Annual Report 2018 CONTENTS ABOUT US

2018 highlights 2 AusNet Services delivers safe and Chairman’s message 4 reliable gas and electricity to more Managing Director’s report 5 than 1.4 million customers. Business review 6 Financial report index 20 We are an Australian energy delivery Directors’ report 21 services business, owning and Lead Auditor’s independence declaration 62 operating approximately A$11 billion Consolidated income statement 63 of electricity and gas network assets. Consolidated statement of comprehensive income 64 We have almost 1,900 employees Consolidated statement of financial position 65 working across our regulated Consolidated statement of changes in equity 66 networks and for our commercial Consolidated statement of cash flows 68 Notes to the consolidated financial statements 69 energy services business. We are Directors’ declaration 115 developing products and services to Independent auditor’s report 116 empower customers to have more Glossary of terms 123 control over their energy usage. Shareholder information 125 Our aim is to maintain a safe and Company information 127 trouble-free energy supply for our customers at all times, while we harness the opportunities being created by new technology and energy industry restructuring to build a truly customer-focused modern energy business.

CORPORATE GOVERNANCE STATEMENT Our Corporate Governance Statement, Infrastructure Entity Statement, and Tax Transparency Report are available on our website www.ausnetservices.com.au/Investor-Centre/Company-reports 11 ANNUAL REPORT 2018 East Rowville Rowville Ringwood Cranbourne Templestowe VEHICLES ELECTRIC South Morang Tyabb SOLAR PANELS Richmond Brunswick Springvale BUSINESSES WITH Heatherton Malvern

AND / OR GENERATION Frankston West Melb. Bend Thomastown Fishermans Brooklyn Keilor FLOW Sydenham TWO-WAY Altona MICRO GRID

a y g g n HOMES WITH SOLAR PANEL n o aut d a d r e o l AND / OR BATTERY l o e o B e

d t W w e w l r M e D o M Haz n a ang w o r n e AusNet Services Electricity Distribution Network Distribution Network AusNet Services Gas Sub-transmission and Jeeral l n o G PUMPED HYDRO BIG BATTERIES / ppart e h AusNet Services Distribution Network S g o n g o l e ndi e l e o G B o t b a g ara oor ran a all e M B K aubr W g n n a e r e m Ararat T e d WIND FARMS WITH / o WITHOUT BATTERIES m W Mortlake o e n o r Heyw r Horsha a S T Red Cliffs ER AusNet Services Transmission Network TATION POW S AusNet Services Terminal Stations SOLAR PLANTS WITH BATTERIES OUR ELECTRICITY NETWORK AUSNET SERVICES’ GASAND SERVICES’ AUSNET ELECTRICITY NETWORKS ABOUT US ABOUT 2 AUSNET SERVICES HIGHLIGHTS 2018 TEXT MESSAGES TEXT TO CUSTOMERS 20% (1.34M) SUPPLY RELIABILITY 148.7 (TOTAL USAIDI) 5.1% DIVIDENDS BEST EVER ORDINARY

MINS

6.5% 42% ($1,142.9M) NEW HIRES FEMALE EBITDA INNOVATION AWARDS 19.3% CASH FLOWCASH NATIONAL 2 LOWEST EVER INJURY FREQUENCY RATEFREQUENCY 5.46

FIVE-YEAR 3 FINANCIAL SUMMARY

2014 2015 2016 2017 2018 Revenue ($M) 1,799.4 1,833.9 1,919.0 1,881.5 1,909.8 EBITDA ($M) 1,017.4 1,047.2 1,142.5 1,073.3 1,142.9 EBIT ($M) 647.7 668.0 750.2 647.4 700.5 Profit for the year ($M) 178.3 22.6 489.3 255.1 291.4 Total assets ($M) 10,612.3 12,063.3 11,676.0 11,756.5 12,517.3 Total borrowings ($M) 6,069.2 7,216.1 6,897.7 6,665.3 7,565.1 Total equity ($M) 3,444.6 3,248.8 3,557.8 3,698.4 3,556.0 Net debt to asset base (%) 68.6% 67.5% 67.2% 67.9% 66.7% Net gearing (%) 62% 66% 64% 63% 66% Interest cover (times) 2.5 2.9 3.0 3.2 3.6 Dividend (cents) 8.36 8.36 8.53 8.80* 9.25 Earnings per share (cents) 5.28 0.66 13.95 7.15 8.08 Capital expenditure ($M) 950.0 809.4 822.7 839.6 750.2 Operating cash flows ($M) 730.2 767.6 710.0 742.8 886.4

* Excludes 1 cent per share special dividend 4 and Nino Ficca Peter Mason (Left toright) AUSNET SERVICES evolving forthefuture Delivering todayand MESSAGE CHAIRMAN’S ongoing focuson costmanagement. contracted assetbase, withan investment inourregulated and to shareholders, through continued sustainable andgrowing returns Our objectiveistodeliver projects suchasminigrids. with communitiesoninnovative renewable generation andisworking networks tosupportnewlarge-scale investing resources inrealigning in thenationalenergy debate, is isactivelyinvolvedAusNet Services energy resources. and theadoptionofdistributed as accelerating technology advances and government intervention, aswell choice andpricesensitivity, regulatory decarbonisation, increasing customer to renewable generation and disruption. This includesthetransition period ofunprecedented changeand The energy industryisexperiencinga and grow ourbusiness. while alsocontinuingtotransition a solidperformanceforshareholders, – ayearinwhichwehavedelivered financial yearended31March2018 Services’ annualreport forthe We are pleasedtopresent AusNet increase inearningsbefore interest, contributed toa6.5percent significant savings thisyear, and Our efficiency program hasdelivered management andworkingcapital. was achievedbydisciplinedcost minimal growth inrevenues, and 19.3 percentto$886milliondespite Cash flowfrom operations increased 5.1 percent. growth in ordinary dividendsof in operating cash, underpinning efficiency program andanincrease expenses drivenbyourcost with adecrease inoperating solid financial performance thisyear, It ispleasingtohavedelivered a strengthening ourcustomerfocus. transforming ourownbusiness, and we have beenpushingahead stakeholders. Inthe meantime, representing theinterests ofour for constructive policysettings We willcontinuetoadvocate to ensure thisoccurs. clarity andconsistency are essential believespolicy AusNet Services Along withourindustrypeers, facilitate renewable generation. modernise infrastructure andto to provide energy security, investment inthecomingdecades Australia willneedsignificant customers. direction forourindustryand policy certaintytofacilitate aclear the year, weare keentoseefurther national energy debate throughout While there hasbeenprogress inthe FINANCIAL THE ENERGY LANDSCAPE PERFORMANCE Chairman Peter MasonAM 2018 inMelbourne. Annual General Meetingon19July I invite allshareholders toattend our Services’ ongoingtransformation. for theircontributiontoAusNet management andmyfellow directors shareholders, customers, employees, I wouldliketothankour focus onourgrowth strategy. outcomes, leverage technology and organisation, torealise customer the performanceofourportfolioand on ourfocusefficiency toimprove In theupcomingyearwewillbuild no revenue resets until January 2021. remain stable, giventhatthere are revenue pathforthebusinesswill funding ourgrowth strategy. The shareholder returns, aswell continue tounderpinsustainable capital managementframework will Our robust balancesheetandactive 14.2 percentto$291.4million. Net profit after tax(NPAT) grew (EBITDA) to$1,142.9million. tax, depreciation andamortisation LOOKING AHEAD 5 ANNUAL REPORT 2018 THE YEAR YEAR THE AHEAD distribution tariffs fell in January distribution tariffs fell than 9 per cent). 2018 (gas by more - two national awards received We for the Mondo community mini grid and for our at Yackandandah mini grid project. Mooroolbark Nino Ficca Managing Director We will continue our efforts to We drive efficiency, change, embrace and lead network transformation, take positioned to so that we are opportunities. up growth businesses will drive Our regulated expectations to meet our customers’ and reliability safety, around seek to be will We affordability. for our influential advocates customers. servicesThe market for new energy and we rapidly, continues to evolve partners working with several are to develop and commercialise new services. in this strategy The long-term and agile, extremely area remains participation in new trials and way is the most effective ventures to identify the best opportunities for both our business and our customers. about our ability to I am confident our business as further transform opportunities. we pursue growth we will continue to In doing so, values deliver against our core and customer expectations. OUR CUSTOMER FOCUS CUSTOMER OUR Our electricity distribution network Our electricity distribution in for reliability set a new record much reflecting calendar year 2017, years. several work over hard along with Reliability incentives, also customer contributions, growth underpinned revenue in this segment. and Gas connections also grew, we have continued to achieve gas cost and deliver network efficiencies savings to customers. ServicesOur Commercial Energy business made good progress targets, growth against its long-term for infrastructure signing contracts collectively worth around projects including four wind farms $170m, during the and other projects expected with more year, financial to follow. We aim to put the customer at the aim to We decision- of our planning, centre making and behaviours. part of the upcoming 2021-25 As electricity distribution price reset, we have embarked on a ground- trial in which we will breaking service our proposed negotiate directly expenditure and offerings with highly skilled customer This trial is being representatives. watched closely by the industry future as a potential and regulators national model. The contribution of network prices costs is customer energy to overall Victoria than in other states, lower in and both electricity and gas

Our energy landscape is changing rapidly. changing rapidly. landscape is Our energy to this transformation. central remain Networks will BUSINESS PERFORMANCE PERFORMANCE BUSINESS SAFETY Our transmission business remains business remains Our transmission in Australia. the most efficient boom generation The renewables of volumes is driving significant connection applications across Victoria is western North- Victoria. and we will focus, our key growth undertake a communications 2018 which will facilitate in upgrade further wind and solar connections in this region. The second year of our efficiency The second year of our efficiency financial tangible delivered program positioning us to grow, results, and our efficiency, improving customer outcomes. The challenge for us is to maintain program, the momentum of a mature and we have sought to do this by engaging our workforce to drive further improvements. Safety is our core value, and I am value, is our core Safety that our long-term delighted has continued trends improvement Injury Our Recordable this year. number (RIFR) Rate Frequency low outcome. of 5.46 was a record We have made strong progress progress have made strong We our Commercial Energy growing Services business and positioning ourselves for further investments as opportunities continue to arise. Our core businesses in electricity Our core electricity and gas distribution and place us in a strong transmission position as the most strategic in networks business diverse energy in many parts of the active Australia, supply chain. energy

DIRECTOR’S REPORT DIRECTOR’S MANAGING MANAGING 6 AUSNET SERVICES BUSINESS REVIEW SAFETY our WellbeingProgram. all employees through vaccination offered to Lauren Chmielnik receiving theflu care atthecore ofthisapproach. basics, withsafety engagementand year withafocusongoingbackto drive ourHSEQPlanforthecoming business. The insightsgathered will participation from across the was wellreceived with a broad Programvision. missionZero The further improvements towards our how we couldcontinuetodrive our leaders andemployees on where we soughtinsightsfrom missionZero Futures Program, During theyearweran a (MTIFR) of3.23. Treatment InjuryFrequency Rate (LTIFR) of2.23withourMedical our Lost Time InjuryFrequency Rate a record lowresult. RIFRcombines improvement ontheprioryear, and of-year result of 5.46 - a17percent Rate (RIFR) improved withanend- Our Recordable InjuryFrequency a long-term improvement trend. Our keysafety measures continued focus andperformance. level, topursuean improved safety people anddeliverypartnersatevery in ourbusiness. We engagewithour strategy remains deeplyembedded missionZero safety vision and As itenters itseighthyear, our TOWARDS ZERO –MOVING SAFETY

7 ANNUAL REPORT 2018 a record low result 5.46 Rate (RIFR) result of 5.46 was result Rate (RIFR) Our Recordable Injury Frequency Injury Frequency Our Recordable Health assessments: all employees all employees Health assessments: to the opportunity offered were in one-on-one healthparticipate with individual assessments, action plans developed for The participants. health has also assessment program important themes which provided will inform the development of health and wellbeing future initiatives. as a Training: Healthy Minds the business step, proactive for developed a program managers on mental health and built The Program resilience. the and reduced awareness mental wellbeing stigma around and provided within the workplace, they steps leaders with practical could take to support employees particularly within the workplace, during periods of workplace change. the injury line was Injury Line: the impact to minimise introduced of injury and illness by providing on-the-spot medical advice and to the most connecting employees medical servicesrelevant for their The service has received injury. rating 100 per cent satisfaction and leaders all employees from who have used the service. > > > HEALTH WELLBEING AND HEALTH The business increased its focus on The business increased the health throughout and wellbeing new initiatives with three year, introduced: > > > CRITICAL RISK PROGRAM RISK CRITICAL The Critical Risk Program will remain will remain The Critical Risk Program in our Health and a key focus area as we going forward, Plan Safety the risk of harm continue to reduce within our operations. Each of the nine critical risks had a within from network of people drawn delivery our the company and from The network members partners. worked together to develop and of identified monitor the effectiveness has the Program date To controls. understanding in a stronger resulted and improvement of our critical risks, The Program of these risks. in control information has also introduced for ongoing and tools that provide in understanding improvement critical risks and the effectiveness of existing controls. The Health and Safety Critical Risk Critical Risk The Health and Safety focuses on nine key risks to Program examples of these Three our people. incidents, Vehicle Motor risks are and Hit by Object, Electrocution, Plant or Equipment. Our Critical Risk Program has Our Critical Risk Program become a fundamental part of the Our safety Program. missionZero performance has improved of since the inception significantly with an improvement missionZero, Injury Frequency in our Recordable from than 50 per cent of more Rate very While this is its high point. in injury improvement encouraging, alone is not a reliable frequency For in risk. indicator of a reduction the we have introduced this reason, Critical concept of Health Safety and Risk Management. Our safety performance has improved significantly since the since significantly improved has performance safety Our Recordable our in improvement with an of missionZero inception point. its high from 50 per cent than of more Rate Frequency Injury 8 AUSNET SERVICES BUSINESS REVIEW CUSTOMERS customer outcomes. guiding principlesforachieving industry peerstodevelopaset of also workingwithmanyofour customer needsandissues, weare whole-of-industry solutionsto Recognising thefrequent needfor business andindustry. basis regarding issuesfacing our provide commentonaquarterly Senior Executive Team. Members perspectives tobeheard byour channel forexternal customer valuable insightsandadirect Committee continuestoprovide Our Customer Consultative to thisnewprocess. role inguidingandproviding input The AERwillalsoplayanimportant Australian Energy Regulator(AER). prior toitslodgementwiththe our 2021-25regulatory proposal negotiating manykeyelementsof be activelyinvolved inaprocess of customers andhavethecapacityto whose membersrepresent our establishment ofaCustomer Forum, expenditure plans. This involves the at theheartofdevelopingour new process thatplacescustomers Australian energy businesstotriala isthefirstAusNet Services five yearsfrom 2021. standards for set pricingandservice distribution pricereview, whichwill customers forthenextelectricity forward inourengagementwith We are seekingtotakeamajorstep CUSTOMERS ENGAGING WITH

9 ANNUAL REPORT 2018 Peter Maruff Peter shows Mooroolbark customers Jeff and their Ward Corrine new residential installation. battery calendar 2017 – up 20% – calendar 2017 1.34m about their power supply in text messages to customers text INNOVATING FOR FOR INNOVATING CUSTOMERS Our ground-breaking projects projects Our ground-breaking with communities in Mooroolbark providing are Yackandandah and opportunities for partnerships both parties. benefit which directly pioneers These customers are in community-based energy making environmental management, the same At and economic savings. enhancing both our we are time, knowledge of the new technologies the and our insights into involved ways that customers understand use. and manage their energy

CUSTOMER SERVICE CUSTOMER IMPROVEMENTS We’ve also enhanced our outbound also We’ve sending customer communications, messages than 1.3 million text more to customers about planned and a 20 per cent – unplanned outages a year of record despite increase, and we on our network; reliability this with have supplemented social media presence. increased We’ve also added a solar pre- We’ve application for customers approval seeking to install solar systems of less than 15KW and a customer connections calculator allowing customers to obtain an estimate for connection costs within minutes. Team ServiceOur Customer 82 per cent of all fault answered and we have calls within 30 seconds, multi-skillingbeen to enhance teams our customer responsiveness. In the online environment, we have we have In the online environment, enhanced our My Home Energy which is a user-friendly tool portal, that enables customers to monitor, budget and download their smart consumption data. meter online tools number of Our growing for is simplifying our processes the time customers and shortening needs. customers’ to fulfil required We continue to work to improve the continue to work to improve We experience customers have through channels they use to the different engage with our business in accessing our services. In line with our purpose to empower communities and their energy energy their and communities to empower our purpose with In line and our planning of centre at the put customers is to goal our future, during clear progress have made We behaviours. making and decision to do in work have much more that we while recognising the year, needs. to customer respond understand and to this area 10 AUSNET SERVICES BUSINESS REVIEW PEOPLE Shannon Maile, Joy Eastaughand Meghan Brennan are three ofour ten all-female intake oftrainees and apprentices thisyear.

future success. positioning ourbusinessesfor improvement initiatives, again to informthedevelopmentof are currentlysurveys beingused check” surveys. The results ofthese by conductingengagement“pulse opportunities todriveimprovement insight intoourculture and We havealsobeengaininggreater meet businessneeds. build andevolve ourworkplaceto basis uponwhichwewillcontinueto and flexibility. This provides acritical digital enablers, diversity, inclusion capability, physicalenvironment, workplace includingculture, defining theaspectsofourfuture environment is“future-ready” by placed onensuringourworking the pastyear, real focushasbeen optimise ourperformance. Over workplace thatwillberequired to opportunity toarticulate thefuture we are operating offers usthe The dynamicenvironment inwhich principles ofdiversity andinclusion. accountable people livingour a thrivingworkplaceofempowered, Statement commitsustobecome launched inMarch2018. This Inclusion Statement thatwas embodied inourDiversityand for ourpeople. These values are nurtures andcreates opportunities andthatgenuinely we serve values, representative ofthecommunities inclusive workforcethatwillbetruly We are buildingadiverseand FUTURE-READY WORKPLACE DIVERSITY AND INCLUSIONDIVERSITY 11 ANNUAL REPORT 2018 300 Leadership Program Leadership participants in our Switched On participants in our Switched MANAGING ORGANISATIONAL ORGANISATIONAL MANAGING CHANGE This year has seen us support a substantial amount of organisational a consistent Creating change. with people experience and treating our key are dignity and respect priorities in the execution of effective change A centralised change. has been management practice the use of established to ensure better common methodologies, planning of change activities and support of our employees. in play a critical role Leaders On Our Switched managing change. now in its third Program, Leadership which vehicle through is the year, delivering enterprise-wide we are development for our leaders. During the year almost 300 leaders focusing in the Program, participated on mental health and wellbeing, and on new management and systems. technology workshops and programs Wellbeing in have also helped build resilience change. of ongoing an environment that our change Feedback indicates valued and is having a is training constructive impact on our workforce. Another priority this year has been nearing to engage with employees to identify and address retirement, We needs. their transitional to upskill a program implemented managers in how to manage to ensure in this category, employees this change takes place effectively for individuals and the business. We have again invested heavily in invested have again We partnerships which support fostering AusNet Services This year, diversity. for became an “Endorsed Employer with an important online Women” This will enable us jobs platform. and develop new and to share ways of supporting female interesting and participation in the workforce, continuing progress our leverage being an inclusive employer. toward one new Deakin In addition, University Vocation Engineering scholarship was awarded, Program the number of bringing to five students being engineering female into the profession. assisted Development of our female Development of our female is a key pillar of our employees The seventh year diversity approach. Development Women’s Career of our saw another 20 talented Program join a growing employees female development network. professional participants Seven senior female the through also mentored were Female Team’s Executive Leadership Program. Sponsorship Career We continue to work towards our continue to work towards We While diversity targets. long-term ongoing requiring this is an area pleased that 42 per we are focus, year during the cent of all new hires that the number of female; were women in senior management roles 23 to 33 per cent; from increased apprentices female and that ten in recruited were and trainees time This is the first January 2018. that this important intake has been of women, comprised entirely helping to bring balance to this area. male-dominated traditionally We are building a diverse and inclusive workforce that will be truly be truly will that workforce and inclusive a diverse building are We we serve communities of the genuinely that and representative our people. for opportunities creates and nurtures values, 12 AUSNET SERVICES BUSINESS REVIEW COMMUNITY Cornerstone Program. from ourCommunity pursued hispassion for fossilswithhelp Dean Wrighthas program. previously graduated from this apprentices thisyear whohad delighted totakeontwofemale Employment Network, andwere Baw Latrobe Local Learning and and Training Project beingrunbythe for the Victorian Energy Education We haveagainextended oursupport now in its third year. Scholarship atDeakinUniversity, the Women inPowerEngineering support elsewhere inGeelongfor This pledgecomplementsour Heart CollegeforgirlsinGeelong. mathematics) program attheSacred technology, engineering, artsand support theSTEAM(science, made afive-year commitmentto engineering andenergy. This yearwe and buildparticipationinscience, education, particularly tosupport We recognise theneedtoinvestin Kiewa valleys. and environmental groups intheOvens grants tocommunity, sportingand in northeast Victoria wasawarded network areas. In2017, AlpineShire selected municipalitiesacross our community organisations in15 Development Fundhassupported Since itsinception, ourCommunity choices. growing anddiversifying customer enhancing ourcapabilitiestomeet A seriesofinnovative projects is COMMUNITIES HELPING BUILD STRONGER PROJECTS ENERGY COMMUNITY 13 ANNUAL REPORT 2018 Yackandandah is Yackandandah the location of our groundbreaking community mini grid. 23 nominated by our employees nominated to 23 community organisations to 23 community organisations We provided financial donations financial provided We

SUPPORTING EMPLOYEES EMPLOYEES SUPPORTING IN THEIR THEIR IN COMMUNITIES As well as providing essential well as providing As we services to their communities, our people to actively encourage and in local organisations participate This year we provided activities. donations to 23 community financial by our nominated organisations time who give their own employees to those organisations. Wright Dean Draftperson / Surveyor by fossils since has been fascinated For studying geology at University. Dean has been than 15 years, more with Monash volunteering University’s Dinosaur Dreaming what the which explores Project, Victoria and biota of environment years ago. than 120 million was more AusNet Services the supported through Project Dinosaur Dreaming our Community Cornerstone our which recognises Program, people’s volunteer activities supporting their own communities. Both these projects received national received Both these projects their innovation recognising awards and high levels of customer engagement. Similarly, our Mooroolbark mini grid our Mooroolbark Similarly, our continued to develop project capabilities to manage distributed customers with and provide energy value for their investment in better This year our energy. distributed Energy Distributed innovative Network Optimisation Platform the was used to control (DENOP) the stored and share batteries among all 18 trial energy renewable even those without solar – homes from “islanded” while they were – the electricity network for almost successfully before 24 hours, switching all homes back to the main power grid. In late 2017, we successfully we successfully 2017, In late the and launched completed community mini Yackandandah of a partnership the result grid, as between our Commercial Energy Mondo brand product Services’ Totally AusNet Services and Power, for (TRY) Yackandandah Renewable This the community. Yackandandah the installation of different involved solar combinations of rooftop and Mondo storage battery systems, monitoring our smart energy – Ubi which and management system on 169 – manages the mini grid network as well as extensive homes, these activities, Through upgrading. us with has provided the project invaluable learnings in technology, customer insights and relationships, and in commercial models and opportunities. We support our customers in their local communities through our through communities local in their customers our support We with directly also work We donations. and sponsorships of program through futures their energy of take control keen to communities people our own and encourage we support And projects. innovative their communities. to contribute to actively who seek 14 AUSNET SERVICES BUSINESS REVIEW NETWORKS Station rebuild incorporates innovative industrialdesign for anurban landscape. Our Brunswick TerminalOur capacity tomeetfuture demand. to provide regional transmission Electricity MarketOperator (AEMO) working closelywiththeAustralian projects inwestern Victoria, weare driven bynewrenewable energy applications andenquiries, primarily And with8,500MWofconnection National ElectricityMarket(NEM). supply securityandstabilityforthe Ballarat Terminal Station, enhancing battery, tobeinstalledin2018at We willown Victoria’s biggest West Melbourne Terminal Station. has begunonupgrades at be completed in2018, andwork stations; Richmondisscheduledto Heatherton andBrunswickterminal We completed rebuilds atSpringvale, was thebestforatleast13years. by “Transmission system minutes” early in2017. Reliability, asmeasured closure ofHazelwoodPowerStation network realignment followingthe during theyeardespite national has delivered onkeymeasures is Australia’s mostefficient, andit Our electricitytransmission network ELECTRICITY TRANSMISSION ELECTRICITY PERFORMED? HOW HAVE OUR NETWORKS 15 ANNUAL REPORT 2018 Our electricity distribution network record recorded in 2017. reliability This growth has been partially offset This growth consumption, by a decline in average driven by changing habits and high we are this, Despite prices. gas retail play a gas will continue to confident energy in Australia’s role central and fuel, as a low-emissions future assessing the opportunities we are for alternative biogas fuels including and hydrogen. GAS Our gas customers will benefit from from benefit Our gas customers will by gas distribution tariffs falling the start than nine per cent at more of 2018 following the Australian Gas final Regulator’s (AER) Energy Review (GAAR) Access Arrangement decision. regulatory Our gas network tops industry Supply reliability tables. productivity on the for customers improved and new connections year, previous six at their highest level for are in the year Bannockburn Late years. town to be became the final to the network under the connected Gas Regional Victorian Government’s Program. Infrastructure ELECTRICITY DISTRIBUTION Our three networks are at the core of our service to our customers. service of our core at the our customers. to are networks three Our efficiency reliability, the improve further and maintain work to While we we are every day, depend on customers of the networks and safety of new dynamic range of the our understanding building also actively their to manage our capabilities and enhancing technologies, energy empowered and communities are so that customers introduction choices. own energy to make their We have also made progress have also made progress We simplifying our distribution business careful through costs and removing while analysis and restructuring, ensuring we maintain or improve performance and service standards. Network reliability in calendar year Network reliability high, 2017 was an all-time record of the amount of time that in terms customer off kept the average faults and in the frequency supply (USAIDI), While of unplanned outages (USAIFI). mild weather helped relatively it also reflects deliver this outcome, effort we have put the significant and into simplifying our processes prioritising our activities. Waurn Ponds. micro gridat an industrial-scale University todevelop with Deakin We are partnering 16 AUSNET SERVICES BUSINESS REVIEW (CONTINUED) transportable formofenergy storage. and asaneasilyconverted and has hugepotential asbothafuel possibilities suchashydrogen, which facilitate research intofuture energy energy system, thepartnershipwill this latest innovative renewable As wellasincreasing thescale of at Deakin’s Waurn Pondscampus. research andeducationplatform energy system andintegrated industrial-scale smartmicro grid Deakin Universitytodevelopan business willbeapartnershipwith (CES)Commercial Energy Services developments. The nextstep forour technical andcommercial provided initialplatformsforfurther Mooroolbark and Yackandandah have Our continuingminigridtrialsat WORLD OF ENERGY NEW DELIVERING THE NETWORKS

