $’000

Accrued benefits 253,178 269,770 Net market value of Scheme assets (233,120) (290,066)

Net (surplus)/deficit 20,058 (20,296)

Recommended contribution rates for the entity are: Div B = 1.90 x member contributions Div C = 2.5% x salaries Div D = 1.64 x member contributions The method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding method. The method adopted affects the timing of the cost to the employer. Under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions.

(j) Nature of asset/liability If a surplus exists in the employer’s interest in the Scheme, the employer may be able to take advantage of it in the form of a reduction in the required contribution rate, depending on the advice of the Scheme’s actuary. Where a deficiency exists, the employer is responsible for any difference between the employer’s share of Scheme assets and the defined benefit obligation.

(k) Percentage contribution of each major class of total plan assets The percentage contribution of each major class of total plan assets comprises:

2009 2008 % %

Australian equities 34.30 37.60 Property 6.10 3.20 Australian fixed-interest securities 9.00 10.70 Overseas equities 33.10 34.00 Overseas fixed-interest securities 6.90 6.30 Cash 6.10 6.00 Other 4.50 2.20

100.00 100.00

All scheme assets are invested by the Trustees at arm’s length through independent managers. The expected return on assets assumption is determined by weighting the expected long term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees. In addition to normal contributions, Integral Energy expects to contribute an amount of $5.7m to the defined benefits plan for the year ended 30 June 2010, as advised by the Scheme’s actuary.

91 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

716 Trade and Other Payables

2009 2008 $’000 $’000

Trade payables 29,343 26,151 Accruals 249,921 196,946 Other payables 11,539 10,022

Total current trade and other payables 290,803 233,119

Trade payables 46,627 –

Total non-current trade payables 46,627 –

Trade and other payables are non-interest bearing and are normally settled within 35.0 days. The net of GST payable and GST receivable is remitted to the appropriate tax body on a monthly basis.

17 Other Current Liabilities

2009 2008 $’000 $’000

Deposits and retentions 24,654 26,081 Unearned income 3,627 3,934

Total other current liabilities 28,281 30,015

18 Borrowings

Effective 2009 2008 interest rate $’000 $’000

Current Unsecured bank loans Floating rate loans 3.2% 382,000 360,500 Fixed rate loans 6.3% 184,561 46,010

Total current borrowings 566,561 406,510

Non-current Unsecured bank loans Fixed rate loans 6.3% 1,697,865 1,494,008

Total non-current borrowings 1,697,865 1,494,008

Bank loans are unsecured and repayable in full on various maturity dates. Interest rates are based on weighted average effective rates on the entire debt.

92 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

19 Provisions

(a) Movement in carrying amounts

Employee Benefits Self Insurance Other Total $’000 $’000 $’000 $’000

Opening balance at 1 July 2008 179,066 7,680 11,884 198,630 Additional provisions 89,124 2,608 64,406 156,138 Utilised during the period (64,359) (1,174) (6,697) (72,230) Reversed during the period – (45) (405) (450)

At 30 June 2009 203,831 9,069 69,188 282,088

(b) Analysis of Total Provisions

2009 2008 $’000 $’000

Current 127,802 111,236 Non-current 154,286 87,394

Total provisions 282,088 198,630

Included within the current provision for employee benefits are amounts totalling $75.7m that are expected to be settled after more than 12 months. Self insurance provisions include workers compensation. Other provisions include $61.5m relating to the Defined Benefits Superannuation liability. The balance is not detailed due to commercial and legal sensitivity.

20 Other Non-Current Liabilities

2009 2008 $’000 $’000

Deposits and retentions 4,268 4,905 Deferred income – 754

Total other non-current liabilities 4,268 5,659

21 Reserves

(a) Asset Revaluation Reserve The asset revaluation reserve is used to record increments and decrements in the fair value of property, plant and equipment to the extent that they offset one another. The reserve can only be used to pay dividends in limited circumstances. Refer to the Statement of Changes in Equity for movements in the asset revaluation reserve during the period.

(b) Hedge Reserve The hedge reserve records revaluations of items designated as hedges. Refer to the Statement of Changes in Equity for movements in the hedge reserve during the period.

93 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

722 Financial Instruments (a) Financial risk management objectives and policies Integral Energy’s principal financial instruments comprise cash, trade debtors, trade creditors, short term deposits, bank loans and derivatives. The main purpose of these financial instruments is to raise finance or invest surplus cash for the Corporation’s operations, and to manage exposure to price movements. Integral Energy’s Treasury function, Financial Risk function, Treasury Committee and Board manage the Corporation’s exposure to key financial risks including interest rate risk, liquidity risk, electricity price risk and credit risk, in accordance with the Board’s financial risk management policies. The Board reviews and agrees policies for managing each of the key financial risks by approving an annual Debt Funding Strategy paper and receiving regular updates with respect to the management of the debt portfolio, and a monthly energy risk management paper providing updates of the management of the electricity trading portfolio.

(b) Credit risk Credit risk is the risk of financial loss arising from another party to a contract, or financial position failing to discharge a financial obligation thereunder. Integral Energy’s maximum exposure to credit risk is represented by the carrying amounts of the financial assets included in the Balance Sheet. Integral Energy’s Treasury and Financial Risk function control risk through the use of external credit ratings which are used to derive risk limits as approved by the Board of Directors, and monitoring procedures. On occasion Integral Energy may require collateral or other security to support financial instruments with credit risk. Integral Energy does not have any significant exposure to any individual customer or counterparty outside Board approved counterparty limits. Credit risks from derivative contracts recognised in the Balance Sheet is minimised due to Integral Energy having policies in place which prevent excessive counterparty concentration, and limit individual counterparty exposure based on an assessment of individual counterparties credit worthiness. Financial assets which are neither past due nor impaired have been transacted with approved creditworthy counterparties in accordance with Board approved financial risk management policies, and are assessed on a continual basis.

(c) Electricity price risk Price risk is the risk that Integral Energy’s cash flows will be adversely affected by the movements in commodity prices that will increase the Australian dollar value of commodity payables. Integral Energy is exposed to price risk through electricity purchasing within the National Electricity Market (NEM) pool. Integral Energy purchases electricity from the NEM pool to meet customer load requirements. Price risk arises from the purchase of electricity at variable pool prices in the NEM. It is the responsibility of the Board to use a combination of risk management tools such as swaps, options and futures contracts transacted with market participants and energy trading operators to hedge the customer load and control exposure to NEM pool prices. Trading is performed under Board approved mandates which permit active portfolio management within regularly monitored risk limits. The limits consider measurements of Cashflow at Risk and Earnings at Risk, accompanied by Volumetrics Position Analysis. The following table summarises the impact of changes in commodity prices on the Corporation’s post-tax profit and equity. A 6% movement in electricity prices has been assumed, based on an average of market price movements over the preceding twelve months. All variables other than the commodity price are held constant in the summary below.

Price risk – impact of changes in prices

2009 2008

Profit Equity Profit Equity $’000 $’000 $’000 $’000

Change in electricity price 6% increase in electricity price 3,084 37,903 3,889 42,803 6% decrease in electricity price (3,084) (37,903) (3,889) (42,803)

Sensitivity to reasonably possible price movements in the above table reflect Integral Energy’s use of electricity derivatives within a portfolio to manage risk. Profit would be impacted as stated due to the use of contracts that, while representing viable hedges, cannot be designated in hedging relationships in accordance with the rules of AASB139 Financial Instruments: Recognition and Measurement. Equity movements are a reflection of the impact of changes in prices on derivatives that have been designated in cashflow hedging relationships.

94 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

22 Financial Instruments continued

(d) Interest rate risk Interest rate risk is the risk of a reduction in earnings and/or the net present value of the Corporation as a consequence of adverse movements in interest rates. Interest rate risk is managed by the Treasury function within Integral Energy. The Corporation’s exposure to market risk for changes in interest rates relates primarily to interest bearing liabilities as Integral Energy borrows funds at both fixed and floating interest rates. The Corporation’s policy is to manage its interest cost using a mix of fixed and variable rate debt, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal strategies are applied by either positioning the balance sheet or protecting interest expense through different interest rate cycles. The table below summarises the interest rate maturity profile of Integral Energy’s financial assets and liabilities.

<1 year 1–5 years >5 years Total $’000 $’000 $’000 $’000

2009 Floating rate Financial assets Cash and cash equivalents 11,825 – – 11,825 Financial liabilities Borrowings 382,000 – – 382,000 Derivative financial liabilities – interest rate swaps (60,000) 60,000 – – Fixed rate Financial liabilities Borrowings 184,561 713,504 984,361 1,882,426 Derivative financial liabilities – interest rate swaps 60,000 (60,000) – – 2008 Floating rate Financial assets Cash and cash equivalents 32 – – 32 Financial liabilities Bank overdraft 6,037 – – 6,037 Borrowings 360,500 – – 360,500 Derivative financial liabilities – interest rate swaps (65,000) – – (65,000) Fixed rate Financial liabilities Borrowings 46,010 625,603 868,405 1,540,018 Derivative financial liabilities – interest rate swaps – 65,000 – 65,000

Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument. Other financial instruments of the Corporation not included in the above tables are non-interest bearing and therefore not subject to interest rate risk. Exposure to interest rate risk arises primarily through the Corporation’s interest bearing liabilities. This risk is minimised by undertaking mainly fixed rate borrowings, primarily with NSW T-Corp. The Corporation does not account for any fixed rate financial instruments at fair value through profit or loss or as available for sale. These are accounted for at amortised cost. The only impact on profit or loss would be the change in interest rates on floating rate borrowings. A reasonably possible change of +/- 1% is used, consistent with current trends in interest rates. The basis will be reviewed annually and amended where there is a structural change in the level of interest rate volatility. The Corporation’s exposure to interest rate risk is set out below.

95 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

722 Financial Instruments continued

-1% +1% Carrying Amount Profit Equity Profit Equity $’000 $’000 $’000 $’000 $’000

2009 Financial assets Cash and cash equivalents 11,825 (118) – 118 – Derivative financial assets – cash flow hedges 2,437 (1,150) – 1,150 – Financial liabilities Borrowings 2,264,426 3,820 – (3,820) – Derivative financial liabilities – cash flow hedges 1,794 1,150 – (1,150) –

2008 Financial assets Cash and cash equivalents 32 – – – – Derivative financial assets – cash flow hedges 5,541 (1,800) – 1,800 – Financial liabilities Bank overdraft 6,037 60 – (60) – Borrowings 1,900,518 3,605 – (3,605) – Derivative financial liabilities – cash flow hedges 3,687 1,150 – (1,150) –

The Corporation’s sensitivity to interest rates has increased during the current year mainly due to the increase in the amount of variable rate borrowings and increases in interest rate contracts.

(e) Foreign exchange risk Foreign exchange transaction risk is the risk that the Corporation’s cash flows will be adversely affected by movements in the exchange rate that will increase the Australian dollar value of foreign currency payables or diminish the Australian dollar value of foreign currency receivables. Integral Energy’s exposure to foreign currency risk is minimal and the Treasury department limits this risk by entering into foreign currency options and forward foreign exchange contracts. The foreign currency risk is immaterial in terms of a possible impact on profit and loss or total equity and, as such, a sensitivity analysis has not been completed.

96 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

22 Financial Instruments continued

(f) Liquidity risk Liquidity risk is associated with ensuring the availability of sufficient funds to meet the Corporation’s financial commitments in a timely manner. Liquidity risk is managed by the Treasury function. Treasury maintains a balance between continuity of funding and flexibility through the use of bank overdrafts and debt. The Corporation’s funding requirements and strategy is reviewed annually and monitored on an ongoing basis. The Corporation manages debt via a duration approach. At 30 June 2009 the Corporation’s debt duration was within the policy limit approved by the Board. During the current and prior year no assets have been pledged as collateral. Liquidity risk management with regard to electricity derivatives is managed by ensuring Integral Energy has sufficient funds available to settle its commitments to counterparties.

