2019 Annual Report

14 June 2019 2019 Annual Report Attached is the AusNet Services 2019 Annual Report. A copy of the report will be sent today to those shareholders who have elected to receive a copy. The report is also available on the company’s website www.ausnetservices.com.au. Claire Hamilton Company Secretary Annual Report 2019 About us CONTENTS AusNet Services delivers safe and reliable gas Our footprints 1 and electricity to more than 1.4 million customers across Victoria. Our networks 2 2019 highlights 4 We are a diversified Australian energy infrastructure Five-year financial summary 5 business, owning and operating almost A$13 billion Chairman’s message 6 of electricity and gas network assets. Managing Director’s report 7 We have more than 1,900 employees working Business Review across our regulated networks and Mondo, our Safety 8 commercial energy services business. Customers 10 We are committed to maintaining a safe and People 12 trouble-free energy supply for our customers Community 14 at all times, while we harness the opportunities Networks 16 being created by new technology and Australia’s Mondo 18 transition to renewable energy, to build a truly Sustainability 20 customer-focused modern energy business. Financial report 24 Our Vision is to create energising futures by Directors’ Report 25 delivering value to our customers, communities Notes to the consolidated financial statements 75 and partners. Directors’ declaration 129 Independent Auditor’s report 130 Glossary of terms 138 Shareholder information 140 Company information 142 Our Corporate Governance Statement, Infrastructure Entity Statement, and Tax Transparency Report are available on our website: www.ausnetservices.com.au/ Investor-Centre/Company-reports ANNUAL REPORT 2019 | 1 Our electricity and gas footprints A B Thomastown Sydenham South Morang Yallourn Keilor West Melb. South Morang Morwell Loy Loy Altona Brunswick Yang Yang Ringwood A B Richmond Buronga Brooklyn Deer Valley Park Newport Malvern Murraylink Springvale Rowville Hazelwood Interconnect Fishermans SY Jeeralang Loy Bend Yang Red Cliffs Heatherton East Hazelwood Monash Rowville Frankston Tyabb Cranbourne Wemen Western Port Kerang Jindera Wodonga Murra Warra Shepparton Murray Fosterville Glenrowan Dederang Horsham Bulgana Bendigo Mt Beauty Ararat Dartmouth Crowlands Kiewa Waubra Bogong South East Mckay Creek Eildon Ballarat Elaine A B Mortlake Moorabool Heywood Geelong Tarrone Terang Basslink Portland Interconnect Aluminium Smelter Victorian Desalination Plant LEGEND AusNet Services’ electricity distribution network AusNet Services’ gas distribution network AusNet Services’ terminal/switching stations Non-AusNet Services terminal/switching stations Power stations (non-AusNet Services) AusNet Services’ regulated transmission lines Non-AusNet Services transmission lines 2 | AUSNET SERVICES Our electricity and gas networks Coal/gas generation 13,000 6,685km of high Micro grid Supplying electricity to almost transmission voltage transmission homes with 740,000 residential and towers powerlines solar panel business customers and battery Electric vehicles Wind farms with/without batteries Solar plants with/without 400,000 batteries powerpoles, with 53,000km EV fast of powerlines charging stations Big battery/ 11,650 kilometres pumped hydro 66 zone substations of underground gas pipelines Supplying natural Gas gas to more than production 710,000 residential and business customers 58 terminal stations ANNUAL REPORT 2019 | 3 LEGEND Electricity transmission Electricity distribution Gas distribution Coal/gas generation 13,000 6,685km of high Micro grid Supplying electricity to almost transmission voltage transmission homes with 740,000 residential and ELECTRICITY TRANSMISSION towers powerlines solar panel business customers Our transmission network transports and battery electricity from where it is generated, through terminal stations and high-voltage transmission powerlines Electric across the state, to Victoria’s five vehicles lower voltage distribution networks. Wind farms with/without batteries ELECTRICITY DISTRIBUTION Our electricity distribution network Solar plants feeds lower voltage electricity to with/without 400,000 customers across all of eastern batteries powerpoles, and northeastern Victoria and in with 53,000km EV fast Melbourne’s north and east. of powerlines charging stations GAS DISTRIBUTION Our gas distribution network supplies natural gas to residential and business customers in western Big battery/ Melbourne, central and western 66 zone 11,650 kilometres pumped hydro Victoria, through our network of substations of underground gas pipelines underground gas pipelines. Supplying natural Gas gas to more than production 710,000 residential and business customers MONDO Mondo provides services and 58 terminal