to simplify connectionprocesses for solar installations. We are working 100,000 ofourcustomersnowhave At theresidential level, more than of more tocome. to our networks, with theprospect new windandsolarconnections currently more than70potential At theindustrylevel, there are challenges andopportunitiesforus. renewable energy iscreating Australia’s inexorable shiftto underway. world’s bestenergy start-upsnow second round ofsearchingforthe energy accelerator program, witha member oftheglobalFree Electrons participation as afoundingindustry Our CESbusinesshascontinuedits RENEWABLES work togetherfor thebenefit ofall. demonstrates howthesepartiescan battery inthe Victorian grid; andalso the first integrated large-scale public-private consortium, willbe project, whichisco-funded bya in the greening ofthesector. The significant technological advance Terminal Station marksanother which willbeinstalledinourBallarat The battery energy storage system provider.services a leading contracted infrastructure keeping withourgoaltobecome wind farms inwestern Victoria, in transmission connectionsforfour signed contracts tobuild During theyearourCESbusiness for broader applicationinthefuture. demand, andshowed goodpotential significant reductions intheirpeak residential customers. Itsaw voluntary program withselected This yearwealsoinitiated a large customers. and CriticalPeak Demandtariffswith our demandmanagementcontracts Market (NEM). We haveextended across theNationalElectricity to supportthesecurityofsupply investment costsforcustomers, and and offerings, toreduce network demand managementcapability Key prioritiesare toexpandour the resulting dynamicenergy flows. conditioning ournetworktomanage customers atthesametimeas 1717 ANNUAL REPORT 2018 Advanced aerial asset inspections bushfire help reduce risk and improve reliability. THE RESULTS THE Our demand management Our demand management to contribute programs helped of supply security the maintenance summer. the NEM over throughout was for summer Network reliability allowing after ahead of target for two major summer storm events. have starts on our networks Fire the past over by two-thirds fallen nine years. of these proud are We we remain achievements, but to continue to give determined top priority to further improving of our and reliability the safety the networks for customers, community and our employees. COMMUNICATING COMMUNICATING WITH CUSTOMERS critical peak demand tariffs have critical peak demand the peak successfully reduced demand of participating commercial This and industrial customers. them summer we supplemented trial Partners” with the “Peak working with residential program homes Participating customers. by their peak demand reduced earning financial up to 40 per cent, will We their efforts. for rewards build on this success and expand in coming summers. these programs We enhanced our social media We and Twitter communications through LinkedIn and a new Facebook page at This is a growing the start of summer. with customers, channel for interaction alerts ahead of hot and our safety days and storms have been particularly valued. LOAD AND DEMAND DEMAND AND LOAD MANAGEMENT MANAGING BUSHFIRE RISK BUSHFIRE MANAGING PREPARATIONS PREPARATIONS FOR SUMMER We see an important role for important role see an We demand management strategic activities in ensuring supply security Our the peak summer months. over and demand management contracts The first phase of the world-leading The first REFCL (Rapid Earth Fault Current on track. remains Program Limiter) will help enhance This technology Victoria’s highest in safety bushfire and construction risk areas, bushfire is underway at eight zone Other long-term substations. initiatives include network safety Government’s the Victorian Powerline Replacement Fund, aerial bundled voltage our high and fuse and cable replacement programs. replacement crossarm We are harnessing new technologies, harnessing new technologies, are We and asset mapping including drones, our to increase data analysis, meter knowledge and to further improve of our programs. the efficiency Beyond compliance, we prioritise the compliance, Beyond risk, and activities of highest areas using detailed analysis and targeted to keep and upgrades maintenance risk. fire the lights on and prevent Extensive vegetation Extensive management are and asset inspection programs our electricity across conducted to networks ahead of summer, they comply with safety ensure regulations. Demand peaks on our networks, supply security and the and security supply networks, our on peaks Demand months summer the that mean bushfires for potential our networks. when operating a challenge can be 18 AUSNET SERVICES BUSINESS REVIEW SUSTAINABLY BUSINESS DO HOW WE as partofstrategic planning. broader environment andcommunity sustainable value generation andthe considers potential impactstoour and socialsustainabilityrisks. Italso including economic, environmental internal andexternal driversofrisk, process thatactivelyassessesboth We havearobust riskmanagement framework. and toourriskmanagement is integral toourstrategic planning and theenvironment, sustainability relationship betweenenergy supply ongoing debate aboutthe service, andinthecontext ofan As theprovider ofanessential environment. our communitiesand tothe how wecontinuetocontribute to performance intothefuture, and important isconsistent financial value forallstakeholders. What is communities, whilstcreating lasting of energy tocustomersand on thesafe andreliable delivery successful businesswhichfocuses Sustainability isaboutoperating a and socialsustainability Economic, environmental, sustainably. managing ourbusiness strategies thatweapplyin principles, structures and more detailaboutthe on ourwebsite, provides Statement, whichisavailable Our Corporate Governance energy resources. technology changeandtheadoptionofdistributed and government aswellaccelerating intervention increasing customerchoiceandpricesensitivity, regulatory towards renewable generation anddecarbonisation, network isa highpriority. the operational productivity ofourelectricitydistribution business opportunities. communities oninnovative projects such asminigrids. new large scalerenewable generation; andworkingwith monitoring and management system. Ubi ECONOMIC

TM isMondoPower’senergy

disruptive factors. These includethetransition unprecedented changeimpacted byarange of as the mostefficient inAustralia. Improving networks havebeenindependentlyassessed underpinning investmentinstrategic new sustainable shareholder returns, whilealso resources inrealigning ournetworksto support ongoing nationalenergy debate. We are investing The energy industryisexperiencingaperiodof Our gasdistributionandelectricitytransmission Our strong balancesheetenablesustomaintain hasbeenactivelyinvolvedAusNet Services inthe Some of our key achievements 19 during the year are as follows:

ENVIRONMENTAL SOCIAL

EMISSIONS AND ENERGY USE SAFETY Total scope 1 Total Scope 2 The Recordable Injury Frequency Rate (RIFR) emissions (t CO -e) emissions (t CO -e) 2 2 of 5.46 was a record low result, driven in part AusNet Services 23,863 1,308,613 (Transmission) Pty Ltd (up 1.57%) (down 10.45%) by our Critical Risk Program, and all the more AusNet Services 179,528 531,348 notable for the maturity of the missionZero Program Holdings Pty Ltd (up 2.73%) (down 4.52%) and the levels of organisational and industry change.

The majority of AusNet Services’ Scope 1 emissions relate CUSTOMERS to fugitive gas emissions. 100.2 km of aged or defective gas At an average 148.7 minutes off supply during pipes were replaced during the year, supporting a reduction 2017, our customers experienced less time off in emissions. The small increase in the most recent supply from unplanned outages than ever before. emissions report above was driven by gas network growth The average number of unplanned outages they experienced offsetting the gains from fugitive gas emission reduction. was also an all-time record low, and has been cut by Scope 2 emissions are primarily related to transmission line 40 per cent in the past two decades. losses. We have implemented a range of improvements in Our network tariffs for both gas and electricity fell on system operations and modernised assets, but the biggest 1 January, and constitute a smaller share of total electricity factor contributing to the decline in scope 2 emissions has bills in Victoria than in any other NEM state. been the closure of the Hazelwood Power Station and the shift to black coal power. We have partnered with communities on innovative projects which are delivering energy solutions and As the operator of networks across Victoria, broader customer benefits. including poles and wires in most of the highest- risk regions, we place top priority on DIVERSITY environmental risk management. A comprehensive bushfire We recognise that a talented and diverse mitigation program, encompassing vegetation management workforce is essential for our long term and increased inspection and maintenance cycles has sustainability. contributed to a reduction in fire starts by some 60 per cent over the past nine years, and our results are well below Some measures of progress towards achieving regulatory benchmarks. We are implementing the Victorian Board-approved diversity and inclusion objectives are: Government’s leading-edge Rapid Earth Fault Current >> 42 per cent of all new hires in FY18 were female Limiter (REFCL) and Powerline Replacement Fund programs. >> A successful recruitment campaign for eight female We are also supporting our customers’ apprentice line workers and two trainee positions, increased environmental aspirations, and have now female trade and technical representation to 4 per cent connected more than 100,000 residential solar >> Scholarships, education assistance and research power installations. We have demand management partnerships for female students with Deakin University programs and trials in both commercial and residential and a sponsorship with Sacred Heart College for Girls customer segments. in Geelong focused on the School’s Science, Technology, 100km of gas mains were replaced during Engineering, Arts and Mathematics (STEAM) agenda the year, reducing gas emissions. >> We launched of an AusNet Services Diversity and Inclusion Statement 20 FINANCIAL REPORT

DIRECTORS’ REPORT SECTION D – FINANCING OUR BUSINESS Introduction 21 Note D.1 Capital management 86 Our Board of Directors 22 Note D.2 Borrowings 86 Our Executive Leadership Team 25 Note D.3 Financial risk management 88 Strategy 28 Note D.4 Net finance costs 101 Operating and financial review 29 Note D.5 Equity 102 Material risks and uncertainties 33 Note D.6 Dividends 103 Remuneration Report 37 SECTION E – GROUP STRUCTURE Statutory disclosures 59 Note E.1 Subsidiaries 104 Lead Auditor’s independence declaration 62 Note E.2 Parent entity information 105 FINANCIAL STATEMENTS Note E.3 Related party transactions 106 Consolidated income statement 63 SECTION F – OTHER DISCLOSURES Consolidated statement of comprehensive income 64 Note F.1 Remuneration of auditors 108 Consolidated statement of financial position 65 Note F.2 Defined benefit obligations 109 Consolidated statement of changes in equity 66 Note F.3 Share-based payments 112 Consolidated statement of cash flows 68 Note F.4 Contingent liabilities and contingent assets 113 NOTES TO THE CONSOLIDATED Note F.5 New accounting standards not yet adopted 113 FINANCIAL STATEMENTS Note F.6 Events occurring after the balance sheet date 114

SECTION A – OVERVIEW 69 Directors’ declaration 115 SECTION B – OPERATING OUR BUSINESS Independent auditor’s report 116 Note B.1 Segment results 70 Glossary of terms 123 Note B.2 Earnings per share 72 Note B.3 Working capital 73 Note B.4 Taxation 76

SECTION C – INVESTING IN OUR BUSINESS Note C.1 Property, plant and equipment 79 Note C.2 Intangible assets 82 Note C.3 Desalination licence receivable 83 Note C.4 Impairment of non-current assets 83 Note C.5 Commitments 85

AusNet Services Ltd AusNet Services Ltd is a company limited by shares, incorporated and domiciled ACN 603 317 559 in Victoria, Australia. Its registered office and principal place of business is: Financial Report Level 31, 2 Southbank Boulevard For the financial year ended 31 March 2018 Southbank, Victoria 3006 This financial report covers the consolidated entity consisting of Australia AusNet Services Ltd and its subsidiaries. The financial report is presented A description of the nature of AusNet Services Ltd’s operations and its principal

AUSNET SERVICES AUSNET in Australian dollars. activities is included in the Directors’ report. 21 ANNUAL REPORT 2018 RIGHT WE DO WHAT’S WHAT’S WE WORK SAFELY WE DELIVER WE WE’RE ONE TEAM ONE OUR VALUES OUR Our values are the foundation for how values are Our we achieve our business objectives:

AusNet Electricity Services Pty Ltd; AusNet Gas Services Pty Ltd; and Ltd; Pty Select Solutions Group Pty Ltd. Group Transmission AusNet > > > > WHAT WE WE DO WHAT INTRODUCTION These activities are conducted through through conducted These activities are companies: the following operating > > > > We are an energy delivery services delivery an energy are We our through conducted business, gas distribution electricity distribution, businesses. and electricity transmission safely, energy we move 24 hours a day, a million to over and efficiently reliably our networks of through Australians people and solutions. services, assets, our commercial through In addition, servicesenergy business we provide specialist infrastructure, unregulated and asset intelligence metering, solutions to the utility telecommunication sectors. and infrastructure The financial report is for AusNet report The financial entities and its controlled Services Ltd AusNet Services or the our, us, (we, Group). The Directors of AusNet Services The Directors present purpose on the general their report entity of the consolidated report financial March year ended 31 for the financial 2018 (FY2018).

REPORT DIRECTORS’ 22 AUSNET SERVICES OF DIRECTORS OUR BOARD > > None > Children’s Hospital. Order ofAustralia forhiscontributiontothe Mr Mason wasappointed aMemberofthe of theChildren’s HospitalFundforeightyears. the Children’s HospitalinSydney andChairman for 13years. For12yearshewasaDirector of Council oftheUniversityNewSouth Wales House Trust forsixyearsandamemberofthe Mr Masonwasa Trustee oftheSydney Opera UBS Australia Foundation. Independent Studies andChairmanofthe Advisor toUBS, Chairmanof The Centre for Telecommunications Ltd (SingTel), aSenior Mr Masoniscurrently aDirector ofSingapore Chairman of David JonesLimited. including asChairmanofAMPLimited and a non-executivedirector oflisted companies extensive experienceasbothachairmanand his investment bankingcareer, MrMasonhas ofbusinessexperience.wealth Inadditionto and Schroders andbringstotheBoard a investment banking, includingatJPMorgan Mr Masonhasover 40years’ experiencein > > > (appointed March2016) Independent Chairman SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE QUALIFICATIONS PETER AM MASON DIRECTORS’ REPORT > > > > > > Chairman oftheNominationCommittee Chairman oftheBoard (SGX-ST listed company) Singapore Telecommunications Ltd (from 2010) University ofNew South Wales Honorary Doctorate, University ofNewSouth Wales Master ofBusinessAdministration, University ofNewSouth Wales Bachelor ofCommerce(FirstClassHonours), > > > Managing Director None None of Australia. and Director oftheEnergy Supply Association Queensland. HewasformerlyDeputyChairman Board. MrFiccaisalsoaDirector of Transurban of theDeakinUniversityEngineeringAdvisory past Chairman) ofCIGREAustralia andChair Association Limited, aDirector (andimmediate Mr FiccaistheChairofEnergy Networks including asManagingDirector since2003. Group PtyLtd (formerlySPIPowerNetPtyLtd) management roles withAusNet Transmission energy industry, includingnumerous senior Mr Ficcahasover 30years’ experienceinthe (appointed September2005) Managing Director SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE QUALIFICATIONS NINO FICCA > > > Harvard Business School,Harvard Business USA Advanced ManagementProgramme, Deakin University Graduate DiplomainManagement, Deakin University Bachelor ofEngineering(Electrical – Honours),

> > > > > > > > (appointed January2014) Non-executive Director in ShellCoalPtyLtd andNRGAsia Pacific Limited. Limited andalsoheldseniorexecutivepositions Dr Craven wasCEOof Transpower NewZealand of theIECNationalCommittee ofAustralia. Electrotechnical Commission(IEC) andChair six-year term asDirector oftheInternational Energy Ltd. At theendof2015hecompleted a Tully SugarLimited andDeputyChairofArrow Chair ofErgon Energy Corporation Limited, a Director of Windlab Limited. Hewasformerly Limited and Audit Committee ofMitchellServices Limited, Non-executiveDirector andChairofthe directorships includebeingChairofInvion generation companyinQueensland. Hisprior Corporation Limited, thelargest electricity Dr Craven isthecurrent ChairmanofStanwell private sectors. onmanyboards inthepublicand and served full-time Non-executiveDirector since2007 infrastructure projects. DrCraven hasbeena at thenationallevelanddeliveryofmajor management oflarge-scale system operations businesses, mining, commoditiestrading, background encompasseselectricityandgas sectors formore than35years. Hisprofessional resources, infrastructure andagribusiness range ofindustries, havingworkedintheenergy, Dr Craven hassignificant experienceacross a QUALIFICATIONS SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE RALPH CRAVEN > > > > > > > > Processing, UniversityofQueensland Postgraduate DiplomainInformation Deakin University Postgraduate DiplomainManagement, of New South WalesUniversity Doctor ofPhilosophy, Class Honours), UniversityofQueensland Bachelor ofEngineering(Electrical – First Committee andtheNominationCommittee Member oftheAuditandRiskManagement Invion Limited (2011to2015) Genex PowerLimited (from 2015) Senex Energy Limited (from 2011) ANNUAL REPORT 2018 23 Member of the Audit and Risk Management and Committee Remuneration Committee, Nomination Committee Bachelor of Commerce, Bachelor of Commerce, University of Queensland Bachelor of Laws (Honours), University of Queensland of Business Administration, Master Australia University of Western Advanced Management Program, USA Harvard Business School, > > > > > ROBERT MILLINER ROBERT EXPERIENCE AND EXPERTISE AND EXPERIENCE COMPANY LISTED CURRENT OTHER DIRECTORSHIPS DIRECTORSHIPS COMPANY LISTED FORMER IN LAST THREE YEARS RESPONSIBILITIES SPECIAL QUALIFICATIONS Mr Milliner has extensive experience in the legal Mr Milliner has extensive sectors and during his time in legal and corporate in commercial law in major specialised practice acquisitions, and mergers sector reforms, energy He transactions. privatisation and infrastructure is a Senior Adviser at UBS and Senior Adviser Chamber of Commerce to the International of the Global He is a Director General. Secretary the Board and Chairman of Hub Ltd Infrastructure In 2013 Australians. Young of the Foundation for Sherpa and 2014 he was the B20 Australia business the international and coordinated to the 2014 G20. community’s recommendations 2004 to 2011 he was Chief Executive From Jaques Mallesons Stephen of law firm Partner from and retired Wood Mallesons) & (now King 28 years as Mallesons in January 2012 after a partner. None None Independent Non-executive Director Independent Non-executive Director (appointed July 2015) > > > > > Member of the Remuneration Committee and Committee Member of the Remuneration the Nomination Committee DBS Group Holdings Ltd (from 2011) (SGX-ST (SGX-ST 2011) (from Holdings Ltd DBS Group company) listed 2011) (from DBS Bank Ltd (SGX-ST listed company) Bachelor of Arts (Economics), Portsmouth Bachelor of Arts (Economics), UK University, University of Business Administration, Master USA of Chicago, > > > > > HO TIAN TIAN HO YEE SPECIAL RESPONSIBILITIES SPECIAL OTHER CURRENT LISTED COMPANY COMPANY LISTED CURRENT OTHER DIRECTORSHIPS DIRECTORSHIPS COMPANY LISTED FORMER IN LAST THREE YEARS QUALIFICATIONS EXPERTISE AND EXPERIENCE None Mr Ho has over 30 years’ experience in managing 30 years’ Mr Ho has over various holding and investing in global markets, in the banking and financial leadership roles and principal shareholder As services sectors. Management Asset of Pacific Managing Director of the the management he oversees Ltd, Pte (S) for all company and assumes responsibilities investment decisions and risks. he is the Chairman of Fullerton Fund Currently, an Advisor to Blue and Ltd Management Co. He also serves as a Ltd. Edge Advisors Pte Holdings of DBS Group Non-executive Director Chairman of Mount Alvernia DBS Bank Ltd, Ltd, Hospital and is a member of the Urban Renewal Investment (URA) Authority of Singapore and board employment previous His Committee. Company, Trust membership includes Bankers Power Limited. and Singapore Singapore Non-executive Director Non-executive Director (appointed September 2008) > > > > > Chairman of the Remuneration Committee Chairman of the Remuneration Member of Audit and Risk Management and the Nomination Committee Committee Meridian Energy Limited (2012 to 2016) (New (2012 to 2016) Limited Meridian Energy Company) Exchange Listed Zealand Stock Bachelor of Chemical and Process Engineering Bachelor of Chemical and Process University of Canterbury, (First Class Honours), New Zealand Victoria of Business Administration, Masters New Zealand Wellington, University of Diploma in Finance and Post Graduate Securities Institute Investment Analysis, of Australia > > > > > > SALLY FARRIER SALLY SPECIAL RESPONSIBILITIES SPECIAL FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS COMPANY LISTED FORMER IN LAST THREE YEARS OTHER CURRENT LISTED COMPANY COMPANY LISTED CURRENT OTHER DIRECTORSHIPS EXPERIENCE AND EXPERTISE AND EXPERIENCE QUALIFICATIONS None Ms Farrier is a professional non-executive non-executive is a professional Ms Farrier with extensive adviser and corporate director and experience in industry restructuring and strategy privatisation, economic reform, has career Her professional risk management. sectors, focused on the utilities and infrastructure She has electricity and gas. including water, energy experience in the Australian significant in expert roles industry and has held numerous federal at Australian resources to water relation has served Ms Farrier as a levels. and state as a member Commissioner and Water National In Council. Advisory Trust Water Victorian of the in innovation, has an active interest she addition, community development and healthcare. of women active supporter is also an Ms Farrier her membership of through entrepreneurs Scale Investors. and Deputy a Director is currently Ms Farrier Her prior Chairman of Kidney Health Australia. Limited, include Meridian Energy directorships and Tasmania Hydro Manidis Roberts Pty Limited, was also a founding Ms Farrier Power. Western Consulting Pty Limited. Swier of Farrier Director Independent Non-executive Director Independent Non-executive Director (appointed January 2014) The persons listed below were Directors of AusNet AusNet of Directors were below listed persons The year and the financial of the whole during ServicesLtd otherwise unless noted. of this report date up to the > > > > > > 24 AUSNET SERVICES (CONTINUED) > > > > > > > business leadership. toAustralianmedal forservices societyin Panel. In2003, shewasawarded acentenary Trust andisaformermemberofthe Takeovers University, a Trustee ofthe Victorian ArtsCentre the MelbourneBusinessSchoolat Dr Scheinkestel isanAssociate Professor at Corporation Limited. Limited, Pacific Brands Limited andStockland Pharma Limited, OricaLimited, Newcrest Mining Insurance Australia Group Limited, Mayne its fundsmanagementandbankingsubsidiaries, Her priordirectorships includeAMPLimited and OceanaGold Corporation. Limited, Telstra Corporation Limited and Director ofMacquarieAtlas RoadInternational Chairman ofMacquarieAtlas RoadsLtd anda a numberoflisted companies. Sheiscurrently having chaired theauditandriskcommittees of and riskmanagementexpertise, whichincludes and project financing. Shehasextensive financial and hassignificant experienceininternational Dr Scheinkestel isaformerbankingexecutive water and electricitycompanies. both chairmananddirector ofanumbergas, sectors. as Intheutilitysectorshehasserved including thepublic, government andprivate companies inawiderange ofindustry sectors as anon-executivechairmananddirector of director withmore than25years’ experience Dr Scheinkestel isanexperiencedcompany > > > (appointed November 2016) Independent Non-executiveDirector SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE QUALIFICATIONS NORA SCHEINKESTEL DIRECTORS’ REPORT OF DIRECTORS OUR BOARD > > > > > > > > > > Committee Committee andmemberof the Nomination Chairman oftheAudit andRiskManagement Orica Limited (2006to2015) Stockland Corporation Limited (2015to2018) Telstra Corporation Limited (from 2010) Macquarie Atlas RoadsLimited (from 2014) (from 2015) Macquarie Atlas RoadInternational Limited OceanaGold Corporation (from 2018) Centenary Medal PhD, MelbourneUniversity Melbourne University Bachelor ofLaws(Honours),

> > None None Hong Kong\India Representative Office. Investment Limited andHeadofState Grid of ElectraNet, ChairmanofState GridOverseas Mr Suniscurrently aNon-executiveDirector Engineering. General Institute forElectricPowerPlanningand also workedasaSeniorEngineerattheChina Department, SGCC. Inhisearlyyears, MrSun Division ChiefofInternational Cooperation Grid ShenzhenEnergy DevelopmentsLtd and Department SGCC, andChiefEngineerofState General ofMaterials & EquipmentSupplying Development CompanyLtd, DeputyDirector Office, DeputyCEOofState GridEnergy (SGCC), HeadofSGCCAustralia Representative Department, State GridCorporation ofChina include Co-ChairofInternational Cooperation roles intheenergy sector. Hisprevious roles several seniorexecutiveand engineering and businessexperiencehasperformed Mr Sunhassignificant international engineering (appointed January2014) Non-executive Director SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE QUALIFICATIONS SUN JIANXING > > and Nomination Committee Member ofRemuneration Committee Northeast DianliUniversity, China Bachelor ofEngineering, > > > > (appointed May2016) Non-executive Director None None Deputy Chairmanof WongPartnership LLP. Senior Counselin2006. Heiscurrently the private practice in1993, andwasappointed Affairs DepartmentinSingapore. Mr Tan joined Chambers, andDeputyDirector oftheCommercial and criminaldivisionsoftheAttorney-General’s and DeputyPublicProsecutor inboththecivil holding offices ofDeputySeniorState Counsel before becomingaqualified legalpractitioner, Mr Tan spenthisearliercareer asacivilengineer English School. School ManagementCommittee ofAssumption St Gabriel’sFoundation. HeistheChairmanof Singapore UrbanRedevelopmentAuthorityand Audit Committees. Healsositsontheboards of Committee andamemberofitsExecutive and Chairmanofthatcompany’sNominating Mr Tan isaDirector ofSingapore PowerLimited proceedings. insurance, professional indemnityanddisciplinary engineering dispute resolution, criminallaw, of general civillitigation, constructionand in thelegalindustry, practising intheareas and lawhasover 30yearsofexperience Mr Tan hasdualqualifications inengineering QUALIFICATIONS SPECIAL RESPONSIBILITIES YEARS THREE LAST IN FORMER LISTED COMPANY DIRECTORSHIPS DIRECTORSHIPS OTHER CURRENT LISTED COMPANY EXPERIENCE AND EXPERTISE TAN CHEE MENG > > > > of Cambridge, UK Master ofLaws(FirstClass), University University ofSingapore, Singapore Bachelor ofLaws(Honours), National New Zealand Class Honours), UniversityofCanterbury, Bachelor ofEngineering(Civil – First Committee andNominationCommittee Member oftheAuditandRiskManagement (retired 20July2017) Tina McMeckan FORMER DIRECTORS ANNUAL REPORT 2018 25 Bachelor of Arts (Business Studies – Honours), Honours), – Bachelor of Arts (Business Studies UK University of Sheffield, Accountant (ICAEW) Chartered and Service in Innovation Certificate Graduate RMIT Management, Governance Practice, in Governance Certificate of Australia Institute > > > > CLAIRE HAMILTON ROLE EXPERTISE AND EXPERIENCE QUALIFICATIONS Ms Hamilton is responsible for the legal, company for the legal, Ms Hamilton is responsible security and risk management, secretarial, audit functions of AusNet Services.internal experience in the 18 years’ Ms Hamilton has over internal risk management, industry in energy Prior to accounting roles. audit and corporate Ms Hamilton gained joining AusNet Services, audit and advisory experience external extensive accountant in while working as a chartered Ms Hamilton is both the UK and Australia. and of the Energy a Non-executive Director and the Institute (Victoria) Ombudsman Water Ms Hamilton is a Auditors Australia. of Internal of Company Institute the Australian of graduate course. Directors’ Executive General Manager, Manager, Executive General and Company Secretary Governance > > > >