Contractual maturities

< 1 year 1–5 years > 5 years Total $’000 $’000 $’000 $’000

2009 Financial Liabilities Trade and other payables 290,803 46,627 – 337,430 Borrowings 566,561 713,504 984,360 2,264,425 Derivative financial liabilities – electricity derivatives 35,004 28,571 – 63,575

Total financial liabilities 892,368 788,702 984,360 2,665,430

2008 Financial liabilities Bank overdraft 6,037 – – 6,037 Trade and other payables 233,119 – – 233,119 Borrowings 406,510 625,603 868,405 1,900,518 Derivative financial liabilities – interest rate swaps (65,000) 65,000 – – Derivative financial liabilities – electricity derivatives 8,234 13,091 – 21,325

Total financial liabilities 588,900 703,694 868,405 2,160,999

(g) Net Fair Value The following table sets out the fair values and carrying amounts of each financial asset and financial liability carried in the financial statements, where these amounts differ.

2009 2008

Carrying Carrying amount Net fair value amount Net fair value $’000 $’000 $’000 $’000

Financial liabilities Borrowings – floating rate 382,000 384,268 360,500 363,401 Borrowings – fixed rate 1,883,843 1,921,603 1,540,018 1,504,214

Total financial liabilities 2,265,843 2,305,871 1,900,518 1,867,615

Where available, fair value is determined directly through the use of market quoted prices. Valuation techniques are used to varying degrees for financial instruments where direct market quotes are not available. Exchange traded instruments are recorded at closing market prices. Fair value is calculated on the basis of discounted cash flows at an assumed discount rate for swap transactions using published market prices as the basis for deriving a continuous forward price curve. Over the counter option instruments are valued with reference to quoted market prices.

97 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

722 Financial Instruments continued (h) Hedge accounting – cash flow hedges At 30 June 2009 Integral Energy held swaps, options and futures contracts to reduce the exposure of the Corporation to the NEM pool prices. The cash flows are expected to occur, and will enter into the determination of profit and loss over forthcoming years ending 2014. Due to the variability in total usage estimates for customers, forecast purchases of electricity fluctuate. These fluctuations are reflected in the hedged item. During the period ending 30 June 2009 a reduction has been experienced in a limited number of periods due to a deferral in the roll off of the Electricity Tariff Equalisation Fund (ETEF), which has resulted in de-designation of hedging relationships during those periods since the forecast transaction is no longer expected to occur. Movement in swaps and futures contract cash flow hedge reserve (net of tax)

2009 2008 $’000 $’000

Opening balance 65,464 383,424 Amounts recognised in equity (99,705) (317,771) Amounts removed from equity and recognised in profit & loss (1,673) (189)

Closing balance (35,914) 65,464

23 Detailed Statement of Changes in Equity

Asset Revaluation Contributed Equity Retained Earnings Reserve Hedge Reserve Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance – 335,046 335,046 179,417 149,064 458,331 464,077 65,464 383,424 1,038,258 1,331,611 1 July Profit for the year – – 142,190 172,377 – – – – 142,190 172,377 Superannuation actuarial losses – – (70,901) (27,065) – – – – (70,901) (27,065) Asset revaluation – – – – (21,202) (5,478) – – (21,202) (5,478) Swap hedge revaluation – – – – – – (144,826) (454,228) (144,826) (454,228) Transfers to retained earnings – – 4 2,728 (4) (2,728) – – – – Income tax on items taken directly to equity – – 21,271 7,305 6,361 2,460 43,448 136,268 71,080 146,033 Dividends paid or provided for – – (103,619) (124,992) – – – – (103,619) (124,992)

Closing balance – 30 June 335,046 335,046 168,362 179,417 443,486 458,331 (35,914) 65,464 910,980 1,038,258

98 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

24 Contingent Liabilities and Contingent Assets

(a) Contingent Assets

2009 2008 $’000 $’000

Sundry General Claims 1,500 5,418

1,500 5,418

(b) Contingent Liabilities

2009 2008 $’000 $’000

Self Insurance 2,320 223 WorkCover Authority 2,925 3,700 Sundry General Claims 3,540 2,366

8,785 6,289

The contingent asset relates to a contractual dispute and recovery of workers compensation. The contingent liabilities relate to injury claims (self insurance), possible penalties and legal costs (WorkCover Authority), and other employment related claims (sundry general claims). The directors are not aware of any circumstances or information that would lead them to believe that the above contingent liabilities will crystallise, and consequently no provisions are included in the accounts in respect of these matters.

25 Expenditure Commitments

(a) Operating Expenditure Commitments

2009 2008 $’000 $’000

Estimated operating expenditure contracted for at reporting date, but not provided for, payable: Within one year 204,705 143,201 After one year but not more than five years 288,366 338,045 More than five years 182,124 142,698

Total operating expenditure commitments 675,195 623,944

(b) Lease Expenditure Commitments

Operating leases (non-cancellable): Within one year 1,367 1,543 After one year but not more than five years 3,442 3,764 More than five years 1,219 2,264

Total lease expenditure commitments 6,028 7,571

(c) Capital Expenditure Commitments

Estimated capital expenditure contracted for at reporting date, but not provided for: Within one year 185,232 219,052 After one year but not more than five years 989 5,159

Total capital expenditure commitments 186,221 224,211

99 Notes to the Financial Statements For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

725 Expenditure Commitments continued (d) Smithfield Energy Purchase Contract Operating Expenditure Commitments

2009 2008 $’000 $’000

Estimated operating expenditure contracted for at reporting date, but not provided for: Within one year 88,386 88,240 After one year but not more than five years 359,383 355,615 More than five years 1,154,868 1,341,957

Total Smithfield energy purchase contract operating expenditure commitments 1,602,637 1,785,812

The Corporation leases property under operating leases expiring from one to five years. Leases generally provide the entity with a right of renewal, at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. Capital expenditure commitments relate primarily to works to be performed under the Strategic Asset Management Program. Smithfield energy purchase commitments relate to a 30 year Power Purchase Agreement (PPA) entered into in 1995 by Integral Energy’s predecessor Prospect Electricity. The PPA, with the Smithfield Power Partnership, is for the purchase of electricity from a 160-megawatt natural gas-fired power plant. The plant, which began operating in 1997, produces around 1 million megawatt-hours per annum. The PPA expires in June 2027. Total expenditure commitments include input tax credits of $223.8m (2007–08: $239.4m) which are expected to be recovered from the Australian Taxation Office.

26 Events After the Balance Sheet Date There has not arisen, in the interval between the end of the financial period and the date of this report, an event of a material and unusual nature likely, in the opinion of the Directors of the Corporation, to affect significantly the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity, in subsequent financial years.

27 Auditor’s Remuneration

2009 2008 $’000 $’000

Amounts received or due and receivable by the Auditor-General for: – Auditing the Financial Report 311 323

Total auditor's remuneration 311 323

100 Integral Energy Annual Performance Report 2008–09 Notes to the Financial Statements For the year ended 30 June 2009

Annual Performance Report 2008–09

28 Key Management Personnel

(a) Directors’ Appointments The following information is provided regarding appointment of Non-Executive Directors:

Re-appointments John Fahey (re-appointed 1 March 2009) Paul Sinclair (re-appointed 13 October 2008)

Continuing Directors Michael McLeod Terry Downing Penny Le Couteur Vince Graham (Chief Executive Officer – Executive Director)

(b) Key Management Personnel Remuneration

Superannuation Non-cash Salaries & Fees Contribution At-risk payment Benefits Total $’000 $’000 $’000 $’000 $’000

2009 Total remuneration 3,416 359 463 125 4,363

2008 Total remuneration 2,757 302 435 110 3,604

The at-risk payment for 2008–09 and 2007–08 relates to payments in relation to the 2007–08 and 2006–07 financial years respectively.

29 Prudential Requirements An unsecured Bank Guarantee of $125.2m (2007–08: $301.5m) is given to the National Electricity Marketing Management Co. Ltd. (NEMMCO) by way of a New South Wales Treasury Corporation guarantee. The guarantee is a condition of Integral Energy Australia’s trading licence.

30 Related Party Transactions

Directors The name of each person who held or is holding the position of director of Integral Energy during the financial period is set out in Note 28 above. Details of directors’ remuneration is set out above. There were no declared director related party transactions for the 2008–09 financial year.

31 Energy Reform On 5 March 2009, the NSW Government released the New South Wales Energy Reform Strategy, which has the primary objective of optimising the conditions to ensure private sector investment in generation capacity in New South Wales is adequate, economic and timely. The Government’s reforms include maintaining public ownership of existing power stations and electricity transmission and distribution networks; transferring the electricity retailing operations of Energy Australia, Integral Energy and Country Energy to the private sector; selling a number of potential development sites for new power stations; and contracting to the private sector the right to sell electricity produced by the State- owned generators, namely Delta Electricity, Macquarie Generation and Eraring Energy (the Gentrader model).

End of audited Financial Statements

101 Statement by Directors For the year ended 30 June 2009 Annual Performance Report 2007–08 Annual Performance Report 2008–09

7Pursuant to Section 41C of the Public Finance and Audit Act 1983, we state that in the opinion of the Directors of Integral Energy Australia: (a) the accompanying financial statements and notes are a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, the State Owned Corporations Act 1989, the Public Finance and Audit Act 1983 and the Public Finance and Audit Regulation 2005, and Accounting Interpretations, and give a true and fair view of the financial position of Integral Energy Australia as at 30 June 2008 and its financial performance for the year ended on that date. (b) At the date of this statement, there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and payable. (c) We are not aware of any circumstances at the date of this statement that would render any particulars included in the financial report to be misleading or inaccurate. This declaration is made in accordance with a resolution of the Board of Directors.

Vince Graham Michael McLeod Director Director 2 September 2009 2 September 2009

102 Integral Energy Annual Performance Report 2008–09 Annual Performance Report 2008–09

CONTENTS Page Five-year statistical table 104 Australian Financial Services Licence 105 Board Code of Conduct 105 Consultants 105 Code of Ethics and corporate values 106 Credit card certification 107 Customer service guarantees 107 Disclosure of approved exemptions 108 Electronic service delivery 109 Executive remuneration and performance 109 Freedom of information 110 Funds granted to non-government organisations 115 Heritage management 115 Implementation of price determinations 116 Multicultural Policies and Services Program 119 Nightwatch 120 Notifications to the Independent Commission Against Corruption 120 Publications 120 Overseas travel 121 Summary of legislative changes and significant judicial decisions 122 Location addresses 125 Contact details 126 Glossary 127

103 Appendices

Annual Performance Report 2008–09

8Five-Year Statistical Table

(1) 2004-05 2005-06 2006-07 2007-08 2008-09

EFFICIENCY Employment (2) 2,298 2,457 2,593 2,760 2,871 Output/employee (GWh) (3) 7.5 7.2 6.9 6.5 6.2 Sales revenue ($'000) (4) 1,185,429 1,259,831 1,368,075 1,705,953 1,852,002 Customer/employee ratio (5) 364.2 348.1 331.7 316.8 304.2 Operating cost/unit sold ($/MWh) (6) 27.2 26.5 26.2 30.3 32.5 Operating cost/customer (7) 553.6 547.3 547.3 624.1 660.3 System loss index (%) (8) 5.1 5.4 5.4 4.8 4.4 Days sick leave/employee 6.3 6.7 5.8 6.4 6.8 Lost time incidents 28 26 24 19 17

EFFECTIVENESS Output (GWh) (9) 16,833 17,197 17,483 17,4 40 17,426 Supply reliability (minutes) (10) 86.3 95.9 94.1 97.8 89.3 Customer service indicator (11) Target 80% 80% 82% 82% 82% – 84% Result 78% 81% 83% 83% 83%

FINANCIAL INDICATORS EBIT ($m) 252.2 300.2 346.8 367.3 355.7 Operating profit after tax ($m) 132.7 138.6 153.2 172.4 142.2 Revenue ($m) (12) 1,353.8 1,434.3 1,538.9 1,848.1 1,998.4 Return on assets (%) (13) 8.8 9.8 9.6 9.2 8.7 Return on equity (%) (14) 13.6 15.6 13.9 14.6 14.6 Asset base ($m) 2,978.5 3,179.4 4,067.9 3,918.7 4,305.7 Asset sales ($m) (15) 7.6 7.2 7.6 9.6 4.1 Financial distribution ($m) 148.3 169.1 193.0 191.7 167.1 Tax equivalent ($m) (16) 34.2 65.2 86.0 66.7 63.4 Dividend payment ($m) 114.1 103.9 107.0 125.0 103.6 Gross external debt ($m) 1,196.7 1,381.6 1,531.5 1,900.5 2,264.4 Gearing ratio (%) (17) 57.3 61.0 53.6 64.7 71.3 Times interest earned (18) 3.0 3.1 3.2 2.9 2.4 Social programs ($m) (19) 20.7 20.6 19.7 21.1 24.0

