Powerlink Queensland Annual Report 2009/10

2009/10 Statement of Corporate Intent

Prepared by the Directors and Management of Powerlink Queensland for shareholding Ministers, including the: . Treasurer and Minister for Employment and Economic Development . Minister for Natural Resources, Mines and Energy and Minister for Trade

Queensland Electricity Transmission Corporation Limited ABN 82 078 849 233 2009/10 Statement of Corporate Intent

CONTENTS

PART 1 CORPORATE OBJECTIVES AND STRATEGIES ______1 1.1 Core Business ______1 1.2 Corporate Objectives ______2 1.3 Operational Objectives ______2 1.4 Corporate Strategies ______3 1.5 Performance Drivers ______3 1.6 Corporate Performance Outcomes ______7

PART 2 MANDATORY MATTERS ______8 2.1 Financial Targets ______8 2.2 Non-Financial Performance Targets ______9 2.3 Assumptions______10 2.4 Community Service Obligations ______10 2.5 Employment and Industrial Relations Plan ______10

PART 3 ADDITIONAL MATTERS ______11 3.1 Financials ______11 3.2 Assets ______17 3.3 Capital Expenditure Program ______17 3.4 Other Undertakings ______19

PART 4 PERFORMANCE AGREEMENT ______23 Directors Statement and Agreement of shareholding Ministers ______23

PART 5 ATTACHMENTS ______24 Employment and Industrial Relations Plan ______24 Government Policies and Guidelines ______43 Sponsorship, Advertising, Corporate Entertainment and Donations ______44 WACC Parameters ______46 Deﬁ nitions and Glossary of Abbreviations ______47 2009/10 Statement of Corporate Intent

PART 1 CORPORATE OBJECTIVES AND STRATEGIES 1.1 Core Business Powerlink Queensland (Powerlink) is a Queensland Government Owned Corporation established in 1995 under the Government Owned Corporations (GOC) Act 1993. It is a Transmission Entity under the Electricity Act 1994, and is the sole holder of a Transmission Authority from the Queensland Government that authorises the corporation to operate the Queensland electricity transmission grid.

Powerlink is the Queensland Transmission Network Service Provider (TNSP) in the National Electricity Market (NEM), and owns, develops, operates and maintains the State’s high voltage electricity transmission network, and is the Jurisdictional Planning Body responsible for transmission network planning in Queensland. These activities are regulated in accordance with the National Electricity Rules (Rules) and the Electricity Act 1994. The Economic Regulator for electricity transmission is the Australian Energy Regulator (AER).

Powerlink’s Core Business is to: • Deliver a reliable transmission service to electricity market participants via open, non-discriminatory access to the Queensland transmission grid, which connects power stations with customer / distribution network connection points. This involves planning, designing, constructing, operating and maintaining transmission assets to meet present and future needs for the transmission of electricity in its designated area in Queensland. These activities are regulated in accordance with the Rules and the Electricity Act 1994. • Provide negotiated and non-regulated transmission network connection services to new generators and loads wishing to connect to the transmission network, in compliance with the Rules. • Establish and operate “network support” contracts with power generators or providers of non-network solutions, to complement transmission capacity in locations where network support is, for the time being, more economical than a transmission investment. These contracts enable “on request” operation of generators or other providers that would not otherwise be dispatched under normal electricity market conditions. • Deliver system operator services to assist the National Electricity Market Management Company, (NEMMCO) to manage power system security in the Queensland region of the NEM. • Provide metering services to measure electricity generation and usage at connection points to the transmission network. • As appointed by the Queensland Government, perform the functions of: – Jurisdictional System Security Coordinator in Queensland; – Jurisdictional Planning Body for the electricity transmission network in Queensland; and – Responsible Officer for Queensland under the NEM protocol.

Powerlink derives the majority (over 90%) of its revenue from the provision of prescribed (regulated) transmission services. Powerlink’s revenue for a ﬁ ve year period concluding in 2011/12 was determined by the AER in their report published in June 2007.

Regulated transmission prices are calculated in line with the approved revenue caps, with adjustments for the AER Service Target Performance Incentive Scheme and the provisions of the Rules.

Powerlink’s other revenue sources include negotiated and non-regulated transmission services, technical services and the provision of services to telecommunications carriers.

Customers for technical services have been secured from across Australia and in some cases outside Australia. Powerlink has shareholding Minister approval to pursue the provision of these services to agreed overseas countries.

Powerlink also receives returns from its investment in ElectraNet SA, the transmission entity in South Australia. Powerlink currently owns 41.11% of the ordinary equity in ElectraNet SA.

1 2009/10 Statement of Corporate Intent

1.2 Corporate Objectives

Vision To be the leading transmission network service provider in Australia, and one of the best in the world.

Mission To deliver transmission network services and related services, at world class levels of safety, reliability and cost-effectiveness.

Objectives  Develop the grid to meet reliability standards as Queensland’s load grows.  Deliver a rate of return on investments at least equal to that implicit in the WACC determined by the regulator.  Maintain an “investment grade” credit rating.  Retain leadership as the most cost effective TNSP in the NEM.  Do all this safely (public & employees).  Attract and retain the necessary skills and capabilities.

1.3 Operational Objectives Powerlink’s “Operational Excellence” corporate strategy continues to be a focus of all activities.

Cost Efﬁ ciency Network Performance Safety Environment

Cost Efﬁ ciency International benchmarking shows that Powerlink remains in the top quartile internationally when measured against cost-efﬁ ciency and reliability. Powerlink intends to maintain this leadership position.

Network Performance The AER sets network performance targets under its service standards incentive scheme that apply to Powerlink for the regulatory period July 2007 to June 2012. Under the scheme Powerlink may earn a bonus or incur a penalty of up to 1% of the revenue cap. Powerlink’s network performance in 2007 and 2008 exceeded the AER targets. Powerlink’s goal is to continue to meet or exceed the AER’s reliability targets.

Safety Safety for both our employees and the general community continues to be the ﬁ rst consideration in all work associated with the construction, operation and maintenance of the transmission network.

Environment Powerlink meets its environmental obligations via its Environmental Management System by raising awareness among employees and contractors, and by complying with the relevant environmental legislation. In accordance with the Queensland Government policy directions, Powerlink has adopted the QFleet Climate Smart Action Plan objectives for the motor vehicle ﬂ eet.

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1.4 Corporate Strategies Powerlink focuses on three major strategies to enhance shareholder value: (i) Develop the Networks we Own and Manage We plan and develop the transmission network to ensure a secure, reliable, safe and cost effective high voltage electricity grid in Queensland that meets customer needs. (ii) Achieve Operational Excellence To maintain Powerlink’s position as the leading transmission network service provider in Australia and one of the best in the world by achieving excellence in the key aspects of our business.

Safety Provide a safe environment for employees and the public. Environment Demonstrate regard for the environment and comply with all relevant legislation. Network Meet or exceed the regulatory service standards. Performance Cost Efﬁ ciency Maintain the position as the most cost effective transmission entity in the NEM.

(iii) Grow Non-Regulated Proﬁ ts (Selectively) Selectively grow Powerlink’s non-regulated business to enhance proﬁ tability, and to develop and retain key skills by leveraging core competencies where we have a sustainable competitive advantage.

Continue to deliver good returns from the investment in ElectraNet SA.

In developing the 2009/10 Statement of Corporate Intent, Powerlink has taken into consideration the expectations of recent correspondence from shareholding Ministers and the Queensland Treasurer, namely: – Strategic Directions Expectations Letter (12 December 2008) – Treasurer Economic Statement – GOC Reforms Expectations Letter (9 December 2008)

Powerlink responded to the Treasurer on 18 December 2008 and 18 February 2009 outlining Powerlink’s proposed actions in response to the GOC Reforms Expectations letter.

1.5 Performance Drivers Powerlink plans to remain the most cost effective electricity transmission entity in the NEM. The business environment in which Powerlink operates is characterised by many elements, some of which are unique to Queensland, such as geography/decentralisation, high demand growth, mandated reliability of supply obligations, location of generation and key legislation.

Electricity transmission is fundamentally a transportation business – the economics are driven by not only how much is transported (megawatts – MW), but also by how far it has to be transported (kms). In Queensland, the “how far” is very large – by way of illustration, the UK National grid would ﬁ t into a small corner of Queensland.

The key drivers for Powerlink in this environment include: • Network Development • Operational Excellence • Community and Customer Relations

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1.5.1 Network Development Load Growth Powerlink follows a robust process in developing its load forecasts by consulting market participants and directly connected customers, and engaging a consultant to concurrently conduct an independent top down assessment.

Queensland has experienced consistently high growth in electricity demand and energy. Powerlink’s Annual Planning Report (APR), published in late June 2008, highlighted that the state wide summer maximum demand is forecast to increase by an annual average of 3.6%. Annual energy to be delivered over the transmission grid is forecast to increase at an annual rate of 3.2%, over the next ten years for the medium economic growth scenario.

Overall electricity demand growth in Queensland has been signiﬁ cantly higher than for the rest of the NEM as shown in the graph below sourced from NEMMCO’s 2008 Statement of Opportunities.

Demand forecasts are updated each year in the Annual Planning Report (APR), which is published in late June /early July.

Given the long term nature of transmission investment decisions and Powerlink’s regular planning process, it is not expected that any changes to the demand forecasts that will form part of the 2009 APR will result in a material impact on Powerlink’s capital expenditure plans and forecasts for the next few years.

NEMMCO Statement of Opportunities 2008 Summer Maximum Demand 10 Year Average Annual Growth Rate Projections 4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0% Queensland News South Victoria South Tasmania Wales Australia

Mandated Reliability Obligations Powerlink is the sole holder of the Queensland transmission authority, which authorises it, under the Queensland Electricity Act 1994, to operate the high voltage transmission grid in the coastal region of Queensland, and is a registered TNSP in the NEM. Powerlink must comply with the relevant provisions of the Rules and its transmission authority.

A salient feature of the arrangements in Queensland is that Powerlink has mandated reliability obligations that drive non-discretionary investments in grid augmentations as electricity demand grows.

As a regulated monopoly, the processes that Powerlink must undertake to plan and augment the Queensland Grid are deﬁ ned in the Rules and the AER’s Regulatory Test. The Rules require extensive consultation with market participants and interested parties, and comparison of transmission options with alternatives such as local generation and demand side management options. The AER’s Regulatory Test deﬁ nes the economic test that must be applied to justify transmission network augmentations. 4 2009/10 Statement of Corporate Intent

In meeting these obligations, Powerlink’s approach to network planning is economically based, subject to environmental, safety and land use planning legislation, and consistent with both the Rules and the AER’s Regulatory Test. Capital Works In meeting its mandated reliability of supply standards, Powerlink follows the processes outlined in the Rules for consultation with interested parties and economic assessment under the AER’s Regulatory Test.

By ensuring that new capital works expenditure meets the AER’s Regulatory Test, Powerlink can be conﬁ dent that this expenditure will be included in the regulatory asset base.

The AER has adopted an “ex ante” framework for determining the levels of capital expenditure for the regulatory period (2007/08 to 2011/12). The “ex ante” framework is based on a determination by the AER at the start of the regulatory period of an efﬁ cient level of capex for the duration of the regulatory period.

The AER’s capital expenditure provision made allowance for expected new works and cost increases, including exchange rate movements. Powerlink is carefully managing its capital works program taking into consideration the AER’s capital expenditure allowance. To the extent that additional new works are required or that input costs increase (eg. due to falling exchange rates), Powerlink is exposed to absorbing the additional expenditure whilst still meeting reliability obligations.

1.5.2 Operational Excellence Cost Efﬁ ciency Powerlink’s operational expenditure is increasing due to the growth and ageing of network assets as well as rising input costs (exchange rate movements, EBA outcomes, excessive wet weather, legislative changes). In this environment, Powerlink’s costs are expected to increase at rates above CPI.

Notwithstanding this upward pressure on operating expenditure, Powerlink’s real operating expenditure in the longer term is forecast to increase at a slower rate than the growth in the size and value of the network to be managed. This is due to targeting ongoing operational efﬁ ciencies and the harnessing of scale economies.

Powerlink’s on-going comprehensive workforce planning and the completion of the new three year term “Working at Powerlink 2008” Union Collective Agreement in November 2008 gives Powerlink a level of certainty over its cost management over the next few years.