Bachelor of Science, Monash University Bachelor of Science, Diploma in Psychology, Graduate Monash University Doctor of Psychology (Organisational), University of Melbourne > > > MATT GUTHRIDGE MATT QUALIFICATIONS ROLE EXPERTISE AND EXPERIENCE Dr Guthridge is responsible for managing the Dr Guthridge is responsible development and implementation of AusNet business planning strategy, corporate Services’ agenda. and transformation than 15 years of strategy Dr Guthridge has more experience in assisting and transformation utilities some of the world’s leading energy and Prior to his appointment as the companies. & Strategy – Manager Executive General Dr Guthridge was Head of in 2017, Transformation ConsultingThe Boston at Transformation Utilities Dr Guthridge was formerly a Partner (BCG). Group Principal and an Associate at PwC in Australia & of McKinsey Practice in the Global Energy During his career, in London. based Company, and multi-year strategy he led numerous for some of the world’s programs transformation and utilities companies. leading energy Executive General Manager, Manager, Executive General & Transformation Strategy 2017) (appointed 29 November > > >

NINO FICCA NINO ROLE As Managing Director, Mr Ficca manages AusNet Mr Ficca Managing Director, As strategic and provides operations Services’ to ensure to the Board guidance and direction that the Company achieves its mission and objectives. Managing Director Managing Director

LEADERSHIP TEAM LEADERSHIP OUR EXECUTIVE EXECUTIVE OUR 26 AUSNET SERVICES (CONTINUED) & New Zealand. various financial roles forMotorola Australia his career atArthurAndersen, followedby and businessdevelopment. MrHymasbegan of strategic initiativesinstrategy, transformation Business Development, leadingabroad range most recently General Manager, Strategy and positions withinAusNetServices, MrHymaswas since2001.Services Havingheldnumerous having workedfor TXU, SPIElectricityandAusNet and finance experienceintheenergy sector, Mr Hymashasextensive strategy, operations intelligence services. markets, andasset utilityandmetering services infrastructure services, emerging energy businesswhichincludesunregulatedservices strategic direction ofthecommercialenergy Mr Hymasisresponsible forthegrowth and > > > > Commercial Energy Services Executive General Manager, EXPERIENCE AND EXPERTISE ROLE QUALIFICATIONS CHAD HYMAS DIRECTORS’ REPORT LEADERSHIP TEAM OUR EXECUTIVE > > > > Certified Practising Accountant(ASCPA) Deakin University Master ofBusinessAdministration, Monash University Bachelor ofArts(Organisational Psychology), Monash University Bachelor ofBusiness(Accounting),

> > the public health sectorandlocal government.the publichealth various seniorexecutiveandleadershiproles in Markets. Herbackground alsoincorporates for BlueScope’sAustralian Coated andIndustrial including General ManagerHuman Resources nine years, holdingseniorHRleadershiproles, Leslie workedatBlueScopeSteel foralmost in2009,Prior tojoiningAusNetServices Ms the People, Safety & Customer Division. and customerfunctionsfor theGroup, knownas safety environment andquality, corporate affairs Ms Leslie managesthehumanresources, health, SafetyCustomer & Executive General Manager, People, EXPERIENCE AND EXPERTISE ROLE QUALIFICATIONS GERALDINE LESLIE > > University of Wollongong University Master ofBusinessAdministration, Bachelor ofArts, Universityof Wollongong > > > > Chief Financial Officer Executive General Managerand and London. Advisory group from 1989to1996inbothPerth also workedatCoopers & Lybrand’s Corporate Mr NewmanisaChartered Accountantwho and AcquisitionsBusinessDevelopment. from 1996to2001inCorporate Strategy, Mergers joining BlueScope, MrNewmanworkedatBHP Steelscape Inc. andCFONorthAmerica. Priorto Commercial Australia andNew Zealand, President United States, includingasGeneral Manager, roles atBlueScopeSteel inAustralia andthe having heldnumerous financial andoperational in2013,Mr NewmanjoinedAusNetServices and Tax.Insurance Procurement, InvestorRelations, Treasury, and financial reporting functionsaswell Mr Newmanisresponsible forallkeyfinancial QUALIFICATIONS EXPERIENCE AND EXPERTISE ROLE ADAM NEWMAN > > > > Chartered Accountant Securities Institute ofAustralia Graduate Diploma inApplied Finance, Curtin University Post Graduate DiplomaofBusiness, Institute of Technology (nowCurtin University) Bachelor ofBusiness, Western Australian ANNUAL REPORT 2018 27 Bachelor of Business (Accounting), Bachelor of Business (Accounting), Philip Institute of Technology (ASCPA) Accountant Practising Certified Computer Society Australian Senior Member, > > > MARIO TIEPPO MARIO ROLE EXPERTISE AND EXPERIENCE QUALIFICATIONS Mr Tieppo manages organisationally aligned manages organisationally Tieppo Mr to support and architecture strategies technology also leads Mr Tieppo goals. long-term the Group’s operational investments to improve technology and digital innovation. effectiveness experience than 25 years’ has more Tieppo Mr building IT (IT), Technology in Information business change functions and leading large joined AusNet Services Tieppo Mr programs. as Chief Information following his role in 2013, He has also for SA Power Networks. Officer held senior management positions in the and logistics retail postal utilities, government, has been Mr Tieppo positions, In previous sectors. program and planning, for strategy responsible management and the management and project also Tieppo Mr of critical information systems. as a Certified background financial has a strong of financial Accountant in the areas Practising audit and procurement. management, Executive General Manager, Technology Manager, Executive General > > > Bachelor of Engineering UK (Honours), Aston University, of Business Administration, Master UK University, Lancaster > > ALISTAIR PARKER ALISTAIR EXPERIENCE AND EXPERTISE AND EXPERIENCE ROLE QUALIFICATIONS Mr Parker has more than 30 years’ experience than 30 years’ has more Mr Parker including a decade of industry, in the energy joined AusNet Mr Parker senior leadership roles. Regulation and Services in 2009 as Director, promoted prior to being Network Strategy Management. Asset – Manager to General spent Mr Parker to Australia, moving Before initially as an UK, 15 years with National Grid, into commercial roles. then moving engineer, he became a consultant with Ernst In 2000, to moving in New Zealand before Young & ultimately in Australia, PricewaterhouseCoopers Leader. Economics Practice as Melbourne Energy Mr Parker is responsible for the Regulated Energy Energy for the Regulated is responsible Mr Parker Services including three portfolio of businesses strategy, regulatory networks, energy regulated and service metering delivery. asset management, Executive General Manager, Manager, Executive General ServicesRegulated Energy The persons listed below and the preceding page were were page preceding and the below listed persons The Team Services AusNet of the members Leadership Executive of date up to the year and the financial the whole of during otherwise. stated unless this report, > > 28 AUSNET SERVICES STRATEGY contracted assetsandimproved data. ElectricityDistributionbenchmarkingperformancebasedonCY2017 During FY2018wehavemadesignificant progress inrelation totheseobjectives, includingthesigningofover $170million of financial settingsanda strong investment-grade credit rating. contracted businessesprovides significant andpredictable long-term cashflows, enablingmaintenance ofprudentandsustainable and contracted assetbase, withacontinuedfocusoncostmanagement. Ourassetbaseforboththecore regulated networksand A core objectiveof ourstrategy istodeliversustainableandgrowing returns toshareholders, through investmentinourregulated The ‘Focus2021’ Corporate Strategy accelerates oureffortsto: expectations andchangingroles andresponsibilities intheenergy market. This newenvironment ischangingrapidly duetotechnological advancements, heightened regulatory scrutiny, highercustomer and transformation ofallaspects oftheenergy market. which ischaracterised byawaveofindustrychange, focusedonmodernisation Our “Focus2021” Corporate Strategy responds tothenewenergy environment, The keyobjectivesofour“Focus2021” Corporate Strategy are: DIRECTORS’ REPORT transformation and embrace change Lead network

To grow ourcontracted asset baseto$1 billion energy infrastructure Grow commercial services throughout theportfolio efficiency benchmarks in thetopquartileof three core networks and effectiveness to maximise value to Drive efficiency To operate all

respect withcustomers and partnerstobuild our reputation with Generate trustand all stakeholders ANNUAL REPORT 2018 29 % 2.7 (0.4) (14.8) (1.6) 15.9 (28.4) Movement 192.2 381.4 586.0 FY2017 163.8 601.9 379.8 FY2018

Capital Capital ($M) expenditure Segment revenue Segment revenue ($M) Segment – result ($M) EBITDA ELECTRICITY TRANSMISSION BUSINESS Net profit after tax increased by 14.2 per cent as a result of by 14.2 per cent as a result tax increased after Net profit and lower operating revenues higher customer contribution efficiency a combination of our ongoing costs arising from one-offs in the prior year. and program segment by operating and results A summary of our revenues below. year ended 31 March 2018 is set out for the financial Higher transmission revenues were due to the $25.1 million were revenues Higher transmission both which increased in easement tax pass-through, increase from resulting offset by lower revenues and expenses, revenue Final Revenue Reset (TRR) Transmission year under the the first for 2017-22. Determination million (excluding $7.6 expenses decreased transmission Total which included an additional to FY2017, relative easement tax) as well as costs, redundancy and $5.2 million restructuring of a 14 per cent lower labour costs in FY2018 as a result the AusNet Services in headcount across Group. decrease excluding lower revenues reflects The decline in EBITDA approximately Easement tax represents easement tax. expenses and is reflected 60 per cent of total operating item. revenue as a pass-through account for station rebuilds The major CBD terminal of a reduction $64.1 million of total capital expenditure, at Brunswick year (reductions the prior $9.1 million from Melbourne, West at and Richmond partly offset by an increase which was in the design phase in FY2017). % % 1.5 5.1 6.5 14.2 14.3 19.3 (17.1) 36.3 (1.13) 28.3 0.45 69.6 1.0% 143.6 Movement Movement 6.59 8.80 7.0% 255.1 742.8 1,881.5 1,073.3 FY2017 FY2017 9.25 5.46 291.4 8.0% 886.4 1,142.9 1,909.8 FY2018 FY2018

$M Revenue EBITDA NPAT Cash flow from flow from Cash operations Dividends per (ordinary) share Return on equity (ROE) Recordable Injury Recordable Rate Frequency (RIFR) SAFETY PERFORMANCE FINANCIAL PERFORMANCE FINANCIAL We own and operate three regulated regulated three own and operate We which network businesses, energy include Victoria’s voltage high network, electricity transmission distribution network in an electricity and a gas distribution Victoria eastern as well Victoria, network in western business. as a commercial energy Cash flows from operations increased 19.3 per cent as a result as a result 19.3 per cent increased operations flows from Cash lower tax paid due in cash earnings, of a $60 million increase and positive working capital movements to a $25 million refund and payments). (timing of receipts The following table summarises our financial performance The following table summarises our financial year: in the current measures and key financial FY2018 saw a 17 per cent reduction in the Recordable Injury in the Recordable FY2018 saw a 17 per cent reduction primarily driven by a 39 per cent reduction Rate, Frequency in the number of lost time injuries.

FINANCIAL REVIEWFINANCIAL OPERATING AND AND OPERATING 30 AUSNET SERVICES million) andhighercustomerconnections. Limiter (REFCL) program ($44million), PowerofChoice ($11 due toincreases inexpenditure Current forRapidEarthFault metering remediation program inFY2017 ($73 millionreduction) Capital expenditure increased, despite thecompletion ofthe > > > > due to: Operating expensesdecreased $49.3millionor12.3percent million. FY2018 impactofthisadjustmentwasapproximately $6.8 ($2018) smoothedover calendaryears2018to 2020. The Charges Applicationwhichdecreased revenue by$52.7million on our2016AdvancedMetering Infrastructure (AMI) Transition revenues duetotheAustralian Energy Regulator(AER) decision Price Review(EDPR). This waspartiallyoffsetbylowermetering a result oftheprice pathinthe2016-20ElectricityDistribution metering) duetofavourable weatherandincrease inpricesas Regulated revenues haveincreased by$16.7million (excluding developments duringFY2018. in the volume ofcustomer-initiated worksrelating tohousing recovery ofcustomer-initiated worksandanoverall increase a changeintheNationalElectricityRulesthatallowgreater $19.3 million increase incustomercontributionsasaresult of Increased revenues of$23.2millionare primarilydueto (CONTINUED) ELECTRICITY DISTRIBUTION BUSINESS ELECTRICITY DIRECTORS’ REPORT FINANCIAL REVIEW OPERATING AND EBITDA ($M) result – Segment ($M) Segment revenue expenditure ($M) Capital Connections Volume (GWh) > > > > $7.5 millionwrite-off foran ITproject intheprioryear. initiatives includedintheprioryear; and implementation costsassociated withbusinessefficiency $8.5 millionofredundancy, restructuring andprogram October 2016stormeventsintheprioryear; levelpaymentsdueto $13.6 milliondecrease in service Group; headcount across theAusNetServices labour costsasaresult ofa14percentdecrease in $17.8 millionincostreduction initiatives, primarilylower 722,046 FY2018 540.2 439.3 891.4 7,716 705,186 FY2017 868.2 427.0 7,682 467.7

Movement

16,860 23.2 72.5 12.3 34 15.5 0.4 2.9 2.4 2.7 % > > > revenues forourelectricitydistributionbusinessasfollows: are set, there are anumberofitems thatwillimpactfuture March. Giventhenature oftheregulatory modelandhowtariffs calendar yearbasiswhichdiffers toourfinancial yearofAprilto electricity distributionbusinessisregulated bytheAERona are provided, basedontheprevailing tariffsatthetime. Our We recognise asthoseservices revenue fordistributionservices > > > offsetting eachotherbeing: Revenues were largely unchanged, withseveral impactslargely GAS DISTRIBUTIONGAS BUSINESS FUTURE REVENUE IMPACTS expenditure ($M) Capital Connections Volume (PJ) EBITDA ($M) result – Segment ($M) Segment revenue > > > > > > and stormactivitiesthatoccurred inCY2016. we willreceive noSTPISrevenue asaresult ofoutages outperformance oftargets inCY2015. However, inCY2018 Scheme (STPIS). This revenue wasreceived asaresult of revenues undertheService Target Performance Incentive In FY2018, wereceived $31.0millionofincentive 31 March2018is$45.9million. years 2018to2020. The amountremaining tobeadjusted at Application decreased revenue by$52.7million over calendar The AER’sdecisiononour2016AMI Transition Charges reduce andCY2019. ourrevenue inCY2018 we haveacumulativeover‑recovery of$8.0millionwhichwill adjustment totariffsinfuture periods. As at31March2018 the EDPRdetermination. This difference istrued‑upasan under ouraccountingpolicy, andtherevenue capunder isadifferenceThere betweentheregulated revenue recognised Arrangements Review(GAAR); and part oftheAERFinalDecisionon 2018-22GasAccess a 9.4percentdecrease intariffsfrom 1January2018as a 5percentincrease intariffsfrom 1January2017; offsetby Government’s Energy fortheRegionsprogram; the completionofAvoca rollout underthe Victorian $5.0 millionincrease in customercontributionsdueto 692,282 FY2018 224.6 162.3 66.0 96.9 676,035 FY2017 224.3 164.4 66.3 87.7 Movement 16,247 (0.3) (2.1) 0.3 9.2 10.5 (0.5) (1.3) 2.4 0.1 % 31 ANNUAL REPORT 2018 CAPITAL MANAGEMENT CAPITAL FINANCIAL POSITION FINANCIAL We manage our capital structure to maximise the long-term the long-term to maximise manage our capital structure We the flexibility to as well as providing to shareholders, return and other investment opportunities. An growth fund organic an is also maintained to ensure capital structure appropriate cash flows from Through cost of capital is available. efficient and prudent mix and by maintaining an appropriate operations that we achieve our targeted we ensure of debt and equity, rating. credit range metrics to support an “A” credit Total equity of the Group was $3,556.0 million as at 31 March was $3,556.0 million as at equity of the Group Total to the previous of $142.4 million compared a decrease 2018, to the hedge reserve attributed primarily year, financial for the year. movement million liabilities by $0.7 assets exceed current Our current on report the financial have prepared We at 31 March 2018. the continuity of which contemplates a going concern basis, to and is expected is, The Group operations. normal trading cash positive operating generating profitably, continue trading at In addition, maturing debt. flows and successfully refinancing a total of $545.5 million has available the Group 31 March 2018, and $658.2 bank debt facilities but committed of undrawn in June 2018). for a bond repayment million of cash (required by $494.9 million compared increased assets Non-current of capital due to the $750.2 million largely to prior year, base offset by the into the asset invested expenditure of our assets. depreciation by $768.8 million due primarily increased liabilities Non-current of debt during the year. to the refinancing % 1.3 8.9 (6.9) (62.2) 2.4 0.8 (15.2) (82.5) Movement 27.0 59.8 132.7 221.4 FY2017 29.4 50.2 60.6 206.2 FY2018 $10.0 million of billing adjustments for gas adjoining tariffs $10.0 million of billing in FY2017. recognised > Segment revenue Segment revenue ($M) Capital Capital ($M) expenditure Segment – result ($M) EBITDA margin EBITDA (%) COMMERCIAL ENERGY SERVICES ENERGY COMMERCIAL Capital expenditure increased due to spending on the mains increased expenditure Capital experienced delays in the prior year which program, renewal due to timing of council approvals. > primarily due by $2.4 million increased expenditure Operating for gas to billing adjustments relating to $1.8 million write-off in FY2017. adjoining tariffs recognised Capital expenditure included $17.1 million for the Salt Creek million for the Salt Creek included $17.1 expenditure Capital connection assets as well as Wind Farm transmission in connection projects $13.6 million on four other wind farm FY2017 included $116.0 million the early stages of construction. Station. Terminal for the acquisition of Mortlake Revenues reduced by $15.2 million predominantly as a result of as a result by $15.2 million predominantly Revenues reduced certain maintenance providing away from refocus the strategic a number of field exit from causing the deliberate services, was partly offset by This reduction services agreements. Terminal Mortlake from in revenues $4.2 million increase of the refocus. as a result improved margin The EBITDA Station. The commercial energy services business consists of contracted servicesThe commercial energy of contracted business consists asset services and specialised technology infrastructure services. and asset intelligence data solutions to enable energy a asset services own and operate infrastructure Contracted asset base outside the regulated portfolio of assets that fall Wonthaggi Desalination Plant of which is the (the largest made through investments are The connection). transmission pursuant to which AusNet agreements, negotiated directly period the contract over Services revenue typically receives services and operational in exchange for the infrastructure in this business primarily operate The customers of provided. sectors of and essential infrastructure renewables the utility, gas and rail. water, electricity, 32 AUSNET SERVICES (CONTINUED) as follows: Dividends paidtoshareholders duringthefinancial yearwere next twelvemonths. These issuancessatisfyourrefinancing requirements forthe > > > year, being: of $900.9millionbondissuesduringthecurrent financial Investor Services. This contributed tothesuccessfulcompletion A- credit rating from Standard andPoor’sA3from Moody’s debt portfoliobymaturityandsource. hasan AusNetServices In linewithour Treasury RiskPolicy, wemaintainadiversified Ltd.Services The Group hasaccesstofundsthrough theCFV. HoldingsPtyLtd,AusNet Services asubsidiaryofAusNet Our commonorcentral funding operatesvehicle (CFV) through unfranked. share) tobepaidon28June2018. The final dividendwillbe a final dividendforFY2018 of$167.0 million(4.62centsper Since theendoffinancial year, theDirectors haveapproved DIVIDENDS DEBT RAISING CAPITALMANAGEMENT (CONTINUED) DIRECTORS’ REPORT FINANCIAL REVIEW OPERATING AND ordinary dividend Unfranked dividend Unfranked special > > > February 2018. a HKD610 million (A$99.3million) 15-yearbondissuein February 2018; and a EUR161 million(A$251.6 million) 12-yearbondissuein an AUD 550million10.5-yearbondissueinFebruary2018; Cents share 5.40 4.40 1.00 per Final 2017 dividend 194.6 158.6 Total 36.0

$M

Cents share 4.63 4.63 Interim 2018 per - dividend 167.2 Total 167.2 $M - Exchange delistinginprogress. for thefinal 2018dividendasaresult oftheSingapore Stock rate ofapproximately fourpercent. The DRPwillbesuspended of newshares issuedundertheDRP, representing atake-up 21 December2017, $7.4 millionwasutilisedintheallotment six percent. Inrelation totheinterim 2018dividendpaidon under theDRP, representing atake-uprate ofapproximately $12.2 millionwasutilisedintheallotmentofnewshares issued In relation tothefinal 2017dividendpaidon27June2017, DIVIDEND REINVESTMENT PLAN (DRP) ANNUAL REPORT 2018 33

Review”) both explore the need to examine ways to reduce examine ways to reduce the need to both explore Review”) costs embedded in the system. the existing network announced the Government the Federal In October 2017, policy energy a proposed (NEG), Guarantee National Energy clarity and provide prices in Australia rising energy to address The NEG will require investments. infrastructure for energy the to activate in order governments the support of all state is made up of The Guarantee which has yet to occur. scheme, and some retailers energy two parts that together will require and deliver reliability the NEM to ensure users across large The impact on year. each generation lower-emissions energy of any implementation of the NEG is our network as a result design and not yet known given uncertainty as to its detailed adoption. Act 2018 comes into The Security of Critical Infrastructure a critical assets This Act will create in July 2018. effect visibility with greater the Government to provide register and has access to critical and understanding of who controls of critical an owner and operator As assets. infrastructure We by the Act. we will be impacted assets, infrastructure Act obligations of the our reporting continue to work through compliance. to ensure > > > > an continue to closely monitor developments and play We The impacts in the shaping of the industry. role active advocacy cannot be if any, of these developments on AusNet Services, with certainty at this stage. stated models energy traditional In addition to policy development, power stations of coal-fired changing with the closure are and generation and distributed in renewable and the increase driven by changes in technology, are These changes storage. customer expectations, policies, and regulatory environmental to continue in the future expected These changes are and cost. and the need to framework regulatory and impact our networks’ services customers. to adapt and provide of the industry in in the reform to play a key role continue We and the reviews of our active contribution in the current terms is to Our objective on our network. trial of new technologies in shaping industry development and to lead actively participate and deliver network transformation.