Prior year statistics may have (7) Operating expenditure including (12) Revenue includes sales revenue and other changed in line with amendments depreciation and amortisation but income, including capital contributions. excluding finance costs, divided by the to comparative financial statement average number of network customers. (13) EBIT divided by the average asset base. disclosures and amended definitions, (14) Operating profit after tax divided by to ensure consistency on an (8) Energy imported less energy sold, divided by energy imported. For 2007–08 energy average equity. annual basis. imported has been reduced by the impact (15) Total proceeds from asset sales. (1) All dollar amounts are reported of a one-off unread meters adjustment. in real dollars. (16) Defined as income tax expense per (9) Network sales (GWh) including accruals NSW Treasury. (2) Full time equivalent staff as at 30 June. and off peak bulk transfers. For 2007–08 GWh have been reduced by the impact of (17) Debt divided by debt plus equity. (3) Network GWh sold per average number the one-off unread meters adjustment. of FTE employees. (18) Times interest earned calculated by (10) Average minutes per customer per year adding the net interest expense to the (4) Sales revenue includes total electricity sales without supply for unplanned outages. profit before income tax and dividing by and network use of system income only. the net interest expense. (11) Factors contributing to the calculation (5) Average network customers per average include the number of issues with EWON, (19) Based on reimbursement of Community number of FTE employees. the percentage of complaints closed Service Obligations (CSOs). within 30 days and the percentage of (6) Operating expenditure including customer service guarantee breaches. depreciation and amortisation but excluding finance costs, divided by number of units sold. 104 Integral Energy Annual Performance Report 2008–09 Appendices

Annual Performance Report 2008–09

Australian Financial The Financial Services Governance 8. A director has an obligation to Services Licence Committee also oversees compliance be independent in judgement Integral Energy holds an Australian with the Anti-Money Laundering and actions and to take all Financial Services Licence effective and Counter-Terrorism Financing reasonable steps to be satisfied from 1 July 2005. The licence Act 2006. as to the soundness of all authorises Integral Energy to provide decisions taken by the board. Board Code of Conduct financial advice, deal and/or make 9. Confidential information a market in financial products and Reviewed and approved by the Board received by a director in the miscellaneous financial products to of Directors 3 December 2008. course of the exercise of wholesale clients. 1. A director must act honestly, directorial duties remains the The Financial Services Governance in good faith and in the best property of the organisation Committee, established in 2005–06 interests of Integral Energy as from which it was obtained to monitor licence compliance a whole. and it is improper to disclose and good governance, reports to it, or allow it to be disclosed, 2. A director has a duty to use due the Retail Risk Board Committee unless the disclosure has been care and diligence in fulfilling monthly. The Committee met eleven authorised by that organisation, the functions of the office and times in 2008–09 and reported to or the person from whom the exercising the powers attached the Retail Risk Board Committee information is provided, or is to that office. that obligations under the licence required by law. had been complied with as far as 3. A director must use the powers 10. A director should not engage in reasonably practical. of office for a proper purpose, conduct likely to bring discredit and in the best interests of A number of employees have been upon Integral Energy. Integral Energy as a whole. nominated as representatives for the 11. A director has an obligation, purpose of the Australian Financial 4. A director must recognise that at all times, to comply with the Services Licence and have been the primary responsibility is to spirit, as well as the letter, of the trained extensively on the workings Integral Energy’s shareholders law and with the principles of of the licence. as a whole, but should, where this Code and Integral Energy’s appropriate, have regard for the Integral Energy must comply with Code of Ethics. interests of all stakeholders. the licence conditions and inform the Australian Securities and 5. A director must not make Consultants Investments Commission of any improper use of information In 2008–09, consultancy projects reportable breaches of the licence acquired as a director. cost a total of $1.56 million conditions within ten working compared with $2.32 million in 6. A director must not take days. Potential breaches of licence 2007–08. Major projects, improper advantage of the conditions are fully investigated by costing a total of $1.51 million, position of director. a subcommittee of the Financial are listed below. Services Governance Committee. 7. A director must appropriately The Financial Services Governance declare and manage any Committee determined that none conflicts between personal of the potential breaches identified interests, or the interests of during 2008–09 were reportable any associated person, and the breaches of the licence conditions. interests of Integral Energy.

Major consultancy projects, 2008–09

Consultant Purpose

KPMG To provide technical consulting on the strategic procurement review Gibson Quai – AAS Assistance with the delivery of a Smart Grid Communication strategy Langdale Consultants To provide IT technical consulting services for the IAIMS program CECG To provide support for 2009 Network Determination Emergence Consulting To provide technical support re AFSL compliance Energy Network Association To provide support for 2009 Network Determination Charles River & Associates To provide support for 2009 Network Determination and assistance with the 2008 “D-factor” submission SAHA International To provide technical services for Network Pricing Tariff Methodology and support for 2009 Network Determination Farrier Swier Consulting To provide support for 2009 Network Determination

105 Appendices

Annual Performance Report 2008–09

8Code of Ethics and Management by fact Respect for people corporate values Management by fact forms the At Integral Energy we respect a The Integral Energy Code of Ethics backbone of our approach to ‘fair go for all’. This value is crucial provides a set of principles and planning and decision making. It to the personal and professional values designed to guide staff encompasses our use of all available standards expected in our behaviour and business operations. information to make objective, workplace. It means we: In pursuit of Integral Energy’s impartial and confident business • Respect the principles of equal corporate objectives, the Board, decisions and open and honest employment opportunity management and staff have disclosure of relevant information adopted eight key statements to to our shareholders and customers. • Acknowledge and value diversity describe our core values. We respect the confidentiality of in culture and opinion certain business information and do • Offer opportunities for Safety excellence not use this inappropriately. promotion on merit Integral Energy’s safety commitment is to zero accidents, Enterprising spirit • Cultivate an environment of injuries and occupational illnesses. Integral Energy is committed to trust through open and honest This commitment is supported by: fostering an enterprising spirit in communication its people. • Making safety our first priority • Promote self-improvement This pioneering ‘can-do’ attitude and skills development • A belief that all accidents is core to our business growth and are preventable • Encourage effective success. It means we are open to empowerment, teamwork and • Working safely as a condition fresh thinking and new ideas, and participative decision making of employment encourage effort and learning in our people to stimulate creativity. We • Continually reviewing our safety • Not taking shortcuts will pursue opportunities for business standards to ensure a healthy and • Not accepting unsafe behaviour change while managing risks. safe environment for our staff, our customers and the community. • Expecting personal accountability In order to encourage our people for safety from everyone. to find solutions creatively, support Accountability and responsibility will be provided from management Complementing the value of We will live this value by learning for teamwork and collaborative ‘Respect for people’, and the how to work safely; maintaining frameworks, underpinned by the personal and professional workplace awareness in all tasks; having an recognition of the contribution standards it demands, we take orderly work area; checking for of our people and their value to responsibility and accountability and fixing hazards; coming to work the business. free of drugs and alcohol that for our actions, and maintain the could impair performance; taking integrity of performance within Customer commitment action to correct unsafe working our area of responsibility. In all practices; looking for opportunities Integral Energy’s vision is to be our business dealings, we will to participate in and improve safety Australia’s best performing energy promote trust, openness, teamwork, performance; and immediately business by focusing on delivering professionalism and pride in reporting all near misses, incidents, superior value to our customers what we do. injuries and occupational illnesses. and our shareholders now and into the future. This means taking Sustainable outcomes personal responsibility to deliver Integrity Integral Energy recognises a standard of service that goes the significant corporate At all levels of the organisation and beyond our customers’ expectations responsibilities we carry as a in all its business dealings, Integral and exceeds the service provided leading energy business. Energy aims to act with honesty by our competitors. and to achieve the highest level As a responsible corporate citizen, of integrity. This means setting In providing this service we have we strive for sustainable outcomes consistent policies, and maintaining a responsibility to deal in a fair, by balancing the ‘triple bottom line’ soundness of moral principle open and honest way with all our interests of financial, environmental and character. customers, to review challenge and social responsibilities in order to and improve work practices and ensure long-term business success. We each have a responsibility processes which stand in the way Our commercial success ensures to ensure that Integral Energy’s of better standards of customer a sustainable economic future for resources are used properly, and service, and to recognise that, in all stakeholders. that our business dealings are free the end, customer loyalty depends from conflicts of interest. We will on individual relationships with We operate in a way that meets take ownership and responsibility our customers. the needs of the present without for our actions and demonstrate compromising the ability of future outstanding leadership as an generations to meet their own needs. example to others.

106 Integral Energy Annual Performance Report 2008–09 Appendices

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Credit card certification Integral Energy’s corporate and purchasing card program is governed by approved policies and procedures that were developed having regard to the Treasury Circular 05/06 Credit card Use – Best Practice Guide published in August 2005 (originally published in 1999). A copy of the certification is below.

Customer service guarantees Customer service guarantee payments for unplanned outages 2008–09

Payments based on duration Payments based on frequency Claims not paid

Metropolitan 5 Nil 9 Non-metropolitan 32 Nil 4

107 Appendices

Annual Performance Report 2008–09

8Disclosure of approved exemptions

Reference Requirement Comment

s. 41B(c) PF&AAa Financial statements Exemption from preparing manufacturing, trading, and profit and loss statements. Integral Energy is required to prepare a summarised Operating Statement, summarising major categories of revenues and expenses.

Schedule 1, Part 1: PF&AA (General) Item 2 Notes: Income and expenditure amounts set aside for renewal or replacement of fixed assets Item 4 Amounts set aside to any provision for known commitments Item 6 Amount appropriated for repayment of loans, advances, debentures or deposits Item 13 Material items of income and expenditure Integral Energy is required to summarise the items of on a program or activity basis revenue and expenses on a program or activity basis.

s. 7(1)(a)(iii) ARSBAb Budgets: detailed budget for the year reported on; outline budget for next year

cl. 6 ARSBRc Particulars of material adjustments to detailed budget for the year reported on

s. 7(1)(a)(iv) ARSBA Summary Review of Operations Exemption subject to the following condition: comments and information relating to the summary review of operations are to be disclosed in a summarised form.

Schedule 1 ARSBR Management and Activities Exemption subject to the following condition: comments and information relating to ‘management and activities’ are to be disclosed in a summarised form.

Schedule 1 ARSBR Research and Development

Schedule 1 ARSBR Human Resources Exemption subject to the following condition: overseas visits with the main purposes highlighted are required to be disclosed.

Schedule 1 ARSBR Consultants Exemption subject to the following condition: the total amount spent on consultants is to be disclosed along with a summary of the main purposes of the engagements, together with a list of single consultancies with a value exceeding $30,000.

Schedule 1 ARSBR Land Disposal

Schedule 1 ARSBR Consumer Response Exemption subject to the following condition: comments and information relating to consumer response are to be disclosed in a summarised form.

Schedule 1 ARSBR Time for Payment of Accounts As above.

Schedule 1 ARSBR Report on Risk Management and Exemption subject to the following condition: comments Insurance Activities and information are to be disclosed in a summarised form.

Schedule 1 ARSBR Disclosure of Controlled Entities Exemption subject to the following condition: the names of the controlled entities are to be disclosed along with a summarised disclosure of the controlled entities’ objectives, operations and activities, and measures of performance.

cl. 12 ARSBR Investment Management Performance

cl. 13 ARSBR Liability Management Performance

s. 7(1)(a)(ia) ARSBA Financial Statement of Controlled Entities Exemption from preparing manufacturing and trading statements. Integral Energy is required to prepare a summarised Operating Statement (i.e. summarising major categories of revenues and expenses).

a Public Finance and Audit Act 1983; b Annual Reports (Statutory Bodies) Act 1984; c Annual Reports (Statutory Bodies) Regulation 2005

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Electronic service delivery

Integral Energy website Integral Energy continues to evolve the on-line customer experience of its website www.integral.com.au to ensure: • The general public is provided with all relevant information on energy-related areas, including products, education, safety and efficiency • All product, bill payment options and price changes are readily available and located • Key network, safety and community documents are accessible.