Powerlink continues to participate in international benchmarking to assess its performance against similar transmission businesses worldwide. The benchmarking focuses on the competing indicators of cost efﬁ ciency and service performance (network reliability).

This benchmarking continues to show that Powerlink consistently benchmarks in the top quartile internationally for the cost efﬁ ciency and service performance (network reliability) indicators. Powerlink intends to maintain its leadership in cost efﬁ ciency.

Powerlink operates an Asset Owner / Asset Manager / Service Provider (“AO/AM/SP”) business model that supports the effective and efﬁ cient management of assets involved in the provision of transmission services.

Powerlink considers that the AO/AM/SP model remains an essential element in managing the complex, and sometimes conﬂ icting, environment in which we operate. The model delivers an integrated and responsive management structure, capable of reconciling complex issues through well-deﬁ ned responsibilities.

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Network Performance The AER administers a service standards incentive scheme that applies to transmission network service providers in the NEM. The AER establishes targets that should result in a revenue neutral outcome unless there is an underlying change in performance. The scheme provides for a possible ﬁ nancial bonus or penalty resulting from actual performance measured against the service standard.

Speciﬁ c service standard performance benchmarks were set by the AER for Powerlink for the current regulatory period. These include measures of circuit availability, loss of supply and duration of outages. The regulatory service standard benchmarks for 2009/10 have been incorporated into Powerlink’s SCI performance targets.

Powerlink has a geographically dispersed and technically diverse transmission network, requiring consistent and effective operating and maintenance strategies. To ensure that the network continues to deliver the required performance, Powerlink uses two strategic frameworks – plant management strategy (“doing the right thing”) and Work Management Strategy (“doing the thing right”). It is the combination of the two strategy aspects that enables Powerlink to deliver world-class network performance.

Participation in benchmarking studies is used to monitor the effectiveness of the strategies. Safety Electrical safety continues to be the ﬁ rst consideration in all work associated with the construction, operation and maintenance of the transmission network for both our employees and the general community. Powerlink continues to participate constructively in the development of standards, and applies processes that ensure compliance with national standards for working with electrical networks.

Powerlink has developed a set of fundamental occupational health and safety issues regarded as most critical to safe working in the electricity transmission industry. There is an ongoing education campaign within Powerlink on these safety fundamentals.

An independent external advisor audits Powerlink’s safety policies, systems and practices annually. Environment The community in which we operate has ever increasing expectations in regard to acceptable environmental performance. Powerlink addresses these expectations by implementing an Environmental Management System, raising awareness among employees and contractors, and complying with relevant environmental legislation. Powerlink will be required to report greenhouse gas emissions under the National Greenhouse Energy Reporting Act, but is not required to participate in emissions trading.

1.5.3 Customer and Community Relations The community consultation, environmental assessment and approval processes associated with future transmission line routes add to the timeframes for transmission development. Powerlink follows the processes outlined in the Rules for consultation with interested parties, and economic assessment under the Regulatory Test.

Powerlink also follows the guidelines in the Integrated Planning Act legislation for public consultation on new transmission line routes.

Powerlink has a proven program in place to offset the broader social and visual impacts of new transmission lines by providing beneﬁ ts to communities affected by new projects (“Community Beneﬁ ts Program”). Powerlink will continue to apply this program to new transmission line construction projects.

The development of new buildings close to Powerlink’s existing strategically acquired vacant easements remains a key issue requiring future management. Powerlink continues to work with local authorities, planners and developers who approve future developments close to existing easements to ensure they make appropriate allowance for the proximity of these developments to future transmission lines.

Powerlink’s 22 customers comprise generators, distributors and direct connect major loads (eg. smelters).

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1.6 Corporate Performance Outcomes During 2009/10, Powerlink’s target is to achieve the following ﬁ nancial and non-ﬁ nancial performance outcomes.

Key Corporate Objectives / Outcomes Performance Measures / Performance Area Outcomes for 2009–10

Deliver Capital To develop the Queensland To deliver Powerlink's 2009/10 Works Program transmission grid to meet customer capital works program, forecast electricity demands, and safety at $610.4 M (excluding ﬁ nancing and reliability standards. costs during construction).

Meet Financial Achieve speciﬁ ed Financial Refer Section 2.1 Financial Targets Performance Targets. Performance Targets.

Meet Non-Financial Achieve speciﬁ ed Non-Financial Refer Section 2.2 Non-Financial Targets Performance Targets. Performance Targets.

Deliver ElectraNet To deliver the forecast distributions Refer Section 3.1 ElectraNet SA Distributions from Powerlink’s investment Investment Distributions. in ElectraNet.

Deliver To deliver dividends to shareholders, Target dividend payout ratio of 80%. Shareholder Value whilst maintaining at least an “investment grade” business To manage Powerlink’s 2009/10 credit rating. borrowing requirements within the approved borrowing limits.

Increases in the capital works program may require an increase in borrowing requirements. Powerlink will seek approval for any increase should this arise.

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PART 2 MANDATORY MATTERS 2.1 Financial Targets

2009–10 2007–08 2008–09 2008–09 Budget Actual SCI Est. Actual PERFORMANCE TARGETS • EBIT $364.6 M $297.9 M $322.5 M $345.0 M • Net Proﬁ t After Tax (NPAT) $111.1 M $103.1 M $90.3 M $111.7 M • Return on Assets (ROA) 6.3% 6.6% 6.3% 6.4% • Return on Equity (ROE) 5.7% 6.1% 5.0% 5.7% • Dividend Payout Ratio 80% 80% 80% 80%

PERFORMANCE INDICATORS • Debt / Debt + Equity Ratio 63.2% 58.9% 62.2% 61.8% • Debt / Fixed Assets Ratio 59.9% 54.7% 59.0% 58.1% • Interest Cover Ratio (EBITDA) 2.5 3.1 2.5 2.8 • Dividend Return on Share Capital 22.2% 21.0% 18.0% 22.6%

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2.2 Non-Financial Performance Targets

2009–10 2007–08 2008–09 2008–09 Budget Actual SCI Est. Actual PERFORMANCE TARGETS Cost Efﬁ ciency • Total Network Maintenance Cost / 1.0% 1.0% 1.0% 1.0% Replacement Asset Value

• Total Controllable Operating Cost / 1.8% 1.8% 1.9% 1.9% Replacement Asset Value Environment Objective: Powerlink’s objective is to be compliant with relevant legislation. Any reportable instances that may occur will be reported. Target: To be materially compliant.

Safety • Lost Time Calculation (LTC) 3.0 1.3 3.0 3.0

PERFORMANCE TARGETS Network Performance 1 2009 Year 2007 Year 2008 Year 2008 Year • Circuit Availability – Critical Circuits >99.07% 99.48% >99.07% 98.99% – Non-Critical Circuits >98.40% 98.76% >98.40% 98.51% – Peak Periods >98.16% 98.66% >98.16% 98.48% • Average Outage Duration 1,033 minutes 809 minutes 1,033 minutes 1,046 minutes • System Reliability – Events in excess of Not More Not More 2 2 0.2 system minutes Than 5 Than 5

– Events in excess of Not More Not More 1 0 1.0 system minute Than 1 Than 1

PERFORMANCE INDICATORS Safety • LTIFR (Frequency Rate) --- 3.6 --- 5.0 • LTIDR (Duration Rate) --- 47.2 --- 100.0

REPORTING REQUIREMENTS Objective: To comply with data submission and reporting requirement timelines. Target: 100% Compliant 1 Applies to Calendar Year

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2.3 Assumptions Powerlink’s undertaking to achieve its performance outcomes is predicated upon the following assumptions:

Assumptions 2009–10 2007–08 2008–09 2008–09 Budget Actual SCI Est. Actual Economic Indices CPI 2.5% 4.24% 3.0% 2.5% Salaries and Wages Growth 4.5% 1 --- 4.5% 1 --- Income Tax Rate 30% 30% 30% 30% Business Growth Energy Delivered at Connection Points 3.2% 0.4% 3.9% 3.1%

Maximum Demand (Summer), including Powerlink Bulk Loads (“as delivered” 3.6% 1.0% 4.5% -- from the transmission grid)2

Revenue Cap – Regulated $ 667.0 M $ 676.5 M $596.1 M $ 604.4 M Network (Circuit kilometres) 13,081 12,671 13,128 12,977 Notes: 1 Salaries & Wages Growth assumption excludes any impacts of changes due to approved training plan progressions & allowance changes. 2 Temperature and diversity corrected

2.4 Community Service Obligations No community service obligations are payable to Powerlink.

2.5 Employment and Industrial Relations Plan An Employment and Industrial Relations Plan meeting the requirements of Section 171 of the GOC Act has been provided to shareholding Ministers and is included as Attachment 1 to this SCI.

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PART 3 ADDITIONAL MATTERS 3.1 Financials 3.1.1 Group Proﬁ t And Loss Statement

POWERLINK QUEENSLAND 2009/10 2007/08 2008/09 2008/09 (Consolidated) Budget ($M) Actual ($M) SCI ($M) Est. Act ($M) Operating Revenue Total Operating Revenue 741.3 611.6 658.6 681.5 Operating Expenses Controllable Operating Expenses 169.8 146.0 155.6 148.1 Depreciation 199.5 158.1 174.2 173.6 Other 7.4 9.6 6.3 14.8 Total Operating Expenses 376.7 313.7 336.1 336.5 Earnings Before Interest and Tax (EBIT) 364.6 297.9 322.5 345.0 Interest Expense 212.1 146.7 193.5 183.2 Income Tax Equivalent Expense 41.4 44.9 38.7 48.6 Profi t After Tax (PAT) 111.1 106. 3 90. 3 113.2 (Before Equity Accounting Entries) Share of net profi ts/(losses) of Associates 0.0 1 (3.2) 0.0 (1.5) Net Profi t After Tax (NPAT) 111.1 103.1 90.3 111.7 Retained Earnings at beginning 1,021.9 995.2 1,014.4 1,000.8 of fi nancial year Total Available for Appropriation 1,133.0 1,098.3 1,104.7 1,112.5 Dividends Provided for 88.8 84.4 72.2 90.6 Retained Profi ts @ end of fi nancial year 1,044.2 1,000.8 1,035.5 1,021.9

Notes: 1 As the amount cannot be readily forecast, for business planning purposes a value of “0.0” is adopted”. The item does not have a material impact on NPAT and does not impact the forecast dividend provision for the year.

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Balance Sheet – at 30 June of Relevant Financial Year

POWERLINK QUEENSLAND 2009/10 2007/08 2008/09 2008/09 (Consolidated) Budget ($M) Actual ($M) SCI ($M) Est. Act ($M) Current Assets Cash 10.0 100.6 10.0 10.0 Receivables 60.5 65.7 53.8 55.1 Other 42.6 35.3 23.0 35.2 Total Current Assets 113.1 201.6 86.8 100.3 Non-Current Assets Investments 138.8 111.5 109.4 126.0 Property, Plant & Equipment 5,793.5 4,599.1 5,153.2 5,233.0 Other 13.8 13.5 31.5 13.7 Total Non-Current Assets 5,946.1 4,724.1 5,294.3 5,372.7 Total Assets 6,059.2 4,925.7 5,381.1 5,473.0 Current Liabilities Creditors 34.3 100.0 36.6 34.4 Other 130.3 197.1 100.3 133.5 Total Current Liabilities 164.6 297.1 136.9 167.9 Non-Current Liabilities Borrowings 3,460.9 2,516.4 3,040.9 3,038.4 Other 417.2 355.1 359.0 385.2 Total Non-Current Liabilities 3,878.1 2,871.5 3,399.9 3,423.6 Total Liabilities 4,042.7 3,168.6 3,586.8 3,591.5 Net Assets 2,016.5 1,757.1 1,844.3 1,881.5 Shareholders Equity Share Capital 401.0 401.0 401.0 401.0 Reserves 571.3 355.3 410.8 458.6 Retained Earnings 1,044.2 1,000.8 1,032.5 1,021.9 Total Shareholders Equity 2,016.5 1,757.1 1,844.3 1,881.5

Powerlink Queensland – Transaction with Owners as Owners

POWERLINK QUEENSLAND 2009/10 Budget 2007/08 Actual 2008/09 SCI 2008/09 Est. Act (Consolidated) ($M) ($M) ($M) ($M)

Equity Injections / Withdrawals Nil Nil Nil Nil NPAT Adjustment pre Dividend $111.1 M $106.3 M $90.3 M $113.2 M calculation 1 Dividend Payout Ratio (%) 80% 80% 80% 80% Dividend Amount Provided ($M) 2 $88.8 M $84.4 M $ 72.2 M $90.6 M

1 NPAT excludes “Share of net proﬁ ts/(losses) of Associates” in determining the dividend amount. 2 Dividend provided for in the ﬁ nancial year.