Review of the Rate of Return Guideline – the AER is currently the AER is currently – of Return Guideline Review of the Rate of Return Guideline for electricity the Rate reviewing The National Electricity determinations. network regulatory years of five within to be completed a review Rules require The guidelines (due December 2018). publishing the current a non-binding guideline, of Return Guideline is currently Rate (COAG) Governments the Council of Australian however, This Council is likely to make the guideline binding. Energy revenue implications for future may have significant review determinations. of Treasurer of the at the direction – Retail pricing review Competition and the Australian Government, the Australian is conducting an inquiry into Consumer Commission (ACCC) electricity and the competitiveness of the supply of retail Whilst the primary focus of the review electricity prices. retail is the review is on the market elements of the supply chain, also examining the contribution of network costs to customer This inquiry and the “Independent Review into the bills. (“the Finkel Security of the National Electricity Market” Future > > INDUSTRY AND REGULATORY RISKS REGULATORY AND INDUSTRY INDUSTRY DEVELOPMENTS INDUSTRY We maintain oversight of our material business risks (financial risks (financial business of our material maintain oversight We level and report at an enterprise-wide and non-financial) and Management Committee to the Audit and Risk regularly of the management on the effectiveness of Directors the Board cognisant of the following principal risks are We of these risks. achievement of impact the execution and which may materially prospects. and financial our business strategy We are committed to understanding committed are We risk managing and effectively certainty and greater to provide for our shareholders, confidence suppliers and customers, employees, operate. communities in which we > > A number of regulatory and policy reviews are in progress, in progress, are and policy reviews A number of regulatory to): including (but not limited The energy industry is currently experiencing a period of industry is currently The energy with a significant change and uncertainty, unprecedented Various and affordability. reliability security, focus on energy and industry bodies continue to debate, regulatory political, that will programs various reform and implement recommend market energy of the operation impacts on the have significant impacts on our business. and could have significant

AND UNCERTAINTIES AND MATERIAL RISKS RISKS MATERIAL 34 AUSNET SERVICES (CONTINUED) degree ofbushfire risk. measures wouldprovide thegreatest benefit, dependingonthe attributed tothosezonesubstationswhere fire mitigation is attributed apointscore from 1to5, withthehighest value at 22zonesubstationsby1May 2023. Eachzonesubstation Regulations require toinstallREFCLdevices AusNetServices with REFCLsby1May2023(63 points intotal). Intotal, the points) andtheremaining designated zonesubstationsfitted with anadditionalquotatobeoperational by1May2021(53 substations withoperational REFCLsby1May2019(30points) isrequiredAusNet Services tomeetadefined quotaofzone is toreduce therisk ofabushfire causedbyafallen powerline. designated zonesubstations. The purposeoftheREFCLdevices regulations require Victorian distributorstoinstallREFCLsat Regulations) cameinto effect in Victoria. The amended Amendment Regulations2016(AmendedBushfire Mitigation On 1May2016, theElectricitySafety (Bushfire Mitigation) processes andinteraction withanewmarketgateway. including cost-reflective pricing, newbusiness-to-business accommodate anyfuture changesbeyond metering contestability, existing metering systems. This laysthefoundationtoallowus systems andprocesses, andmakesignificant changesto of PowerChoice, whichrequired ustoinvestinnew During FY2018, completed theimplementation AusNet Services implementing metering competition. be addressed andtheexperienceofotherjurisdictionsin potential barriers todistributors’ accesstometering datacan onparticularcustomergroups,in metering services how of switchingtothenationalregime, theimpactofcompetition review willexaminethebenefits to Victorian electricityusers metering competitionshouldbeintroduced in Victoria. The undertaken priorto1January2021determine whether The Victorian Government proposed thatareview be in place. 2021 andthe Victorian smartmetering specification willremain forallsmallcustomersuntil at least1January metering services Victorian electricitydistributorswillremain responsible for deferred theadoptionofmetering competitionin Victoria. (Power ofChoice). InMarch2017, the Victorian Government rule onexpandingcompetitioninmetering andrelated services Commission (AEMC) publisheditsfinal determination andfinal On 26November 2015, theAustralian Energy Market RAPID EARTH FAULT CURRENT LIMITER (REFCL) PROGRAM TRANSITION TO METERING COMPETITION IN VICTORIA INDUSTRY AND REGULATORY RISKS (CONTINUED) DIRECTORS’ REPORT AND UNCERTAINTIES MATERIAL RISKS

the deliveryof overall program. acceptable modifications totheirassetsmayresult indelaysto that delaysinworkingwithHVcustomers andimplementing modifications toournetworkwhere required. There isa risk to protect theirassetsfrom increased voltages, including We are currently workingwithaffected high voltage customers Amendment ActandAmendedBushfire MitigationRegulations. in order toalignthe Codetoourobligationsunderthe Commission standards bytheEssentialServices isunderway Victorian ElectricityDistributionCode. Areview of voltage operating outsideofthe voltage standards setoutinthe mayresult inpartsofthenetwork REFCL devicesinservice to future contingent applications. for tranches twoandthree oftheREFCLprogram willbesubject to meetthedefined quotaof 30 pointsby1May2019. Funding tranche one, withtheprojects remaining onscheduleinorder During FY2018, spent$49milliononREFCL AusNet Services > > > April 2019, comprises: expenditure fortranche one, whichisduetobecompleted by was $7millionlowerthanouroriginalapplication. The proposed program, approving totalcapitalexpenditure of$97 million. This project applicationfortranche oneoftheREFCLinstallation the AERmadeafinal decisiononAusNetServices’ contingent risk, networkrisk, vendor riskandfundingrisk. InAugust2017, The REFCLprogram presents several risks, includingtechnology remains non-compliant. each dayAusNetServices dates. Additionally, of$5,500canbeappliedfor adailypenalty failsServices toachievetherequired capacitybytheprescribed of upto$10millionperzonesubstationcanapplyifAusNet fallsper pointthatAusNetServices short. Accordingly, penalties legislationprescribesThe penalties of$2,000,000 apenalty by theapplicabledeadline. achieve thenumberofpointsprescribed bytheRegulations for significant fails financial ifAusNetServices penalties to amended theElectricitySafety Act1998(Vic) (ESA) toprovide Scheme) Act2017(AmendmentAct). This AmendmentAct Electricity Safety Amendment(Bushfire MitigationCivilPenalties The Victorian Government subsequentlyintroduced the > > > voltages asaresult ofREFCLoperation. (HV) customers’ equipmentfrom damageduetoincreased installation ofisolatingtransformers toprotect high voltage that isincompatiblewithREFCLoperation; and replacement ofequipmentinthe22kVdistributionnetwork installation ofREFCLdevicesatninezonesubstations; ANNUAL REPORT 2018 35 NETWORK RISKS Our energy transmission and distribution networks and transmission Our energy to human error vulnerable are systems information technology (such as disasters natural failure, equipment in operation, sabotage, floods and earthquakes), weather, severe bushfires, events which or other attacks (including cyber-attacks) terrorist network failures, to customers, can cause service interruptions Certain events may occur outages. or unplanned breakdowns or distribution lines electricity transmission that may affect the supply of or gas mains in a manner that would disrupt in our equipment may cause supply Failures electricity or gas. or physical damage. interruptions Any service disruption may cause loss or damage to customers, and Services, AusNet damages from who may seek to recover Our emergency this could harm our business and reputation. crisis management and business continuity response, methodology to guide is the approved management system it may not be able However, activities. and recovery response these from our business and operations protect to effectively events. equipment. faulty also exposed to the cost of replacing are We only discovered are in plant items faults occasions, On rare requiring has been installed within a network, the item after Only some such incidents program. replacement a large-scale and in some instances these by plant warranties covered are incidents in our Additionally, may only be partial. warranties to cover stations have property zone substations and terminal outside the boundaries of but incidents against failure, insure self-insured. stations are our zone substations and terminal or particularly if not insured program, Any forced replacement our could be costly and adversely affect by warranties, covered performance and position. financial Victoria and the location mix in The changing generation may impact the configuration in the future of generators the network and increases of the electricity transmission network assets in the event of significant risk of redundant work closely with all continue to We changes. configuration with the planning and development of stakeholders associated capacity to manage such risk. generational enable efficiency, effectiveness and control. In addition, through through In addition, and control. effectiveness enable efficiency, we aim to improve program, efficiency our organisation-wide our benchmark performance. PRICE DETERMINATIONS PRICE AusNet Services will be the first Australian energy business energy Australian AusNet Services will be the first places customers at the heart of that to trial a new process the involves The new process plans. developing our expenditure part of our Forum which will form establishment of a Customer is called New Reg: process This draft 2021-25 EDPR proposal. more Network Regulation, Consumer-Centric Energy Towards (https:// details of which can be found on the AER’s website www.aer.gov.au/networks-pipelines/guidelines-schemes- During the regulatory models-reviews/regulatory-innovation). period we continuously monitor and manage our costs through and high-quality data which produce and systems processes We carefully manage these risks in a number of ways. Prior manage these risks in a number of ways. carefully We we develop period, to the commencement of a regulatory a detailed plan of works to be undertaken and costs to be forecasts. and maximum demand as well as energy incurred emphasis is placed on ensuring that we continue to Particular networks and that the costs and reliable resilient maintain safe, is This information prudent. and efficient are to be incurred process, to the AER as part of the determination submitted views of industry and other external the appropriate, where and, sought to be included in the submission. experts are Regulated charges do not necessarily reflect actual or projected actual or projected reflect do not necessarily charges Regulated If the or the costs of capital. capital expenditure costs, operating this lower than our costs, set by the AER are charges regulated In and position. performance our financial may adversely affect exposed to cost changes within a regulatory we are addition, in allowances period and bear the risk of any shortfall control The regulator determinations. by regulatory for costs provided to each applies benchmarking as it considers appropriate objective that to an overall having regard network business, should form part of efficient that is only capital expenditure is particularly expenditure Operating asset base. the regulated levels efficient subject to benchmarking comparisons to set going forward. The energy industry in Australia is highly regulated. The is highly regulated. industry in Australia The energy 86 per (approximately component of our revenues regulated are 2018) for the year ended 31 March cent of total revenues revenue where by the AER, resets subject to periodic pricing for each of the networks for the or prices will be determined reset upcoming regulatory The period. regulatory specified gas distribution network, for our electricity transmission dates 1 April 2022, are network and electricity distribution network Under respectively. 1 January 2023 and 1 January 2021, are network service providers passed, legislation recently the decision from regulatory no longer able to have a final Tribunal. Competition by the Australian AER reviewed 36 AUSNET SERVICES (CONTINUED) emissions energy generation eachyear. will AusNetServices some large usersacross theNEMtodeliverreliable andlower clarity forenergy infrastructure investmentsandrequire announcement oftheNEGproposed energy policytoprovide risks sectionabove. Inparticular, theFederal Government to regulations asoutlinedintheindustryandregulatory the implicationsofenergy policydevelopmentsandchanges change risks. Risksassociated withclimate changeinclude isactivelyassistingtheindustryaddress climateServices As an energy transmission anddistributioncompany, AusNet we aimtohedge90100percentofourinterest rate risk. In addition, through theuse ofderivativefinancial instruments markets andlimitsthefundingrequirement foranygivenyear. “A” range credit rating, ensures continuedaccessto various manage ourcredit metrics. This enablesustomaintainan mix interms ofsourceandtenor andproactively monitorand periodically. Underthispolicy, weaimtohaveadiversefunding reviewed bytheAuditandRiskManagementCommittee Treasury RiskPolicy, whichisapproved bytheBoard and We effectively managetheserisksinaccordance withour and foreign currency risk. of marketrisksassociated withthisdebt, includinginterest rate additional financing. Inaddition, weare exposedtoanumber opportunities, to respond tocompetitivepressures ortoobtain make capitalinvestments, totakeadvantageofcertainbusiness and otherobligations, to paydividendstoshareholders, to leveraged inthefuture couldaffect debt ourabilitytoservice million ofhybridinstruments). The degree towhichwemaybe 2018 of67 percent(excludingequitycredit forthe$706 to Regulated andContracted Asset Baseratio at31March Furthermore, wehavealarge amountofdebt, withanetdebt upon fundingrequirements atapointintime. The useofaDRPandtheleveldiscountingisdependent discount levelsthathave varied betweenzero and2.5percent. capital. hasoperated AusNetServices theDRPsince2008, with intensive businesses, andwouldlikelyincrease ourcostof could impactourabilitytosustainandgrow ourcapital- particularly duringtimesofuncertaintyinthefinancial markets, credit rating. The inabilitytoraise capitalonfavourable terms, material adversechangeinourbusinessorareduction inour be adverselyimpacted through various factors, suchasa operating cashflows. Ouraccesstofinancial marketscould of liquidityforgrowth capitalrequirements notsatisfied by We rely onaccesstofinancial marketsasasignificant source CLIMATE CHANGE AND SUSTAINABILITY RISKS FUNDING AND MARKET RISKS DIRECTORS’ REPORT AND UNCERTAINTIES MATERIAL RISKS

development andtesting ofemergency response plans. investment inbushfire mitigationactivitiesandtheongoing engineering standards andratings forequipment, asignificant Risk managementfortheserisksincludesreviewing bushfires orfloods. interruptions from severe weathereventssuchasstorms, environmental conditionsonournetworkassetsandsustained Other risksincludethephysicalimpactsofchanging the industrytode-carbonise. play anactiverole inoperationalising thispolicyandhelping applied. architecturally-led approach withappropriate governance technology needsare delivered successfullythrough an architecture, deliveryandgovernance capability toensure To mitigate theserisks, wehaveestablishedacentralised rule issubjecttoapproval from the Victorian Government. Similar tometering contestability, theapplicationofAEMC with increased datacollection andmanagementrequirements. require additionalinvestmentinmetering andITsystems, minutes tofive minutes, startingon1July2021. This rulemay the settlementperiodforelectricityspotpricefrom 30 On 28November 2017, theAEMCmade afinal ruletochange business continuity. impact theeffectiveness andcostofsuchasolution support. The realisation ofanysuchriskscouldadversely planning, integration, future maintenance, upgrades and associated withsolutiondesign, implementation, budgeting, In addition, aswith allnewbusinesssolutions, there are risks unforeseen capitalinvestmenttoreplace obsolete technology. technology, thismaynegativelyimpactourrevenue orrequire event there isanysignificant delayinthedevelopment ofnew the introduction ofnewdigitaltechnology platforms. Inthe management andoperations ofutilitynetworkswillrequire This increased focusontherole technology playsinthe with anincreased riskandpotential impactofcyber-attacks. of utilitynetworks. The greater role oftechnology comes technology intheenablement, managementandoperations cost ofdigitaltechnology haveresulted in agreater role for needs forhigherlevelsofreliability andthereduction inthe The drivetoreduce carbonemissions, customers’ increasing TECHNOLOGY RISKS INFORMATION AND COMMUNICATION

ANNUAL REPORT 2018 37

During FY2018, the During FY2018, market review: Executive remuneration and arrangements executive remuneration reviewed Board the review In general and pay levels. benchmarked structures arrangements existing remuneration that overall confirmed some fixed highlighted but in line with market levels, were which have been taken into account anomalies, remuneration remuneration. in setting FY2019 fixed a key During FY2018, strategy: Executive remuneration the of our review, a result As plan. of focus was our LTI area performance hurdles, that changes to the LTI identified Board would be group TSR comparator vesting scales and relative > > IMPACT OF DESIGN CHANGES INTRODUCED IN FY2018 INTRODUCED CHANGES DESIGN OF IMPACT ARRANGEMENTS REMUNERATION TO ADJUSTMENTS FOR FY2019 FY2015 which is used to calculate CAGR; FY2015 NPAT and EPS FY2015 NPAT CAGR; to calculate FY2015 which is used Consistent tax settlement. by a significant reduced were results make adjustments to not to approach with the Board’s performance, LTI the purpose of testing statutory outcomes for significant. FY2016 to FY2018 was therefore EPS from growth no increases remuneration, to Non-executive Director In relation and committee fees Director made to base Non-executive were Chairman’s Board the 1 October 2017, effective However, fees. to $430,000 to align by 10.3 per cent was increased annual fee complexity. with other companies of a similar size and the FY2017 accompanying I outlined in my letter As a new STI during FY2018 we introduced Report, Remuneration AusNet Services’ plan to drive performance and execution of to financial heavily weighted plan is more The new STI strategy. to 60 per cent contribute KPIs directly performance (financial outcomes links remuneration directly more of the STI outcome), the maximum STI opportunity with performance and reduces the new In addition, 196 per cent to 150 per cent of target. from that must be gateways and safety STI plan includes financial made. are any payments achieved before made to the FY2018 STI is pleased that changes The Board helping to are performance to highlight financial framework and cohesive business commercial more an increasingly grow alignment strengthen is helping The single scorecard culture. while also supporting the benefit the business, and focus across and diversity. of collaboration Report and approved outlined in the FY2017 Remuneration As FY2018 the effective at the 2017 AGM, by shareholders to 120 per cent of fixed increased grant LTI Managing Director’s proportion a larger to ensure a decision reflecting remuneration, the longer term. be at risk over of his remuneration > >

AUSNET SERVICES FY2018 REMUNERATION REMUNERATION SERVICES FY2018 AUSNET OUTCOMES The LTI vesting outcome reflects the sound financial the sound financial vesting outcome reflects The LTI to FY2018 performance period the FY2016 performance across (64th percentile), return total shareholder of relative in terms of 130 (EPS growth CAGR) compound annual earnings per share The per cent. capital of 5.67 on invested per cent and return by the low baseline EPS is heavily impacted in high EPS CAGR In that letter, I said that the Board would continue to monitor would continue I said that the Board In that letter, and to feedback listen practice, developments in remuneration they to ensure arrangements executive remuneration review shareholder long-term in driving performance and effective are to the changes attention draws this letter In that context, value. of focus areas for FY2019 and comments on current instigated and Board. Committee for the Remuneration financial the strong outcomes reflect The STI remuneration in executing AusNet progress performance and significant businesses. and unregulated in our regulated strategy Services’ and significant Financial performance exceeded targets in cost efficiency was made on driving increased progress the asset portfolio in business and growing the regulated the STI outcomes also Importantly, business. the unregulated which is a performance, a continued emphasis on safety reflect touchstone for AusNet Services. This letter addresses key remuneration outcomes for FY2018, for FY2018, outcomes key remuneration addresses This letter during on the changes introduced including commenting accompanying FY2017 in my letter FY2018 as highlighted Report. Remuneration outcomes for the remuneration overall terms, In absolute Management Personnel Key and Executive Managing Director no changes to were There than for FY2017. higher are (KMP) of $1,300,000 or remuneration fixed the Managing Director’s of our as a result However, other Executive KMP during FY2018. Term Short the Managing Director’s outperformance, financial vesting of payment was higher in FY2018 with Incentive (STI) to 96.8 per cent for FY2017. compared 110.0 per cent of target per cent to 107.5 vesting increased STI Executive KMP average Incentive Term Long to 93.3 per cent for FY2017. compared in 2015 (for the FY2016 to FY2018 performance awarded (LTI) to 70.6 per vesting compared in 85.9 per cent resulted period) cent for FY2017. On behalf of the Board, I am pleased to introduce our FY2018 I am pleased to introduce On behalf of the Board, support at our your for which we seek Report, Remuneration on 19 July 2018. Meeting (AGM) Annual General Dear Shareholder,

REMUNERATION REPORT REPORT REMUNERATION (AUDITED) 38 AUSNET SERVICES > > > > our shareholders: ensure itappropriately reflects theneedsofourbusinessand brief ontheremuneration framework andhowitisappliedto The Remuneration Committee andBoard maintainawatching > > > > arrangements that: The Board iscommitted toAusNetServices’ remuneration AREAS OFAREAS FOCUS AND CONTINUOUS IMPROVEMENT DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) > > > > > > > > agenda. in supportingand planningactivitiesonourremuneration regular stakeholderengagement. This hasbeen valuable Stakeholder engagement: We havebenefited from and therefore improving ourremuneration report each year. transparent andmeaningful disclosures onremuneration Remuneration report: We continuetofocusonproviding and ourownthinkingregarding remuneration. information andstakeholder views tochallengemanagement performance andremuneration outcomes. We useexternal are indrivingbehaviours andexaminetrends inbusiness concerning howeffective performancemeasures andtargets Evidence andexternal perspectives: We lookforevidence and consistency. balancing thebenefits oftransparency, relative simplicity business performanceanddeliverourstrategic objectives, of evolving theremuneration arrangements toenhanceour We willcontinuetoexplore theopportunitiesandmerits Evolution toalignremuneration andbusinessstrategy: link reward outcomestoshareholder benefits. safety and doing therightthing; and promote the values andbehavioursofteamwork, performance; provide incentivesforreward asaresult ofstretch support short- andlong-term businessperformance; this report. Details ofthechangestoourLTI planare describedwithin in performance, inkeepingwithshareholder expectations. Board’s commitmenttoensuringcontinuedimprovement performance hurdles and vesting scalesreflect the significant sizedbusinesses. Inaddition, changestothe management are challengedandbenchmarkedagainst (withoutexceptions)will bealignedtoASX100 toensure For the2018LTI grant, therelative TSR comparator group reflect AusNetServices’ current strategy andenvironment. appropriate toenhancetheeffectiveness oftheplanand Regards and feedback, andcommendthisreport toyou. On behalfoftheBoard, Ithankyou foryour support Remuneration Committee Chairman Sally Farrier ANNUAL REPORT 2018 39 41 44 52 54 53 48 40 Governance Remuneration Non-executive Directors Non-executive Directors Disclosures Remuneration Statutory Management Personnel Key Mix and Reward Framework Executive KMP Remuneration Summary and Remuneration FY2018 Performance Outcomes FY2018 Executive KMP Incentive Plans Detailed INTRODUCTION INTRODUCTION CONTENTS AND 6 5 7 2 3 4 1 Page Section Information within this report has been laid out in the following sections: has Information within this report To support this objective, this report includes an overview of our performance and remuneration outcomes, as well as a summary as well as a summary outcomes, of our performance and remuneration includes an overview this report support this objective, To Act of the Corporations requirements against the disclosure and audited been prepared has The report practices. of our governance 2001 (Cth). The report also explains the framework and governance that we have in place to ensure effective remuneration practices. practices. remuneration effective that we have in place to ensure governance and framework also explains the The report Our objective in preparing this report is to illustrate how AusNet Services is to illustrate this report in preparing Our objective outcomes and shareholder align with business performance executive rewards for FY2018 outcomes and performance reward the specific explain time, over how the around considerations and reasoning Board’s and set out the supports the business strategy. and reflects framework remuneration 40 AUSNET SERVICES Tina McMeckanretired from theBoard asaNon-executiveDirector andceasedtobeaKMPeffective 20July2017. 1. Those thatare assessedtobeKMPforFY2018are: and responsibility forplanning, directing andcontrolling theactivitiesofAusNetServices. AusNet Services’ KMPare assessedeachyearandcomprisetheDirectors ofthecompanyandseniorexecutives. KMP haveauthority 1. KEY MANAGEMENT PERSONNEL FORMER KEY MANAGEMENT PERSONNEL: DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) Nino Ficca Executive KMP Tan Sun Jianxing Nora Scheinkestel Robert Milliner Tian YeeHo Tian Mario Tieppo Sally Farrier Alistair Parker Ralph Craven Adam Newman Peter Mason Non-executive Directors Chad Hymas Name

Mr Ficcawasappointed asManagingDirector uponlistingontheAustralian Stock Exchange. CheeMeng 1 Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Executive General Manager, Technology Non-executive Director Executive General Manager, Regulated Energy Services Non-executive Director Executive General ManagerandChiefFinancialOfficer Non-executive Chairman(Appointed asChairman11May2016) Executive General Manager, CommercialEnergy Services Position Managing Director May 2016 January 2014 November 2016 July 2015 September 2008 September 2013 January 2014 April 2013 January 2014 March 2013 March 2016 April 2013 Date appointed asKMP September 2005 41 ANNUAL REPORT 2018 Effective Effective governance Maximum 120% 50% the business Reflection of fairness across across fairness Motivates and rewards sustainable and rewards Motivates which superior performance, of is aligned with the interests shareholders. vesting period aligns The three-year executive performance and decision- outcomes making with longer-term of key and assists in the retention executives. as percentage of fixed Expressed annual remuneration. KMP LTI delivered as performance delivered KMP LTI a three-year vest over rights that performance period if relevant achieved. are hurdles > > > > Threshold 36% 15% > > > > Long Term Incentive (at risk) Term Long

Position in proposition Maximum 112.5% 60% employee value employee Target 75% 40% transparency Simplicity and Ensures executive remuneration is executive remuneration Ensures and business aligned with financial aligns and therefore performance, and interests with shareholder outcomes. performance Emphasis on financial focus on strategic reinforces performance. Expressed as percentage of fixed as percentage of fixed Expressed (performance annual remuneration target 50 per cent of +/- range opportunity). For the Managing Director, STI For the Managing Director, cash as two-thirds outcome delivered equity rights deferred and one-third period. with a two-year deferral a cash Other Executive KMP receive based on performance STI payment, the year. over > > > > > Threshold 37.5% 20% > > > > > Short Term Incentive (at risk) Incentive Term Short driven focus Performance- Performance- Market Attracts and retains and retains Attracts executives with the capability and experience to deliver outcomes. Set at a market competitive level to key and retain attract talent and with regard to the complexity of skills and the role, required. competencies > > competitiveness > > Fixed annual remuneration strategy and strategy Alignment to business need Opportunity Managing Director Managing Director Purpose and rationale Other Executive KMP Approach - The Board believes the three-component structure of remuneration arrangements, with arrangements, of remuneration structure believes the three-component The Board - structure Remuneration at this stage in is effective incentive components, incentive and long-term short-term annual remuneration, fixed aspirations. and growth transformation the business’ FY2018 Board decisions on remuneration matters, including the design of the executive remuneration framework, how the framework is how the framework framework, remuneration including the design of the executive matters, decisions on remuneration Board guided by principles around: are determined, set and how outcomes are are and targets how performance measures applied, The objective of our approach to the Executive KMP remuneration structure is to allow the specific considerations of long-term of long-term considerations is to allow the specific structure remuneration to the Executive KMP The objective of our approach and upon our strategic senior executives to deliver and retain to attract remuneration performance and fixed short-term factors, outcomes. shareholder linked to company performance and outcomes are that remuneration while ensuring business plans, Remuneration Objectives and Principles Remuneration FRAMEWORK AND REWARD MIX REWARD AND FRAMEWORK The following table summarises AusNet Services’ Executive KMP remuneration objectives and design principles and an overview of and design principles and an overview objectives Executive KMP remuneration AusNet Services’ The following table summarises in place during FY2018: the arrangements 2. EXECUTIVE KMP REMUNERATION REMUNERATION KMP EXECUTIVE 2.