Electronic tendering system Integral Energy manages all of its tenders using an electronic tendering solution provided by TenderLink Pty Ltd. The new solution overcomes the problems experienced in managing tenders received by email and significantly enhances probity and information security. In order to be eligible to receive request for tender and request for expressions- of-interest documents, suppliers must firstly register at the e-tendering portal https://www.tenderlink.com/integral/ Registration is free and relatively simple. Suppliers that are registered to use the solution will be notified immediately by email of all new open requests for tender in relation to categories for which they have registered. They will also have earlier access to all relevant documentation to better understand the scope and details of the request for tender.

Executive remuneration and performance

Remuneration paid to Performance Position 30 June 2009 payment a Comments

V. Graham Chief Executive Officer $558,600 $19,460 Organisational leadership, delivering improved safety, customer service and financial results. A. Flett General Manager Network $233,625 $33,190 Delivered the maintenance program. Asset Operations R. Howard Group General Manager $320,800 $32,170 Improved reliability and expanded capital Network delivery capability. K. Waldman General Manager Regulatory $210,071 $38,390 Led Integral Energy’s regulatory determination and Corporate Affairs 2009–14. B. Rowley General Manager Retail $305,200 $51,640 Successfully led Integral Energy’s retail business in a competitive and challenging market. I. White Company Secretary $280,300 $45,670 Delivered strong corporate governance and effective Board support. D. Lucas Group General Manager $353,000 $44,250 Led Integral Energy’s corporate strategy, Corporate Development IT services and innovation strategies. D. Ferguson General Manager Human $275,100 $41,380 Leadership of the Human Resources function. Resources J. Pizzinga Chief Financial Officer $372,067 $31,104 Financial stewardship of the organisation. L. Schenke Group General Manager $23,333 $0 Commenced employment 1 June 2009. Corporate Services

Total $2,932,096 $463,154 a Performance payments are based on an assessment of actual results in relation to corporate, business unit and individual performance. Achievements against objectives are reviewed by the Board.

Notes: Mr A. Flett concluded employment on 31 March 2009, and received an additional payment to the above of $35,306.84 for annual leave entitlements and $59,165.73 for long service leave entitlements on conclusion of appointment. He also received an additional payment of $187,453.70 as termination related payments. Ms K. Waldman concluded employment on 6 March 2009, and received an additional payment to the above of $27,560.43 for annual leave entitlements and $75,175.05 for long service leave entitlements on conclusion of employment. Mr. J. Pizzinga was back paid in August 2008 for commencing in the Chief Financial Officer role on 1 February 2008.

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8Freedom of information Freedom of information statistics In 2008–09 Integral Energy received nine new requests pursuant to the Freedom of Information Act 1989 (FOI Act). The FOI requests were received from members of the public, members of Parliament, lawyers and investigators. There were no internal reviews sought during the 2008–09 financial year. The Ombudsman was not involved in any matters involving requests under the FOI Act during the financial year, nor were there any appeals to the Administrative Decisions Tribunal in relation to any requests under the FOI Act. The following tables provide a summary of the responses to requests pursuant to the Freedom of Information Act 1989 (NSW).

Section A New FOI applications

Number of FOI applications How many FOI applications were Personal Other Total received, discontinued or completed? (previous year) (current year) (previous year) (current year) (previous year) (current year)

A1 New – 1 10 8 10 9 A2 Brought forward 1 – 1 1 2 1 A3 Total to be processed 1 1 11 9 12 10 A4 Completed 1 1 10 9 11 10 A5 Discontinued – – – – – – A6 Total processed 1 1 10 9 11 10 A7 Unfinished (carried forward) – – 1 – 1 –

Section B Discontinued applications

Number of discontinued FOI applications Why were FOI applications Personal Other Total discontinued? (previous year) (current year) (previous year) (current year) (previous year) (current year)

B1 Request transferred out to another agency (s.20) – – – – – – B2 Applicant withdrew request – – – – – – B3 Applicant failed to pay advance deposit (s.22) – – – – – – B4 Applicant failed to amend a request that would have been an unreasonable diversion of resources to complete (s. 25(1)(a1)) – – – – – – B5 Total discontinued – – – – – –

Section C Completed applications

Number of completed FOI applications Why were FOI applications Personal Other Total discontinued? (previous year) (current year) (previous year) (current year) (previous year) (current year)

C1 Granted or otherwise available in full – – 9 6 9 6 C2 Granted or otherwise available in part 1 1 1 1 2 2 C3 Refused – – – – – – C4 No documents held – – – 2 – 2 C5 Total completed 1 1 10 9 11 10

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Section D Applications granted or otherwise available in full

Number of FOI applications (granted or otherwise available in full) How were the documents made Personal Other Total available to the applicant? (previous year) (current year) (previous year) (current year) (previous year) (current year)

D1 Provided to the applicant – – 9 6 9 6 D2 Provided to the applicant’s medical practitioner – – – – – – D3 Available for inspection – – – – – – D4 Available for purchase – – – – – – D5 Library material – – – – – – D6 Subject to deferred access – – – – – – D7 Available by a combination of any of the reasons listed in D1–D6 above – – – – – – D8 Total granted or otherwise available in full – – 9 6 9 6

Note: Two applications are not included in the above table as Integral Energy did not hold the requested documents.

Section E Applications granted or otherwise available in part

Number of FOI applications (granted or otherwise available in part) How were the documents made Personal Other Total available to the applicant? (previous year) (current year) (previous year) (current year) (previous year) (current year)

E1 Provided to the applicant 1 1 1 1 2 2 E2 Provided to the applicant’s medical practitioner – – – – – – E3 Available for inspection – – – – – – E4 Available for purchase – – – – – – E5 Library material – – – – – – E6 Subject to deferred access – – – – – – E7 Available by a combination of any of the reasons listed in E1–E6 above – – – – – – E8 Total granted or otherwise available in part 1 1 7 1 2 2

Section F Refused FOI applications

Number of refused FOI applications Why was access to the Personal Other Total documents refused? (previous year) (current year) (previous year) (current year) (previous year) (current year)

F1 Exempt – – – – – – F2 Deemed refused – – – – – – F3 Total refused – – – – – –

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8Section G Exempt documents

Number of FOI applications (refused or access granted or otherwise available in part only) Why were the documents classified as exempt? Personal Other Total (identify one reason only) (previous (current (previous (current (previous (current year) year) year) year) year) year)

Restricted documents: G1 Cabinet documents (Clause 1) – – – – – – G2 Executive Council documents (Clause 2) – – – – – – G3 Documents affecting law enforcement and public safety (Clause 4) – – – – – – G4 Documents affecting counter terrorism measures (Clause 4A) – – – – – – Documents requiring consultation: G5 Documents affecting intergovernmental relations (Clause 5) – – – – – – G6 Documents affecting personal affairs (Clause 6) – – – – – – G7 Documents affecting business affairs (Clause 7) – – 1 2 1 2 G8 Documents affecting the conduct of research (Clause 8) – – – – – – Documents otherwise exempt: G9 Schedule 2 exempt agency – – – – – – G10 Documents containing information confidential to Olympic Committees (Clause 22) – – – – – – G11 Documents relating to threatened species, Aboriginal objects or Aboriginal places (Clause 23) – – – – – – G12 Documents relating to threatened species conservation (Clause 24) – – – – – – G13 Plans of management containing information of Aboriginal significance (Clause 25) – – – – – – G14 Private documents in public library collections (Clause 19) – – – – – – G15 Documents relating to judicial functions (Clause 11) – – – – – – G16 Documents subject to contempt (Clause 17) – – – – – – G17 Documents arising out of companies and securities legislation (Clause 18) – – – – – – G18 Exempt documents under interstate FOI Legislation (Clause 21) – – – – – – G19 Documents subject to legal professional privilege (Clause 10) – – 1 – 1 – G20 Documents containing confidential material (Clause 13) – – – – – – G21 Documents subject to secrecy provisions (Clause 12) – – – – – – G22 Documents affecting the economy of the State (Clause 14) – – – – – – G23 Documents affecting financial or property Interests of the State or an agency (Clause 15) – – – – – – G24 Documents concerning operations of agencies (Clause 16) – – – – – – G25 Internal working documents (Clause 9) – – – – – – G26 Other exemptions (e.g. Clauses 20, 22A and 26) – – – – – – G27 Total applications including exempt documents – – 2 2 2 2

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Section H Ministerial Certificates (s. 59)

Number of Ministerial Certificates How many Ministerial Certificates were issued? (previous year) (current year)

H1 Ministerial Certificates issued – –

Section I Formal consultations

Number How many formal consultations were conducted? (previous year) (current year)

I1 Number of applications requiring formal consultation 3 4 I2 Number of persons formally consulted 10 8

Section J Amendment of personal records

Number of applications for amendment of personal records How many applications for amendment of personal records were agreed or refused? (previous year) (current year)

J1 Agreed in full – – J2 Agreed in part – – J3 Refused – – J4 Total – –

Section K Notation of personal records

Number of applications for notation How many applications for notation of personal records were made (s. 46)? (previous year) (current year)

K1 Applications for notation – –

Section L Fees and costs

Assessed costs Fees received What fees were assessed and received for FOI applications processed (excluding applications transferred out)? (previous year) (current year) (previous year) (current year)

L1 All completed applications $Nil $Nil $355.00 $240.00

Note: Two applications were refunded the application fee as Integral Energy did not hold the requested documents [total $60].

Section M Fee discounts

Number of FOI applications (where fees were waived or discounted) How many fee waivers or Personal Other Total discounts were allowed and why? (previous year) (current year) (previous year) (current year) (previous year) (current year)

M1 Processing fees waived in full – – – – – – M2 Public interest discount – – 1 – 1 – M3 Financial hardship discount – pensioner or child – – 1 – 1 – M4 Financial hardship discount – non-profit organisation – – – – – – M5 Total – – 2 – 2 –

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8Section N Fee refunds

Number of refunds How many fee refunds were granted as a result of significant correction of personal records? (previous year) (current year)

N1 Number of fee refunds granted as a result of significant correction of personal records – –

Section O Days taken to complete request

Number of completed FOI applications How long did it take to process completed applications? Personal Other Total (Note: calendar days) (previous year) (current year) (previous year) (current year) (previous year) (current year)

O1 0–21 days – statutory determination period 1 – 7 6 8 6 O2 22–35 days – extended statutory determination period for consultation or retrieval of archived records (S.59B) – 1a 3a 3a 3 a 4 O3 Over 21 days – deemed refusal where no extended determination period applies – – – – – O4 Over 35 days – deemed refusal where extended determination period applies – – – – – O5 Total 1 1 10 9 11 10

a As Integral Energy was required to obtain the views of third parties it was necessary to extend the 21-day response period by a further period of 14 days, pursuant to Section 59B of the FOI Act.

Section P Processing time

Number of completed FOI applications How long did it take to process Personal Other Total completed applications? (previous year) (current year) (previous year) (current year) (previous year) (current year)

P1 0–10 hours 1 – 7 5 8 5 P2 11–20 hours – 1 2 4 2 5 P3 21–40 hours – – 1 – 1 – P4 Over 40 hours – – – – – – P5 Total 1 1 10 9 11 10

Section Q Number of reviews

Number of completed reviews How many reviews were finalised? (previous year) (current year)

Q1 Internal reviews 2 – Q2 Ombudsman reviews – – Q3 ADT reviews – –

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Section R Results of internal reviews

Number of internal reviews What were the results of internal reviews finalised? Personal Other Total

Grounds on which the internal Original agency Original agency Original agency Original agency Original agency Original agency review was requested decision upheld decision varied decision upheld decision varied decision upheld decision varied

R1 Access refused – – – – – – R2 Access deferred – – – – – – R3 Exempt matter deleted from documents – – – – – – R4 Unreasonable charges – – – – – – R5 Failure to consult with third parties – – – – – – R6 Third parties views disregarded – – – – – – R7 Amendment of personal records refused – – – – – – R8 Total – – – – – –

Impact of the requirements Statement of Affairs Heritage management of the Freedom of Information Section 14 of the FOI Act requires Integral Energy is continuing to work Act 1989 (NSW) a Statement of Affairs of an agency towards the delivery of its Heritage The impact of the requirements of to be published every 12 months. Asset Management Strategy, the the Freedom of Information Act Integral Energy’s Statement of original document for which an 1989 (NSW) on Integral Energy’s Affairs is incorporated within this acknowledgement of acceptance activities was minor and no major Annual Report, as is a description from the Heritage Office was issues arose in connection with of Integral Energy’s structure received in May 2006. Integral Energy’s compliance with and functions. the requirements of the Act. Heritage and Funds granted to non- Conservation Register Access to documents under the government organisations Integral Energy’s draft Heritage Freedom of Information Act Integral Energy does not grant funds & Conservation (s170) Register is Documents can be requested or to non-government organisations. in the process of being finalised. examined by forwarding a request Rather, through a Board-approved Further research is being undertaken to Integral Energy together with the policy and annual program of on sites to confirm the level of FOI fee of $30 to the Freedom of sponsorships and donations, the heritage significance and to Information Officer, Integral Energy, organisation lends support to prepare conservation management PO Box 6366, Blacktown NSW 2148. selected community organisations strategies on each of the sites. Work Please note that in addition to the that reflect Integral Energy’s has also continued on development FOI fee, charges may be imposed obligations as a State Owned of a moveable heritage policy and for the time spent in searching for Corporation and align to Integral the collection and cataloguing of and retrieving relevant documents, Energy’s Corporate Plan. potentially significant items. decision-making time, photocopying Details of Integral Energy’s and postage. In certain cases a 50% community partnership portfolio reduction in fees and charges may and strategy can be found on our apply. Any request, as well as clearly website www.integral.com.au, identifying the applicant and a return under the ‘Community’ heading. address, must be in writing and must contain sufficient information to enable the requested document(s) to be located and identified.