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Statement of Cash Flows

POWERLINK QUEENSLAND 2009/10 2007/08 2008/09 2008/09 (Consolidated) Budget ($M) Actual ($M) SCI ($M) Est. Act ($M) Cash Flows from Operating Activities Cash Receipts in the course of Operations 730.8 610.9 649.7 680.8 Cash Payments in the course of Operations (180.5) (185.6) (179.0) (224.1) Interest Received 0.7 6.6 0.7 3.0 Interest Paid (226.5) (146.6) (193.5) (183.2) Tax Equivalent Payments (41.9) (57.5) (36.5) (35.5)

Net Cash Provided by Operating Activities 282.6 227.8 241.4 241.0 Cash Flows from Investing Activities Payments for Property Plant and Equip. (610.4) (638.2) (675.4) (686.1) Proceeds ex Sale of Non-Current Assets 2.6 1.6 1.7 6.7 Other (6.8) (16.5) (9.8) (8.9) Net Cash used in Investing Activities (614.6) (653.1) (683.5) (688.3) Cash Flows from Financing Activities Proceeds from Borrowings 422.6 509.5 522.0 522.0 Dividends Paid (90.6) (92.6) (79.9) (84.4) Other ------Net Cash from Financing Activities 332.0 416.9 442.1 437.6 Net Increase/(Decrease) in Cash Held 0.0 (8.5) 0.0 (9.7) Cash @ Beginning of the Financial Year 10.0 109.1 10.0 19.7 Cash @ End of the Financial Year 10.0 100.6 10.0 10.0

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3.1.2 Key Assumptions Powerlink’s 2009/10 fi nancial forecasts are based on the following key assumptions. Changes to these assumptions may impact on the projected fi nancial results. Regulated Revenue Cap Powerlink derives the majority (over 90%) of its revenue from the provision of regulated transmission services. The SCI regulated revenue and expenditure fi nancial forecasts are consistent with AER’s regulated revenue determination for Powerlink.

Powerlink has calculated the regulated revenue cap for 2009/10 based on the CPI from the March 2008 to March 2009 period (2.47%). Regulatory Pass Through Items There are a number of cost items that are subject to regulatory “pass through” arrangements, such as “Network Support costs”.

Should actual costs for pass through items vary from the forecast estimates, Powerlink is able, with the consent of the regulator, to adjust the revenue collections in subsequent years for any over/under recovery. Whilst this does not impact proﬁ tability, it does affect Powerlink’s cashﬂ ows and ultimately, annual borrowing requirements.

These adjustments cannot be accurately known prior to the end of each fi nancial year. Consequently, the fi nal level of the revenue may vary from that shown for 2009/10. Capitalised Interest Accounting Standard “AASB123 – Borrowing Costs” will apply to Powerlink from July 2009. The standard requires the capitalisation of borrowing costs on qualifying assets for accounting purposes. Powerlink does not currently capitalise any interest (borrowing) costs. This treatment will be adopted commencing with the 2009/10 annual fi nancial statements.

Application of the standard will result in an “accounting” reduction in reported Finance Charges and an equivalent increase in the Net Profi t After Tax (NPAT) result in the Profi t and Loss Statement. The change does not represent a Cashfl ow benefi t to Powerlink. It is solely an accounting reporting change.

The effect of the change will be an increase in dividends of approximately $11 million in 2009/10, which has a modest impact on the level of borrowings. Extraordinary Costs Powerlink assets are subject to extreme climatic events, and transmission structures are designed to withstand high wind loadings. Events such as Cyclone Larry in 2007 that cause major network damage are infrequent.

More recently severe winds collapsed a section of a 132kV transmission line and towers near Dysart in December 2008.

No provision for major asset damage is included in the 2009/10 SCI annual budget. However, the AER’s self insurance regulatory allowances for Powerlink are available to offset these extraordinary costs should they arise. Network Performance – Service Standards Incentive Scheme Regulatory service standard targets are set by the AER for Powerlink as part of its revenue determination.

For the year 2009/10 and following years of this regulatory period to 30 June 2012, Powerlink’s grid service revenue is exposed to bonus /penalty awards of up to 1% of the revenue cap for performance against the service standard targets under the regulatory Performance Incentive (PI) Scheme.

The AER’s service standards are designed to deliver an equal possibility of Powerlink earning a bonus or penalty. For business planning purposes, Powerlink assumes a “Nil” bonus or penalty will apply in future ﬁ n a n c i a l y e a r s . 14 2009/10 Statement of Corporate Intent

In 2009/10, a bonus of $3.0 million achieved for the 2008 calendar year (still subject to AER confi rmation and approval) has been included in the regulated revenue cap. Dividends Powerlink manages its overall cashfl ow requirements, including investments, dividends and operating expenditure, to achieve appropriate prudential requirements and maintain at least an “investment grade” business credit rating, and a specifi c target rating agreed with shareholding Ministers.

Powerlink has assumed a dividend payout ratio of 80% for 2009/10 for business planning purposes. In accordance with Section 159 of the GOC Act, Powerlink has chosen to exclude “Share of net proﬁ ts/ (losses) of Associates” in determining the dividend amount.

Powerlink excludes “Share of net profi ts/(losses) of Associates” as this represents the equity-accounted portion of ElectraNet’s profi t/loss for the fi nancial year. It is an unrealised gain/loss refl ected in the Profi t and Loss Statement. Contestability It is assumed that: • Powerlink will continue to be a monopoly owner of transmission assets in Queensland; and • Contestability of new negotiated and non-regulated transmission connection assets in Queensland will continue. Subsidiary Companies Powerlink has established subsidiary companies, Powerlink Transmission Services Pty Ltd (PTS) and Harold Street Holdings Pty Ltd (HSH), to pursue business investment opportunities.

ElectraNet SA – Investment Through the subsidiaries mentioned above, Powerlink is a part owner in ElectraNet SA, the South Australian transmission network service provider. ElectraNet holds a 200-year lease over the South Australian transmission network assets.

Powerlink holds a 41.11% voting interest in ElectraNet. The other owners in ElectraNet are Hastings Funds Management Limited, YTL Power International Berhad and UniSuper. The investment in ElectraNet comprises: • Ordinary Equity (Voting Rights) • Shareholder Loan Notes • Preferred Loan Notes

ElectraNet SA – Distributions The estimated level of Loan Note Distributions is subject to ElectraNet’s ﬁ nancial performance, capital investments requirements and credit rating agency outcomes. For business planning purposes, Powerlink has assumed full distributions in 2009/10.

ElectraNet SA – Equity Accounting To comply with the equity accounting requirements of Australian Accounting Standards, Powerlink must bring to account its portion of the ElectraNet accounting loss or profi t in its Profi t and Loss Statement. Whilst an estimate of the ElectraNet accounting entries have been incorporated in the fi nancial forecasts, the actual amount that will be brought to account is outside Powerlink’s control. As such the Net Profi t after Tax result will vary depending on the actual ElectraNet result.

Whilst any variations may impact Powerlink’s actual Net Proﬁ t after Tax result, this variation is excluded from determining the level of dividends for the ﬁ nancial year.

15 2009/10 Statement of Corporate Intent

Potential Investments Outside Queensland Powerlink is not aware of other investment opportunities outside of Queensland at this time. COAG Energy Reforms Powerlink has assumed no signiﬁ cant change affecting its ﬁ nancial position or structure as a result of the reviews being undertaken by COAG.

One of the announced COAG reforms which will affect transmission companies is the creation of a new national transmission planning function within the soon to be formed Australian Energy Market Operator (AEMO), whose primary output will be a 10 year strategic development plan for the national electricity grid, which is updated annually.

The COAG decision also requires that the new national transmission planning function does not create any delays to the timetables for transmission grid development.

The responsibility for transmission investment decisions in Queensland remains with Powerlink. Powerlink will still need to plan and develop the Queensland grid to maintain reliability of supply. Emission Trading Powerlink does not expect any impacts in 2009/10 from any emissions trading arrangements which have been proposed by government. Powerlink is required to provide open and non-discriminatory access to its transmission grid.

Adoption of an emissions trading regime may result in a change in the generation mix and generation pattern in Queensland, and Powerlink’s transmission network planning will take this into account.

Powerlink is witnessing a strong level of enquiries regarding gas-ﬁ red generation in the Surat Basin. Powerlink already has some strategic transmission corridors for future 500kV development, to support large power transfers from near Tarong to south-east Queensland. Such developments will be driven by load growth in south-east Queensland.

The National Greenhouse and Energy Reporting Act 2007, introduces a single national reporting framework for greenhouse gas emissions, greenhouse gas projects, energy consumption and energy production of corporations from July 2008 to underpin the introduction of an emissions trading scheme.

The Act requires controlling corporations to register and report if they emit greenhouse gases, produce energy, or consume energy at or above speciﬁ ed quantities per ﬁ nancial year. Powerlink is a registered reporting entity.

As transmission losses are covered by the legislation, Powerlink will be required from 1 July 2008 to report this in accordance with the Act. Powerlink has been voluntarily reporting this data for several years. Transmission to Mt Isa Powerlink’s transmission licence applies to the east-coast of Queensland and does not extend to western Queensland, including the Mt Isa Region.

Powerlink notes that the Queensland Government and Queensland Resources Council have jointly been examining electricity supply options to meet the longer term needs of the Mt Isa region. One potential option is a new regulated transmission line between the Powerlink transmission network and Mt Isa. No allowance has been included for any expenditure associated with the investigation or future development of such a proposal.

16 2009/10 Statement of Corporate Intent

3.2 Assets Regulated Transmission Network Powerlink’s total property, plant and equipment, including works currently under construction, will total $5.8 billion at 30 June 2010. Powerlink’s network of high voltage transmission lines and substations delivers electricity from Queensland power stations to major connection points of supply to distribution corporations, major Queensland industrial loads, and to and from the NSW grid.

The AER as the Economic Regulator for electricity transmission reviews the valuation of assets at the commencement of each regulatory period. It determines an appropriate value of regulated assets at the commencement of each regulatory period and sets an ‘ex ante’ level of capital works to apply over the period of the revenue cap determination.

The AER accepted Powerlink’s opening asset valuation at 1 July 2007 in its regulatory determination.

Non-Regulated And Negotiated Transmission Network Connections The competitive electricity market presents opportunities for Powerlink to win new network connection business when generators or major customer loads seek new connections to the transmission grid or modiﬁ cations to existing connections. These are opportunistic in nature and are dependent on new generation developments and new major customer loads as they emerge.

Telecommunications Powerlink has an extensive telecommunications network in Queensland required for operating the regulated electricity transmission business. Limited surplus capacity in this network presents a non-regulated business opportunity to provide services to telecommunications carriers.

Shareholding Ministers have approved Powerlink’s investment in selective non-regulated capital projects utilising this limited surplus capacity to provide wholesale telecommunication services. This telecommunications infrastructure provides services to The Australian Academic Research Network (AARNET), Ergon Energy, Optus and others.

3.3 Capital Expenditure Program Proposed Capital Works Expenditure Powerlink undertakes to notify shareholding Ministers of all investments greater than $20 million immediately following their approval by the Powerlink Board. Regulated investments greater than $100 million and non-regulated investments greater than $60 million will be submitted to shareholding Ministers for approval, following their approval by the Powerlink Board.