42 AUSNET SERVICES STI deferred LTI MANAGING DIRECTOR 2. EXECUTIVE KMP REMUNERATION STI cash performance outcomeand100percentLTI vesting outcome, atthetimeofgrant, isshownbelow: The ManagingDirector andExecutiveKMPtotalreward mix, inclusiveoffixed annualremuneration, andassuming100percentSTI DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) FRAMEWORK AND REWARD MIX (CONTINUED) measures review and Performance FY2018 41% 17% 8% > > > Fixed annualremuneration > > > employment. KMP contracts of increases inExecutive No guaranteed FAR comparable roles. against marketrates for FAR reviewed periodically conducted annually. Performance review Fixed pay Short Term Incentive(atrisk) > > > > > > > > performance. flow from operations andsafety performance criteria relating tocash Total STIsubject togateway (individual specific). against strategic initiatives customer outcomesandperformance Non-financial measures cover safety, capital. and effectively manageworking grow revenues, exhibitcostcontrol Return onEquity – reflect abilityto Two financial measures - EBITDA and financial andnon-financial measures: STI scorecard KPIsincludeselected 34% LTI STI cash OTHER EXECUTIVEKMP 26% 21%

Long Term Incentive(atrisk) > > > > > > > > investments inoperations. measures returns generated from Return oninvested capital(ROIC) creation.shareholder value providesEPS tangiblemeasure of performance ofcomparator group. the investmentsmadeagainst measures returns generated from Total shareholder return (TSR) capital (25percent). (25 per cent) andreturn oninvested earnings pershare (EPS) growth shareholder return (50percent), LTIP KPIsare relative total Fixed pay 53% ANNUAL REPORT 2018 43 Permanent, subject to six months’ notice of termination by either party. by either notice of termination to six months’ subject Permanent, FAR at 31 March 2018, As includes base salary and superannuation. Fixed annual remuneration was $1,300,000. periodically against market by the Remuneration is reviewed Fixed annual remuneration of annual increase. with no guarantee and the Board, Committee of performance with a range for on-target incentive of 75 per cent of FAR Annual short-term performance to threshold for per cent of FAR commencing at 37.5 vesting range STI potential in cash payment as two-thirds STI is delivered at maximum performance. 112.5 per cent of FAR Unless otherwiseby determined period. with a two-year deferral rights, in deferred and one-third vesting date. prior to for cause or resignation if terminated forfeited are STI awards the Board, on the performance based for maximum performance, incentive of 120 per cent of FAR Long-term vesting commences at 36 per cent of FAR. performance Threshold EPS and ROIC. TSR, of measures In general, of grant. terms plan rules and the specific LTI in the stated are awards of LTI Treatment for or termination lapse upon resignation awards LTI unless otherwise by the Board, determined to be tested basis, on foot on a pro-rata without cause will remain and for termination cause, vesting date. conditions at the performance against the relevant of performance period and no retesting with three-year Annual invitation to participate years. in subsequent performance measures apply in Plan Rules. Clawback provisions pay for every year of service paid at the Managing weeks’ at three calculated benefits Termination and capped at six months. rate FAR Director’s Managing Director of agreement Term Fixed annual remuneration incentive (at risk) Short-term incentive (at risk) Long-term benefits Termination REMUNERATION AND OTHER TERMS OF EMPLOYMENT EMPLOYMENT OF TERMS OTHER AND REMUNERATION Remuneration and other terms of employment for the Managing Director are set out in the table below. in the table below. set out are for the Managing Director of employment and other terms Remuneration The major provisions contained in the services agreements of the other Executive KMP are substantially the same as those contained in the services of the other Executive KMP are agreements The major provisions incentive for Executive KMP being short-term opportunity differs variable reward However, that apply to the Managing Director. performance and long- for on-target 20 per cent and maximum of 60 per cent of FAR) (threshold opportunity of 40 per cent of FAR for maximum performance (15 per cent at threshold). incentive of 50 per cent of FAR term 44 AUSNET SERVICES 3. 2. 1. 6. 5. 4. and thecorrelation betweenthelevelsofbusinessperformanceachievedandManagingDirector STIandLTI payoutcomes. and LTI vesting. The tableandfigures belowshowkeyfinancial performanceoutcomesforthecurrent andpastreporting periods The businesshasdelivered strong underlyingfinancial performanceforFY2018, whichhasresulted inabove-target STIoutcomes our shareholders. Our executiveremuneration framework isdesignedtoalignexecutiverewards withperformanceachieved, andhowbenefits flowto 3. FY2018 PERFORMANCE AND DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) REMUNERATION SUMMARY growth rate (CAGR) Earnings pershare (EPS) (%) 3-yearcompoundannual Dividends (centspershare) LTI vested as% oftarget – otherExecutive KMP relative performance Total shareholder return (TSR) percentileranking - Share priceat31March($) LTI vested as% oftarget – MD Return onequity(%) Return oninvested capital(ROIC) (%) 3-yearaverage STI % STI vested as% of target – MD EBITDA ($m) Financial performance NPAT ($m)

FY2014 EPS measureFY2014 EPS wasadjusted toexcludethe$50millionpayablefortermination oftheMSAatBoard’s discretion. Agreementtermination (MSA) oftheManagementServices and$7.7 millioninrestructuring costsassociated withthe Termination Deed. FY2014 netprofit after taxincludesanetcharge of$86.7millionfortheamountpayableinrespect oftheSection163AAdispute, $50.0millionpayableforthe Corporate STIScorecard outcomefrom FY2014toFY2017, FY2018hasmoved toanindividualSTIscorecard foreachemployee. FY2017 dividendsconsistof8.80centspershare ordinary dividendplus1.0centspershare specialdividend. with theATO ($28.1million). FY2016 netprofit after taxincludesone-offbenefits of$163.1millionassociated withourcorporate restructure ($135.0million) andsettlementoftheIPdispute provision forAdvancedMetering Infrastructure (AMI) customerrebates of$22.8million(after tax). the intra-group financing audit, therecognition of$84.1millionnetexposure inrelation totheintellectual property taxdispute withtheATO andtherecognition ofa FY2015 netprofit after taxincludestherecognition of$142.6millioninincometaxexpenseforthesettlement withtheAustralian Taxation Office (ATO) inrelation to 6 1, 3, 4 3, 1, 2

5

1.310 1,017 FY14 80.0 50.0 8.36 64.0 88.1 4.97 48.1 (11.1) 178 5.3 1, 2 1, 1.460 1,047 (58.1) FY15 8.36 45.0 4.58 56.2 33.5 62.3 37.5 1.0 23 3 1.490 104.9 120.3 1,143 115.7 127.1 FY16 8.53 4.82 14.0 489 17.8 71.4 4 1.685 1,073 107.6 9.80 68.6 96.8 4.89 FY17 70.6 76.1 255 3.4 7.0 5 130.4 1.675 110.0 1,143 FY18 85.9 85.9 9.25 64.2 N/A 5.67 291 8.0 ANNUAL REPORT 2018 45 291 64.2 85.9 FY18 FY18 110.0 1,143 130.4 255 68.6 FY17 FY17 70.6 96.8 3.4 1,073 MD LTIP vesting % of target 489 71.4 FY16 FY16 115.7 104.9 17.8 1,143 23 62.3 MD STI % of target FY15 FY15 45.0 37.5 TSR – Percentile ranking -58.1 1,047 NPAT ($M) 8.1 178 8 FY14 FY14 64.0 48.1 -11.1 1,017 EPS – 3 year CAGR % EBITDA ($M) 0 0 30 60 90 120 150 30 60 200 400 600 800 1,200 1,000 MD OVERALL LTI OUTCOME % OF TARGET TO TSR AND EPS MD OVERALL LTI OUTCOME % OF TARGET % MD OVERALL STI OUTCOME % OF TARGET TO EBITDA AND NPAT MD OVERALL STI OUTCOME $ 46 AUSNET SERVICES 3. FY2018 PERFORMANCE AND KEY REMUNERATION OUTCOMES FOR FY2018: DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) REMUNERATIONSUMMARY (CONTINUED) performance period) Plan grant (FY2019 - FY2021 2018 Long Term Incentive performance period) awards (FY2016 - FY2018 term IncentivePlan Vesting of2015Long Incentive Planoutcomes Short TermFY2018 performance period) grant (FY2018 - FY2020 Long Term IncentivePlan Managing Director 2017 remuneration Executive fixed at theAnnualGeneral Meeting tobeheldon19July2018. Shareholders willhavetheopportunity to vote ontheproposed LTI grant fortheManagingDirector > > > > scales andthe TSR comparator group asfollows: going forward, theLTI effectiveness LTI willbeenhancedbyaltering performancehurdles, vesting no compellingreason to move awayfrom theexistingmeasures of TSR, andROIC. EPS However, The review identified andconsidered KPImeasures. alternative The Board concludedthatthere was During FY2018, theBoard reviewed theKPIandperformancemeasures oftheexistingLTI program. Further detailsoftheLTI planandLTI vesting canbefoundinsection4. therefore significant. adjustments forpurposesofmeasuringLTI performance, growth from EPS FY2016toFY2018was were reduced byasignificant taxsettlement. Consistent withtheBoard’s approach nottomake the baselineforcalculatingearningsgrowth over theFY2016 - FY2018performanceperiod, positively. DuringFY2018, thisimpacted theLTI vesting; FY2015earningspershare, whichis impacts paymentsmadeunderourincentiveprograms – sometimesnegativelyand The Board hasapolicynottoadjuststatutoryperformanceoutcomesforsignificant items. This CAGR)(EPS of130percentandreturn oninvested capitalof5.67 percent. relative totalshareholder return (64thpercentile), compoundannualearningspershare growth the soundfinancial performanceacross theFY2016toFY2018performanceperiodinterms of and return oninvested capital), resulting in85.9percent vesting. The LTI vesting outcomereflects tested againstperformancecriteria (relative totalshareholder return, earningspershare growth The LTI awards granted in2015, applicablefortheFY2016 – FY2018performanceperiod, were Further detailsoftheFY2018STIplanandoutcomescanbefoundinsection 4. KMP increased relative toFY2017. including allfinancial metrics. As aresult, STIpaymentsfortheManagingDirector andExecutive The businessdelivered above-target performanceonthemajorityofkeymetrics, varied between105.0and110.0percentoftarget. The MD’sSTIpaymentwas110.0percentoftarget. OtherExecutiveKMPSTIscorecard outcomes remuneration andforotherExecutiveKMPsetat40percentoffixed remuneration. performance. FortheManagingDirector, thetarget STIopportunitywassetat75percentoffixed link betweenperformanceachievedandpaymentsmade, andalarger weightingonfinancial FY2018 wasthefirst yearofournewSTIplanbasedonasinglescorecard, providing atransparent of thethree-year performanceperiodbeingFY2018 - FY2020. remuneration arisingfrom thereview inFY2016. The 2017LTI grant willbetested attheconclusion vesting. This adjustmentwasthelastelementofchangesmadetoManagingDirector’s the ManagingDirector’s 2017LTI grant increased to120percentoffixed remuneration atmaximum As outlinedintheFY2017Remuneration Report, andapproved byshareholders attheJuly2017AGM, Executive KMPduringFY2018. There were nochangestofixed annualremuneration (FAR) oftheManagingDirector orother > > > > resulted ina50percent vesting forthisKPI. a linearapproach to100percentatmaximum performance. Previously threshold performance vesting fortheROICKPIwillcommence at0percentthreshold performance andbasedon CAGR to7.5 percent CAGR over thethree-year performanceperiod; and the maximumperformancerequired forfull KPIwillincreasevesting oftheEPS from 5 percent replacing theprevious 200comparator ASX group; alignment ofthenominated comparator group for 100(withoutexceptions)TSR totheASX performance levelat75thpercentileranking; retention ofthe TSR threshold performancelevelatthe50thpercentileranking andmaximum

ANNUAL REPORT 2018 47 Total 816,217 747,642 910,644 809,941 964,635 845,480 1,316,429 3,162,120 1,336,624 3,436,831 2 161,941 171,203 161,828 917,930 190,225 332,603 200,644 263,589 203,699 1,064,331 LTI vested LTI ------126,733 212,680 ex-gratia Retention / / Retention ------STI 314,730 357,500 deferred (2 years) Paid 187,158 175,510 164,767 154,399 253,467 290,991 715,000 210,000 629,460 198,000 Incentive Short Term Short Term 479,745 422,040 425,360 425,360 692,835 692,835 450,000 500,000 1,300,000 1,300,000 Fixed annual remuneration FY 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 Total remuneration paid to Non-executives Directors for FY2018 was $1.83 million, which represents which represents for FY2018 was $1.83 million, to Non-executives Directors paid remuneration Total million. cap of $2.25 81.2 per cent of the fee during fees and committee fees Non-executive Director made to our base were No increases FY2018. annual Chairman’s 2017 the Board 1 October effective fees, to review with the policy In accordance to align with other companies of $390,000 to $430,000) by 10 per cent (from was increased fee for membership of Board no additional fees The Chairman receives a similar size and complexity. Committees. 1 1 LTI vesting is calculated based on the number of performance rights vested multiplied by the share price at 31 March 2018, being $1.675. price at 31 March 2018, multipliedvested by the share based on the number of performance rights vesting is calculated LTI Mr Newman received a higher STI Award relating to his participation in the company’s FY2017 Executive Retention Plan, which ceased on 31 March 2017. Mr Tieppo Tieppo Mr which ceased on 31 March 2017. Plan, participation in the company’s FY2017 Executive Retention to his relating a higher STI Award Mr Newman received fully disclosed in the were Both these items incentive plan. program remediation vesting of his metering to the an additional incentive payment related received Report. FY2017 Remuneration

Nino Ficca Executive KMP Non-executive Director fees Non-executive Director Alistair Parker Chad Hymas Mario Tieppo Adam Newman KEY REMUNERATION OUTCOMES FOR FY2018: (CONTINUED) FY2018: FOR OUTCOMES REMUNERATION KEY FY2018 ACTUAL REMUNERATION PAID TO EXECUTIVE KMP (UNAUDITED) KMP EXECUTIVE TO PAID REMUNERATION ACTUAL FY2018 2. due the actual pay received from differ shown in section 7 of this report are which of remuneration accounting disclosures Statutory awards. LTI and unvested of leave provisions to the accounting treatment 1. Note that the following table is non-IFRS information and is unaudited. that the following table is non-IFRS information Note The Managing Director and Executive KMP did not receive any fixed remuneration increases during FY2018. Actual remuneration Actual remuneration during FY2018. increases remuneration any fixed KMP did not receive and Executive The Managing Director of the July as a result due to promotion remuneration in fixed an increase and Mr Hymas in FY2017 represents paid to Mr Parker in FY2018. reflected of these increases with the full effect restructure 2016 organisational The table below sets out the actual remuneration paid to current Executive KMP over the past two reporting years. This years. past two reporting the Executive KMP over paid to current The table below sets out the actual remuneration to the Managing in respect STI equity value of deferred the STI cash paid, remuneration, includes annual fixed remuneration in FY2018. vested that awards value of the 2015 LTI and the Director, 48 AUSNET SERVICES of theFY2018STIPlanare setoutasfollows: The maximumSTIopportunitywasalsoreduced from 196percentoftarget opportunitytoamaximumof150percent. Key features weightings andgateways helpstoensure STIpaymentsare onlymadewhenshareholders alsobenefit. based KPIs, alongwiththeintroduction ofbothfinancial andsafety-based gateways. The combinationofhigherfinancial KPI dual corporate andpersonalscorecard approach. The STIPlanhasalsobeen designedwithhigherweightingtowards financial- The STIPlanusesasingleadditivescorecard withabalanceoffinancial andnon-financial measures, whichreplaced theprevious business strategy. population. The aimofthenewplanwastoincrease transparency andsimplicitytobetter alignwiththecompany’soverall In FY2018, theBoard introduced asimplified STIPlanfortheManagingDirector, ExecutiveKMPandthebroader employee 4. FY2018 EXECUTIVE KMP INCENTIVE FY2018 SHORT TERM INCENTIVE PLAN DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) PLANS DETAILEDPLANS OUTCOMES STI deliverymechanism weightings measures and STI performance gateway anddiscretion STI performance STI opportunity held over atwo-yearperiod. STIispaidincashforallotherexecutives. Two-thirds oftheManaging Director’s STIaward ispaidincashwithone-third deferred intoshares applied. For hisexecutiveteam, KPIsreflecting acascadeofstrategic priorities asappropriate foreachrole were business.Energy Services business costefficiency program andgrowth inourunregulated assetbaseacross ourCommercial set theManagingDirector’s strategic KPIstobealignedourongoing Regulated Energy Services KPIs alignedtostrategic prioritiesare setbytheBoard fortheManagingDirector. ForFY2018theBoard that drivetheexecutionofAusNetServices’ strategy andshareholder return. The KPIsare designedto reward achievementofbothfinancial targets andnon-financial objectives of the event. make someoralloftheSTIavailableforpaymenttothesepartiesdepending onthecircumstances Managing Director, otherExecutiveKMPoremployees. The Board willretain thediscretion to In theeventofafatality, theBoard retains complete discretion toadjustanySTIaward forthe in accordance withAusNetServices’ dividendguidancetargets fortherelevant year. from operational performanceprovides thecompanywithabilitytopayshareholder dividends the performanceofanyKPIswillonlybeconsidered incircumstanceswhere thecashflow Notwithstanding theoverall assessmentofeachscorecard, STIpaymentsgenerated asaresult of assessed performanceoutcomes. not limited to) thesettingofKPIperformancetargets andranges, selectionofKPIsweightings, andany The Board retains theflexibilitytoexercise itsdiscretion over allelementsoftheSTIplanincluding(but 60 percentofFAR atmaximumperformance. Other ExecutiveKMP – 40percentofFAR attarget, 20percentofFAR atthreshold performanceand 112.5 percentofFAR atmaximumperformance. Managing Director – 75percentof FAR attarget, 37.5 percentofFAR atthreshold performanceand performance. by theparticipant’sSTIopportunityandisexpressed asapercentageoftheparticipant’sFAR attarget Executive STIoutcomesare theoutcomeofeachExecutive’sSTIscorecard determined bymultiplying EBITDA 40.0% Financial on equity Return 20.0% HSEQ index 5.0%

Customer 10.0% index Non-financial strategic priorities KPIs alignedto 25.0% ANNUAL REPORT 2018 49 150% Maximum

100% Target FY2018 performance outcome 50% Threshold Measure EBITDA Return on equity HSEQ index index Customer cost efficiency Regulated business growth Unregulated KPI wtg (at target) 40.0% 20.0% 5.0% 12.5% 10.0% 12.5% Managing Director FY2018 STI scorecard FY2018 STI scorecard Managing Director

Safety Safety Strategic Initiatives Customer Customer Key Performance Indicators Performance Key Financial Non-Financial Strategic FY2018 MANAGING DIRECTOR STI SCORECARD PERFORMANCE OUTCOMES PERFORMANCE SCORECARD STI DIRECTOR MANAGING FY2018 FY2018 EXECUTIVE KMP STI SCORECARD PERFORMANCE OUTCOMES PERFORMANCE SCORECARD STI KMP EXECUTIVE FY2018 Note that while the STI design allows for a total maximum opportunity of 150 per cent of target, for FY2018 the Managing Director’s for FY2018 the Managing Director’s 150 per cent of target, maximum opportunity of that while the STI design allows for a total Note no outperformance KPI having cost efficiency the Regulated per cent to reflect maximum STI opportunity was capped at 143.25 opportunity. The company’s strong financial performance dominated this outcome and accounts for the majority of the total scorecard outcome. outcome. and accounts for the majority of the total scorecard this outcome performance dominated financial The company’s strong The Managing Director’s FY2018 STI scorecard assessment is shown below. This assessment resulted in an outcome of 110.0 per This assessment resulted below. assessment is shown FY2018 STI scorecard The Managing Director’s 76.8 per cent of maximum STI opportunity. performance or cent of target Performance against both safety and financial gateway tests was positive. However, the Board exercised its discretion in relation to in relation its discretion exercised the Board However, was positive. tests gateway and financial against both safety Performance see below. – HSEQ Index the assessment of the The Board assessed the performance gateways for STI payment and performance against the MD’s STI scorecard. STI scorecard. and performance against the MD’s for STI payment assessed the performance gateways The Board The average FY2018 STI outcome for other Executive KMP was 107.5 per cent of target and 75 per cent of maximum STI opportunity. and 75 per cent of maximum STI opportunity. per cent of target FY2018 STI outcome for other Executive KMP was 107.5 The average Executive KMP scorecards include the same financial and non-financial weightings as for the Managing Director, with individual with individual weightings as for the Managing Director, and non-financial include the same financial Executive KMP scorecards KPIs cascaded for each role. strategic The HSEQ index performance outcome was assessed at 95 per cent of target. However, while most elements of the index while most However, target. assessed at 95 per cent of The HSEQ index performance outcome was was not (n=7) than 10 days lost time duration of more the business deemed that the level of injuries performed strongly, outcome to a threshold the final to moderate exercised its discretion the Board Upon management’s recommendation, acceptable. performance with STI rewards. of performance to highlight the importance of aligning underlying safety (50 per cent) level 50 AUSNET SERVICES and elected to approve hisgrant atourAGM heldinJuly2017. These grants were madetoExecutiveKMPinMay2017. The ManagingDirector’s grant wasmadeshortlyafter shareholders voted and endingon31March2020(FY2018toFY2020). The followingdescribesourLTI plandesignforthe2017LTI grant, withthethree-year performanceperiodcommencing1April 2017 4. FY2018 EXECUTIVE KMP INCENTIVE LONG TERM INCENTIVE FOR PLAN FY2018 TO FY2020 PERFORMANCE PERIOD DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) PLANS DETAILEDPLANS OUTCOMES (CONTINUED) arrangements Clawback Change ofcontrol and dividends Unvested rights mechanism Delivery scales and vesting Weighting, targets measures Performance Opportunity Eligibility Design aspect otherwise besatisfied.otherwise been satisfied bytheparticipantasaresult offraud, dishonestyorbreach ofobligationswhichwould not The Board maydetermine thatanyawards beclawedbackintheeventperformancemeasures have absolute discretion determine thetreatment ofanyoralltheParticipant’s unvested performancerights. If achangeofcontrol eventoccurs, ortheBoard determines sucheventislikely tooccur, theBoard mayinits No dividendsordividendequivalentpaymentsaccruetounvested rightsduringtheperformanceperiod. that vest. continued employment. The Board retains therightto vary atitsdiscretion thenumberofperformancerights The LTI award isgranted asperformancerights, subjecttoperformanceagainst theabove measures and ranges. The vesting ofeachtheabove KPIswilloccuronalinearbasisbetweenthethreshold andmaximum 100 percent vesting percentile - 75th Maximum performance 35 percent vesting percentile - 50th Threshold performance Weighting 50% comparator group. with theperformanceof regard toourperformancecompared given apercentileranking, having The levelof TSR growth achievedis companies inthecomparator group. of eachgrant andthatofthe TSR growth from thecommencement reviewed bytheBoard indicating been met, independent datais whether performancehurdles have 200index.S&P/ASX Inassessing TSR performancemeasure isthe The comparator group usedforthe Total shareholder return (TSR) Other ExecutiveKMP – 50percentofFAR atmaximumperformance Managing Director – 120percentof FAR atmaximumperformance over thefive trading released dayperiodcommencingonthedate itsFY2017results. AusNetServices performance rightsissuedisthepercentageofFAR dividedbythe volume weighted average price(VWAP) The LTI award iscalculated asapercentageoftheparticipant’sFAR asatthegrant date. The numberof long-term shareholder value toparticipate intheLTI plan. Executive KMP. The Board mayinitsdiscretion invite additionalemployees whoare inapositiontoinfluence Commentary

100 percent vesting 5.0 percentCAGR - Maximum performance 0 percent vesting 2.5 percentCAGR - Threshold performance Weighting 25% number ofshares onissue. divided bytheweighted average company’s netprofit after tax iscalculated bytakingthe EPS performance period. (CAGR) rate over thethree-year compound annualgrowth based onachievinganominal growth measureThe EPS is Earnings pershare (EPS)

100 percent vesting 4.55 percent - Maximum performance 50 percent vesting 4.35 percent - Threshold performance Weighting 25% Equity + Average Debt). adjusted for Tax) / (Average equals (NPAT +FinanceCost year performanceperiodand ROIC iscalculated over athree- invested inouroperations. use funds(borrowed andowned) to measure howeffectively we The ROICmeasure isdesigned Return oninvested capital(ROIC) 51 ANNUAL REPORT 2018 (100%) Maximum

Return on invested capital (ROIC) capital Return on invested 25% Weighting performance Threshold - 5.08 per cent vesting 50 per cent Maximum performance - 5.28 per cent vesting 100 per cent per cent 5.67 (30%) Threshold Earnings per share (EPS) Earnings per share 25% Weighting performance Threshold – 2.5 per cent CAGR nil vesting Maximum performance - 5.0 per cent CAGR vesting 100 per cent 130.4 per cent 50% 25% 25% 100% MD/ Executive MD/ KMP weighting

Weighting 50% Weighting Other Executive KMP – 50 per cent of FAR (at grant date) at maximum performance. date) (at grant cent of FAR 50 per – Other Executive KMP (TSR) return shareholder Total performance Threshold 50th percentile - vesting 35 per cent Maximum performance 75th percentile - vesting 100 per cent KPIs occurs on a linear basis between the threshold above vesting outcome for each of the The and maximum performance targets. 64.2 percentile ranking The LTI award is calculated as a percentage of the participant’s FAR as at the grant date, being 1 April 2015. being 1 April 2015. date, as at the grant as a percentage of the participant’s FAR is calculated award The LTI average weighted volume divided by the is the percentage of FAR The number of performance rights issued AusNet Services its FY2015 day period commencing on the date released trading five the over price (VWAP) $1.4692. price was therefore grant The 2015 LTI results. at maximum performance. date) (at grant 100 per cent of FAR – Managing Director Relative total shareholder return Relative total shareholder Earnings per share capital Return on invested maximum At 2015 LTI Grant Grant 2015 LTI performance measures Key Weighting, targets targets Weighting, and vesting scales Performance Performance measures Performance outcome Opportunity The shares vested to the Managing Director and other KMP under the 2015 LTI plan are proposed to be allocated to each executive allocated to be proposed plan are and other KMP under the 2015 LTI to the Managing Director vested The shares to sell, subject to the AusNet Services with each recipient Guidelines for Dealing in Securities and applicable laws, on 18 May 2018, or otherwise dispose of their securities. transfer The parameters of the 2015 LTI Award are summarised below: summarised are Award of the 2015 LTI The parameters 2015 LTI GRANT (FY2016 TO FY2018 PERFORMANCE PERIOD) OUTCOMES PERIOD) PERFORMANCE FY2018 TO (FY2016 GRANT LTI 2015 TSR, (relative measures the three FY2016 to FY2018 performance period against the assessed performance over The Board a safety under the ROIC measure, participants to qualify for an award For plan. set out in the 2015 LTI EPS and ROIC) growth vesting must be achieved. in the 12-month period prior to for our employees fatalities of zero performance gateway The following table sets out the overall 2015 LTI grant performance and vesting outcomes. These grants were made to Executive were These grants vesting outcomes. performance and grant 2015 LTI The following table sets out the overall at our his grant to approve and elected voted shareholders was made shortly after grant The Managing Director’s KMP in May 2015. in July 2015: held AGM The above outcome resulted in an overall vesting of 85.9 per cent of maximum (100 per cent) opportunity. vesting of 85.9 per cent of maximum (100 per cent) in an overall outcome resulted The above 52 AUSNET SERVICES 1. The followingdescribesourapproach toNon-executiveDirector remuneration: attracts Directors withthenecessaryskills, expertiseandcapability. Non-executive Director remuneration isdesignedtoensure thatDirectors maintainobjectivityandindependencethattheBoard 5. NON-EXECUTIVE DIRECTORS to individual entities within the AusNet Services Group. to individual entitieswithintheAusNetServices superannuation) forthefinancial yearended31March2018are setoutinthetablebelow. Itisnotpossibletoallocate fees The annualfees andapproved payabletoNon-executiveDirectors ofAusNetServices bytheBoard (inclusive ofstatutory DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) Role Director fees Non-executive approach to levels and Review offee benefits Retirement expenses Business-related compensation Equity-based Directors of Non-executive for remuneration Total fee pool Fees NED fee element Board Audit andRiskManagementCommittee Remuneration Committee Nomination Committee