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8Heritage assets The three NSW Distribution Integral Energy’s 2009 Regulatory Of the 15 potential heritage sites Network Service Providers, Integral Proposal was prepared in accordance identified in the draft s170 Register, Energy, EnergyAustralia and Country with both the Transitional Rules and Integral Energy is: Energy (the NSW DNSPs), as well as the AER’s Regulatory Information ActewAGL were the first electricity Notice issued on 24 April 2008. The • Developing a strategy for the distribution businesses to be 2009 Regulatory Proposal related to alternative use of the cottage regulated by the AER. the assets owned and operated by substation in Moss Vale which is no Integral Energy. The 2009 Regulatory longer an operational network site. National Regulatory Framework Proposal was in relation to our The strategy requires a rezoning Changes to the National Electricity distribution services and our public of the site to commercial and Law to enable the AER to assume lighting services and consisted of: relocation of overhead transmission economic regulation for electricity lines that traverse the site • The Regulatory Proposal distribution network services document and appendices • Developing a strategy for the commenced on 1 January 2008. alternative use of the cottage A new Chapter 6 of the National • The AER’s pro-formas and substation in Crown Street, Electricity Rules (Rules) that sets out supporting documents Harris Park, which is no longer an key elements of the methodology • The completed versions of the operational network site. Together and process for such reviews also AER’s Post Tax Revenue Model with the adjacent residential commenced on 1 January 2008. and Asset Roll Forward Model cottage a development application Due to the timeframe over which is being prepared for possible • The Chief Executive Officer’s the changes to the National ‘professional office suites’ Statutory Declaration Electricity Law were developed • Developing a design for the and in order to provide certainty • The Directors’ Certification rebuilding of the South Granville to the AER and the businesses, a set of the reasonableness of Zone Substation site allowing of transitional arrangements that the key assumptions for the for the retention of the heritage would apply to the NSW DNSPs and forecast capital and operating building, possibly being utilised ActewAGL were also developed (the expenditures. as a meal room or for similar use Transitional Rules). The Transitional Integral Energy’s 2009 Regulatory once the substation is rebuilt. Rules were gazetted by the South Proposal was lodged with the Australian Minister for Energy in AER on 2 June 2008 and on Condition assessments December 2007 and commenced 27 June 2008 the AER advised All sites are maintained in on 1 January 2008. Integral Energy that its Regulatory accordance with the organisation’s Proposal and supporting information civil maintenance program and/or Integral Energy’s 2009 substantially complied with the conservation management strategies. Regulatory Proposal relevant provisions of the Rules. The outcomes from the 2009 Heritage training Network Determination are Integral Energy’s 2009 Revised Integral Energy staff attended important to Integral Energy. A Regulatory Proposal training events organised by the project to prepare Integral Energy’s The AER released its Draft Heritage Office. 2009 Regulatory Proposal to the Distribution Determination AER was launched on 14 May 2007. 2009–10 to 2013–14 (the Draft Implementation of price The 2009 Regulatory Proposal Determination) on 28 November determinations was prepared that aligned with 2008. As provided for under the Integral Energy’s Network Strategy Rules, Integral Energy lodged a Network Regulatory and Financial Plans and presented Revised Regulatory Proposal with Determination 2009–14 a credible case for the business the AER on 14 January 2009 to The Independent Pricing and requirements over the 2009 to address any areas of concern in the Regulatory Tribunal’s (IPART’s) 2004 2014 regulatory control period. Draft Determination. Network Determination expired It was developed from the critical Integral Energy’s Revised Regulatory on 30 June 2009. A new five-year requirements to meet the key Proposal accepted many of determination, the 2009 Network drivers on the business and was the AER’s draft decisions, but Determination, took effect from underpinned by rigorous decision also incorporated a number of 1 July 2009. making and governance processes. amendments that Integral Energy The 2009 Network Determination The 2009 Regulatory Proposal considered necessary. Where was conducted by the Australian was also subjected to internal and Integral Energy did not fully adopt Energy Regulator (AER) over the past external scrutiny. the AER’s Draft Determination, two years, with the final decision the Revised Regulatory Proposal issued on 30 April 2009. The review provided additional information, positions the organisation for the including expert reports, to address five years 2009–14 and determines the matters raised by the AER. the revenue/price path for the network business.

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Integral Energy argued that many AER Final Distribution Forecast operating expenditure of the revisions to Integral Energy’s Determination 2009–14 Integral Energy’s Revised Regulatory original proposal were required The AER released its Final Proposal included an operating to address the onset of the global Distribution Determination on expenditure allowance of financial crisis that occurred 30 April 2009. The outcomes for $1,521 million ($2008–09) for the following the preparation and Integral Energy from the Final next regulatory control period. lodgement of the original proposal Determination are discussed below. on 2 June 2008. Consequently, The AER’s conclusion on Integral neither Integral Energy nor the AER Demand forecasts Energy’s forecast operating expenditure allowance was to were able to adequately consider Integral Energy’s Revised Regulatory provide for a total expenditure the impacts of the global financial Proposal, included revised customer allowance of approximately crisis on the expenditure programs number and energy forecasts $1,515 million ($2008–09) over and forecasts put forward that based on audited 2007–08 WAPC the regulatory control period ultimately formed the basis of the data and incorporating the effects from 2009 to 2014. Draft Determination. of a revised National Institute of Integral Energy submitted that the Economic and Industry Research Cost of capital (NIEIR) gross state product (GSP) effect of the global financial crisis The AER’s Final Determination forecast for Integral Energy’s region. was far reaching and impacted on updated their draft decision for the NIEIR’s GSP forecast was updated in Integral Energy’s original proposal nominal risk free rate and debt risk December 2008 to incorporate the in the following ways: premium and the expected inflation worsening global financial crisis and rate. It used an averaging period • Energy and customer number the impact of the Carbon Pollution for Integral Energy of 15 business forecasts declined due to the Reduction Scheme White Paper. slowdown in economic activity days from 2 March 2009 to 20 After analysing Integral Energy’s March 2009, which Integral Energy • Capital expenditure was also revised customer number and argued was biased by the impact expected to decline to some energy forecasts the AER concluded of the global financial crisis and the extent as a result of lower that they had been developed lowest interest rates since the Great customer connections and according to a reasonable Depression. The AER’s averaging deferral of some major projects methodology, and the resulting period resulted in a nominal risk free • The nominal risk free rate was forecast is an appropriate input into rate for Integral Energy of 4.32%. the post-tax revenue model (PTRM). at an abnormal level that does The AER used Bloomberg fair yields not represent a reasonable Forecast capital expenditure and the same averaging period that expectation of interest rate was adopted for the risk free rate to Integral Energy’s Revised Regulatory movements over the 2009 determine the debt risk premium. Proposal included a capital regulatory control period Based on the AER’s analysis the debt expenditure allowance of $2,735 risk premium for Integral Energy • The costs of contributing to million ($2008–09) for the next was 3.52% which, when combined defined benefits superannuation regulatory control period. Integral with the risk free rate produced an schemes have increased as a result Energy revised its forecast capital allowed return on debt of 7.84%. of the loss in value of the funds. expenditure down by $244 million As requested by the AER, Integral from the original regulatory The AER used an inflation forecast Energy also revised its forecasts proposal due to the impacts of the of 2.47% which was consistent underpinning the original proposal global financial crisis. with the 10 year estimate draft decision methodology. for energy and customer numbers Following its review of Integral and incorporated the audited Energy’s revised capital expenditure The AER’s conclusion on Weighted 2007–08 weighted average price proposal, the AER made the Average Cost of Capital (WACC) cap (WAPC) information. following adjustments: parameters resulted in a nominal vanilla WACC of 8.83% compared On 16 February 2009, Integral Energy • $15 million reduction to with the nominal vanilla WACC of also prepared and lodged with the substation renewal projects AER a written submission which 10.02% used in Integral Energy’s contained additional information to • $2 million increase to reflect Revised Regulatory Proposal. support Integral Energy’s Revised the application of modified input Revenue requirements Regulatory Proposal and provided cost escalators. The AER calculated the annual comments on other aspects of the The AER provided a capital revenue requirement and X factors AER’s Draft Determination. expenditure allowance totalling based on its decisions on the approximately $2,720 ($2008–09) building block components. million over the regulatory control period from 2009 to 2014.

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8For Integral Energy, the AER’s Final Network prices 2009–10 The trial commenced on 1 August Determination results in a total In June 2009, the AER approved 2006 and was in operation until revenue requirement over the 2009 Integral Energy’s 2009–10 annual 31 July 2009. A key finding of the to 2014 regulatory control period of network pricing proposal as consistent trial is that customers, in particular $4,485 million ($nominal) compared with the requirements of chapter 6 of those on the dynamic peak TOU with $4,916 million ($nominal) the Transitional Rules and the 2009 tariff, are willing to change their proposed by Integral Energy in the Network Determination. usage patterns when basing their Revised Regulatory Proposal. consumption decisions on a more A key element of Integral Energy’s focused and efficient pricing signal. The AER set Integral Energy’s X network tariff strategy that was The results of the trial will inform factors to satisfy the requirements of revisited in 2009 is to ensure the development of Integral Energy’s the National Electricity Rules (NER) network tariffs achieve the network tariffs moving forward. in that the expected revenue and objectives of providing revenue the annual revenue requirement sufficiency, achieving pricing The potential move to TOU tariffs are equal in Net Present Value efficiency, promoting customer to accompany a mandated rollout (NPV) terms and in the final year equity and minimising revenue of ‘smart’ meters will introduce the the difference between expected volatility. Primary areas of focus risk of revenue and pricing volatility revenue and the annual revenue will be to develop residential and to Integral Energy and its customers. requirement is as close as practicable General Supply time of use (TOU) Therefore, gaining a better (difference is 3.8%). The resulting tariffs that would become Integral understanding of customers’ usage X factors for Integral Energy were a Energy’s primary network tariffs in patterns will increase in importance real increase of 12.58% in 2009–10 the anticipated mandated roll-out under a TOU meter scenario in followed by real increases of 7% of interval meters (targeted to the financial management of the in the following two years, a 2% commence in 2012) and to ensure business and in setting efficient real increase in 2012–13 and a CPI our prices reflect efficient costs in prices for our customers. increase in 2013–14. order to provide ‘value for money’ for our customers. Retail Regulatory Merits review Determination 2007–10 To better understand customers’ Following release of the AER’s Final IPART regulates the prices that price responsiveness, in 2008–09 Determination and analysis of the Integral Energy can charge we continued a pricing trial decision by Integral Energy, it was customers whose electricity is involving a representative sample decided to lodge an application supplied under a standard form of approximately 1,300 residential with the Australian Competition customer supply contract. Tribunal (the Tribunal) to seek a customers in western Sydney who merits review of the AER’s decision have elected to be placed on either On 14 June 2007 IPART released its on the WACC averaging period for of the following tariffs: final report and final determination for the regulated retail charges to the risk free rate in the Distribution • Dynamic peak time-of-use tariff apply from 1 July 2007 to 30 June Determination 2009–10 to 2013–14. – Customers on this tariff pay 2010 (2007 Retail Determination). different prices for their energy Integral Energy’s application The terms of reference for this consumption at different times of was lodged with the Australian review required IPART to set the day. They pay a significantly Competition Tribunal on 21 May regulated retail tariffs and charges higher dynamic peak price for 2009 and on 18 June 2009 Justice for small customers such that their their energy consumption during a Middleton, Deputy President of the reliance on regulated prices would dynamic peak event. The number tribunal, granted leave allowing the be reduced and retail competition of dynamic peak events is limited merits review to proceed. would be facilitated over the period to 12 a year. A two-week-long merits to 30 June 2010. review hearing commenced on • Seasonal peak time-of-use tariff 10 August 2009 with a final – Customers on this tariff pay Energy cost allowance decision by the tribunal expected by different prices for their energy In the 2007 Retail Determination November 2009. consumption at different times of IPART allowed for an annual review the day and year. They pay a higher of the market-based energy purchase If Integral Energy’s merits review is price for their energy consumption cost allowance, to factor into the successful, any tribunal decision is during the peak periods in summer determination material step changes expected to be implemented from (November to March) and winter in this allowance, if required. The 1 July 2010. (June to August). annual review is a mechanical review in that it applies the pre-determined methodology that is set out in the 2007 Retail Determination.