Total capital works expenditure in 2009/10 is forecast to be $610.4 million (excluding ﬁ nancing costs during construction). The major projects expenditure in 2009/10 includes:

17 2009/10 Statement of Corporate Intent

Project Estimated Estimated Total Cost @ Costs in Completion 2009/10 Project 881 – Ingham to Yabulu South 275/132kV Transmission Line $107.0M $12.0M Replacement (Replace aged assets with a double circuit transmission line)

Project 1015 – Woolooga 275/132kV Substation Replacement $36.9M $9.7M (Replace aged assets) Project 1017 – Tarong Secondary Systems $24.5M $8.0M (Replacement of aged assets) Project 1018 – Swanbank A 110kV Substation Rebuild $34.4M $20.0M (Replace aged assets by rebuilding on adjacent site) Project 1067 – Clare Substation Rebuild $31.4M $7.1M (Replace aged assets by rebuilding on adjacent site) Project 1101 – Nth Qld Transmission Reinforcement Stage 2 $145.4M $16.0M (Reinforce supply to North Qld with new 275kV transmission line Nebo-Strathmore) Project 1134 – South Pine 110kV Substation Refurbishment $63.0M $15.5M (Replace aged assets to maintain reliable supply to north Brisbane) Project 1169 – Innisfail – Edmonton Line Replacement $94.7M $3.7M (Replace aged assets with dual voltage 275/132kV transmission line) Project 1177 – Belmont 110kV Substation Refurbishment Stage 1 $50.3M $12.7M (Replace aged assets) Project 1243 – Pandoin Substation Establishment $44.1M $15.7M (Construct 132/66kV substation at Pandoin and Bouldercombe-Pandoin 132kV line) Project 1265 – Bowen Substation Establishment $83.0M $55.9M (Construct new 132/66kV substation & new 132kV double circuit line Strathmore – Bowen) Project 1327 – South Pine to Sandgate 275kV Transmission Line $57.9M $24.6M (Construct a double circuit 275kV transmission line between South Pine and Sandgate substations) Project 1359 – Bouldercombe to South Pine OPGW Retroﬁ t $35.4M $8.1M (Replacement of aged Overhead Earthwires with Optical Fibre Ground Wires) Project 1512 – North Queensland Transmission Reinforcement Stage 3 $218.0M $110.5M (Construct a double circuit 275kV transmission line between Strathmore and Ross substations) Project 1958 – Larcom Creek 275/132kV Substation $74.3M $36.6M (Construct a new 275/132kV substation at Larcom Creek, and a new double circuit 275kV line between Larcom Creek and Yarwun substations)

18 2009/10 Statement of Corporate Intent

3.4 Other Undertakings As part of its performance agreement with its shareholding Ministers, Powerlink provides the following additional undertakings: 3.4.1 Prudent Financial Management The Board and CE of Powerlink take full responsibility to ensure that prudent ﬁ nancial practices will be applied both within the corporation and within its subsidiaries (whether fully controlled or otherwise).

Without limiting the obligations imposed on the Board and the CE by the GOC Act, and where applicable the Corporation’s Law, this includes a commitment to: • abide with the Code of Practice for Government Owned Corporations’ Financial Arrangements as issued by the Queensland Government; and • establish, maintain and implement appropriate ﬁ nancial risk management practices and policies required and as speciﬁ ed in the Code of Practice.

3.4.2 Capital Structure Powerlink will prudently manage the ﬁ nancing of its existing business and new business developments. As an integral part of the ﬁ nancing of the Corporation, the overall debt will be managed to ensure that Powerlink maintains the credit rating agreed with shareholding Ministers within the investment grade range.

3.4.3 Weighted Average Cost of Capital (WACC) As a regulated monopoly, Powerlink’s weighted average cost of capital (WACC) is set by the AER for each regulatory period. The methodology and guidelines for determining the rate is set out in the Rules. The regulatory WACC set for Powerlink in the AER Decision (14 June 2007) is 8.76%.

3.4.4 Dividend Policy Powerlink’s dividend policy takes into account the return its shareholders expect on their investments. Powerlink expects to be able to recommend a dividend amount equivalent to 80% of the Corporation’s applicable net profi t after tax result for the 2009/10 fi nancial year, excluding “Share of net profi ts/(losses) of Associates”.

The Board will adopt such a recommendation on the basis of its shareholders agreeing to provide the necessary funding for projects which have received Board and/or shareholding Ministers’ approval or for the maintenance of Powerlink’s approved capital structure or for ensuring the operational viability of Powerlink.

3.4.5 Corporate Governance Powerlink will continually monitor and review its corporate governance arrangements to reﬂ ect good practice, having regard to the Corporate Governance Guidelines for Government Owned Corporations.

Powerlink has adopted all the recommendations in the Corporate Governance Guidelines for Government Owned Corporations.

3.4.6 Risk Management The Board of Directors of Powerlink has ultimate responsibility for the management of all potential internal and external risks for the Corporation.

The Corporation’s risk identiﬁ cation and management process is monitored by the Audit and Compliance Committee, which is a subcommittee of the Board and which reports to the Board on a regular basis.

The risk management framework is designed to ensure that all potential ﬁ nancial, operational and other risks are regularly identiﬁ ed, assessed, monitored and reported to the Audit and Compliance Committee and the Powerlink Board, along with appropriate risk mitigation and management plans.

19 2009/10 Statement of Corporate Intent

In particular, potential security risks have been considered and identiﬁ ed and a framework to respond to security threats has been developed. The Board will continually monitor security risks and update Powerlink’s response framework as necessary.

Actions to manage risks identifi ed in Powerlink’s Business Risk Profi le are refl ected in business plans and are used to develop the annual internal audit program. This ensures risks are managed effectively, and resources deployed effectively to manage signifi cant risks.

3.4.7 Compliance with Government Policies Powerlink and its subsidiaries will observe and comply with all relevant Government policies and guidelines as set out in Attachment 2.

In particular, Powerlink and its subsidiaries will observe and comply with the approval, notiﬁ cation, reporting and other requirements of those policies and guidelines.

3.4.8 Sponsorship, Advertising, Corporate Entertainment, Donations and Other Arrangements Advertising As a general policy, Powerlink only undertakes advertising that is directly associated with its operational activities such as staff recruitment, and public notices relating to maintenance or construction activities, regulatory notiﬁ cation requirements and community consultations. Corporate Entertainment and Donations In response to the GOC Corporate Entertainment and Hospitality Guidelines issued in September 2008, the Powerlink Board approved the Powerlink Corporate Entertainment and Hospitality Policy for the organisation.

The corporate entertainment and hospitality budget allowance covers business development events, stakeholder and community engagement functions and employee recognition events. Corporate entertainment and hospitality expenditure will be reported quarterly to shareholding Ministers. Sponsorships + Other Related Activities (a) Sponsorship Framework Powerlink has a “Sponsorship Framework” that outlines the Corporation’s approach to sponsorship including strategy, processes, and review and evaluation practices. This approach to sponsorship is successful in focusing Powerlink’s sponsorship activities to ensure they support our commercial and communications priorities.

Powerlink’s “Sponsorship Framework” is consistent with the Government Sponsorship Policy (2004).

For Powerlink, sponsorship activities represent a business relationship between the provider of funds, resources and services, and an individual, event or organisation, which offers in return some rights, association, or opinion leadership that could reasonably be expected to enhance Powerlink’s corporate reputation. (b) Other Related Activities Powerlink also provides funding to community projects through its “Community Beneﬁ ts Program” and “Goodwill Programs”.

Community Beneﬁ ts Program At its discretion, Powerlink implements its Community Beneﬁ ts Program (CBP) in areas where it is building new transmission line projects.

20 2009/10 Statement of Corporate Intent

The CBP is separate to compensation paid to property owners for easements. The CBP aims to provide ﬁ nancial support to local communities traversed by a new transmission line, to undertake worthwhile community projects. Costs associated with CBPs are included within the capital costs of the related transmission line project.

Goodwill Programs From time-to-time, Powerlink also becomes involved in special proactive community based projects designed to build relationships with local councils, communities and other key stakeholders in areas of strategic signiﬁ cance to Powerlink.

These activities are regarded as separate from the Corporation’s sponsorship activities. (c) Budget Allowance Consistent with the Corporate Entertainment and Hospitality Guidelines and (GOC’s) Corporate Entertainment and Hospitality Policy (GOC) has budgeted the following total amounts for Sponsorship, Advertising, Corporate Entertainment, Donations and Other Arrangements for 2009/10.

Full details of the budgeted expenditure are provided in Attachment 3 to the SCI.

Activity Budget Est. Actual Budget 2008/09 2008/09 2009/10

Advertising 1 N/A N/A N/A Sponsorship & Goodwill Programs $272 440 $272 000 $455 000 Corporate Entertainment 2 and Donations $130 000 $80 000 $200 000 Total $402 440 $352 000 $655 000

1 As a general policy, Powerlink only undertakes advertising that is directly associated with its operational activities. 2 Includes all activities above and below $5,000.

3.4.9 Local Industry Policy Whilst the specialist nature of Powerlink’s work on the high voltage transmission grid is such that a substantial amount of equipment, materials and services can realistically only be sourced from large international and national suppliers, Powerlink is committed to providing local industry a full, fair and reasonable opportunity to tender for project based work on its high voltage transmission grid.

Through discussions with the Industry Capability Network, we have agreed that there is little value (and non-trivial administrative overhead cost) in Powerlink developing a Local Industry Participation Plan for each project given our projects are very similar in nature, and the majority of the project spend is realised via period contracts with major suppliers, which Powerlink has in place for both construction and equipment sourcing. The exception is non-transmission network projects where Powerlink will work with Industry Capability Network to develop a Local Industry Participation Plan, as appropriate, for projects that are above the Local Industry Policy spend limits.

Powerlink and Industry Capability Network have agreed there is more value to be gained by Powerlink including the relevant aspects of the Local Industry Participation Plans in its sourcing strategies. Powerlink’s sourcing strategies review the market capability, and describe how Powerlink will approach the market and under what commercial conditions. Sourcing strategies are established and maintained for Powerlink’s signiﬁ cant expenditure items.

21 2009/10 Statement of Corporate Intent

Examples of how Powerlink promotes opportunities to maximise local industry participation include the following where applicable: • utilising Australian Standards and Codes in the formulation of specifi cations, tenders and the letting of contracts; • evaluating tenders according to the Tender Evaluation Criteria as set out in a Contract specifi cation document and Tender Evaluation Plan; • advertise open tenders in newspapers and the listing of tenders on the Queensland Government’s Chief Procurement Offi ce website. In addition a forward procurement schedule is prepared at six monthly intervals and listed on this website; and • ensure that Queensland design, engineering, manufacturing, construction and project management capabilities are considered when preparing work scopes to enhance Queensland industry opportunities, without impacting on safety, reliability, quality, cost or schedule.

Powerlink will provide the Industry Capability Network with agreed reports on the 30 September and 31 March each year. The Industry Capability Network will use this information to report on Powerlink’s compliance with the Local Industry Policy to the Department of Tourism, Regional Development and Industry (DTRDI) and the Local Industry Committee.

22 2009/10 Statement of Corporate Intent

PART 4 PERFORMANCE AGREEMENT Directors Statement and Agreement of shareholding Ministers This Statement of Corporate Intent (SCI) for the ﬁ nancial year 2009/10 is presented in accordance with Section 9 and Part 8 of the Government Owned Corporations Act 1993 (GOC Act).

The SCI represents a formal performance agreement between the Board of Directors of Powerlink and its shareholding Ministers, the Treasurer and the Minister for Mines and Energy with respect to the fi nancial and non-fi nancial performance targets specifi ed for the fi nancial year. The SCI also represents an acknowledgment and agreement on major activities, the objectives, undertakings, policies, investments and borrowings of Powerlink for the fi nancial year.

This SCI is consistent with Powerlink’s 2009/10 to 2013/2014 Corporate Plan submitted to, and agreed to by, the shareholding Ministers in accordance with Part 7 of the GOC Act.

In signing the document, Powerlink has undertaken to take all reasonable steps to ensure that the document and all reports to shareholding Ministers are prepared with accuracy and timeliness.

Major changes to key assumptions and outcomes detailed in this SCI, and which come to Powerlink’s attention during the year, will be bought to the attention of shareholding Ministers. Any modiﬁ cations to this SCI will be dealt with in accordance with the GOC Act.

This SCI is signed by the Chairman on behalf of all the Directors in accordance with a unanimous decision of the Board of Powerlink.