In additiontothefees noted above, Non-executiveDirectors mayalsobepaidfees forspecialdutiesorexertions. 1 10.3 per centfrom $390,000to$430,000, effective 1October2017. committee fees were withinmarketrange. Therefore, theBoard increased theChairman’sannualfee by below marketbenchmarkranges forcompaniesofasimilarsizeandcomplexity, butthatmemberand Non-executive Director fees were reviewed inFY2018. The review highlighted thattheChairman’sfee was Consistent withthisapproach, andgivenBoard Memberandcommittee fees were adjusted inJuly2015, years, asthisfrequency helpstoensure thatthefee levelsremain alignedwiththemarket. carrying outtheirduties. Ingeneral ithasdetermined thatfees shouldbereviewed atleasteverythree market practices, governance developmentsandthetimecommitmentresponsibilities involved in The Remuneration Committee regularly reviews thefees payabletoNon-executiveDirectors, considering statutory superannuation obligations. of superannuation contributionsmadeonbehalfoftheNon-executiveDirectors inaccordance withour Non-executive Directors are notprovided withanyformofretirement benefit. Feespaidare inclusive company business, asmay beincurred inthedischarge oftheirduties. Non-executive Directors are entitledtobereimbursed forallbusiness-related expenses, includingtravel on Non-executive Directors are notprovided withanyformofequity-basedcompensation. at the AnnualGeneral Meetingheldon21July2016. The shareholders approved atotalremuneration poolforNon-executiveDirectors of$2,250,000peryear a general meeting. or exertions) mustnotexceedinaggregate inanyfinancial yeartheamountapproved byshareholders in The totalamountprovided toallNon-executive Directors (includinganyadditionalfees forspecialduties additional fees forspecialdutiesorexertions. Ltd,In accordance withtheconstitutionofAusNetServices Non-executiveDirectors mayalsobepaid objectivity andindependence. comparable companies, andthatfees tomaintain paidare notlinkedtotheperformanceofAusNetServices policy isthatfee levelsare sethavingregard toindependentperformanceadviceandfees paidby The remuneration ofNon-executiveDirectors consistsofDirectors’ fees andcommittee fees. The Board’s Commentary 30 September 2017) included inbasefee (1 April2017to $390,000 Chair fee $40,000 $35,000

included inbasefee (1 October2017to 31 March2018) $430,000 Chair fee $40,000 $35,000

included inbasefee Member fee $165,000 $20,000 $17,500 ANNUAL REPORT 2018 53 The Board’s stakeholder engagement plan includes The Board’s and formal interactions remuneration-related regular thinking which help to inform the Board’s meetings, and decisions on remuneration. has engagement and feedback A calendar of regular the year to support been established throughout activities. planning of remuneration Directors and management actively seek Directors opportunities to engage with peers. current and review receive regularly Directors trends and emerging market practices remuneration AusNet Services. to and assess their relevance incentive awards, to satisfy share-based In order on market and held in AusNet purchased are shares as However, Trust. Plan Share Employee Services’ AusNet governance, of good corporate a matter of for grants Services approval seeks shareholder at the AGM. equity to the Managing Director statutory policy is not to adjust The Board’s This items. performance outcomes for significant impacts payments made under our incentive sometimes negatively and sometimes – programs positively. subject to are awards LTI All executives receiving Guidelines for Dealing in Securities AusNet Services’ or transfer the sale, and applicable laws regarding disposal of their securities. > > > > > > > STAKEHOLDER ENGAGEMENT STAKEHOLDER CONTINUOUS DEVELOPMENT, TRANSPARENCY AND AND TRANSPARENCY DEVELOPMENT, CONTINUOUS PRACTICES MARKET OF MONITORING > > > > > > >

The full Board has oversight of AusNet Services’ of AusNet Services’ has oversight The full Board It is accountable for the arrangements. remuneration of executives and of Non-executive remuneration governing and the policies and processes Directors, remuneration. applies Remuneration has developed and The Board on decision point Principles to serve as a reference These principles matters. making on remuneration have been in place since 1 January 2016. information and insights on Management provides and obtains practices remuneration contemporary advisors to external information from remuneration Committee. assist the Remuneration to review is delegated Committee The Remuneration on matters to the Board and make recommendations non- and structure, frameworks of remuneration and executive remuneration, executive remuneration The pay elements. variable and including fixed was last reviewed Charter Committee Remuneration in March 2017. by the Board assesses the performance of the Managing The Board outcomes. reward all related and approves Director The Remuneration Committee formally appointed formally appointed Committee The Remuneration advisor in as its remuneration (EY) Young Ernst and advisors as October 2015 and engages other external required. provided were recommendations No remuneration by EY or the Board Committee to the Remuneration period. during the reporting Committee to the Remuneration Advice provided period focussed on by EY during the reporting to executive in relation market practices overall and frameworks approach design, LTI benchmarking, and non-executive benchmarking. > > > > > > > > THE USE OF EXTERNAL ADVISORS TO SUPPORT SUPPORT TO EXTERNAL OF USE THE ADVISORS DECISION-MAKING INDEPENDENT AND INFORMED DECISION-MAKING CLEAR ROLES ALLOW FOR EFFICIENT EFFICIENT FOR ALLOW ROLES CLEAR The Board and Committee Charters have clear roles for have clear roles Charters and Committee The Board by management, issues to be considered remuneration and the Board. Committee the Remuneration > > > > > > > > AusNet Services’ approach to remuneration governance recognises that remuneration arrangements are important enablers are arrangements that remuneration recognises governance to remuneration approach AusNet Services’ as follows: is summarised Our approach performance. and drivers of business 6. REMUNERATION GOVERNANCE REMUNERATION 6. 54 AUSNET SERVICES DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) 7. STATUTORY REMUNERATION DISCLOSURES EXECUTIVE KMP STATUTORY REMUNERATION

The following table sets out each element of total reported remuneration for Executive KMP, based on statutory remuneration disclosure requirements.

Post- Equity-based Termination Other long-term Short-term Other short-term benefits2,5 employment payments3 benefits benefits4,5 Total Annual leave Long service leave Cash salary Balance Car Super- Balance FY and fees5 STI1 Taken net change parking annuation Taken net change Nino Ficca 2018 1,055,302 1,072,500 127,364 (40,066) 10,541 119,028 712,997 - - 32,302 3,089,968 2017 1,112,677 944,190 74,537 36,119 9,636 125,593 1,016,843 - - 216,763 3,536,358 John Azaris 2017 96,661 40,282 6,091 9,381 2,409 11,604 149,008 329,621 - 6,867 651,924 Chad Hymas 2018 402,203 198,000 21,169 12,026 10,541 24,976 98,362 - - 11,184 778,461 2017 382,492 154,399 14,655 44,879 9,635 25,000 193,164 - - 54,569 878,793 John Kelso 2017 94,561 40,592 - 12,931 2,409 9,791 136,908 234,596 5,647 (406) 537,029 Adam Newman 2018 614,101 290,991 46,058 5,309 10,541 24,976 184,766 - - 17,321 1,194,063 2017 575,720 380,200 84,439 (31,848) 9,635 25,000 308,602 - - 18,179 1,369,927 Alistair Parker 2018 447,691 210,000 26,290 18,240 10,541 27,429 103,188 - - 12,489 855,868 2017 390,732 175,510 38,863 (1,420) 9,635 32,510 209,785 - 21,379 4,235 881,229 Mario Tieppo 2018 335,934 187,158 62,892 (34,288) 10,541 24,976 97,593 - - 10,634 695,440 2017 362,011 164,767 13,806 19,891 9,635 23,467 181,687 - - 119,708 894,972 Total 2018 2,855,231 1,958,649 283,773 (38,779) 52,705 221,385 1,196,906 - - 83,930 6,613,800 Executive KMP 2017 3,014,854 1,899,940 232,391 89,933 52,994 252,965 2,195,997 564,217 27,026 419,915 8,750,232

1. FY2018 STI includes amounts in respect of performance for the year ended 31 March 2018. These amounts have been approved and will be payable in June 2018. 2. Other short-term benefits include car parking benefits and the accrual of annual leave entitlements. The allocation of the premium for Directors’ and Officers’ insurance is not included as under the terms of the current policy this information cannot be disclosed. 3. As the performance period over which the LTI awards vest is three years, the amount included in Equity-based payments is one-third of the amount estimated to vest at the end of the performance period for each outstanding award. This estimated amount is based on certain assumptions regarding the achievement of performance targets, which are reviewed and adjusted annually. Any adjustments to previously recognised amounts, both positive and negative, are included in the current year. The actual amounts vested under these awards will not be known until the end of the performance period. 4. Other long-term benefits include the accrual of long service leave entitlements. 5. The above table represents the accounting value of KMP remuneration, calculated in accordance with accounting standards. As a result, annual leave and long service leave entitlements are recognised as remuneration when they accrue rather than when they are taken. This has the impact of reducing the cash salary and fees remuneration disclosed in the table above when these leave entitlements are ultimately taken by the KMP. In addition, any changes to the value of leave entitlements (for example, because of changes in FAR or long service leave entitlements not vesting) are recognised as remuneration, either positive or negative, in the year that the change occurs. These accounting adjustments to remuneration values are reflected in the Cash salary and fees, Other short-term benefits and Other long-term benefits disclosed in the table. ANNUAL REPORT 2018 55 (1.4) (3.2) (8.5) (8.5) (8.5) (lapsed) target paid/ target Percentage of Percentage 91.5 91.5 91.5 96.8 98.6 ($) paid 377,447 175,510 154,399 944,190 380,200 Total STI Total FY2017 STI 3 - - - - ($) STI 314,730 deferred ($) 377,447 175,510 154,399 STI paid 629,460 380,200 - - - - - (lapsed) Percentage of Percentage target payable/ target 110.0 110.0 110.0 105.0 105.0 ($) 187,158 290,991 payable 210,000 198,000 Total STI Total 1,072,500 FY2018 STI 2 - - - - ($) STI 357,500 357,500 deferred 1 ($) STI 187,158 187,158 290,991 715,000 payable 210,000 198,000 Newman Under the terms of the Deferral Plan, the deferred STI component of Mr Ficca’s STI was allocated by way of deferred rights to be held for a period of two years. two years. rights to be held for a period of by way of deferred STI component of Mr Ficca’s STI was allocated the deferred Plan, of the Deferral Under the terms weighted volume on the based price was calculated share The price of $1.7549. $314,730 divided by share being rights issued was 179,343, The number of deferred AusNet Services its FY2017 results. day period commencing on the date released trading the five over price (VWAP) average One third of the Managing Director’s FY2018 award will be deferred into share rights to be held for a period of two years. STI is paid in cash for all other executives. STI is paid in cash for all other years. rights to be held for a period of two into share will be deferred FY2018 award of the Managing Director’s One third Incentive payments for the performance year ended 31 March 2018 have been approved and will be payable in June 2018. and will be payable March 2018 have been approved Incentive payments for the performance year ended 31

Nino Ficca Chad Hymas Adam Alistair Parker Mario Tieppo SHORT TERM TERM SHORT INCENTIVE 3. 2. 1. The percentage of the available STI that was paid, or that vested, in the financial years ended 31 March 2017 and 31 March 2018, and 31 March 2018, years ended 31 March 2017 in the financial vested, or that available STI that was paid, The percentage of the financial driven by strong FY2018 STI outcomes were set out below. are that was lapsed of target inclusive of the percentage and ROE. to EBITDA performance relating 56 AUSNET SERVICES 2. 1. cent ofperformancerights vesting asshowninthetablebelow. conditions ofthe2015grant. The performanceoutcome, outlinedinsection4ofthisreport forthe2015grant, resulted in85.9per The performancerights vesting inFY2018were granted totheManagingDirector andotherExecutiveKMPundertheterms and (CONTINUED) 7. STATUTORY REMUNERATION DISCLOSURES FY2018 LTI VESTING OUTCOMES against the performanceconditionsatthedate ofthisreport. performance periodsforthegrants madein2016and2017are stillinprogress and, assuch, vesting hasnotbeenassessed The followingtableshowsthenumberand value ofgrants subjecttocurrent vesting andfuture performancetesting. The LONG TERM INCENTIVE LONG TERM DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) LTI RIGHTS ALLOCATION et/vsig date test /vesting Grant

KMP Nino Ficca Nino Ficca Chad Hymas Chad Hymas Adam Newman Adam Newman Alistair Parker Alistair Parker Mario Tieppo Mario Tieppo Total

F.3 inthefinancial statements forfurtherdetails. For performancerightsgranted on1April2015, 1April2016and2017, theamountsrepresent the value oftheperformancerightsongrant date. Refer tonote outcomes payableundertheLTI plan. These grants have vested. Indetermining LTIs forthe1April2015 grant, theBoard hasnotexercisedanydiscretion inrelation tothe performancemeasures and Maximum total value ofgrant 1,364,459 139,450 739,722 231,163 141,573 112,551 ($) 31 Mar2018 1,2 2015 rights granted Performance 1,364,459 139,450 739,722 231,163 141,573 112,551 Maximum total value ofgrant 1,302,524 220,222 706,437 135,203 107,487 133,175 ($) 31 Mar2019 2 Granted 139,450 739,722 231,163 141,573 112,551 2016 rights granted Performance 2015 LTI performancerights 1,276,984 692,585 130,564 215,904 105,379 132,552 Maximum total value ofgrant

198,569 635,421 119,788 Vested 121,611 96,681 1,788,624 1,075,617 238,854 146,642 172,374 155,137 ($) 31 Mar2020 2 2017 rights granted Performance 1,478,202 888,940 142,458 197,400 104,301 Lapsed 128,212 121,192 32,594 15,870 19,662 19,962 ANNUAL REPORT 2018 57 1 Total 67,670 43,809 68,045 213,901 178,222 198,901 189,423 154,635 199,553 182,596 202,342 365,787 182,500 235,625 410,000 185,000 185,000 185,000 202,500 1,822,441 1,828,068 2 5,871 3,801 5,903 13,416 15,781 17,256 17,555 17,569 15,574 16,967 15,462 19,027 15,842 15,833 19,940 18,558 18,990 16,050 16,050 142,476 142,969 Superannuation Post-employment

------Other short- term benefits term

Short-term 62,142 61,799 141,219 40,008 169,219 184,931 181,645 184,787 166,754 173,849 166,667 195,343 162,760 346,797 216,598 182,586 168,950 168,950 390,060 and fees 1,679,965 1,685,099 Cash salary Cash 2018 2017 2018 2017 2017 2018 2017 2017 2018 2018 2017 2018 2017 FY 2018 2017 2017 2018 2018 2017 2018 2017 4 3 5 Chee Meng Dr Scheinkestel was appointed as a Non-executive Director effective 18 November 2016. 18 November effective as a Non-executive Director was appointed Dr Scheinkestel 11 May 2016. effective as a Non-executive Director was appointed Tan Mr Ms McMeckan retired as a Non-executive Director effective 20 July 2017. effective as a Non-executive Director Ms McMeckan retired Superannuation contributions made on behalf of Non-executive Directors to satisfy our obligations under applicable Superannuation Guarantee legislation. This does legislation. Guarantee to satisfy our obligations under applicable Superannuation contributions made on behalf of Non-executive Directors Superannuation and fees. salary included under Cash contributions which are or employee not include any salary sacrifice The allocation of the premium for Directors’ and Officers’ insurance is not included as under the terms of the current policy this information cannot be disclosed. policy this information cannot be disclosed. of the current is not included as under the terms insurance and Officers’ for Directors’ The allocation of the premium

Tina McMeckan Tina Peter Mason Peter Nora Scheinkestel Nora Tian Ho Tian Yee Kee Choe Ng Kee Tan Sally Farrier Robert Milliner Sun Jianxing NEDs Total Non-executive Directors Ralph Craven REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS NON-EXECUTIVE TO PAID REMUNERATION The total remuneration is slightly higher than FY2017, as a result of the higher number of Directors for a period to facilitate for a period to facilitate higher number of Directors of the as a result is slightly higher than FY2017, The total remuneration the Audit and Risk to Chairing in relation particularly Scheinkestel, McMeckan and Nora Tina between a smooth transition Management Committee. The total remuneration paid to Non-executive Directors for FY2018 was $1,826,068, which is 81.2 per cent of the total available fee per cent of the total available fee which is 81.2 for FY2018 was $1,826,068, paid to Non-executive Directors The total remuneration AGM. at the 2016 by shareholders was approved pool of $2,250,000 which 5. 4. 3. 1. 1. 2. 58 AUSNET SERVICES The KMP of AusNet Services havedisclosedrelevant interestsThe KMPofAusNetServices inshares asat31March2018follows: be traded duringspecified trading windows. All KMPmustcomplywithAusNetServices’ Share Trading Policy, whichincludesarequirement thatAusNetServices’ shares canonly (CONTINUED) 7. STATUTORY REMUNERATION DISCLOSURES 3. 2. 1. 5. 4. SHAREHOLDINGS OF KMP DIRECTORS’ REPORT – REMUNERATION REPORT (AUDITED) Sally Farrier Ralph Craven Non-executive Directors Name Nino Ficca Executive KMP Tan Sun Jianxing Nora Scheinkestel Robert Milliner Tina McMeckan Peter Mason YeeHo Tian Mario Tieppo Alistair Parker Adam Newman Chad Hymas

disclosed at31March2018represents thenumberheldatdate thatMsMcMeckanretired. Shares heldbyMcMeckanSuperannuation PtyLtd as Trustee for theMcMeckanFamilySuperFund. MsMcMeckanretired 20July2017. The numberofshares Shares heldbyBondSt Custodians Limited whoistheregistered holderofshares asnomineeforMsFarrier’s personalsuperannuation fund. Shares heldbyimmediate family membersofMr Tieppo. Shares heldbyNewmanFamily Trust forMrNewman. 319,850 shares heldbyimmediate family members ofMrFiccaand1,943,333shares heldbyMrandMrsFiccaas Trustees fortheFiccaInvestment Trust. CheeMeng 3 1 5 4 2 1 April2017 Number of shares at 1,987,183 100,000 192,739 153,491 90,000 211,190 76,400 21,000 26,642 67,700 - - - -

Granted during compensation the yearas 276,000 51,600 48,100 77,000 56,714 ------Acquisitions /

(disposals) 50,000 54,100 10,259 12,394 17,302 ------31 March2018 Number of 2,263,183 shares at 100,000 288,190 220,464 256,733 124,500 121,800 90,000 50,000 21,000 43,944 - - -

ANNUAL REPORT 2018 59 - - - - - 2 6 6 6 6 B Committee - - - 2 4 3 6 6 6 5 A Remuneration Remuneration 1 2 2 2 2 2 2 2 2 2 B Committee 1 - 1 1 2 2 2 Nomination 2 2 2 A - - - - 4 2 6 6 6 6 B

Committee - - 4 2 4 4 6 5 5 6 A Management Audit and Risk 2 6 6 6 6 6 6 6 6 6 B 2 4 6 6 6 5 6 6 6 6 A Services Ltd Board of AusNet Board

2 1

Chee Meng Number of meetings attended. Note that Directors may attend committee meetings without being a member of that committee. meetings without being a member of that committee. committee may attend that Directors Note Number of meetings attended. of the or was a member meetings) (in the case of Board held office Number of meetings held during the time the Director during the year. committee relevant Ms Farrier was appointed as a member of the Audit & Risk Management Committee on 20 July 2017. Risk Management Committee & as a member of the Audit was appointed Ms Farrier Ms McMeckan retired as a Director effective 20 July 2017. 20 July effective as a Director Ms McMeckan retired – oversees the adequacy and effectiveness of AusNet Services’ audit program, audit program, of AusNet Services’ and effectiveness the adequacy oversees – (ARMC) Committee Audit and Risk Management and non- business risks (financial material including the monitoring of systems, control and internal risk management processes compliance; and corporate financial) to the appointment of new Directors, in relation to the Board and makes recommendations reviews – Nomination Committee and CEO succession planning and the appointment Board membership and performance, Committee and Board of Board review and of senior managers; and the of Directors, to the remuneration relating on matters advises the Board and reviews – Committee Remuneration executives. and performance of senior remuneration > > >

Robert Milliner Tian Ho Tian Yee Scheinkestel Nora Peter Mason (Chair) Peter Tina McMeckan Tina Sun Jianxing Nino Ficca (MD) Ralph Craven Tan Sally Farrier MEETINGS OF DIRECTORS OF MEETINGS 1. A =  B =  > > > held during the of AusNet Services Committee Ltd and of each standing Board of Directors The number of meetings of the Board set out in the following table: are by each Director, and the number of meetings attended year ended 31 March 2018, We are committed to achieving a high standard of corporate governance. A key role of the Board is to represent and serve and the is to represent of the Board A key role governance. corporate of to achieving a high standard committed are We do effectively To the company. policies and performance of the strategies, and appraising by overseeing of shareholders interests FY2018: in place during were committees the following standing this, 2.

DISCLOSURES STATUTORY STATUTORY 60 AUSNET SERVICES (CONTINUED) the auditor. is notindemnified andnoinsurance cover isprovided to cover provided totheauditorofGroup, KPMG. The auditor No insurance premiums are paidbyusinregard toinsurance terms ofthepolicy. commercial practice) suchdisclosure isprohibited underthe respect oftheinsurance policy, as(inaccordance withnormal of theliabilitiescovered ortheamountofpremium paidin Services. The Directors havenotincludeddetailsofthenature subsidiaries andtheExecutiveGeneral ManagersofAusNet Directors andCompanySecretaries oftheAustralian-based During thefinancial year, wepaidapremium toinsure the Directors only). books ofthecompaniesandtoBoard documents(tothe the constitution. The deedsalsogivearightofaccesstothe managers onsubstantiallythesameterms asprovided in of theDirectors, theCompanySecretary andcertaingeneral The companyhasexecuted protection deedsinfavour ofeach described above. to giveeffect totherightsconferred bytheconstitutionas LtdAusNet Services mayenter intoadeedwithanyOfficer body corporate. by theOfficer asanofficer ofthecompanyorarelated against anyliability(asdefined intheconstitution) incurred or payagree topayapremium forinsurance, foreachOfficer extent permitted bylaw, topurchaseandmaintaininsurance, The constitutionalsoprovides Ltd, forAusNetServices tothe body corporate. by theOfficer asanofficer ofthecompanyorarelated against allliabilities(asdefined intheconstitution) incurred a fullindemnitybasisandtotheextent permitted bylaw corporate astheDirectors determine (eachan“Officer”), on current andformerofficers ofthecompanyorarelated body executive officer (asdefined intheconstitution), andsuchother company toindemnifyeachcurrent andformerDirector, LtdThe constitutionofAusNetServices provides forthe AND AUDITORS INDEMNIFICATION AND INSURANCE OF OFFICERS DIRECTORS’ REPORT DISCLOSURES STATUTORY page 62. under section307CoftheCorporations Actissetouton A copyoftheauditor’sindependencedeclaration asrequired > > satisfied forthefollowingreasons: auditors imposedbytheCorporations Act. The Directors are is compatiblewiththegeneral standard ofindependencefor provision duringtheyearbyauditor ofnon-auditservices Management Committee, theDirectors are satisfied thatthe In accordance withtheadviceprovided bytheAuditandRisk out inNote F.1 ofthefinancial report. providedaudit andnon-auditservices duringtheyearare set Details oftheamountspaidorpayabletoauditor, KPMG, for experience withtherelevant companyare important. to theirstatutoryauditdutieswhere theauditor’sexpertiseand We maydecidetoemploy theauditoronassignmentsadditional the periodfrom 1July2016to30June2017. lodged ourNGERreporting withtheCleanEnergy Regulatorfor by 31Octobereachyear. We meetthesethresholds andhave required toreport greenhouse gasemissions andenergy usage Act 2007(Cth), corporations thatmeetorexceedthresholds are Under theNationalGreenhouse andEnergy Reporting(NGER) which are material innature. are notaware ofanybreaches oflegislationduringtheyear land useincludingtheapproval ofdevelopments. The Directors disposal ofwastes, andthosewhichgovern theassessment of the managementofoils, chemicalsanddangerous goods, the emissions, thedischarge ofemissionsto land, airandwater, are thosewhichregulate noiseemissions, greenhouse gas areas ofenvironmental legislationaffecting usin Victoria environmental legislationduringtheyear. The mostsignificant We were subjecttobothFederal andState Government NON-AUDIT SERVICES CLIMATE CHANGE ENVIRONMENTAL REGULATION AND > > APES 110 CodeofEthicsforProfessional Accountants. principles relating toauditorindependenceassetoutin underminethegeneralnone ofthenon-auditservices impact theimpartialityandobjectivityofauditor; and Risk ManagementCommittee toensure thattheydonot havebeenreviewed bytheAuditand all non-auditservices

61 ANNUAL REPORT 2018 Nino Ficca Managing Director

ROUNDING OF AMOUNTS OF ROUNDING Melbourne 13 May 2018 AusNet Services is a company of a kind referred to in to AusNet Services referred is a company of a kind Securities by the Australian issued Instrument 2016/191, off” to the “rounding relating and Investments Commission, in the Directors’ Amounts report. of amounts in the Directors’ with that accordance off in have been rounded report thousand dollars unless hundred Instrument to the nearest otherwise stated. of with a resolution is made in accordance This report the Directors. AM Mason Peter Chairman

OF THE THE OF FINANCIAL YEAR MATTERS THE TO SUBSEQUENT END MATTERS SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS OF STATE THE IN CHANGES SIGNIFICANT SINGAPORE STOCK EXCHANGE (SGX) DELISTING (SGX) EXCHANGE STOCK SINGAPORE DIVIDEND Other than referred to above, in the opinion of the Directors, in the opinion of the Directors, to above, Other than referred of of affairs changes in the state no significant were there during the year under review. that occurred the Group No general meeting will be convened to obtain the approval will be convened to obtain the approval meeting No general of AusNet Services to the delisting as the Listing shareholders Rules of the ASX and the Listing Manual of the SGX do not SGX meeting. AusNet Services to hold such a general require under will have the option to sell their shares shareholders otherwise their shares Sale Facility by 16 July 2018; the Share on (and quoted register to the Australian will be transferred the ASX). Currently the SGX listing is approximately three per cent three the SGX listing is approximately Currently and delisting of the total AusNet Services register share institutional investor Singapore to affect is not expected held on the are Power (SP)’s shares Singapore appetite. by this is unaffected SP’s shareholding ASX and therefore announcement. On 2 May 2018 AusNet Services to announced its intention The 16 July 2018. the SGX effective delist from voluntarily both the having considered delist, took the decision to Board on being listed advantages and disadvantages of our shares of concluding that the delisting is in the best interests the SGX, as an The delisting was identified AusNet Services as a whole. simplify our processes costs, administrative initiative to reduce and drive efficiency. Since the end of the financial year, the Directors have approved have approved the Directors year, Since the end of the financial million (4.62 cents per $167.0 dividend for FY2018 of a final dividend will be The final paid on 28 June 2018. to be share) FY2018 The DRP will be suspended for the final unfranked. Exchange delisting Stock of the Singapore dividend as a result in progress. 62 AUSNET SERVICES To t ofCorporationsSection 307C the Act 2001 Lead Auditor’sIndependence Declaration under KPMG financial the ended 31 March have 2018 there been: year I declare that, to the best of declarebest of the to that, my audit andrelation Servicesthe of for belief,to AusNet Ltd in knowledge Ltd Services of AusNet he Directors

i. ii. C no as contraventionsauditor independence the in of set out requirements t no contraventions of any applicable code of no professionalcontraventions of any of conductapplicable in code relation the to or in relation to the porationsaudit; Actthe to and 2001 in relation 1 Melbourne Partner J McDonald Paul 3