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In March 2009 IPART released its • $65 million over five years to Customers draft report on assessing the market increase the pensioner energy We strive to ensure that appropriate based electricity purchase costs for rebate from $112 to $130 per year services are offered to our diverse 2009–10 and called for submissions. and indexation of the rebate to multicultural customer base and that CPI thereafter After considering stakeholder input customers are not disadvantaged from submissions and further advice • $55 million over five years to because of their cultural backgrounds. from IPART’s consultant, Frontier increase funding for the Energy Data collected from the 2006 Economics, IPART released its final Accounts Payment Assistance Census indicates that 29% of decision in May 2009. The final Scheme (EAPA) people living in Integral Energy’s decision was that the 10% threshold • $27.5 million over five years to franchise area – Sydney’s Greater for material change had been met extend the pensioner energy West, the Blue Mountains, the for 2009–10 and therefore the rebate to a selected group of Southern Highlands and the allowance for energy purchase costs health care card holders. Illawarra – were born outside should be increased to reflect this. Australia. Approximately 28% of These measures came into effect As a result of the increase in the the population in our franchise area from 1 July 2009. energy purchase cost allowance and comes from non-English speaking the increase already factored into backgrounds. The three most Review of regulated retail the 2007 Retail Determination, the common languages spoken in our tariffs and charges for electricity retail component of the regulated franchise area, excluding English, 2010–2013 retail prices increased by 11.9%. are Arabic (3.7%), Vietnamese (2%) The 2007 Retail Determination on and Cantonese (1.8%). regulated retail tariffs will cease to Regulated retail prices 2009–10 We aim to provide the same level apply on 30 June 2010. The NSW Based on the 2007 Retail of service to each of our more Government has recently committed Determination, the revised energy than 859,000 customers, who can to retaining regulated retail tariffs purchase cost allowance and contact the organisation 24 hours until at least 2013 and the Minister incorporating the price increase a day, seven days a week. for Energy has asked IPART to from the AER’s 2009 Network undertake a review and make a Integral Energy’s INpower brochure Determination, a regulated retail new determination for the period is available to customers in six pricing proposal for 2009–10 was 1 July 2010 to 30 June 2013. community languages and we developed and submitted to IPART provide an interpreter service that on 29 May 2009. The tariffs were IPART released an Issues Paper and allows customers to speak their own approved for implementation from invited submissions in early July language. Arabic and Vietnamese 1 July 2009. 2009 and expects to release a draft speaking customers are the report and determination in early The annual regulated retail bill predominant users of the interpreter December 2009. IPART’s final report increase in nominal terms for the service, which is supplied by the and determination is expected average residential customer using Australian Government Department to be released in March 2010 for 6,000 kWh per annum is estimated of Immigration and Multicultural application from 1 July 2010. to be approximately $217 (or 21.2%) and Indigenous Affairs. in 2009–10. For the average general Integral Energy has been an active Contact numbers are printed on supply customer using 26,000 kWh participant in the IPART review the back of customer bills and on per annum, the estimated increase consultation process to date, and the front page of the standard will be $896 (or 23.7%). will continue to participate in all service contract. aspects of the review given its NSW Government importance to Integral Energy’s retail Integral Energy’s hardship charter compensation package business, its regulated customers will be translated into 10 community Given the substantial increase in and the level of competitiveness in languages to provide greater electricity pries in 2009–10, the the NSW retail electricity market. assistance for non-English speaking NSW Government announced a customers who may be facing $272 million compensation package Multicultural Policies and financial stress and are unsure to assist families and pensioners Services Program how to get help. to meet the price increases. Integral Energy’s corporate values The package includes: commit the organisation to acknowledging and valuing cultural • $125 million over five years diversity across our stakeholder to support a Customer base, in our delivery of customer Assistance Policy service, in our management of employees and in our interactions with suppliers, communities and other stakeholder groups.

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8Integral Energy offered this same At the end of the six weeks, Nightwatch interpreter service for interested participants have the opportunity NightWatch provides businesses residents to enquire about proposed to undertake the Integral Energy with valuable security through the capital works happening within their Apprenticeship Assessment and if installation of an external lighting local area. To date, newsletters for successful, will be included in the system that utilises existing Integral Liverpool Transmission Substation, remainder of the selection process Energy assets (wooden poles Granville Zone Substation and for our 2010 intake of apprentices. and metal columns) and features Liverpool line works have included automatic dusk to dawn switching. an offer of the interpreter service. Employment Practices 1750 customers are using this low During 2008, Integral Energy The cultural diversity and ethnic mix cost lighting system to illuminate continued its sponsorship of the of our customers is reflected in the their premises that not only provides Community Service Award at the make up of our staff, with employees improved security but helps promote National Multicultural Marketing and their families representing many business after hours. Further Awards for the fourth year. The different countries. information on Nightwatch can be found on Integral Energy’s website awards are designed to encourage To ensure that we have a highly www.integral.com.au. and reward businesses and competent, flexible and competitive organisations that promote their workforce, Integral Energy is Notifications to the products and services to people committed to employing on the basis Independent Commission from culturally and linguistically of merit. Candidates are assessed Against Corruption diverse backgrounds. against job related criteria regardless In 2008–09 there were seven Integral Energy’s Customer of gender, age, ethnicity, religion or notifications to the Independent Consultative Committee considers other irrelevant factors. Managers are Commission Against Corruption the needs of customers of provided with guidelines to follow (ICAC) in accordance with the differing ethnic and cultural during the recruitment and selection provisions of the Independent backgrounds. The Committee process to ensure that equity and Commission Against Corruption provides valuable feedback and diversity are maintained. Act 1988 (NSW). Integral Energy advice about the organisation’s In 2008–09, we continued working received one notification from the policies and services, and helps towards our Workplace Diversity ICAC concerning allegations of us deliver a standard of service Strategy to ensure that diversity corrupt conduct. that meets customer expectations is integrated into our everyday and exceeds the level of service work practices. The purpose of the Publications provided by our competitors. strategy is to provide a framework Integral Energy produces an Committee membership includes a for diversity within Integral Energy extensive range of publications to representative of the Multicultural that recognises, encourages keep stakeholders well informed of and Aboriginal communities. and appreciates the value of our our operations. These publications differences. In August 2009, Integral Energy will include the annual performance introduce PowerStart, an Indigenous The strategy has four key focuses: report, appliance running cost PreVocational program, which brochure, electrical safety at home 1. Ensure that human resources is coordinated by an approved brochures, world of savings brochure, policies and procedures support Federal Government Department statement of business ethics, network a diverse workplace. of Education, Employment and connection brochures for rural and Workplace Relations organisation 2. Create a work environment that subdivision areas, information on who provide work experience to a engages, enables and empowers Blacktown Solar City, Nightwatch, group of indigenous participants. people to do their best at work. INpower brochure, environmental handbook and tree management Participants will attend TAFE for two 3. Adopt an approach to recruitment brochure. These publications are weeks to review and upskill their and retention that supports a available at no cost by calling 131 002 literacy and numeracy skills, and sustained increase in diversity in or by visiting our website receive an introduction to electrical the workforce. theory. They will also complete (www.integral.com.au). a three-week induction program 4. Provide appropriate support for with Integral Energy, where they staff throughout the work lifecycle. will learn about our occupational In 2009–10, we will continue health and safety practices, how to to monitor progress against our climb poles, cable jointing and other diversity strategy. aspects of the energy industry to provide an understanding of what an electrical apprenticeship entails.

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Overseas travel

Name Date Destination Purpose

Garry Neal 13 July – 19 July 2008 Korea Factory accreditation inspections Peter Norrie (Daewoo GIS Facility in Korea; LS Industrial systems in Korea; Hyosung in Korea and Daewoo Transformer factory in Korea)

Andrew Tang 13 August – Thailand Inspection / witness testing at ABB Thailand 16 August 2008 (60 MVA unit 508005)

Rod Howard 22 August – Switzerland, United Consultation with industry and insurers 5 September 2008 Kingdom, Bermuda and United States

Peter Norrie 25 August – Taiwan Attend inspection at Fortune Electric, Taiwan 28 August 2008 (33/11kV 15 MVA Kiama ZS transformer unit D071398)

Andrew Tang 11 September – Thailand Attend inspection / witness testing at ABB Thailand 17 September 2008 (132/33/11kV 60 MVA transformer for Nepean TS)

Peter Norrie 29 October – Thailand Attend inspection / witness testing at ABB Thailand 3 November 2008 (132/33/11kV 120 MVA transformer for West Wetherill Park TS unit 508020)

Andrew Tang 13 November – Taiwan Attend witness testing at Fortune Electric, Taiwan 22 November 2008 (33/11kV 15 MVA Kiama ZS transformer unit D071398)

Peter Norrie 28 November – Vietnam Mechanical design review factory inspection ABB Vietnam 3 December 2008 (132/11kV 45 MVA transformer Granville, unit VN00373; Doonside, unit VN00375 and Doonside unit VN00376

Christian Demuth 14 December – United States Acceptance testing of camera system for Helicopter Inspections 19 December 2008

Peter Norrie 17 December – Thailand Inspection of 132/33/11kV 120MVA transformer 19 December 2008 (Liverpool TS unit 508011 – 12)

Andrew Tang 19 January – Thailand Test of 132/33/11kV 120MVA transformer 24 January 2009 (Liverpool TS unit 508011 – 12)

Peter Norrie 12 February – Taiwan Attend inspection at Fortune Electric, Taiwan 14 February 2009 (33/11kV 25 MVA transformer – Clarmont Meadows Unit 1 D0841901 and North Warragamba unit D0839701)

Peter Norrie 13 February – Vietnam Second inspection at ABB Vietnam 15 February 2009 (132/11kV 45 MVA transformer Granville, unit VN00373; Doonside, unit VN00375 and Doonside unit VN00377

Andrew Tang 15 March – Taiwan Attend witness testing at Fortune Electric, Taiwan 21 March 2009 (33/11kV 25 MVA transformer – Clarmont Meadows Unit 1 D0841901 and North Warragamba unit D0839701)

Graeme Browne 29 March – Korea Factory Acceptance testing of 132kV GIS switchboard Arvin Reddy 4 April 2009 at Hyundai Heavy Industries

Ty Christopher 17 April – 1 May 2009 Germany, Network Technology Study Visit Danny Asvestas Switzerland, France

Neil Browne 21 April – New Zealand Attendance at 2009 CIGRE C4 Meeting and Power Quality 25 April 2009 for Future Networks' Conference

Robin Jong 20 May – Malaysia Factory accreditation 22 May 2009 (General Cables Thailand and Universal Cable Malaysia)

Ian Robinson 23 May – 6 June 2009 Italy, Spain, Network Technology Study Visit Stephen Lette Portugal, Denmark, Sweden, Canada, United States