Else Shepherd Chairman

Shareholding Ministers

Andrew Fraser MP Stephen Robertson MP Treasurer and Minister for Employment Minister for Natural Resources, Mines and Energy and Economic Development and Minister for Trade

23 2009/10 Statement of Corporate Intent

PART 5 AT TACHMENTS ATTACHMENT 1. EMPLOYMENT AND INDUSTRIAL RELATIONS PLAN Shareholder Information 1. HR/IR Philosophy/Direction Employment arrangements within Powerlink are driven by, and integrally linked to, the Mission, Vision and Objectives of the organisation. Powerlink places high value on the well being of our employees and this value underpins all employment policies and practices. We will know we are successful in our relations with our employees when they, and their families, see Powerlink as a safe, enjoyable and rewarding place to work.

Powerlink utilises organisational culture surveys of all employees as a means of driving continuous improvement initiatives within the workplace. The last survey was conducted in 2006 with the next survey is expected to be conducted the second half of 2009.

Powerlink strives to have an open, consultative approach with staff, and create a positive working environment, working with staff in the implementation of any workplace changes, and resolving all issues locally within the business. Effective management and industrial representation will play a constructive role in Powerlink and they are important contributors in maintaining a stable, safe and efﬁ cient work environment. A reasonable and effective relationship between all employees and their industrial representatives is seen as desirable and will be pursued.

Our primary Employment and Industrial Relations goals for this year are to: • Implement the new industrial legislation; • Maintain a focus on resourcing and retention; • Refresh initiatives in our workplace culture programme.

1.1 Powerlink’s 4 Steps Ahead Program Powerlink’s 4 Steps Ahead Program has been in place for more than 10 years, and provides consistency of direction and focus to staff, highlighting the people and culture agenda that we have maintained over these years. We see this program as contributing to a constructive workplace for staff as well as producing positive outcomes for the business.

“Winning in a Changing World” is achieved by harnessing the opportunities presented by change. This is being achieved through the use of change management plans for all signiﬁ cant changes in Powerlink, including communication plans that inform employees on the impacts of change and assists them in adapting to change faster. Encouraging ﬂ exibility in approaches to work at both the organisational and personal level supports this.

“Leadership First” provides for a continued program to develop skilled leaders at all levels to lead the organisation. The adoption and application of proven leadership and relationship principles is a program in which the whole workforce has the opportunity to participate. These programs are key to encouraging employees to work cooperatively to harness the strengths of the whole organisation.

“Developing Employees and Rewarding Performance” incorporates an integrated performance management system that applies to all employees. This system incorporates regular feedback, recognising and rewarding outstanding performance, and ensuring the organisation is able to develop and retain highly capable, motivated individuals who maintain the required skill sets to meet the organisation’s future business needs.

24 2009/10 Statement of Corporate Intent

“Delivering World Class Business Performance” in a commercial environment is being achieved through the involvement of the workplace in national and international benchmarking studies relevant to our lines of activity, and by implementing continuous improvement opportunities that are identiﬁ ed from these studies.

1.2 Operational Excellence Powerlink has instigated strategies for “Achieving Operational Excellence”. Achieving these goals and challenges is only possible through the skills, commitment and expertise of our people, and so our focus is on: • Having the right capability. • Achieving work/life balance. • Focusing on areas of expertise. • Maintaining our successful culture.

Powerlink has structured goals, performance indicators and targets in relation to acquisition and deployment of skills, people management, equity, workplace health and safety and environmental awareness. Consultative structures provide industrial organisations a place in these employee-focussed processes.

Job security is recognised as important for our employees and is addressed through workplace agreement provisions, including redundancy provisions which incorporate redeployment and retraining as ﬁ rst options.

1.3 Contractor Arrangements Powerlink commits to the responsible use of contractors by providing for levels of competency and safe work systems and practices at least equivalent to those operating within Powerlink, and the application of relevant Award or Agreement conditions.

Powerlink continues to use “Period Agreement Contracts” (PACs) with signiﬁ cant national providers to cater for major new transmission line construction. These arrangements allow for the use of speciﬁ c contractors on successive major contracts.

Within the limitations imposed by various laws, these contracts contain governance arrangements in relation to employment and industrial relations that allow Powerlink to audit the contractor’s compliance with its obligations, including that: • The contractor has a documented industrial relations management plan; • The contractor complies with the provisions of applicable industrial instruments that have been certiﬁ ed, registered or otherwise approved under the relevant legislation; • The contractor ensures that staff have the necessary skills and Queensland licenses (if applicable) to carry out the work; • The contractor adheres to the Queensland Code of Practice for the Building and Construction Industry; and • The contractor provides Powerlink with details of any signiﬁ cant employment or industrial relations issue that are likely to impact delivery of the contract.

Powerlink utilises several methods to conﬁ rm, via monthly meetings with the Contractors, that they are compliant and do not have any emerging industrial relations matters. Third Party Audits of each of the Contractors during the operation of PACs are also undertaken. Powerlink retains the ability to submit the Contractor to Audit at any reasonable time to ensure the Contractor is compliant.

Powerlink is currently implementing a new Procurement Strategy for the design, construction, partial procurement and testing of its Substations. The implementation process involves a number of criteria, including consideration of the Contractors’ Industrial Relations Plans.

25 2009/10 Statement of Corporate Intent

The strategy requires Contractors on the Panel to compete for works via a contestable arrangement. Under the terms of AS4902 and AS4000, Powerlink retains the ability to refuse the appointment of any major subcontractor proposed by the Contractor, but should not do so unreasonably. This does not entitle Powerlink to otherwise inﬂ uence the selection of subcontractors by the Contractor.

Powerlink maintains a programme of audits on project related matters such as safety and environment.

2. Signifi cant and Emerging Issues Signifi cant issues for Powerlink are the continued development of the NEM and the exposure of TNSPs, including Powerlink, to economic regulation by an independent regulator, the AER. Queensland’s demand for electricity continues to grow, and this is refl ected in Powerlink’s record capital expenditure program provided for by the AER to proactively satisfy these demand growth needs.

The AER delivered its ﬁ nal Regulatory Revenue Determination for Powerlink in June 2007. The determination provides an expenditure allowance for the 5 year regulatory period (2007/08–2011/12). Given the history of increasing input costs of construction, the outcomes require judicious management of resources and costs. The network performance targets set by the Regulator are demanding and present an ongoing challenge, given the growth of the network.

The consequences of this are: • A greater focus on retention and resourcing, requiring increased innovation and proactive strategies in this area, such as our Retention programme. This is assisting us to better understand what aspects of our employment offer attract and retain staff, as well as seeking to identify any matters that cause us to lose staff, so that we can address these where possible. • Managing the labour costs impact of the new workplace agreement by identifying and implementing work practice and process improvements.

Broader changes to industrial relations legislation arising from the introduction of the Labour Government’s Fair Work Bill and modern awards will also impact upon Powerlink. The Electricity industry is in Stage 3 of the award modernisation process, due to be resolved by the Australian Industrial Relations Commission (“AIRC”) by September 2009. Powerlink is currently involved in a National working group on this matter and anticipates that, through involvement in the development process, the ongoing impacts of the Modern Award should be minimal due to our Workplace Agreement provisions being superior.

3. Non-Executive Directors Board Meeting Fees: Director fees are paid to Directors as an annual fee. Estimated fees for 2008/09 are:

Directors Directors Committee Super or Other Total Fees 1 Fees Equivalent

Else Shepherd (Chairman) $ 46,089 $ 5,930 $ 4,682 --- $ 56,701

Julie Beeby 2 $ 16,790 $ 4,613 $1,926 --- $ 23,329

John Goddard $ 23,230 $ 9,880 $ 2,980 --- $ 36,090

Ken Howard $ 22,386 $ 5,930 $ 2,548 --- $ 30,864

Christina Sutherland $ 22,386 $ 7,247 $ 2,667 --- $ 32,300

Walter Threlfall $ 22,386 $ 7,247 $ 2,667 --- $ 32,300

Notes: 1 Includes Acting Chairman fees. 2 Ms Beeby was appointed to the Powerlink Board from 1 October 2008. 26 2009/10 Statement of Corporate Intent

Superannuation In accordance with remuneration guidelines for directors approved by shareholding Ministers, directors are paid superannuation at the statutory Superannuation Guarantee Levy rate, or its equivalent.

4. CEO and Senior Executives The remuneration details at this time are:

CEO / Senior Executives Total Fixed Employer Total Remuneration 1 Superannuation Remuneration Contributions

Gordon Jardine, 543,271 Included in Fixed 543,271 Chief Executive Remuneration

Simon Bartlett, 430,099 Included in Fixed 430,099 Chief Operating Ofﬁ cer Remuneration

Maurie Brennan, 305,469 Included in Fixed 305,469 Chief Financial Ofﬁ cer Remuneration

Gary Johnston, 248,969 Included in Fixed 248,969 Manager Human Resources & Development Remuneration

Michelle Palmer, 171,490 Included in Fixed 171,490 Manager Corporate Communications Remuneration

Note: 1 Includes any salary sacriﬁ ce items (eg. motor vehicle, superannuation and other beneﬁ ts), employer contribution to superannuation, plus cash salary.

27 2009/10 Statement of Corporate Intent

Employment and Industrial Relations Plan 1. Employment Except for any construction work where compliance with the National Construction Code and Guidelines is required, the following approach is applied.

1.1 Employment Conditions Employees’ conditions are in accordance with Powerlink’s Working at Powerlink 2008 Union Collective Agreement which was lodged under federal government legislation with the Workplace Authority on 20 November 2008. This agreement covers over 820 employees. In accordance with the 2006 Work Choices legislation, this Agreement has incorporated the terms and conditions of the Electricity Generation, Transmission and Supply Award State 2002 and Family Leave Award State, making it a single, comprehensive reference document for employees.

This Agreement was developed in compliance with the Government Policy Guidelines on Agreement Making in GOCs.

Key features of the negotiated agreement include: • A three year agreement with 4.5% wage increases per annum; • Increased paid maternity / adoption leave provisions, with family leave provisions incorporated into the agreement; • Rolling EFT payments into base rates of pay; • Increases to the Transmission Network Reliability Allowance and the Transmission Network Reliability Payment; • Indexing allowances annually by the wage increase (4.5%); and • Maintaining no forced redundancy provisions.

Implementation of new or changed provisions arising from this Agreement will be ﬁ nalised prior to 1 July 2009. Provisions have been implemented through a range of administrative measures including the updating of any relevant procedures. These changes have then been communicated to employees.

Employment conditions are also sourced from the Electricity Regulation 2006. Hours of work are predominantly 36.25 per week, worked in a ﬂ exible pattern to suit the continuity of work.

Some employees covered by Alternative Working Arrangements contained within the Working at Powerlink Agreement work up to 40 hours per week, and are compensated in accordance with conditions agreed within the Workplace Agreement.

Long service leave provisions in the Electricity Regulation provide for 13 weeks leave after 10 years service and an ongoing accrual of 1.3 weeks for each subsequent year of service.

Powerlink has a preference for the regulation of employment conditions via collective agreements with unions.

Workplace Agreement employees are also eligible for both: • a gainsharing payment based on corporate results; and • performance pay based on individual and small team performance during a ﬁ nancial year.

Powerlink ensures the principles of merit and equity are upheld in its processes for the recruitment, selection and promotion of staff.

28 2009/10 Statement of Corporate Intent

2. Enterprise Bargaining The new Working at Powerlink 2008 Union Collective Agreement has a nominal expiry date of 19 November 2011.

Powerlink’s agreement contains a commitment by employees to participate in a range of broad productivity and process improvement initiatives which can include actively participating in teams to improve processes and their outcomes, implementation of resulting changes, technology initiatives, and the change management processes that assist in facilitating all such changes in Powerlink as well as a commitment to a continuous improvement methodology and proactively participating in teams to improve process outcomes.

Such initiatives are identiﬁ ed and implemented through a continuous improvement approach, and therefore it is not possible to pre-identify the full range of opportunities which are likely to be identiﬁ ed and implemented across the life of the agreement.

Powerlink’s time-proven approach has been to measure overall outcomes, and in terms of outcomes for our shareholders, these ultimately manifest themselves in the controllable operating costs of the business, which are shown in the main body of the SCI. The opportunities for improvement through the 2008 agreement have been factored into Powerlink’s plan to improve its cost-efﬁ ciency (controllable Opex to RAB) ratio from 2.9% now to 2.5% by 2011/12. It should be noted that international benchmarking shows Powerlink to be at the least-cost frontier of international electricity transmission businesses.