May 2018

he audit. 45 ANNUAL REPORT 2018 63 $M (6.1) 7.15 18.2 (19.1) (13.7) (41.9) (31.9) 2017 (42.0) (99.3) (55.9) 647.4 255.1 (115.9) 363.3 (139.6) (108.2) (242.8) (425.9) (284.1) (302.3) (808.2) 1,881.5 1,073.3 $M (5.5) 15.9 8.08 (54.1) (12.8) (15.0) (32.4) (36.3) 2018 (93.6) (38.9) (137.1) 291.4 416.6 (142.2) (125.2) 700.5 (442.4) (199.0) (299.8) (766.9) (283.9) 1,142.9 1,909.8 B.1 B.4 B.2 D.4 D.4 Notes C.1, C.2 C.1,

Income tax expense Net finance costs Net finance income tax before Profit Finance costs for the year Profit (cents per share) earnings per share Basic and diluted Finance income Depreciation and amortisation Depreciation activities operating from Profit Earnings before interest, tax, depreciation and amortisation depreciation tax, interest, Earnings before Service level payments Other costs and tax interest amortisation, expenses excluding depreciation, Total Disposal of property, plant and equipment Disposal of property, Use of system and associated charges and associated Use of system Easement and land tax expenses benefits Employee services and contractors’ maintenance External Materials and communication costs Information technology expenses lease rental Operating expenses Administrative Revenue FOR THE THE FOR YEAR ENDED CONSOLIDATED CONSOLIDATED STATEMENT INCOME 31 MARCH 2018 The above consolidated income statement should be read in conjunction with the accompanying notes. income statement should be read consolidated The above 64 AUSNET SERVICES The above consolidatedstatementofcomprehensive incomeshouldberead inconjunctionwiththeaccompanyingnotes. 31 MARCH 2018 MARCH 31 FOR THE YEAR ENDED YEAR FOR THE OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT Total comprehensive incomefortheyear Other comprehensive incomefortheyear, netoftax Income taxonmovement inhedgereserve Movement inhedgereserve Items thatmaybereclassified toprofit orlossinsubsequentperiods Income taxonmovement indefined benefit fund Movement indefined benefit fund Items thatwillnotbereclassified toprofit orlossinsubsequentperiods Other comprehensive income Profit fortheyear

Notes D.3 B.4 B.4 F.2 206.6 (146.2) (84.8) (99.3) 291.4 2018 20.6 46.9 14.5 (6.1) $M 350.7 255.1 2017 (14.0) (19.4) 95.6 32.5 82.5 46.5 63.1 $M ANNUAL REPORT 2018 65 - 5.7 $M 17.4 12.4 41.9 25.1 73.7 10.3 43.3 33.4 25.9 214.1 2017 271.3 106.1 303.1 189.6 786.1 398.4 554.8 586.4 328.8 306.0 655.3 1,104.8 5,153.2 7,272.0 6,266.9 (1,095.1) (1,464.5) 8,058.1 11,101.2 3,698.4 3,698.4 11,756.5 10,000.0 - 3.6 $M 0.9 87.1 12.3 77.8 18.9 42.3 24.5 93.3 52.9 49.6 611.5 2018 192.9 550.1 501.6 183.0 921.2 465.4 180.8 658.2 280.4 920.5 5,162.5 7,099.7 1,048.9 8,961.3 (1,095.1) (1,560.3) 3,556.0 3,556.0 12,517.3 8,040.8 11,596.1 10,291.8 C.1 C.2 C.3 C.3 B.4 B.3 B.3 B.3 B.3 B.3 B.3 B.3 B.3 B.3 D.2 D.2 D.3 D.3 D.3 D.3 D.5 Notes

Current tax receivable Current Desalination licence receivable assets Total LIABILITIES liabilities Current and other liabilities Payables Provisions Borrowings instruments Derivative financial tax liabilities Deferred Desalination licence receivable Desalination licence receivable Inventories instruments Derivative financial Other assets assets current Total assets Non‑current Inventories plant and equipment Property, Intangible assets instruments Derivative financial Other assets assets non‑current Total tax payable Current instruments Derivative financial liabilities non‑current Total Receivables liabilities current Total Provisions Borrowings liabilities Total Net assets EQUITY equity Contributed Reserves Retained profits Other equity equity Total ASSETS assets Current and cash equivalents Cash liabilities Non‑current revenue Deferred CONSOLIDATED STATEMENT STATEMENT CONSOLIDATED OF FINANCIAL POSITION FINANCIAL OF 31 MARCHAS 2018 AT The above consolidated statement of financial position should be read in conjunction with the accompanying notes. in conjunction with position should be read statement of financial consolidated The above 66 AUSNET SERVICES (i) (iii) (ii) 31 MARCH 2018 MARCH 31 FOR THE YEAR ENDED YEAR FOR THE OF CHANGES IN EQUITY CONSOLIDATED STATEMENT Balance asat31March2017 Total transactions withowners Share basedpaymentreserve Dividend ReinvestmentPlan(netoftransaction costs) Dividends paid Transactions withowners, recorded directly inequity Total comprehensive incomefortheyear Other comprehensive income Profit fortheyear Total comprehensive incomefortheyear Balance asat1April2016 31 March2017 Balance asat31March2018 Total transactions withowners Shares purchasedaspartofemployee share plans Share-based paymentreserve Dividend ReinvestmentPlan(netoftransaction costs) Dividends paid Transactions withowners, recorded directly inequity Total comprehensive incomefortheyear Other comprehensive income Profit fortheyear Total comprehensive incomefortheyear Balance asat1April2017 31 March2018

 18 June2015. useful life. The amountwascarried intotheassetrevaluation oftheGroup reserve followingthecorporate restructure on previous Stapled Group wasformed. The fair value upliftwasappliedtoeasementswhich are considered tohaveanindefinite This amountrepresents thefair value uplifttotheassetsofAusNetServices Transmission Group onthedate thatthe highly probable forecast purchasesofanassetwhere thegainsor losses are includedintheinitialmeasurement ofthatasset. instruments. These gainsorlossesare transferred to theincomestatement whenthehedgeditem affects income, exceptfor comprisestheeffectiveThe hedgereserve portionofthecumulativenetchangeinfair value ofcashflow hedging transaction wasrecognised asarestructure reserve. Ltdthe contributed equityofAusNetServices andthepre-restructure contributed equityoftheStapled Group atthedate ofthe Stapled Groupthe AusNetServices onthedate ofimplementation18June2015($4,957.7 million). The difference between LtdAusNet Services share capitalwasmeasured atfair value onthedate ofthetransaction, beingthemarketcapitalisationof Under thecorporate restructure, Ltd AusNetServices shares were issuedtoshareholders inreturn fortheirstapledsecurities.

Notes D.6 D.6 D.6 D.6 D.5 F.3 F.3 Contributed 5,162.5 5,153.2 5,057.3 5,153.2 equity (10.3) 95.9 95.9 19.6 9.3 $M ------

Restructure (1,501.9) (1,501.9) (1,501.9) reserve (1,501.1) (0.8) (0.8) $M ------

(i)

reserve Hedge (99.3) (117.1) (80.9) (99.3) (17.8) (17.8) 63.1 63.1 $M ------

(ii)

Asset revaluation reserve 51.4 51.4 51.4 51.4 $M ------(iii)

Share based payment reserve 3.8 3.5 2.6 3.8 3.5 2.6 7.3 $M 1.2 ------

(iv)

Other equity component (1,095.1) (1,095.1) (1,095.1) (1,095.1) $M ------(v)

Retained profits 1,048.9 1,104.8 1,104.8 1,125.0 (307.8) (361.8) (307.8) (361.8) 305.9 287.6 255.1 291.4 32.5 14.5 $M - - - - - Total equity 3,556.0 3,698.4 3,698.4 3,557.8 (349.0) (307.8) (361.8) (210.1) 206.6 350.7 255.1 291.4 (84.8) (10.3) 95.9 95.6 19.6 $M 3.5 1.8 ANNUAL REPORT 2018 67 1.8 3.5 $M 19.6 95.6 95.9 (10.3) (84.8) 291.4 255.1 350.7 206.6 (210.1) (361.8) (307.8) (349.0) 3,557.8 3,698.4 3,698.4 3,556.0 Total equity Total - - - - - $M 14.5 32.5 291.4 255.1 287.6 305.9 (361.8) (307.8) (361.8) (307.8) 1,125.0 1,104.8 1,104.8 1,048.9 Retained profits

(v) ------$M (1,095.1) (1,095.1) (1,095.1) (1,095.1) component Other equity

(iv)

------1.2 $M 7.3 2.6 3.5 3.8 2.6 3.5 3.8 reserve payment Share based Share

(iii) ------$M 51.4 51.4 51.4 51.4 reserve Asset revaluation Asset revaluation

(ii)

------$M 63.1 63.1 (17.8) (17.8) (99.3) (80.9) (117.1) (99.3) Hedge reserve effected fair value of the performance rights granted under the 2015-17 the performance rights granted value of fair the tax‑effected based payment reserve represents The share vesting and service conditions as at 31 March 2018. This takes into account estimated Incentive Plan. Term the Long of tranches the difference acquisition accounting and represents the application of reverse from The other equity component results and the purchase price paid by and AusNet Finance Pty Ltd Ltd between the net assets of AusNet Services (Transmission) on 20 October 2005. Ltd AusNet Services (Transmission) the legal acquirer, 

(iv) (v) notes. in conjunction with the accompanying statement of changes in equity should be read consolidated The above

(i)

------$M (0.8) (0.8) (1,501.1) reserve (1,501.9) (1,501.9) (1,501.9) Restructure Restructure

------$M 9.3 19.6 95.9 95.9 (10.3) equity 5,153.2 5,057.3 5,153.2 5,162.5 Contributed Contributed F.3 F.3 D.5 D.6 D.6 D.6 D.6 Notes Under the corporate restructure, AusNet Services Ltd shares were issued to shareholders in return for their stapled securities. for their stapled securities. in return issued to shareholders were shares AusNet Services Ltd restructure, Under the corporate being the market capitalisation of of the transaction, value on the date at fair capital was measured share AusNet Services Ltd between The difference million). of implementation of 18 June 2015 ($4,957.7 on the date the AusNet Services Group Stapled of the at the date Group equity of the Stapled contributed and the pre-restructure equity of AusNet Servicesthe contributed Ltd reserve. as a restructure was recognised transaction value of cash flow hedging portion of the cumulative net change in the fair The hedge reserve comprises the effective except for income, affects when the hedged item to the income statement transferred These gains or losses are instruments. of that asset. included in the initial measurement the gains or losses are purchases of an asset where forecast highly probable that the on the date Group Transmission value uplift to the assets of the AusNet Services the fair This amount represents to have an indefinite considered value uplift was applied to easements which are The fair was formed. Group Stapled previous on restructure following the corporate reserve of the Group into the asset revaluation carried The amount was useful life. 18 June 2015. 

Share based payment reserve Share with owners transactions Total Balance as at 31 March 2017 Total comprehensive income for the year comprehensive Total for the year Profit income Other comprehensive income for the year comprehensive Total in equity directly recorded with owners, Transactions Dividends paid costs) Dividend Reinvestment Plan (net of transaction payment reserve Share-based plans share employee purchased as part of Shares with owners transactions Total Balance as at 31 March 2018 31 March 2017 Balance as at 1 April 2016 income for the year comprehensive Total for the year Profit income Other comprehensive income for the year comprehensive Total in equity directly recorded with owners, Transactions Dividends paid costs) Dividend Reinvestment Plan (net of transaction 31 March 2018 Balance as at 1 April 2017 (ii) (iii) (i) 68 AUSNET SERVICES (i) The above consolidatedstatementofcashflowsshouldberead inconjunctionwiththeaccompanyingnotes. (ii) 31 MARCH 2018 MARCH 31 FOR THE YEAR ENDED YEAR FOR THE OF FLOWS CASH CONSOLIDATED STATEMENT Repayment ofborrowings Proceeds from borrowings Dividends paid(ii) Payments foremployee equityplanshares Cash flowsfrom financing activities Net cashoutflowfrom investingactivities Receipts from desalinationlicencereceivable Proceeds from saleof property, plantandequipment Payments forproperty, plantandequipment(i) Cash flowsfrom investing activities Net cashinflowfrom operating activities Net interest paid Income taxpaid Working capitalmovement Other non‑cashitems Add backinterest, tax, depreciation Profit fortheyear Cash flowsfrom operating activities Cash andcashequivalentsattheendofyear Cash andcashequivalentsatthebeginningofyear Net increase/(decrease) incashheld Net cashinflowfrom financing activities

Reinvestment Plannetoftransaction costsof$19.6million(2017: $95.9million). Amounts shownrepresent dividends paidof$361.8 million(2017: $307.8 million) offsetbyproceeds from theDividend payments forproperty, plantandequipment. Net finance costsincludeacredit of$16.9million (2017: $21.8million) forcapitalisedfinance charges whichisincludedin

Notes D.6 D.5 D.2 D.2 C.3 (388.6) (716.8) (342.2) 886.4 (277.0) (732.7) 658.2 900.9 329.4 328.8 159.8 851.5 291.4 2018 (29.2) (10.3) 54.5 (4.8) 8.8 $M 7.1 (888.2) (285.3) (875.1) (756.2) 328.8 (112.6) 742.8 (211.9) 987.8 818.2 255.1 441.4 (49.4) 2017 19.7 (0.2) 8.8 $M 4.3 4.4 - ANNUAL REPORT 2018 69 31 MARCH 2018 Financial risk management Working capital Taxation current assets Impairment of non‑current Property, plant and equipment Property, Defined benefit obligations benefit Defined ‑ ‑ ‑ ‑ CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ESTIMATES ACCOUNTING CRITICAL

with amounts rounded off to the nearest hundred thousand hundred off to the nearest with amounts rounded with in accordance unless otherwise stated, dollars, Securities and issued by the Australian Instrument 2016/191 Investments Commission. B.3 ‑ B.4 ‑ C.1 C.4 D.3 F.2 > > > > > > > > are report applied by us in this financial The accounting policies financial by us in our consolidated the same as those applied have There ended 31 March 2017. as at and for the year report to the Group relevant been no new accounting standards during the period. adopted (B) in conformity with statements of financial The preparation the use of certain requires Accounting Standards Australian management to It also requires critical accounting estimates. of applying the Group’s exercise its judgement in the process of a higher degree involving The areas accounting policies. assumptions and where or areas judgement or complexity, are statements, to the financial significant are estimates the within located statements financial the throughout disclosed following notes: > > > > > >

BASIS OF PREPARATION BASIS OF

our current year results; results; year our current changes the impact of significant or in our business; that are aspects of our operations performance. important to future

in accordance with Australian Accounting Standards and and Accounting Standards with Australian in accordance Accounting by the Australian adopted interpretations as Act 2001 (Cth), and the Corporations Board Standards and Financial Reporting Standards well as International Accounting by the International adopted interpretations Board; Standards the continuity which contemplates on a going concern basis, and is expected is, The Group operations. of normal trading positive operating generating profitably, trading to continue, In maturing debt. cash flows and successfully refinancing has available a total of the Group at 31 March 2018, addition, bank debt facilities but committed $545.5 million of undrawn and $658.2 million of cash; except for certain under the historical cost convention, assets and liabilities (including derivative financial financial and value; at fair measured instruments) > > > > > > NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL CONSOLIDATED THE TO NOTES > > > The financial report has been prepared: report The financial The consolidated general purpose financial report, prepared by a prepared report, purpose financial general The consolidated represents dollars, in Australian entity and presented for-profit of AusNet Services statements Ltd financial the consolidated by approved were statements The financial and its subsidiaries. on 13 May 2018. of Directors the Board (A) > > We have included information in this have included information We that we deem to be material report to the understanding and relevant Disclosure statements. of the financial and material may be considered if the dollar amount is relevant to size or nature, due significant or the information is important to understand: >

OVERVIEW OVERVIEW SECTION A SECTION 70 AUSNET SERVICES OPERATING OUR BUSINESS SECTION B (I) the followingsegments: the chiefoperating decisionmaker. The Group isorganised into available andwhoseoperating results are regularly reviewed by and incursexpensesforwhichdiscrete financial informationis engages inbusinessactivitiesfrom whichitearnsrevenues An operating segmentisacomponentoftheGroup that (A) as ourunregulated business. commercialenergy services measure oursegmentresults foreachofournetworksaswell of management. We present ourreportable segmentsand and allowsuserstoreview operations through theeyes management usestomakedecisionsaboutoperating matters Segment informationisbasedonthethat liabilities incurred asaresult. Group’s operating activitiesandthe working capitalusedtogenerate the section provides informationonthe earnings pershare. Inaddition, this expense andrelated balancesand segment, detailsofincometax year, includingresults byoperating performance oftheGroup forthe This sectionhighlightsthe Melbourne. eastern Victoria includingthe eastern metropolitan region of or sellelectricity. Ourelectricitydistributionnetworkcovers network. The electricitydistributionsegmentdoesnotpurchase regulated rates fortheuseofelectricitydistribution metering. We charge retailers andsomelarge customers the high voltage transmission networktoendusers, including The electricitydistributionnetworkcarries electricityfrom NOTE B.1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF REPORTABLE SEGMENTS ELECTRICITY DISTRIBUTION ELECTRICITY

SEGMENT RESULTS

(II) water, gasandrail. renewables andessential infrastructure sectorsofelectricity, The customersofthisbusinessprimarilyoperate intheutility, provided. in exchangefortheinfrastructure andoperational services typicallyreceives revenueServices over thecontract period directly negotiated agreements, pursuanttowhichAusNet transmission connection). The investmentsare madethrough (the largest ofwhichisthe Wonthaggi Desalination Plant portfolio ofassetsthatfall outsidetheregulated assetbase Contracted infrastructure ownandoperate assetservices a solutions toenableenergy dataandassetintelligence services. infrastructure andspecialisedtechnology assetservices businessconsistsofcontractedThe commercialenergy services (IV) segment doesnotpurchaseorsellelectricity. the electricitytransmission network. The electricitytransmission providers andelectricitygenerators forconnectionsanduseof Energy MarketOperator (AEMO), distributionnetworkservice of the Victorian electricitynetwork. We charge theAustralian electricity distributorsaround Victoria formingthebackbone carry electricityathigh voltages from power generators to network consistsofthetransmission linesand towerswhich transmission networkin Victoria. Ourelectricitytransmission We ownandmanagethe vast majorityoftheelectricity (III) covers central andwestern Victoria. does notpurchaseorsellgas. Ourgasdistributionnetwork of thegasdistributionnetwork. The gasdistributionsegment retailers andsomelarge customersregulated rates fortheuse and residential endusers, includingmetering. We charge The gasdistributionnetworkcarries natural gastocommercial

COMMERCIAL ENERGY SERVICES TRANSMISSION ELECTRICITY DISTRIBUTION GAS 31 MARCH 2018 MARCH 31 71 ANNUAL REPORT 2018 $M 47.5 59.1 53.7 49.3 45.5 34.8 36.8 36.0 132.0 150.2 291.4 255.1 750.2 839.6 (125.2) (284.1) (442.4) (108.2) (766.9) (425.9) (283.9) (808.2) 1,567.5 1,142.9 1,578.9 1,881.5 1,073.3 1,909.8 Consolidated

------(1.1) $M (0.1) (4.2) (3.2) (3.6) (9.5) 14.3 18.4 (11.0) (14.3) (18.4) - Inter segment eliminations ------$M 21.3 21.5 49.3 45.5 50.2 60.6 59.8 (18.4) 132.7 (20.5) 154.4 135.6 221.4 (161.6) 206.2 (145.6) energy services Commercial ------1.5 5.7 $M 47.5 53.8 (99.4) 192.2 163.8 542.4 537.0 381.4 601.9 (222.1) 379.8 586.0 (106.9) (204.6) Electricity transmission ------2.7 $M 0.6 6.0 Gas 11.0 87.7 96.9 (48.7) (62.3) (48.6) (59.9) 215.6 213.0 162.3 164.4 224.3 224.6 distribution ------$M 13.5 48.1 10.3 28.8 427.0 467.7 439.3 891.4 825.9 833.0 540.2 (351.2) (251.9) 868.2 (273.9) (400.5) Electricity distribution REPORTABLE SEGMENT FINANCIAL INFORMATION FINANCIAL SEGMENT REPORTABLE Earnings before interest, tax, depreciation and amortisation. depreciation tax, interest, Earnings before

2018 Regulated revenue Regulated Excluded transmission revenue Excluded transmission Unregulated infrastructure revenue infrastructure Unregulated Customer contributions Customer Service revenue Other revenue Total segment revenue Total Segment operating expense Segment operating Segment result ‑ EBITDA (i) EBITDA ‑ Segment result Depreciation and amortisation Depreciation Capital expenditure Capital Profit for the year Profit Net finance costs Net finance Income tax expense 2017 revenue Regulated Excluded transmission revenue Excluded transmission Unregulated infrastructure revenue infrastructure Unregulated Customer contributions Customer Service revenue Other revenue Total segment revenue Total Segment operating expense Segment operating Segment result ‑ EBITDA (i) EBITDA ‑ Segment result Depreciation and amortisation Depreciation Net finance costs Net finance Income tax expense for the year Profit expenditure Capital (B) (i) 72 AUSNET SERVICES (CONTINUED) (I) (C) more appropriate. of theasset, unlessanothermeasure offair value isconsidered determined withreference to thedepreciated replacement cost at thedate wegaincontrol oftheasset. Fair value is assets are measured atthefair value oftheassetscontributed the cashcontributionreceived andcustomercontributionsof Customer contributionsofcashare measured withreference to line basisover theterm oftheconnection agreement. contributions received are recognised asrevenue onastraight- connected tothenetwork. Forunregulated customerprojects, is gainedofthecontributionorassetandcustomer recognised asrevenue andanassetrespectively oncecontrol the costofextending ormodifyingournetworksare generally Non‑refundable contributions received from customerstowards (IV) contract are rendered. periodastheservices infrastructure assets. These revenues are recognised over the providedservices inconnectionwiththedesalinationelectricity addition, weearn revenues from theoperation andmaintenance from customersconnectingtotheassetsand/orfrom AEMO. In own andoperate assetsandearncontracted annualrevenues electricity transmission projects whereby wetypicallybuild, Unregulated infrastructure revenues relate tocontestable (III) excluded permanentlyfrom theRAB(Negotiated services). from transmission customerinitiated projects thatwillbe revenue cap(Prescribed services). Italsoincludestherevenue at thenextmajorregulatory reset andwillbe subject tothe projects thatwillberolled intotheRegulatoryAsset Base(RAB) commissioned transmission regulated customerinitiated capital Excluded transmission revenue includesrevenue from (II) areis recognised rendered. astheservices Tax (GST) payabletothetaxationauthority. Regulated revenue consideration received netoftheamountGoodsandServices (distribution). Revenueismeasured atthefair value ofthe as wellrevenue earnedfrom control alternative services in accordance withtherelevant regulatory determination, distribution ofelectricityandgastransmission ofelectricity Regulated revenue includesrevenue earnedfrom the NOTE B.1 SEGMENT RESULTS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OPERATING OUR BUSINESS BSECTION

NOTES TO AND FORMING PART CUSTOMERCONTRIBUTIONS UNREGULATED REVENUE INFRASTRUCTURE REVENUE EXCLUDED TRANSMISSION REGULATED REVENUE OF SEGMENT INFORMATION

Accordingly, basicanddiluted earningspershare are thesame. however weare currently purchasing theseonmarket. option toissueequitymeet vested share rightstoemployees, average numberofordinary shares outstanding. We havethe or lossattributabletoordinary shareholders ortheweighted There were nofactors causingadilutionofeithertheprofit (B) between thesegmentsthatare eliminated onconsolidation. Segment revenues, expensesandresults includetransactions the relevant segment. Regulator (AER) isusedasthebasisforallocatingexpensesto Allocation Methodologyasapproved bytheAustralian Energy be allocated tothesegmentonareasonable basis. The Cost attributable toasegmentandtherelevant portionthatcan Segment revenues andexpensesare thosethatare directly (VII) with thegrant. a systematic basisover theusefullife oftheassetsassociated then recognised intheincomestatement asotherincomeon comply withtheconditionsassociated withthegrant, andare reasonable assurance thattheywillbereceived andwewill initially asdeferred revenue atfair value whenthere is and government grants. Government grants are recognised Other revenues primarilyincludematerial sales, rental income (VI) in particularmetering, monitoringandassetinspectionservices. includes revenue earnedfrom specialistutility-related solutions, revenue are isrecognisedService rendered. astheservices This (V) (A) NOTE B.2 equals divided by

DILUTED EARNINGS PER SHARE ALLOCATIONSEGMENTS TO OTHER REVENUE SERVICE REVENUE BASIC EARNINGSBASIC PER SHARE

Earnings pershare (cents) of shares (million) Weighted average number ($M) of AusNet Services ordinary shareholders Profit attributableto EARNINGS PER SHARE 31 MARCH 2018 MARCH 31 3,605 291.4 2018 8.08 3,570 255.1 2017 7.15 ANNUAL REPORT 2018 73 - - - - $M (5.0) (17.8) (41.9) (21.5) (38.1) (73.7) (13.0) 2017 (27.0) (38.9) (127.8) (106.1) (137.7) (137.7) (271.3) (373.1) (510.8) - - - - - $M Liabilities (87.1) (41.2) (13.5) (27.5) (10.5) (93.3) 2018 (49.6) (46.0) (38.8) (144.1) (415.8) (551.6) (135.8) (135.8) (280.4) - - - - - 3.3 $M 0.3 5.0 0.6 1.4 17.4 25.1 51.3 43.3 33.4 2017 214.1 153.6 331.9 333.3 ------Assets 1.5 3.3 $M 0.2 1.5 18.9 43.2 42.3 24.5 52.9 2018 134.8 321.6 320.1 183.0 WORKING CAPITAL WORKING

Includes $51.9 million (2017: $32.2 million) defined benefit surplus; refer to note F.2 for further details. for further details. F.2 to note refer surplus; benefit defined $32.2 million) Includes $51.9 million (2017: to capital expenditure. expense that relate and the portions of accounts payable and accrued Includes accrued interest