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8Summary of legislative 2. Material changes to (direct) and scope 2 (indirect) changes and significant relevant Acts greenhouse gas emissions judicial decisions New South Wales • Confirming the ability of the Integral Energy’s operations are The Environmental Planning and Minister to specify conditions for subject to numerous state and Assessment Amendment Act 2008 the use of alternative methods federal laws, subordinate legislation made substantial reforms to NSW to calculate greenhouse gas such as mandatory codes and rules, planning laws, amending more emissions and Judge made law. A number than 22 pieces of legislation. Its of these laws were amended and • Clarifying provisions relating to commencement was staggered new laws affecting Integral Energy reporting of greenhouse gas between 1 August 2008 and 2 commenced in the financial year projects and offsets. March 2009. The reforms aimed to: ending 30 June 2009. The Financial System Legislation • Reduce development assessment Amendment (Financial Claims 1. Principal State and Federal timeframes and tailor application Scheme and other Measures) Act Acts to which Integral Energy processes to specific classes 2008 amended the Corporations is subject of application. Smaller scale Act 2001 and commenced in parts State Owned Corporations developments will continue to be on 17, 18 & 19 October 2008. Act 1989 (NSW) dealt with by councils. Projects The Act introduced measures to of State or regional significance implement a financial claims scheme Energy Services Corporations may be assessed by the Planning including a 100% guarantee of Act 1995 (NSW) Assessment Commission or deposits in authorised deposit Public Authorities (Financial Joint Regional Planning Panel. taking institutions and makes Arrangements) Act 1987 (NSW) Independent Hearing and other arrangements to deal with Assessment Panels and Planning distressed or failing institutions. Public Finance and Audit Arbitrators will have a role in Act 1983 (NSW) review and appeal processes The Offshore Petroleum Amendment (Greenhouse Gas Independent Commission Against • Increase the use of exempt and Storage) Act 2008 commenced Corruption Act 1988 (NSW) complying development and on 21 and 22 November 2008. Freedom of Information codify State-wide standards The Amendment Act amended Act 1989 (NSW) with the aim to cover 50% the Corporations Act 2001 by of development establishing a system of off shore Electricity Supply Act 1995 (NSW) • Limit appeals to the Land and titles to authorise the transportation Occupational Health & Safety Environment Court by pipeline and injection and Act 2000 (NSW) storage of greenhouse gas • Reform the certification process substances under the sea bed. Protection of the Environment by extending certification Operations Act 1997 (NSW) processes and making certifiers The Trade Practices Legislation more accountable. Amendment Act 2008 commenced Environmental Planning and on 22 November 2008. The Assessment Act 1979 (NSW) The Independent Commission Amendment Act clarified the role Independent Pricing and Regulatory Against Corruption Amendment of recoupment in predatory pricing Tribunal Act 1992 (NSW) Act 2008 commenced on cases under subsection 46(1) of the 16 December 2008. The Trade Practices Act 1974 and ensured National Electricity Amendment Act made minor that predatory pricing remains clearly (New South Wales) Act 1997 (NSW) amendments to the Independent prohibited by that provision. This Commission Against Corruption Act Trade Practices Act 1974 (Cth) addressed concerns raised about 1988 in relation to proceedings for predatory pricing in the recent inquiry Privacy Act 1988 (Cth) offences and other matters. into the effectiveness of the Act. Corporations Act 2001 (Cth) Commonwealth The Australian Energy Market Workplace Relations Act 1996 (Cth) The National Greenhouse and Amendment (AEMO and Other Energy Reporting Amendment Act Measures) Act 2009 partially National Greenhouse and Energy 2008 commenced on 15 and 16 commenced on 26 and 27 March Reporting Act 2008 (Cth) September 2008. The Amendment 2009. The Act amended the Renewable Energy (Electricity) Act made minor amendments to the Renewable Energy (Electricity) Act 2000 (Cth) National Greenhouse and Energy Act 2000 and the Trade Practices Reporting Act 2008 including: Act 1974 to replace references Anti-Money Laundering and Anti- to the National Energy Market Terrorism Financing Act 2006 (Cth) • Simplifying requirements for the Management Company Limited ACN registration of corporations 072 101 327 (NEMMCO) with the • Making mandatory the separate Australian Energy Market Operator public disclosure of scope 1 Limited ACN 072 101 327 (AEMO).

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The Trade Practices Amendment The Environmental Planning and (General) Regulation 1998, and (Clarity in Pricing) Act 2008 Assessment Amendment Regulation other related regulations. These commenced on 25 May 2009. 2000 was amended by the amendments concern environmental This amendment required following regulations: protection licences, treatment of companies to specify the total contaminated groundwater, clarifying • The Environmental Planning price of products in advertising the circumstances in which a licence and Assessment Amendment including all of its components. is required for certain processes, (Complying Development) The Amendment Act also set out increasing fees, and providing Regulation 2009 commenced exceptions to this requirement. additional requirements in relation to on 27 February 2009. the transport of waste. The Trade Practices Amendment It amended procedures (Cartel Conduct and Other that relate to the application, Commonwealth Measures) Act 2008 had a staggered notification and determination The National Greenhouse and commencement between 27 June process for complying Energy Reporting Regulations 2008 and 24 July 2009. The amendment development certificates commenced on 1 July 2008. The Act introduced four new cartel • The Environmental Planning regulations detailed and clarified offences and established criminal and Assessment Amendment existing administrative requirements penalties (including up to 10 years (Inspections and Penalty Notices) and reporting obligations under the jail) for serious cartel conduct. Regulation 2009 commenced National Greenhouse and Energy The National Greenhouse and on 2 March 2009. It amended Reporting Act 2007 such as: Energy Reporting (Measurement) requirements for development • Reporting thresholds Amendment Determination 2009 involving excavation. This commenced on 26 June 2009. The included prescribing development • Definitions for important concepts Amendment Determination amended consent conditions (including including ‘facility’, ‘energy’, and the National Greenhouse and for complying development ‘greenhouse gas emissions’ Energy Reporting (Measurement) certificates), prescribing required • Rules for nominating a responsible Determination 2009 by: records and timeframes and entity for joint ventures providing for penalty notices to • Updating the measurement with be issued for certain offences • Registration and de-registration new 2008 standards and updated requirements emission factors • The Environmental Planning and Assessment Amendment • Matters for inclusion in a • Detailing methods specified (Complying Development corporation’s report. for certain sectors Certificates) Regulation 2009 The National Greenhouse and • Clarifying certain issues, commenced on 5 June 2009. Energy Reporting (Measurement) such as definitions. It further amended notification Determination 2008 commenced process for complying on 1 July 2008. The Measurement 3. New legislation development certificates. Determination contained New South Wales The Protection of the Environment methodologies for estimating Nil Operations (General) Regulation a corporation’s greenhouse gas 2009 commenced on 30 June 2009 emissions, energy production and Commonwealth (with the exception of Schedule 9, energy consumption. which commences on 1 June 2012). Nil The Renewable Energy (Electricity) The regulation consolidated (with Amendment Regulations 2008 some changes) and remade the 4. Subordinate legislation, commenced on 19 December 2008. Protection of the Environment codes and determinations The Amendment Regulations Operations (General) Regulation amended the Renewable Energy New South Wales 1998, Protection of the Environment (Electricity) Regulations 2001 to specify The Electricity Supply (Corrosion Operations (Penalty Notices) the Renewable Power Percentage for Protection) Regulation 2008 Regulation 2004 and the Protection 2009, which was to be 3.64% (an commenced on 1 September 2008. of the Environment Operations increase from 3.14% in 2008). The regulation remade the existing (Savings and Transitional) Electricity Supply (Corrosion Regulation 1998. The Corporations Amendment Protection) Regulation 2003 Regulations 2009 (No. 4) The Protection of the Environment with minor amendments. commenced on 2 May 2009. Operations Amendment The regulations amended the The Electricity Supply (Safety (Miscellaneous) Regulation 2009 had Corporations Regulations 2001 to and Network Management) a staggered commencement between improve the operation of financial Regulation 2008 commenced on the end of May and 30 June 2009. services and market regulatory policy. 1 September 2008. The regulation The Amendment Regulation amended Among other things, the amendment remade the existing Electricity Supply the Protection of the Environment provided for the licensing of clearing (Safety and Network Management) Operations Act 1997, the Protection and settlement facilities. Regulation 2002 with some changes. of the Environment Operations

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8The Energy Efficiency Opportunities Reallocators, and Transfer of 6. Significant legislation Amendment Regulations 2009 (No 1) Registration) Rule 2008 No. 15 enacted but commencing commenced on 23 June 2009. The commenced on 1 January 2009. next financial year Amendment Regulations amended The Rule Change included the Energy Efficiency Opportunities additional and explicit eligibility NSW Regulations 2006 to extend the requirements for persons applying Amendments to Electricity period of the current exemption of to be a Trader or Reallocator in Supply Act 1995 (NSW) electricity generators and electricity the National Electricity Market. It The Electricity Supply Amendment and natural gas transmitters and also adopted changes to facilitate (Energy Savings) Act 2009 amends distributors from obligations transfer of registration of registered the Electricity Supply Act 1995 from under the Energy Efficiency facilities to a new owner. 1 July 2009 by establishing the NSW Opportunities Legislation. • National Electricity Amendment Energy Savings Scheme (NESS). National Electricity Rules (Compensation Arrangements The NESS aims to lower electricity Under Administered Pricing) Rule consumption by encouraging energy The National Electricity Rules (Rules) 2008 No. 17 commenced on saving activities. govern the operation of the National 1 January 2009. The Rule change Electricity Market. The Rules have the The Amendment Act adds a new amended the process used to force of law and are made under the Part 9 ‘Energy Savings Scheme’ to calculate compensation following National Electricity Law. During the the Electricity Supply Act 1995 and the application of an administered current financial year the following makes consequential amendments price cap, market suspension instruments made amendments to to Part 8A of the Act relating to the event, VoLL, or market floor price. the Rules which materially impacted Greenhouse Gas Abatement Scheme on Integral Energy: • National Electricity Amendment (GGAS). (The two schemes will (Confidentiality Arrangements in work side by side until, as presently • National Electricity Amendment Respect of Information Required anticipated, the latter is repealed by (NEM Reliability Settings: for Power System Studies) Rule the CPRS Scheme on 30 June 2011). Information, Safety Net and 2009 No. 4 commenced on Directions) Rule No. 6 commenced From 1 July 2009, scheme 27 February 2009. The Rule on 1 July 2008. The Rule Change participants including Integral change affected the sharing of introduced the Energy Adequacy Energy will need to meet individual confidential information between Assessment Projection and the energy savings targets for each registered participants, NEMMCO Reliability and Emergency Reserve year by surrendering energy and network service providers. Trader (replacing the existing savings certificates. They will also reserve trader arrangements). It • The National Electricity need to lodge an annual energy also extends NEMMCO’s powers Amendment (WACC Reviews: savings statement with the Scheme to make reliability directions. Extension of Time) Rule 2009 Regulator with an assessment of No. 6 commenced on 31 March their individual energy savings target • National Electricity amendment 2009. The Rule change provided for the year and the energy savings (Setting VoLL Following the an extension for the AER’s first certificates they propose to surrender Shedding of Interruptible Load) Weighted Average Cost of to meet that target. An energy Rule 2008 No. 12 commenced Capital (WACC) Review and for savings shortfall penalty is payable if 20 November 2008. The Rule the submission of regulatory a scheme participant fails to meet its change removed NEMMCO’s proposals by Distribution Network individual energy savings target. obligation to set the dispatch Service Providers in South prices equal to the value of lost An energy savings certificate is a Australia and Queensland. load (VoLL) following automatic tradeable certificate which may be load shedding. • The National Electricity Amendment created by an accredited person (NEM Reliability Settings: VoLL, carrying out a ‘recognised energy • National Electricity Amendment CPT and Future Reliability Review) saving activity’. One certificate (Reclassification of Contingency Rule 2009 No. 13 commenced on represents one tonne of carbon Events) Rule 2008 No. 8 28 May 2009. The Rule change dioxide equivalent of greenhouse commenced on 23 October 2008. increased the level of VoLL and the gas emissions saved by that activity. The Rule Change required Cumulative Price Threshold. NEMMCO to develop and apply Transitional arrangements apply for pre-determined risk assessment accreditation and other issues that 5. Significant judicial decisions criteria when considering whether are currently covered by GGAS. to re-classify a contingency event Integral Energy is unaware of any For example, certificates may not and also required that market significant judicial decisions during the be created in relation to energy participants be provided with financial year ending 30 June 2009 savings already claimed under improved information about that have affected or may affect it GGAS. The NESS also includes potential and actual reclassifications in its capacity as an energy services provision for the Minister to grant of contingency events. corporation or affect the users of its exemptions to industries or activities services in their capacity as customers that are both trade-exposed and • National Electricity Amendment of an energy services corporation. emissions-intensive. (Registration Changes for Traders,