The attached Schedule of Minimum Employment, Industrial Relations and Job Security Principles for Government Owned Corporations (Schedule of Minimum Standards and Entitlements) forms part of this Plan. Where there are differences between the conditions contained in the Schedule of Minimum Standard Conditions and Entitlements and those contained in the Corporation’s industrial instruments or policies as at 26 March 2006, the 26 March 2006 provisions from the Corporation’s industrial instruments or policies will prevail.

Employee Flexibility Enterprise agreement outcomes from previous agreements relating to fortnightly pays, annual leave loading payment etc. have been carried forward. Annual leave loading and EFT are now incorporated into base salary rates.

Powerlink offers a range of ﬂ exible working arrangements, which have been developed to take into account the business needs of Powerlink, its customers, the preferences of employees, including parental responsibilities, and health and safety considerations of all employees. These include: • Maternity, adoption and paternity and primary care giver leave provisions including various periods of paid leave, up to 2 years unpaid leave, and part time work on return from leave up till the child is of school age; • Flexible start and ﬁ nish times where mutually agreed; • Jobsharing and part time working opportunities; • Working from home opportunities, on a case by case basis, for both long term work arrangements and temporary arrangements to assist with family/carer responsibilities; • Purchased leave (reduced working week) for those with dependant family members of up to an extra 4 weeks of leave per annum; and • Special leave without pay (eg. for career break, study leave for a period of up to 52 weeks, etc).

Employees are also supported in their career development through Powerlink paying 50% of costs of relevant and approved ongoing studies and enabling time off to attend lectures of up to 4 hrs per week. This time can be used for residential studies where relevant.

29 2009/10 Statement of Corporate Intent

Redundancy Provisions Powerlink’s redundancy provisions focus on redeployment and retraining but provide for the following in case of redundancy: • 6 months notice of redundancy or 13 weeks early separation payment. • 3 weeks per year of service severance payment, to a maximum of 75 weeks. • Pro-rata long service leave. • Outplacement and retraining support.

Employment Security The Working at Powerlink union collective agreement provides a commitment to “no forced redundancies”, subject to employees accepting reasonable redeployment and retraining.

Contracting Out Powerlink is committed to orderly and sustainable best practices in relation to the use of contractors, the use of labour hire arrangements and, where necessary, the employment by contractors of skilled overseas staff to cover labour shortages through employer sponsored Temporary Long Stay Subclass 457 Visas. Contractors are also encouraged to develop the relevant skills locally, but Powerlink recognises that the total demand for infrastructure resources in Australia exceeds the local supply, and that this situation may continue for a number of years, notwithstanding local training efforts.

Contractual arrangements require contractors to ensure that their workers have the necessary occupational licences to work in Queensland prior to being engaged to undertake any work.

Superannuation Employer superannuation contributions for all employees are made to the ESI Superannuation Scheme, except for those employees who have existing membership of QSuper, who may remain in that fund. In accordance with the enterprise agreement, Powerlink contributes 9% of an employee’s salary or 10% where the employee contributes 5% of their salary.

Powerlink will notify shareholding Ministers and Government (if applicable) where the use of the surplus is to be used to provide an additional beneﬁ t to employees beyond what is provided for in the Workplace Agreement.

Currently 169 employees are defi ned benefi t members and 755 are defi ned contribution members.

3. Workforce Planning A comprehensive workforce planning process has been used in Powerlink for over 12 years. Powerlink enhanced its labour resourcing planning methodology during 2005/06. This strategic planning model for labour resourcing contains both a 5 year resourcing plan aligned to the forward-looking grid plan for the State, and a workforce plan which identiﬁ es the detailed resourcing requirements for a one year outlook. This process is repeated annually and integrated with the annual budget cycle.

Over the past 6 years, permanent staff numbers have increased to match the larger program of work. Given the long term nature of transmission investment decisions and Powerlink’s regular planning process, it is not expected that any short term changes to demand forecasts will result in material impact on Powerlink’s capital expenditure plans and forecasts for the next few years. Accordingly, workforce numbers are expected to plateau over the next three years at the June 2009 levels. Capital work is primarily undertaken by external construction companies, but is project managed by Powerlink employees. Due to the variable nature of capital projects, Powerlink uses a combination of permanent, ﬁ xed term and labour hire to appropriately resource these activities. Any minor variability in resource requirements will be managed by adjusting the levels of labour hire resource.

30 2009/10 Statement of Corporate Intent

3.1 Trainees and Apprentices Powerlink keeps a watchful eye on the external labour market and internal employee movements to proactively manage future resourcing.

Firstly, Powerlink has a range of well established trainee and development schemes to provide for future staffi ng needs. The number of trainees has been increasing in recent years in line with our increase in employee numbers, as part of our efforts to grow our own pool of experienced staff. In total, our development schemes continue to account for around 10% of our employees and this includes apprentices (39%), engineering offi cers (18%), graduate engineers (25%), environmental offi cers (5%), administration (5%), procurement (1%) and information technology (7%). These schemes will assist with future succession planning needs. These graduates and trainees are offered study support to complete relevant tertiary studies as well as in-house professional development programs.

Powerlink has apprentices in all ﬁ eld areas, being lines, substations, and secondary systems.

We have also been able to increase our number of graduate engineers in recent years, to meet future anticipated needs. These graduates undertake a 5 year rotation program, to experience different parts of the business, creating well rounded professionals to meet the future needs of Powerlink. We promote our graduate opportunities through attendance at Career Fairs, and through our Vacation work experience program. We have had a large number of high calibre students apply for our graduate program each year, as our program is highly regarded by electrical engineering students.

Our workplace agreement reﬂ ects this commitment to the recruitment and development of graduates, trainees and apprentices.

3.2 Other Resourcing Strategies including 457 Visas Powerlink continues to be quite successful in being able to attract staff in what has been a challenging resource market. While most recruitment has been within Australia, a selective overseas recruitment programme exists in order to meet identifi ed immediate specialist needs. Powerlink has obtained pre- approval from the Department of Immigration for up to thirty (30) section 457 visas (for skills categories which are in short supply in Australia) and has thus far engaged eight engineers, three engineering offi cers and one live substation technical expert via this arrangement over a 2 year period, six of whom have now obtained permanent residency status. A further fi ve employees have initiated the process to become permanent residents. Such recruitment will continue to be limited to circumstances where attempts at local recruitment have proven unsuccessful. Consistent with this approach, Powerlink maintains a large number of development positions, provides development opportunities for existing staff and is recruiting locally where possible.

All employees on section 457 visas are engaged in accordance with relevant legislation and as a minimum on the same terms and conditions as employees covered by the Working at Powerlink 2008 Union Collective Agreement.

Powerlink also has senior representation on the boards of the Power Engineering Alliance (PEA) and now the Australian Power Institute (API). Established by the electricity industry, these aim to boost the quality and numbers of power engineering graduates with the skills and motivation for a career in the power industry. Powerlink was heavily involved in establishing the model to promote power engineering at an Undergraduate level, ﬁ rstly in Queensland, and then at a national level. Powerlink contributes to bursaries to students, funding to subsidise University projects (such as upgrading laboratories), subsidies to academics, along with providing students with vacation practice experience.

In addition to these strategies, Powerlink encourages the rotation and movement of employees across different areas of the business to ensure there is an appropriate depth and breadth of skills and competencies, to further support future succession needs.

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3.3 Resourcing Challenges Powerlink continues to attract staff due to our excellent reputation in the industry as a good employer, as we support staff development, offer a positive working culture and have superior working conditions.

One of our primary strategies for resourcing for the future is to develop our own people. Powerlink continues to be very active in developing its staff and planning for future needs. Our approach to succession is to develop people with a breadth of capability so that we have a pool of organisational talent at a range of levels.

This enables us to have a pool of people ready to take on wider roles as they become available. We offer a suite of management and leadership development programs that assist staff to move into higher positions. We support a wide range of technical training, offering staff a range of opportunities including internal training, post graduate modules, support for higher tertiary studies and attendance at conferences. Finally, we actively encourage secondments and acting opportunities so that staff are able to experience other roles, which assists in creating a more ﬂ exible workforce.

The current economic circumstances are showing some early signs of an easing in the resources market, which is expected to result in some increases in the size of applicant pools for vacancies going forward. Workforce Planning Numbers

Workforce Plan 30-Jun-09 30-Jun-10 30-Jun-11 Total Directly Employed Workforce: 911 911 911 Apprentices (Group) 26 26 26 Trainees (Group) 000 Contractor Employees (Trade/Technical /Professional/ 63 63 63 Administrative/Clerical) Total Workforce: 1,000 1,000 1,000

Workforce numbers are expected to plateau at the June 2009 level for the next three years.

4. Workplace Health and Safety Powerlink maintains a strong commitment to the proactive management of Workplace Health and Safety as an integral part of its business activities. A continuing program to regard safety as the priority consideration in the workplace serves to maintain the focus of all staff upon “Safety First”.

Powerlink’s Operational Excellence corporate strategy has Safety (including workplace, health and electrical safety) as a key focus.

4.1 Health and Safety Programs To ensure that Powerlink maintains and continues to promote the “Safety First” culture, a number of education and prevention programs are being utilised. The programs include: • Safety as a core life value – Consists of an education and prevention program on spinal injuries with a focus upon safety as a core lifestyle value. • Flu Buster – Consists of education and prevention campaign on inﬂ uenza which includes vaccinations for staff. • Sun Smart – Offers current Powerlink employees an annual voluntary screening program aimed at maximising the early detection of skin cancer and minimising the associated trauma and costs in treating late stage skin cancer. • Internal Audit – Consists of scheduled audits and inspections being conducted on our staff, contractors, systems and the environment with the audits identifying improvement opportunities relating to workplace health and safety and electrical safety.

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4.2 Powerlink’s WH&S System Powerlink’s safety policies, systems and practices are externally audited and certiﬁ ed on an annual basis. Powerlink was subject to two independent audits and two independent assessments on its Workplace Health and Safety and Electrical Safety Management Systems in 2008. These were performed against the Electrical Safety, Workers Compensation and Rehabilitation and Workplace Health and Safety legislation.

The most recent audit in 2008 indicated Powerlink has in place “…a sound hazard management process…” and our staff having “…a good knowledge and commitment to electrical safety and more broadly, Workplace Health and Safety.” Outcomes from the reports are addressed through a continuous improvement action program. Any areas identifi ed as opportunities for improvement are highlighted and reported to, and monitored by, Powerlink’s Safety Steering Committee and the Board’s Audit and Compliance Committee. No signifi cant issues were identifi ed from the most recent audits.

It is expected that Powerlink’s systems will again be audited in the second half of 2009.

4.3 Improvement Initiatives Powerlink continues to promote consistent practices through its active involvement at Queensland Electricity Industry forums and at the national level in a number of industry Associations and Standards Australia through the Energy Networks Association.

Powerlink worked with ENERGEX, Ergon Energy and the Electrical Trades Union in the development and implementation of a single set of procedures for Safe Access to High Voltage Electrical Apparatus for the Electricity Supply Industry. In 2009, Powerlink plans to work with its customers to promote the approach of adopting a single set of rules governing Safe Access to High Voltage Electrical Apparatus.

Powerlink, ENERGEX and Ergon are also working with Energy Skills Queensland to develop a skills passport and web based data-base, with Energy Skills Queensland providing a central independent body to develop and manage a suitable governance framework to facilitate the development and operation of a Queensland Electricity Supply Industry Passport system for 2009.

A Climbing and Working at Heights committee has also been established within Powerlink with the aim of implementing a coordinated and practical approach in standards both from a Safety in Design and workplace perspective. This committee oversees Powerlink’s safety initiatives to ensure Powerlink continues to meet its Workplace Health and Safety Legislation and Electrical Safety obligations. Powerlink also continues to survey the external environment and works consultatively with other Electricity Supply Industry organisations to ensure that the design and work standards meet with best practice.

4.4 Safety Training and Standards Electrical safety continues to be a major consideration in all work associated with the design, construction, operation and maintenance of the transmission network, for employees, contractors and the general community. Powerlink continues to participate constructively in the development of safety advice, standards and training to ensure that all personnel are informed of the measures to be taken to reduce the risks associated with working on or near our High Voltage Transmission Network. Powerlink’s objective is to ensure that employees, contractors and maintenance service providers are informed of the relevant requirements of the Powerlink safety management system and has recently invested in a Learning Management System to further assist in this area.