technology for essential infrastructure stations in the energy, water and transport sectors, including transmission connections, grid-scale storage, smart energy management systems, mini grids, and community energy hubs. 4 | AUSNET SERVICES 2019 Highlights LOWEST-EVER RECORDABLE PROACTIVE CUSTOMER HIGHEST-EVER FEMALE INJURY FREQUENCY RATE TEXT UPDATES EMPLOYMENT LEVEL 3.53 2.4m 23.4% REGULATED AND TOTAL DIVIDEND CONTRACTED CONTRACTED ASSET BASE (PARTLY FRANKED) ASSET BASE UP 5% UP 5% UP 30% ANNUAL REPORT 2019 | 5 Five-Year Financial Summary 2015 2016 2017 2018 2019 Revenue ($M) 1,833.9 1,919.0 1,881.5 1,909.8 1,861.5 EBITDA ($M) 1,047.2 1,142.5 1,073.3 1,142.9 1,134.2 EBIT ($M) 668.0 750.2 647.4 700.5 677.8 Profit for the year ($M) 22.6 489.3 255.1 291.4 253.9 Total assets ($M) 12,063.3 11,676.0 11,756.5 12,517.3 12,815.8 Total borrowings ($M) 7,216.1 6,897.7 6,665.3 7,565.1 7,946.4 Total equity ($M) 3,248.8 3,557.8 3,698.4 3,556.0 3,289.1 Net debt to asset base (%) 67.5 67.2 67.9 66.7 67.1 Net gearing (%) 66 64 63 66 70 Interest cover (times) 2.9 3.0 3.2 3.6 3.3 Dividend (cents) 8.36 8.53 8.80* 9.25 9.72 Earnings per share (cents) 0.66 13.95 7.15 8.08 7.01 Capital expenditure ($M) 809.4 822.7 839.6 750.2 969.8 Operating cash flows ($M) 767.6 710.0 742.8 886.4 813.7 * Excludes 1 cent per share special dividend 6 | AUSNET SERVICES Chairman’s message Peter Mason AM Chairman For the financial year ended 31 March 2019 The need for better integration of energy contribution to both AusNet Services and AusNet Services has provided a solid and climate change policy is a particularly the wider industry has been outstanding. performance for shareholders and pressing issue, and we are committed to He is widely respected by governments, customers, while making good progress helping Australia meet its emission regulators and shareholders. I have refining and implementing our strategy. reduction targets and long-term personally and professionally valued commitments under the Paris Agreement. his counsel. Australia’s energy sector continues to undergo disruption, driven by policy The past year has also seen a heightened We are pleased to have appointed uncertainty, technology change, an public focus on customers and corporate Tony Narvaez to succeed Nino. Tony has accelerating shift to renewables, and culture. These are matters of importance extensive experience in the Australian increasing customer engagement. for shareholders as well. The Board has energy sector. Nino and Tony will together Many choices are opening in the energy recognised this in the appointment of a facilitate an orderly transition of leadership. supply chain. Energy consumers have Customer Forum to assist timely customer unprecedented opportunities to participate feedback for long-term decision making. Alan Chan Heng Loon and Li Lequan joined more actively in the sector. the Board during the year, to fill the vacancies FINANCIAL PERFORMANCE created by the retirement of Ho Tian Yee The developing changes in consumer and Sun Jianxing respectively. I thank both We are pleased to have been able to behaviour, together with rapidly evolving retiring directors for their contributions, and increase dividends to shareholders by five technology developments, require us to welcome the new directors. per cent in line with guidance, and franked adapt our long-established transmission to 42.5 per cent for the year. At the same and distribution networks to provide access Our business strategy has five key themes time, we have made significant capital and supply in a pattern for which they were – efficiency, customer focus, growth, investments in growth opportunities in not originally designed. We aim to do this in digitisation, and culture and capability. By the contracted transmission sector that a timely, efficient and affordable way. delivering in each of these dimensions, we will serve us well in the future. can achieve our corporate objectives and Regulators and governments are under meet the requirements of our shareholders Earnings before interest, tax, depreciation great pressure to provide policy outcomes while sustaining our customers and the and amortisation (EBITDA) fell marginally, which create the investment environment communities within which we operate. and operating cash flows remain strong, to facilitate these developments. despite lower revenues. AusNet Services is well poised to capitalise Accordingly, maintaining tight control on on the opportunities the energy transition We have largely been able to offset lower costs while adapting our networks and presents, and to support customers as they regulated revenues with continuing investing selectively in growth choose their own energy futures. reductions in operating expenses through

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