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The Energy Legislation Amendment Government’s new workplace The Trade Practices Amendment (Infrastructure Protection) Act 2009 relations system and will completely Regulations 2009 (No. 2) were also was assented to on 9 June 2009 replace the Workplace Relations made on 25 June 2009 and make and will commence on a date yet Act 1996 (Cth). The Act, among similar amendments to the Trade to be proclaimed. The Act amends other things: Practices Regulations 1974. The both the Electricity Supply Act and regulations will commence on the • Creates a new institutional the Gas Supply Act to give network day that item 13 of Schedule 1 to the framework for workplace operators greater protection in Australian Energy Market Amendment relations through the creation respect of persons carrying out work, (AEMO and other Measures) Act of Fair Work Australia particularly excavation work, near 2009 commences (see above). electricity and gas infrastructure. • Provides a minimum safety net for employees through the new Location addresses, The National Electricity (South National Employment Standards phone numbers and Australia) (National Electricity hours of operation Law – Australian Energy Market • Provides for a shift back to Operator) Amendment Act 2009 of collective bargaining and the use Main office South Australia was proclaimed on of enterprise agreements, as well 51 Huntingwood Drive 24 June 2009 and commenced on as creating a requirement to Huntingwood NSW 2148 1 July 2009. The Amendment Act bargain in good faith PO Box 6366, Blacktown NSW 2148 amended the National Electricity • Provides for greater union Bowenfels Field Support Centre (South Australia) Act 1996 and the involvement in the collective 9–13 Cooerwull Road National Electricity Law, including bargaining process and increased Bowenfels NSW 2790 substituting references to NEMMCO union rights of entry with references to AEMO (Australian Coniston Office Energy Market Operator), setting • Narrows the test for “genuine Corner of Bridge Street and out the role and functions of AEMO redundancies” making it more Old Springhill Road under National Electricity Law and difficult to make employees Coniston NSW 2500 clarifying the powers of the AER. The redundant National Electricity (Australian Energy Glendenning Central • Provides for all employees to be Market Operator) Amendment Logistics Facility covered by unfair dismissal laws. Rules 2009 also commenced on 49 Glendenning Road 1 July 2009. These changes applied The Fair Work Act 2009 is supported Glendenning NSW 2761 automatically in New South Wales by the Fair Work Regulations 2009 Glendenning Civil Works Centre by virtue of the National Electricity which commenced on 1 July 2009, 15 Belfast Place (New South Wales) Act 1997. except for Parts 2-2 and 6-3 which Glendenning NSW 2761 commence on 1 January 2010. Commonwealth Glendenning Field As discussed earlier, although Support Centre The National Greenhouse and Energy the Australian Energy Market 43 Glendenning Road Reporting Amendment Regulations Amendment (AEMO and Other Glendenning NSW 2761 2009 amend the National Measures) Act 2009 was assented to Greenhouse and Energy Reporting on 26 March 2009, not all provisions Hoxton Park Field Regulations 2008 to support changes have commenced. Items 7 to 11 and Support Centre made to the National Greenhouse item 13 of Schedule 1 (which deal 490 Hoxton Park Road and Energy Reporting Act 2007 by with the substitution of references to Hoxton Park NSW 2171 the National Greenhouse and Energy NEMMCO with references to AEMO) Reporting Amendment Act 2008 and were due to commence on the Kandos Field Support Centre clarify certain administrative matters. earlier of either a day to be fixed by 16 White Crescent The regulations were registered Proclamation or 26 September 2009. Kandos NSW 2848 on 26 February 2009 but do not commence until the commencement The Renewable Energy (Electricity) Katoomba Field Support Centre of item 1 of Schedule 1 to the Amendment Regulations 2009 27–29 Whitton Street National Greenhouse and Energy (No. 1) amend the Renewable Energy Katoomba NSW 2780 (Electricity) Regulations 2001 to Reporting Amendment Act 2008, Kings Park Field Support Centre which at 1 July 2009 was yet to replace references to NEMMCO with 10 Tasha Place be proclaimed. references to AEMO as a result of Kings Park NSW 2148 the establishment of AEMO. The The Fair Work Act 2009 was assented regulations were made on 25 June Moss Vale Field Support Centre to on 7 April 2009. Certain minor 2009 but do not commence until 8–10 Old Dairy Close administrative provisions commenced the day on which items 7 to 11 Moss Vale NSW 2577 on 26 May 2009, but most provisions of Schedule 1 to the Australian will have a commencement date Energy Market Amendment (AEMO Narellan Field Support Centre of either 1 July 2009 or 1 January and Other Measures) Act 2009 17 McPherson Road 2010. The Act establishes the Rudd commence (see above). Smeaton Grange NSW 2567

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Annual Performance Report 2008–09

8Nowra Field Support Centre Location of operations 20 Depot Road West Nowra NSW 2541 Parramatta Field Support Centre 84–86 Macarthur Street Parramatta NSW 2150 Energy Penrith Field Support Centre Australia 96–120 Blaikie Road Jamisontown NSW 2750 Kandos Picton Field Support Centre 94 Bridge Street Picton NSW 2571

Shellharbour Field Bowenfels Support Centre Buckleys Road Windsor Shell Cove NSW 2529 Northern

South Windsor Field Katoomba Glendenning Kings Park Support Centre Penrith Huntingwood Parramatta Corner Ham Street and Fairey Street South Winsor NSW 2756 Narellan Hoxton Park Springhill Field Support Centre

191–195 Five Island Road Picton Unanderra NSW 2526 Central

Ulladulla Field Support Centre Moss Vale 18 Deering Street Coniston Springhill Ulladulla NSW 2539 Country Energy Shellharbour

Contact details Emergencies, streetlights out, hot water hotline Nowra Tel: 131 003 (24 hours) Southern Customer Service Tel: 131 002 (24 hours) Pacific Account enquiries Ulladulla Ocean Residential customers Tel: 131 002. Business customers Tel: 1300 136 335 for the INbusiness Solutions team (8.00am–6.00pm Monday to Friday) Credit card payments 1300 361 104 (24 hours) Head Office enquiries Tel: 131 081 or (02) 9853 6666 (8.00am – 5:30pm Monday to Friday) Fax: (02) 9853 6000 Email: [email protected] Website: www.integral.com.au Ethics hotline 1800 ETHICS (384 427)

126 Integral Energy Annual Performance Report 2008–09 Glossary Appendices

Annual Performance Report 2008–09

AER Australian Energy Regulator AFSL Australian Financial Services Licence AIFRS Australian equivalents to International Financial Reporting Standards ARSBA Annual Reports (Statutory Bodies) Act 1984 ARSBR Annual Reports (Statutory Bodies) Regulation 1995 ASPs accredited service providers bund area protected by a low wall to prevent the spread of dangerous liquids being stored or processed CAD computer aided design CAPEX capital expenditure CBD central business district CEO Chief Executive Officer CSIRO Commonwealth Scientific and Industrial Research Organisation

CO2e (carbon dioxide units used to describe global warming potential of all greenhouse gases, e.g. carbon dioxide, nitrous oxide, equivalent) methane, carbon monoxide Cth Commonwealth EBIT earnings before interest and tax EBITDA earnings before interest, tax, depreciation and amortisation EEO equal employment opportunity EISS Energy Industries Superannuation Scheme esaa Energy Supply Association of Australia FBT fringe benefit tax FOI Act Freedom of Information Act 1989 (NSW) GAAP Financials GIS Geographic Information System (database of all physical assets) GWh gigawatt hour GST goods and services tax ICAC Independent Commission Against Corruption INgreen a range of Green Power accredited products, launched by Integral Energy in February 2006 INpower an Integral Energy program to assist customers facing financial hardship to pay for their electricity consumption IPART Independent Pricing and Regulatory Tribunal ISDA International Swaps and Derivatives Agreement ISO International Organization for Standardization KPIs key performance indicators kV kilovolt kVA kilovolt ampere kWh kilowatt hour LPG liquefied petroleum gas LTI lost-time injury MVA megavolt ampere MWh megawatt hour NEM National Electricity Market NEMMCO National Electricity Market Management Company Limited NGAC NSW Greenhouse Abatement Certificates NPAT net profit after tax including capital contributions NSW New South Wales ODRC optimised depreciated replacement cost OHS occupational health and safety OPEX operating expenditure PCBs polychlorinated biphenyls PF&AA Public Finance and Audit Act 1983 PPA power purchase agreement SAIDI system average interruption duration index SAMP Strategic Asset Management Plan SCI Statement of Corporate Intent SENI serious electrical network incident TOU time of use TSA Transition Services Agreement

127 Index

Annual Performance Report 2008–09

8A ethics 60, 105–6 Network Strategy 11 apprentices 6, 40–42 Executive Group 58–59, 65, 101, 109 new connections 20 Australian Financial Services Licence 105 external audit 61, 100 New South Wales Government State Plan 26 B F balance sheet 63, 71 finance 88 O Blacktown Solar City project 34, 36–37 financial statements 66–101 oil regeneration 32 Board Code of Conduct 105 financial results 3, 62-65 objectives 9, 31, 97 Board of Directors 52–56, 65, 67, 102 five-year statistical table 104 overseas travel 121 Board Committees 57 freedom of information 110 –15 P business continuity management 61 funds granted to non-government performance indicators 10, 32, 40, 104 business risk plan 60 organisations 115 price determinations 116 –18 C G property, plant and equipment 75–76, 87–88 CAPEX delivery 13, 27 governance and operational structure 51 public consultation 48 capital management 10 greenhouse gas emissions 31–33 public sector 10 capital works program 9, 13–17, 28–29 publications 120 expenditure 65 H forecast expenditure 117 health and safety 42–43 Q carbon neutrality goal 33, 36 heritage management 36, 115–16 Queensland operations 6, 24 cash flows 64, 72, 84–85 Hoxton Park Technical Chairman’s and CEO’s report 5–7 Training Facility 6, 28, 46, 65 R climate change 33 remuneration 100, 101 compliance management 61, 73 I retail business 6, 28, 63 consultants 105 independent auditors’ report 68 Retail Regulatory corporate governance 50–61 Independent Commission Against Determinations 118–19 credit card certification 107 Corruption 120 risk management 28, 60–61 credit rating 65 information and communications technology 28 customer relations 6, 47, 106–7 S insurance 61 customer 6, 11, 23, 39, 40, 47, safety performance 5, 29, 106 Integral Energy 106, 119 sales initiatives 23–24 future challenges 29, 36, 49 Code of Ethics and security issues 29 corporate values 2, 106 highlights/lowlights 4 senior management locations 125-126 and committees 57–59, 109 D year at a glance 3 shareholders 54, 64 disclosure of approved exemptions 108 internal audit 61 site investigation and remediation 35 demand management 18–19, 35, 117 social performance 3–4, 38–49 J stakeholders 36, 48 E judicial decisions 74, 124 Eco Depots program 31, 33, 36 T economic performance 3–4, 8–29, 28 L trading 23 electronic service delivery 109 legislative and regulatory changes 122 employee 6 V benefits 78, 89–91 M values 2 conditions 45, 120 maintenance programs 19 engagement 44–45 major works in progress 2008-09 14-17 W growth of 40–41 management discussion waste management 31–32, 36 and analysis 62-65 planning for 28 water consumption 32, 36 Multicultural Policies and relations 45 Western Sydney pricing trial 34 Services Program 119 –20 Workplace Diversity Strategy 120 energy efficiency 21, 35, 46 N environmental performance 3–4, 24, Network Regulatory Determinations 116 30–37, 67, 106 network reliability 5, 9–12 equal employment opportunity 45

128 Integral Energy Annual Performance Report 2008–09