4.5 Equal Employment Opportunity (EEO) and Anti-Discrimination Powerlink is ﬁ rmly committed to a policy of Equal Employment Opportunity (EEO) and eliminating unlawful discrimination and has guidelines for the Prevention of Bullying and Harassment and Sexual Harassment. Powerlink does not tolerate practices contrary to these policies and guidelines, and hence any signiﬁ cant breaches can impact on the continued employment of anyone involved.

These policies are included in the induction training provided to all new staff and are the subject of periodic awareness brieﬁ ngs across the organisation.

33 2009/10 Statement of Corporate Intent

Consistent with the Government’s focus, Powerlink continues to implement work and family strategies such as the provision of purchased leave for dependant care purposes.

The government Advisory Standard on bullying is supported within Powerlink, and is made available to all staff through the induction programme and the Powerlink information portal.

4.6 Interstate Acquisitions/Operations Powerlink has a minority shareholding interest in ElectraNet SA, the transmission entity in South Australia. Powerlink has no employees based interstate.

4.7 Joint Venture Projects Not applicable.

5. Management of the Relationship with Unions A reasonable and effective relationship between all employees and their industrial representatives is seen as desirable. To this end, the Working at Powerlink Workplace Agreement includes consultative arrangements between Powerlink, union delegates in the workplace and union offi cials. Powerlink seeks to maintain open communication channels with union delegates and offi cials through briefi ngs and consultation at a workplace or organisational level as appropriate. Early recognition of potential issues at the local level and discussions between local managers, employees and union delegates is encouraged and practised.

5.1 Consultation The Department of Employment and Industrial Relations, Department of the Premier and Cabinet, Department of Mines and Energy and the Ofﬁ ce of Government Owned Corporations (OGOC) have been consulted on this plan, as have relevant unions and staff. Further to this, negotiations of the Workplace Agreement and review of employment conditions occurred during the preceding period with an open arrangement to deal with any issues identiﬁ ed by the employer, employees, delegates or unions at the earliest stage possible in a consultative and co-operative approach.

6. Reporting Powerlink will provide a brief report on performance against the Plan to OGOC in January 2010.

34 2009/10 Statement of Corporate Intent

MINIMUM EMPLOYMENT, INDUSTRIAL RELATIONS AND JOB SECURITY PRINCIPLES FOR GOVERNMENT OWNED CORPORATION (GOC) EMPLOYEES

December 2008

35 2009/10 Statement of Corporate Intent

Context The Queensland Government through shareholding Ministers holds the principal ﬁ nancial interest in Government Owned Corporations (GOCs). Consequently Government is an important stakeholder in GOCs, which now operate in the national marketplace. Government also has a leadership role setting minimum employment standards and providing an example of a model employer.

Rationale The introduction of Work Choices legislation has created some uncertainty regarding minimum employment standards, industrial relations practices and job security, especially in the government owned corporation sector, which is subject to the Work Choices legislation. This Government is opposed to the erosion of employment conditions by the Work Choices legislation introduced in 2006.

Objective The principles set out below, which have been endorsed by Government, are intended to conﬁ rm the Government’s position on minimum employment conditions and industrial relations practices and ensure that pre-Work Choices conditions are not eroded.

As a general principle, GOCs should maintain arrangements and policies existing prior to Work Choices, including in any GOCs subsidiaries within Queensland unless otherwise agreed with unions. GOCs should also work cooperatively with unions to resolve issues using services available at the State level where possible.

Application GOC shareholding Ministers request that GOCs put in place available safeguards to maintain standard employment conditions, industrial relations practices and job security through the provisions of GOC Employment and Industrial Relations Plans (E&IR Plans). E&IR Plans form part of the annual Statements of Corporate Intent which are considered and approved by the shareholding Ministers by 30 June each year in line with the Government Owned Corporations Act 1993 provisions.

Legal advice from Crown law supported this approach, except where the relevant GOC is subject to the National Code of Practice for the Construction Industry eg. Qld Rail as a result of undertaking work on federally funded rail infrastructure projects.

Principles 1. Union Encouragement At the point of engagement, employees are to be provided with a document indicating that the corporation encourages employees to join and maintain ﬁ nancial membership of an organisation of employees that has the right to represent their industrial interests.

Union delegates and job representatives have a role to play within a workplace. The existence of accredited union delegates and/or job representatives is to be encouraged.

Accredited union delegates and/or job representatives shall not be unnecessarily hindered in the reasonable and responsible performance of their duties.

2. No Disadvantage Rates of pay and conditions of employment included in a Notional Preserved State Award and/or a Preserved State Collective Agreement, when taken as a whole, are not to be reduced in the future except as required by relevant federal legislation or as agreed between the relevant industrial parties.

36 2009/10 Statement of Corporate Intent

3. Enterprise Agreements The following conditions of employment and practices shall continue – a) collective agreements with unions shall be the preferred means of industrial regulation of rates of pay and conditions of employment; b) new individual common law contracts shall not be written within the relevant enterprise agreement envelope (individual contracts should only be executed where total ﬁ xed remuneration equates to or exceeds the equivalent of the Queensland Public Service AO-8 level (from 1/7/2008 $95,082.40 per annum) plus 12.75% plus the equivalent of annual leave loading plus any overtime component) or the top rate in the respective GOC enterprise agreement plus the applicable superannuation and annual leave components, where the aggregate of these is lower – i) An amount lower than outlined in b) above may be negotiated within an enterprise agreement as agreed between the relevant parties; and ii) Developing and utilising alternative employment arrangements under enterprise agreements, which provide hours and overtime ﬂ exibility linked to a rolled-up rate of pay, is preferred to the use of individual contracts within the relevant enterprise agreement envelope/s.

4. Payroll Deductions of Union Fees Requests from employees for payroll deduction of union fees are to be accommodated where the service was made available immediately prior to 27 March, 2006. It is noted that Government agencies provide this facility without charge to relevant unions.

5. Use of Contractors The following general principles should be followed when using contractors: a) Contractors and/or labour on-hire arrangements are to be utilised in an orderly and responsible manner, such that there is not a detrimental effect on the State’s or public interest eg. causing disruption to services to the public or causing damage to the economy or standing of the State. b) It is recognised that circumstances arise where the use of Contractors is either desirable or essential. These circumstances are seen to be within the following guidelines: i) The work volume, type of work or specialisation required is beyond the capacity of resources or staff; ii) It is in the public interest to undertake such work. Public interest includes issues of cost effectiveness; or iii) The security and tenure of employment of additional staff required to meet work peaks cannot be guaranteed. c) The use of contractors is not to be used to avoid training existing staff or employing new staff to cater for emerging areas of work. “Emerging areas of work” does not include one-off works or temporary work peaks. d) In addition, contractors and/or their employees are not to be appointed to any position as permanent employees unless normal advertising and selection processes have been followed.

37 2009/10 Statement of Corporate Intent

6. Unfair Dismissal Responsible and defensible policies and procedures regarding the management of performance, conduct and capacity of staff should be in place and adhered to. That is, except where situations arise warranting summary dismissal under common law:

a) if an employee’s conduct, capacity or performance is deﬁ cient – i) ensure the employee is formally warned about the conduct, capacity or performance and is given a chance to rectify any deﬁ ciency; and ii) ensure the employee is given an opportunity to respond formally to any allegation about their conduct, capacity or performance; and iii) ensure employees have a right to be represented through all parts of the process; and b) if dismissal is subsequently contemplated – i) provide the employee with a clear reason for dismissal detailing the process gone through to seek improvement as referred to above; and ii) ensure clarity as to whether the dismissal is related to the employee’s conduct, capacity or performance.

7. Right of Entry of Union Ofﬁ cers to the Workplace An ofﬁ cer of a union party to a GOC award or enterprise agreement shall be provided with access to relevant workplaces during business hours to inspect and request information and/or discuss with the employer and members or potential members, a suspected breach of applicable employment legislation, a relevant award or enterprise agreement or a workplace or industrial matter. The above is subject to seeking access from a responsible manager or other person in charge. Permission shall not be unreasonably withheld, but access and the activities undertaken thereafter shall not interrupt the normal continuity of work.

It is noted that by law, entry to certain operations subject to national/State security initiatives can only occur under escort unless the necessary authorities are held. Union ofﬁ cials should make contact with GOCs beforehand to ensure necessary compliance before entering workplaces where this might be the case eg. ports, airports and like essential infrastructure installations.

8. Industrial Relations Education Leave Unless an award/enterprise agreement and/or custom and practice immediately prior to 27 March 2006 provides otherwise, paid time off not exceeding ﬁ ve days per union in any one year non-cumulative, is to be made available to a duly elected or appointed union representative or delegate, upon written application by the union at least 6 weeks in advance (or such lesser period as was provided for in an award/enterprise agreement or custom or practice immediately prior to 27 March 2006 or as is mutually agreed by the union and the GOC), to attend courses or seminars conducted by the union or speciﬁ c training courses approved and accredited by the union. The GOC shall give consideration to the special requirements of any regionally based workplaces in applying the limits on paid time off referred to above, provided that the granting of such leave does not unreasonably interfere with the GOC’s operations. The scope, content and level of such courses or seminars shall be such as to contribute to a better understanding of industrial relations within the GOC’s operations.

9. Consultative Arrangements GOCs shall endeavour to deal with industrial relations matters cooperatively through consultative arrangements with employees and union delegates at the workplace level and through employees and/or delegates and union representatives or ofﬁ cials at the organisation level.

Paid involvement of delegates and relevant employees shall be considered in relation to such consultative arrangements, as well as in circumstances where their involvement facilitates the resolution of industrial relations issues or assists the employer in developing and implementing new initiatives, provided they are not involved in industrial action. Where paid union meetings have been available as a result of an award/enterprise agreement or custom and practice existing immediately prior to 27 March 2006, such arrangements shall be continued. 38 2009/10 Statement of Corporate Intent

10. Job Security In any situation of redundancy, options for redeployment and retraining of staff shall be exhausted before the offer of voluntary redundancy arrangements is considered. DEIR should be consulted prior to the offer of voluntary redundancy arrangements. There shall be no forced redundancies without the explicit and written sanction of relevant shareholding Ministers in the case of forced redundancies at GOCs.

11. Assistance with the Resolution of Disputes The Industrial Relations Act 1999 (IR Act) was amended in 2007 to provide for parties to have access to the Queensland Industrial Relations Commission (QIRC) by agreement, to conciliate and/or arbitrate matters in dispute and to provide greater ﬂ exibilities in the structure of the QIRC to respond to changing workloads as a result of the introduction of Work Choices. This includes parties to Preserved State Collective Agreements or Notional Agreements Preserving State Awards. GOCs are encouraged to utilise these avenues as a means of resolving issues at the State level. Wherever possible, GOCs should genuinely attempt to resolve issues through the provisions of the IR Act.

If a matter cannot be resolved as a result of utilising the QIRC functions, such processes will satisfy the requirements of the Workplace Relations Act 1996 regarding alternative dispute resolution, should matters subsequently be referred to the Australian Industrial Relations Commission by way of dispute.

GOCs are advised to develop a Dispute Resolving Policy that provides a consistent and clear approach for the parties to deal with disputes early on. The Disputes Resolving Policy may list the nominated person(s) agreed with the union(s) to assist the parties in resolving disputes and a range of functions and conditions agreed between the parties to determine on a case by case basis the best way to deal with particular disputes.

This is not a process to deal with industrial action.

See attachments: Guidelines for Establishing a Disputes Resolving Policy for use in seeking the assistance of the Queensland Industrial Relations Commission under section 273A of the IR Act.

39 2009/10 Statement of Corporate Intent

GUIDELINES: Establishing a Dispute Resolving Policy The GOC and Union/s shall have regard to the following principles in establishing a disputes resolving policy.

Step 1 Resolution at the Workplace Level Involves genuine attempt to resolve the issue using consultative arrangements with employees and union delegates and if necessary, with union ofﬁ cers.

If there is no resolution at the work place level, proceed to next level (Step 2):

Step 2 Alternative Dispute Resolution Process [including QIRC assistance] Who The disputes policy shall list the nominated person (s) agreed between the parties to assist in resolving disputes.

Person/s may include a Queensland Industrial Relations Commission (QIRC) member/s in relation to utilising section 273A under the Industrial Relations Act 1999 or, alternatively establish a panel of agreed persons (eg. industry expert, AIRC/QIRC representative and union representative)

How The parties may determine the appropriate approach to each dispute on a case-by-case basis and must agree in writing how the dispute is to be resolved. If the parties agree to seek the QIRC’s assistance, the parties must submit a referral agreement to the QIRC as to how the dispute is to be resolved by the QIRC (refer to section 273A (1)(b) under the Industrial Relations Act 1999).

What General Provisions

Provisions covered in the disputes resolving policy must be agreed between the parties in advance of handling any particular dispute. Such provisions can include: (i) Commitment from parties to follow agreed process. (ii) Determine appropriate timeframes to deal the dispute. (iii) The allocation of any costs associated with a dispute process will be as agreed between the parties on a case-by-case basis or if no agreement can be reached, each party shall meet its own costs. (iv) Work as directed unless the employee has a reasonable concern about an imminent risk to their health or safety. (v) At any time industrial action is threatened or taken during the process, either party may directly proceed to AIRC for assistance.

Any time industrial action is threatened or taken, the GOC must inform Department of Employment and Industrial Relations as soon as possible.

Functions of QIRC The following provisions are consistent with the functions available under section 273A (4) of the Industrial Relations Act 1999: (a) conciliating; (b) arbitrating; (c) granting a remedy or other relief; and/or (d) deciding any other issue or question.

Furthermore, a decision by the QIRC in performing the dispute resolution functions does not bind the parties unless the referral agreement provides for the decision to bind the parties.

40 2009/10 Statement of Corporate Intent

Disputes Resolving Policy – Checklist The following checklist could also be used as a basis of a referral agreement under section 273A(1)(b) of the Industrial Relations Act 1999.

1. Request the informal assistance of [INSERT Commissioner] to resolve a dispute between [INSERT parties involved]. 2. Advise the dispute is in relation to [INSERT subject matter, brief background and timeframe the dispute has existed]. 3. Indicate the [INSERT union or other party to the dispute] has been notifi ed and agrees to the Commissioner’s assistance to resolve this dispute and the parties request that the Commissioner be requested [INSERT terms of disputes process. eg. – to conciliate the matter – to conciliate the matter and if the dispute remains unresolved, arbitrate the matter – to arbitrate the matter – granting a remedy or other relief – deciding any other issue or question arising in the dispute. 4. State that in its role as [INSERT conciliator / arbitrator] the Commissioner is requested [INSERT any of the following relevant term]s: – to observe the confi dentiality of the matters in dispute – to identify and defi ne the matters in dispute – to develop a procedure that aims to resolve the dispute quickly, fairly and cost-effectively – to suggest resolution techniques for individual issues aimed at narrowing the matters in dispute – to act as the facilitator of direct negotiations between the parties – to make suggestions for resolution (Conciliation process) – express opinions about a reasonable resolution (Conciliation process) – that if the matter is unresolved it may within seven days of terminating the process, provide a written report to the parties expressing the opinion of what would be a reasonable resolution of the dispute (Conciliation). – to determine the matter (s) in dispute by selecting one only of the fi nal round of offers on the basis of which offer the Commissioner believes provides the most reasonable basis on which to resolve the matter in dispute (Arbitration) – not to amend or otherwise qualify the offer it selects (Arbitration) – to notify the parties in writing as to the offer it considers to provide the most reasonable basis of settlement as soon as practicable after receiving the fi nal round of offers from the parties (Arbitration) – to make a recommendation which the parties accept as a binding resolution of the dispute. The recommendation can be based on the information provided in conciliation and additional information provided by the parties. The parties agree that the Commission may issue directions for the purposes of obtaining further information. (Informal Determination) – to make a formal determination and that the parties agree to abide by the determination. The parties will have the opportunity to be head formally on the matter(s) in dispute and the Commissioner will only regard material including witness evidence, submission and will disregard admissions, concession, offers or claims made in mediation. The Commissioner may also make and issue directions in relation to the process leading to its determination and the parties will abide by those directions. (Formal Determination)

41 2009/10 Statement of Corporate Intent

5. Address procedural matters including [INSERT details about: – how the parties will present its position – conﬁ dentiality arrangements – representation – timing, location and duration of the process – if a telephone conference is required – how the process will be recorded – any other particulars about the Commissioner’s role in relation to establishing procedures. 6. Advise that in the event that the requested Commissioner is not available, the parties request [INSERT Commissioner] to assist the parties.

42 2009/10 Statement of Corporate Intent

ATTACHMENT 2. GOVERNMENT POLICIES AND GUIDELINES Powerlink will observe and comply with the following Policies and Guidelines issued by the Queensland Government:

• Government Owned Corporation Subsidiaries – Key Shareholder Requirements for Constitutions (2006) • Guidelines for the Preparation of Statements of Corporate Intent and Corporate Plans For Government Owned Corporations (2006) • Government Owned Corporations Air Travel Policy (2008) • Corporate Governance Guidelines for Government Owned Corporations (2005) • Investment Guidelines for Government Owned Corporations (2008) • Code of Practice for Government Owned Corporations’ Financial Arrangements (2004) • Agreement Making in Government Owned Corporations – Guidance for Chief Executive Ofﬁ cers (2004) • Guidelines for the Development of Employment and Industrial Relations Plans in Government Owned Corporations (2008) • Audit and Reporting Requirements for Government Owned Corporation Controlled Entities and Investments (2002) • Guidelines for Export of Services by Government Owned Corporations (2001) • State Procurement Policy (2008) • Queensland Code of Practice for the Building and Construction Industry (2000) • Local Industry Policy: A Fair Go for Local Industry (2008) • Corporate Entertainment & Hospitality Guidelines (2008) • Cost of Capital Principles (2006) • GOC Subsidiaries – Key Requirements for Constitutions (2006) • Purchasing Carbon Offsets for Government Air Travel (2008) • Government Sponsorship Policy (2004) • Government Owned Corporations Governance Arrangements for Chief and Senior Executives (February 2009)

43 2009/10 Statement of Corporate Intent

ATTACHMENT 3. SPONSORSHIP, ADVERTISING, CORPORATE ENTERTAINMENT AND DONATIONS

Table 1: Sponsorship, Advertising, Corporate Entertainment, Donations and Other Activities for Activities $5,000 and above.

Activity Description / Date Budget Est. Actuals Budget Per Head Benefit or 2008/09 2008/09 2009/10 Budget Timeframe Sponsorship & Goodwill Programs • Qld Energy Museum Preservation Qtr 4, 2009 $ 54,540 $ 54,000 $ 140,000 N/A of industry info. • Engineers Australia 2010 Eng. Qtr 4, 2009 $ 17,000 $ 17,000 $ 10,000 N/A Excellence Awards • Energy Users Assoc. Program of events Qtr 3, 2009 $ 15,500 $ 8,000 $ 17,500 N/A of Aust. & Conference • Planning Institute 2010 Conference Qtr 4, 2009 $ 14,400 $ 9,900 $ 15,000 N/A of Aust. & Awards • Local Govt. Assoc. 2010 State Qtr 4, 2009 $ 19,900 $ 17,950 $ 18,000 N/A of Qld Conference

• QUEST net 2010 Conference Qtr 4, 2009 $ 11,100 $ 12,500 $ 12,000 N/A

• Brisbane North Program of events Qtr 2, 2009 $ 11,000 $ 11,000 $ 11,000 N/A Dev. Forum & Forum

• Qld Weeds Symposium 2010 Conference Qtr 3, 2009 $ 5,500 $ 5,500 $ 5,500 N/A

• Qld Landcare 2009 Conference Qtr 2, 2009 $ 9,000 $ 9,000 $ 9,000 N/A Foundation • Local Govt. Assoc. 2010 Environment Qtr 3, 2009 ------$ 5,000 N/A of Qld Conf. Total Sponsorship $157,940 $144,850 $243,000 N/A

Advertising • Nil ------N/A Total Advertising $ Nil $ Nil $ Nil N/A

Corporate Entertainment and Donations • Staff Recognition Event Engineering Qtr 2, 2009 $ 14,500 $ 13,354 $ 15,000 $70 & Projects • Staff Recognition Event Network Qtr 2, 2009 $ 9,900 $ 7,796 $ 10,000 $70 Field Services • Staff Recognition Event Network Qtr 2, 2009 $ 6,500 $ 5,321 $ 8,000 $70 Operations Total Corporate Entertainment & Donations $30,900 $26,471 $33,000 N/A

Total for All Activities greater than $5,000 N/A $188,840 $171,321 $276,000 N/A

44 2009/10 Statement of Corporate Intent

Table 2: Corporate Entertainment and Hospitality: Activities less than $5,000 per event.

Activity Budget 1 Est. Actuals Budget 2008/09 2008/09 2009/10

Staff Functions Number of functions: 20 17 50 Expenditure (Total $): $ 30,000 $ 20,624 $ 60,000 Business Development Number of functions: 35 13 70 Expenditure (Total $): $ 49,100 $ 6,394 $ 77,000 Stakeholder and Community Engagement Number of functions: 5 Nil 10 Expenditure (Total $): $ 20,000 Nil $ 30,000

Total Expenditure on Corporate Entertainment $99,100 $27,018 $167,000 and Hospitality Below $5,000

Note: 1 No budget allocation undertaken in 2008/09. A retrospective allocation applied in 2008/09 based on 2009/10 budget.

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ATTACHMENT 4. WACC PARAMETERS

WACC PARAMETER AER Powerlink Determination WACC Parameter Value (June 2007)

Nominal Risk Free Rate (Rf) 5.68% (10-Year) Market Risk Premium (MRP) 6.0%

Equity Beta (Be) 1.0 Debt Margin 1.14% (10-Year) Benchmark Credit Rating BBB+ Gearing 60% Debt “Vanilla” Discount Rate (WACC) 8.76%

46 2009/10 Statement of Corporate Intent

ATTACHMENT 5. DEFINITIONS AND GLOSSARY OF ABBREVIATIONS DEFINITIONS

Return on Total Assets Earnings Before Interest and Tax (EBIT) Average Total Assets

Dividend Return on Share Capital Dividends Share Capital

Return on Equity Net Proﬁ t After Tax (NPAT) Average Total Equity

Debt to Debt + Equity Total Debt Total Debt plus Total Equity (end of year)

Debt to Fixed Assets Total Debt Total Closing Fixed Assets (including WIP)

Interest Cover (EBITDA) EBITDA / Interest Expense (Cashfl ow Statement) Dividends Provided Dividend calculated using Dividend Payout Ratio (cashfl ow occurs in following year) Dividend Payout Ratio Dividend as % of Net Profi t after Tax (excluding “Share of net profi ts/(losses) of Associates”) Total Distributions Tax Equivalent Liability + Dividends Provided

Lost Time Calculation (LTC) Total Deﬁ cit Points (No. of Employees/100)

“An indication of ﬁ nancial and personal loss. Higher deﬁ cit points are given to longer-term absences from work due to work-related injury and illness.”

Lost Time Injury Frequency Rate (LTIFR) No. of Injury Occurrences x 1 000 000 No. of Hours Worked

Lost Time Injury Duration Rate (LTIDR) No. of Working Days Lost x 1 000 000 No. of Injury Occurrences

System Minute A measure of energy not supplied during transmission disturbances. One system minute is the amount of energy that would be transported during one minute at the system maximum demand.

47 2009/10 Statement of Corporate Intent

GLOSSARY OF ABBREVIATIONS

AEMC Australian Energy Management Commission

AEMO Australian Energy Market Operator

AER Australian Energy Regulator

APR Annual Planning Report

COAG Council of Australian Governments

EBA Enterprise Bargaining Agreement

ETI ElectraNet Transmission Investments

MCE Ministerial Council on Energy

NEMMCO National Energy Market Management Company

NEM National Electricity Market

NER National Electricity Rules

Rules National Electricity Rules

TNSP Transmission Network Service Provider

WACC Weighted Average Cost of Capital

48 2009/10 Statement of Corporate Intent

49 Powerlink Queensland ABN 82 078 849 233

33 Harold Street Virginia Queensland Australia 4014

PO Box 1193 Virginia Queensland Australia 4014

Telephone: (07) 3860 2111 Facsimile: (07) 3860 2100 www.powerlink.com.au