KEY ESTIMATES AND JUDGEMENTS ‑ ACCRUED REVENUE REVENUE ACCRUED ‑ JUDGEMENTS AND ESTIMATES KEY The accrual for solar rebates paid to retailers is calculated by applying the average rebate per day (based on the amount billed) on the amount billed) per day (based rebate by applying the average is calculated to retailers paid The accrual for solar rebates to the number of unbilled days at month end. Revenue accrual estimates are made to account for the unbilled period between the end user’s last billing date and the end billing date unbilled period between the end user’s last made to account for the are Revenue accrual estimates and takes into historical consumption patterns, detailed analysis of customers’ on The accrual relies of the accounting period. applied for the number of are of this analysis The results weather conditions. account base usage and sensitivity to prevailing the unbilled period. days and weather conditions over

Operating activities Investing and financing activities (ii) revenue Deferred provisions Current provisions Non‑current revenue deferred Non‑current Accounts receivable/payable settlement Mickleham bushfire party receivables/payables Related Other receivables/payables receivables/payables Interest Accrued revenue/accrued expenses expenses Accrued revenue/accrued and other liabilities receivables/payables current Total other assets (i) Non‑current inventory Current inventory Non‑current reserve payment reserve and share-based benefit Defined capital Working Current other assets Current Comprising: NOTE B.3 NOTE day operations of the Group and are not used for not used and are of the Group utilised as part of the day‑to‑day operations assets and liabilities that are Working capital are investing purposes. (i) (ii) 74 AUSNET SERVICES and otherpayablesare stated atcost, are unsecured andare usuallypayablewithin30daysofendmonth. These amountsrepresent provided liabilitiesforgoodsandservices tous priortotheendoffinancial yearwhichare unpaid. Trade (B) Retailers mustprovide guarantees asrequested byAEMOtominimisetheriskofexposure byotherparticipantstoanydefaults. The Australian Energy MarketOperator (AEMO) alsohashighprudentialrequirements forretailers whoparticipate inthemarket. Commission hasminimumprudentialrequirements which mustbemetbefore aparticipantcanberegistered asadistributor. industry. There are strictregulatory requirements regarding whocanobtainaretail ordistributionlicenceandtheEssentialServices regulated revenue streams (whichaccountforapproximately 86percentofrevenues) are owedbyretailers anddistributorsinthe Of thosedebtsthatare pastdue, themajorityare receivable from highcredit qualitycounterparties. Receivablesrelating to (CONTINUED) The ageingofaccountsreceivable asatreporting date was: isten businessdays.utility services Accounts receivable are non‑interest bearingandtheaverage credit periodonsalesoftransmission, distributionandspecialist original terms ofthereceivables. for impairmentisestablishedwhenthere isobjectiveevidencethatwewillnotbeabletocollectallamountsdueaccording tothe Collectability ofreceivables isreviewed onanongoingbasis. Debtsthatare knowntobeuncollectableare written off. Anallowance measured atamortisedcost, lessanyallowanceforimpairment. Current andnon‑current receivables are initiallyrecognised atthefair value oftheamountstobereceived andare subsequently (A) NOTEB.3 WORKINGCAPITAL (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OPERATING OUR BUSINESS BSECTION 0 Not pastdue 31 61 Total Greater than90days ‑ ‑ ‑

30days 60days 90days TRADE AND OTHER PAYABLES ACCOUNTS RECEIVABLE

Gross 2018 44.0 28.3 0.9 $M 5.5 7.4 1.9 31 MARCH 2018 MARCH 31

Allowance 2018 (0.8) (0.8) $M - - - - Gross 2017 40.5 51.4 0.9 3.8 $M 4.8 1.4 Allowance 2017 (0.1) (0.1) $M - - - - ANNUAL REPORT 2018 75 7.4 $M 4.9 5.3 6.6 8.8 41.9 87.2 27.8 2017 106.1 148.0 $M 8.7 5.9 3.0 0.6 8.8 32.1 93.3 49.6 83.8 2018 142.9 Employee benefits provisions represent provisions for annual and long service leave for our employees as well as provisions as well as provisions for annual and long service leave for our employees provisions represent provisions benefits Employee future value of expected at the present Liabilities for annual leave and long service measured leave are bonuses. for employee is given to expected Consideration including on costs. date, up to the reporting by employees payments for services provided payments are future Expected and periods of service. departures experience of employee wage and salary levels, future the as closely as possible, that match, maturity and currency to bonds with a term on corporate rates using interest discounted cash outflows. future estimated boundary charges. for cross and provisions make good provisions losses, include uninsured Sundry provisions costs to including the estimated sites, the costs of rehabilitating of an estimate represents provision The environmental The provision facilities. used as coal gas production previously which were contamination on gas sites soil and water remediate legal requirements, taking into account current costs and timing of remediation/refurbishment, is based on the estimated and methods and the technologies areas, and surrounding of the site the nature of the contamination, extent the estimated available.  PROVISIONS

Current provisions Current (i) benefits Employee Sundry provisions (ii) Sundry provisions provisions current Total provisions Non‑current (i) benefits Employee (iii) provision Environmental Make good provision Redundancy provision (iii) provision Environmental Total non‑current provisions non‑current Total provisions Total (C) (i) (ii) (iii) 76 AUSNET SERVICES Current taxforcurrent andpriorperiodsisrecognised asaliability(orasset) totheextent that it isunpaid(orrefundable). for theperiod. Itiscalculated usingtaxrates andtaxlawsthathavebeenenacted orsubstantivelyenacted bythereporting date. Current taxiscalculated byreference totheamountofincometaxespayableor recoverable inrespect ofthetaxableprofit orloss (B) income taxanddeferred taxare calculated using tax rates thathavebeenenacted orsubstantively enacted atreporting date. accounting forabusinesscombination, inwhichcaseitistakenintoaccountthedetermination ofgoodwill. Bothourcurrent or debited directly toequity, inwhichcasethedeferred taxisalsorecognised directly inequity, orwhere itarisesfrom theinitial Current anddeferred taxisrecognised asanexpenseorincomeinthestatement, exceptwhenitrelates toitems credited (A) (CONTINUED) NOTE B.4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OPERATING OUR BUSINESS BSECTION Income taxexpense Prior yearunder/(over) provision – deferred tax Deferred tax Prior year(over)/under provision – current tax Current tax Consists of: Income taxexpense Sundry items Prior yearunder/(over) provisions Tax effect ofamountswhichare not(taxable)/deductibleincalculatingtaxableincome: Tax attheAustralian taxrate of30.0% (2017: 30.0%) Profit before incometax amount ofprovision forincometaxes anddeferred taxbalancesrecognised. statement offinancial position. Changesintaxlegislationortheinterpretation oftaxlawsby authoritiesmayaffect the expenditure, whichimpactstheamountofincometaxpayableandwhetherdeferred taxbalancesare toberecognised inthe Ltd.of taxlegislationasitappliestoAusNetServices Judgementisrequired indetermining thetimingofdeductibility The taxexpenseanddeferred taxbalancesassumecertainoutcomesand values ofassetsinrelation totheapplication KEY ESTIMATES AND JUDGEMENTS ‑ INCOME TAXES

CURRENT TAX EFFECTIVE TAX RATE RECONCILIATION

TAXATION

31 MARCH 2018 MARCH 31 125.0 416.6 125.2 125.2 2018 53.3 71.3 (0.4) (5.2) 0.6 5.8 $M 363.3 109.0 108.2 108.2 2017 88.6 20.0 (0.5) (0.4) (0.4) $M 0.1 ANNUAL REPORT 2018 77 - $M 11.4 (9.8) 51.6 27.8 57.5 28.9 (15.6) (18.9) (26.7) (23.3) 2018 (26.6) (39.0) (611.5) (572.6) (642.6) (586.4) 31 March

------

$M 0.5 0.9 (6.1) 41.3 46.9 (19.4) (14.0) (32.5) equity Charged/ Charged/ (credited) (credited) directly in directly

0.1 3.5 3.5 (1.1) 5.5 $M 5.6 0.3 0.9 (1.9) (0.1) (4.4) (4.4) (11.3) (81.1) (71.3) (75.0) (88.6) credited credited to income statement (Charged)/ (Charged)/ ------1.6 $M 3.0 0.5 (0.1) (5.7) (3.9) (0.2) (5.8) overs (under)/ Prior year

(i)

------$M 10.7 10.7 Deferred tax assets / (Deferred tax liabilities) (Deferred / tax assets Deferred Prior- returns returns year tax

1.7 $M 11.3 (9.8) 51.6 31.0 44.2 28.9 (14.5) (18.9) 2017 (26.7) (25.2) (26.6) (39.0) (487.6) (572.6) 1 April (586.4) (465.8) DEFERRED TAX DEFERRED Deferred tax liabilities were reduced by the estimated tax effect of the valuation uplift. The Group is amending the FY2016 and The Group valuation uplift. of the tax effect the estimated by reduced tax liabilities were Deferred on individual assets following an allocation exercise undertaken in FY2018. the actual tax depreciation to reflect FY2017 tax returns During FY2016 AusNet Services Ltd formed a single tax consolidated group that replaced the previous two tax consolidated two tax consolidated the previous that replaced group formed a single tax consolidated During FY2016 AusNet Services Ltd the tax bases of this change, a result As Ltd. and AusNet Services (Transmission) of AusNet Services Ltd groups (Distribution) valuation uplift. with a reset were group tax consolidated of the assets of the AusNet Services Ltd (Distribution)

Property, plant and equipment Property, 2017 benefits Employee Defined benefit funds benefit Defined Intangibles tax liabilities Net deferred Other accruals and provisions and instruments Derivative financial value adjustments on borrowings fair Desalination licence receivable Other accruals and provisions Desalination licence receivable plant and equipment Property, tax liabilities Net deferred 2018 benefits Employee and instruments Derivative financial value adjustments on borrowings fair losses Tax Defined benefit funds benefit Defined Intangibles (C) Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and we intend to income taxes levied by the same taxation authority and we intend offset when they relate tax assets and liabilities are Deferred to settle our tax assets and liabilities on a net basis. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and when to apply to the period(s) expected that are at the tax rates measured tax assets and liabilities are Deferred or substantively that have been enacted (and tax laws) based on the tax rates or settled, realised liability giving rise to them are the tax consequences that would tax liabilities and assets reflects of deferred The measurement date. by the reporting enacted amount of its assets and liabilities. or settle the carrying to recover date in which we expect at the reporting the manner follow from Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it to the extent recognised tax assets are Deferred differences. all taxable temporary for recognised tax liabilities are Deferred or unused tax losses differences deductible temporary taxable amounts will be available against which that sufficient is probable giving rise to differences if the temporary not recognised tax assets and liabilities are Deferred and tax offsets can be utilised. which affects of a business combination), of assets and liabilities (other than as a result recognition the initial them arise from to taxable temporary in relation tax liability is not recognised a deferred Furthermore, neither taxable income nor accounting profit. goodwill. arising from differences (i)  (i) 78 AUSNET SERVICES (CONTINUED) (I) (C) amounts. recognised inconjunction withanytaxfundingarrangement from the subsidiariesinthetaxconsolidated group are arising from unused taxlossesassumedbytheheadentity Any current taxliabilities(orassets) anddeferred taxassets subsidiaries are recognised bythehead entity only. tax assetsarisingfrom unusedtaxlossesassumedfrom can beutilised. Any subsequentperiodadjustmentstodeferred consolidated group willbeavailableagainstwhichtheassets that itisprobable thatfuture taxableprofits ofthetax unused taxlossesofitsconsolidated group totheextent The headentityrecognises deferred taxassetsarisingfrom entities leavingthetaxconsolidated group. default onitstaxpaymentobligationsandthetreatment of tax liabilitiesbetweentheentitiesshouldheadentity consolidation legislationwhichsetouttheallocationofincome also entered intoa valid taxsharingagreement underthetax the headentity. Membersofthetaxconsolidated group have and anydeferred taxassetrelating to taxlossesassumedby (asset) calculated underthestandalonetaxpayermethod to/(from) theheadentityequaltocurrent taxliability/ amounts. The taxfundingarrangement requires payments of membersthetaxconsolidated group inrespect oftax funding arrangement whichsetsoutthefundingobligations Members ofthetaxconsolidated group haveentered intoatax alone taxpayermethod. group are allocated amongentitiesin thegroup usingthestand The current anddeferred taxamountsfortheconsolidated group comprisingitselfanditswhollyownedsubsidiaries. LtdAusNet Services istheheadentityinataxconsolidated NOTEB.4 TAXATION (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OPERATING OUR BUSINESS BSECTION

DEFERRED TAX(CONTINUED) TAX CONSOLIDATION

31 MARCH 2018 MARCH 31 ANNUAL REPORT 2018 79 Items of plant and equipment under construction are under construction are of plant and equipment Items Once the asset as capital work in progress. recognised the asset is capable of operating and construction is complete of plant and the item management, by in the manner intended to the in progress capital work from equipment is transferred of the asset commences. asset class and depreciation relevant charged are minor renewals costs and and repair Maintenance to the they relate except where as expenses as incurred, capitalised in which case the costs are of an asset, replacement is derecognised. item and the replaced and depreciated, plant and equipment, on property, is recognised Depreciation excluding land and easements. buildings but including freehold basis so as to write on a straight-line is calculated Depreciation to useful life its estimated off the net cost of each asset over residual lives, useful The estimated value. residual its estimated and annually, reviewed are methods values and depreciation a for on accounted are their effects made, changes are where basis. prospective

PROPERTY, PLANT AND EQUIPMENT PLANT AND PROPERTY,

KEY ESTIMATES AND JUDGEMENTS ‑ ‑ JUDGEMENTS AND ESTIMATES KEY ASSESSMENTS LIFE USEFUL Items of property, plant and equipment are stated at stated plant and equipment are of property, Items The cost of contributed historical cost less depreciation. of the we gain control value at the date assets is their fair asset. Management judgement is applied to estimate serviceManagement judgement is applied to estimate lives reviewed assets and these are values of our and residual need to be values If service lives or residual annually. the expense changes as from the depreciation modified, useful end of the revised until the of reassessment date This assessment years). future and (for both the current life and environment of the regulatory includes consideration developments. technological NOTE C.1 NOTE This section highlights the This section highlights made by us into our investments the including asset base, non‑current and provides assets, network core our impairment a summary of assessment. Subsequent costs are included in the asset’s carrying amount included in the asset’s carrying Subsequent costs are only when it as appropriate, asset, as a separate or recognised with the associated economic benefits that future is probable can be measured will flow to us and the cost of the item item reliably. Historical cost includes all expenditure that is directly that is directly Historical cost includes all expenditure including an attributable to the acquisition of the asset, and capitalised borrowing allocation of overheads appropriate the hedge reserve from Cost may also include transfers costs. of any gains/losses on qualifying cash flow hedges of foreign plant and equipment. purchases of property, currency SECTION C C SECTION BUSINESS OUR IN INVESTING 80 AUSNET SERVICES (CONTINUED) NOTE C.1 PROPERTY, AND PLANT EQUIPMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INVESTING IN OUR BUSINESS SECTION C Disposals Additions Carrying amountasat1April2017 2018 Useful life (years) Transfers Depreciation expense Additions Carrying amountasat1April2016 2017 Useful life (years) Carrying amountasat31March2018 Accumulated depreciation Cost Carrying amountasat31March2018 Transfers Accumulated depreciation Cost Disposals Carrying amountasat31March 2017 Depreciation expense Carrying amountasat31March2017

Freehold land Freehold land Indefinite Indefinite 253.5 253.5 253.2 253.2 253.5 253.2 253.2 251.1 31 MARCH 2018 MARCH 31 0.3 $M $M 2.1 ------Buildings Buildings 40‑99 40‑99 423.0 423.0 363.0 499.8 410.6 410.6 410.6 521.5 (98.5) (89.2) (18.6) (13.7) 66.8 26.9 (0.8) (0.6) $M $M - - Easements Easements Indefinite Indefinite 1,223.4 1,223.4 1,219.2 1,219.2 1,223.4 1,219.2 1,219.2 1,219.2 $M $M 4.2 ------Transmission Transmission network network 2,055.3 2,055.3 2,055.3 2,899.3 2,780.5 2,104.3 2,104.3 1,867.9 (795.0) (725.2) 15‑70 15‑70 271.4 (82.2) 135.1 (79.7) (6.4) (1.8) $M $M - - distribution distribution Electricity Electricity network network (1,406.9) (1,248.0) 3,698.0 3,901.3 3,901.3 4,007.1 4,007.1 3,901.3 5,414.0 5,149.3 (162.6) (176.4) 292.5 5‑70 5‑70 (10.3) 371.1 (5.2) $M $M - - Gas distribution Gas distribution network network 1,930.5 1,557.3 1,557.3 1,515.3 1,515.3 2,012.9 1,515.3 1,474.3 (455.6) 15‑80 15‑80 (415.2) (40.0) (43.7) 88.3 83.2 (2.6) (2.2) $M $M - - Other plantand Other plantand equipment equipment (483.7) 665.6 (417.5) 194.0 194.0 248.1 248.1 206.1 248.1 677.7 (76.6) 115.5 (72.7) 3‑12 3‑12 (0.8) (0.6) 23.1 $M $M - - Capital workin Capital workin progress progress (570.4) 529.2 529.2 (910.1) 397.0 397.0 789.6 702.6 529.2 397.0 397.0 517.5 n/a n/a $M $M ------10,000.0 10,000.0 10,000.0 10,291.8 10,291.8 12,895.1 13,531.5 (3,239.7) (2,895.1) 9,597.1 (390.1) (376.1) 789.6 702.6 (20.7) (10.6) Total Total $M $M - - ANNUAL REPORT 2018 81 - - $M $M Total Total (10.6) (20.7) 702.6 789.6 (376.1) (390.1) 9,597.1 (2,895.1) (3,239.7) 13,531.5 12,895.1 10,291.8 10,291.8 10,000.0 10,000.0 10,000.0 ------$M $M n/a n/a 517.5 397.0 397.0 529.2 702.6 789.6 397.0 397.0 (910.1) 529.2 529.2 (570.4) progress progress Capital work in Capital Capital work in Capital - - $M $M 23.1 (0.6) (0.8) 3‑12 3‑12 (72.7) 115.5 (76.6) 677.7 248.1 206.1 248.1 248.1 194.0 194.0 (417.5) 665.6 (483.7) equipment equipment Other plant and Other plant and - - $M $M (2.2) (2.6) 83.2 88.3 (43.7) (40.0) (415.2) 15‑80 15‑80 (455.6) 1,474.3 1,515.3 2,012.9 1,515.3 1,515.3 1,557.3 1,557.3 1,930.5 network network Gas distribution Gas distribution - - $M $M (5.2) 371.1 (10.3) 5‑70 5‑70 292.5 (176.4) (162.6) 5,149.3 5,414.0 3,901.3 4,007.1 4,007.1 3,901.3 3,901.3 3,698.0 (1,248.0) (1,406.9) network network Electricity Electricity distribution distribution - - $M $M (1.8) (6.4) (79.7) 135.1 (82.2) 271.4 15‑70 15‑70 (725.2) (795.0) 1,867.9 2,104.3 2,104.3 2,780.5 2,899.3 2,055.3 2,055.3 2,055.3 network network Transmission Transmission Transmission Transmission ------4.2 $M $M 1,219.2 1,219.2 1,219.2 1,223.4 1,219.2 1,219.2 1,223.4 1,223.4 Indefinite Indefinite Easements Easements - - $M $M (0.6) (0.8) 26.9 66.8 (13.7) (18.6) (89.2) (98.5) 521.5 410.6 410.6 410.6 499.8 363.0 423.0 423.0 40‑99 40‑99 Buildings Buildings ------2.1 $M $M 0.3 251.1 253.2 253.2 253.5 253.2 253.2 253.5 253.5 Indefinite Indefinite Freehold land Freehold Freehold land Freehold Disposals expense Depreciation 2017 amount as at 31 March Carrying Cost depreciation Accumulated 2017 amount as at 31 March Carrying 2018 amount as at 1 April 2017 Carrying Additions Transfers Disposals expense Depreciation amount as at 31 March 2018 Carrying Cost depreciation Accumulated amount as at 31 March 2018 Carrying (years) Useful life 2017 amount as at 1 April 2016 Carrying Additions Transfers Useful life (years) Useful life 82 AUSNET SERVICES (CONTINUED) NOTE C.2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (i) (ii) (iii) INVESTING IN OUR BUSINESS SECTION C Carrying amountasat1April2016 2017 Additions Carrying amountasat1April2017 2018 Useful life (years) Amortisation expense Additions Carrying amountasat31March2017 Transfers Cost Amortisation expense Accumulated amortisation Carrying amountasat31March2018 Carrying amountasat31March2017 Cost Accumulated amortisation Carrying amountasat31March2018 itiuin Licences Distribution Goodwill Software  > > > The distributionlicencesare considered tohaveanindefinite life forthefollowingreasons: tested forimpairmentannuallyandare carried atcostlessanyaccumulated impairmentlosses. stated atcostandare considered tobeindefinite life intangible assets, whichare notamortised. The distributionlicencesare The distributionlicencesheldentitleustodistribute electricityandgaswithinourlicensedregion. Distributionlicencesare assets are amortisedonastraight‑line basisover their estimated useful lives. expenditure. Subsequently, theseassetsare carried atcostlessaccumulated amortisationandimpairmentlosses. Software Computer software, developed internally oracquired externally, isinitially measured atcost andincludesdevelopment Goodwill isnotamortisedbut reviewed forimpairmentatleast annually. in theacquiree (ifany), theexcessisrecognised immediately intheincomestatement asagain. transferred, theamount ofanynon‑controlling interests intheacquiree andthe fair value ofourpreviously heldequityinterest If, after reassessment, ourinterest inthefair value oftheacquiree’s identifiable netassetsexceedsthesumof the consideration acquisition date amountsoftheidentifiable assets acquired andtheliabilitiesassumed. in theacquiree, andthefair value oftheacquirer’s previously heldequityinterest intheacquiree (ifany) over thenetof Goodwill ismeasured as theexcessofsumconsideration transferred, theamountofanynon‑controlling interests Goodwill arisinginabusinesscombinationisrecognised asanassetatthedate thatcontrol isacquired (theacquisitiondate). > > > we intend to, andare abletocontinueto, maintainthenetworks fortheforeseeable future. we monitorourperformanceagainstthoselicencerequirements andensure thattheyare met; and the licenceshavebeenissuedinperpetuityprovided wecomplywithcertainlicencerequirements;

INTANGIBLE ASSETS

Distribution Indefinite licences 354.5 354.5 354.5 354.5 354.5 354.5 354.5 354.5 $M ------

(i)

Indefinite Goodwill 35.8 35.8 35.8 35.8 35.8 35.8 35.8 35.8 $M ------(ii)

31 MARCH 2018 MARCH 31 Software (386.7) (345.7) 508.3 545.8 162.6 162.6 168.4 (49.2) 162.6 159.1 159.1 (51.8) 3‑10 43.4 47.6 $M 0.7

(iii)

intangible assets Other 3‑10 (0.6) (0.5) (5.5) (4.8) (0.7) 0.7 0.7 $M 5.5 1.9 2.5 1.9 1.9 7.4 - - (391.5) 554.8 (351.2) 550.1 550.1 554.8 554.8 906.0 941.6 Total (49.8) (52.3) 561.2 47.6 43.4 $M - ANNUAL REPORT 2018 83 AND ESTIMATED RECOVERABLE AMOUNT OF OF AMOUNT RECOVERABLE ESTIMATED s AND s KEY ESTIMATES AND JUDGEMENTS ‑ DETERMINATION DETERMINATION ‑ JUDGEMENTS AND ESTIMATES KEY CGU OF CGU We have applied significant judgement in determining our judgement in determining have applied significant We that the electricity have determined we In particular, CGUs. assets form part of the electricity distribution metering with together required, assets are CGU as the metering to in order of the electricity distribution network, the rest the a result, As service a network customers. to provide for impairment together with tested assets are metering network assets and the electricity distribution regulated cash flows. of the Commercial was a restructure there During the year, in a which resulted Services business, Energy (CES) a portion of a result, As CGUs. change to the unregulated CGU was Technologies the Geomatic the goodwill from CGU. to the Electricity distribution regulated reallocated and judgements have also been applied in estimates Key the details of amount, of recoverable the measurement overleaf. provided which are Intangible assets with indefinite useful lives, including goodwill, including goodwill, useful lives, indefinite Intangible assets with of whether there for impairment annually regardless tested are CGU may be impaired. asset or related is an indication that the value less costs to is the higher of fair amount Recoverable value less costs to sell, assessing fair In value in use. sell and to discounted post-tax cash flows are future the estimated that reflects a post‑tax discount rate value using their present value of money and the assessments of the time market current to the asset. risks specific is estimated of an asset (or CGU) amount If the recoverable amount of the carrying amount, to be less than its carrying The amount. to its recoverable is reduced the asset (or CGU) amount the carrying reduce to first impairment loss is allocated to the other to the CGU and then of any goodwill allocated amount on the basis of the carrying assets of the CGU pro-rata in An impairment loss is recognised of each asset in the CGU. immediately. the income statement $M 12.4 2017 189.6 202.0

$M 12.3 2018 193.1 180.8 ASSETS IMPAIRMENT OF NON‑CURRENT NON‑CURRENT OF IMPAIRMENT DESALINATION LICENCE RECEIVABLE LICENCE DESALINATION

Desalination licence receivable Desalination licence receivable Current desalination licence receivable Total current receivable Non‑current NOTE C.4 NOTE NOTE C.3 NOTE At each reporting date we review the carrying amounts of our the carrying we review date each reporting At is whether there tangible and intangible assets to determine an impairment any indication that those assets have suffered An impairment loss occurs when an asset’s carrying loss. If any such indication amount. amount exceeds its recoverable in order amount of the asset is estimated the recoverable exists, Where of the impairment loss (if any). the extent to determine independent cash flows that are the asset does not generate amount of the the recoverable we estimate other assets, from A CGU is to which the asset belongs. unit (CGU) cash generating independent largely that generate of assets the smallest group cash inflows. At the end of the agreements we are required to hand back required we are the end of the agreements At In the event of assets. line and all associated the transmission the unamortised portion of the agreements, early termination along with the is refunded, licence payment of the upfront to effect order in of necessary costs incurred reimbursement the termination. The upfront payment of $235 million plus transaction costs of payment of $235 million plus transaction The upfront as a receivable. $1.2 million for the licence has been classified bearing and $8.8 million (2017: is interest This receivable the operator from flows received of the total cash $8.8 million) against this receivable during the year has been allocated the from payment received The monthly revenue balance. Any with an annual adjustment for inflation. is fixed, operator past but which are the operator, from amounts not received Government. Victorian State the from can be recovered due, In December 2012 we entered into a 27-year licence agreement a 27-year licence agreement into In December 2012 we entered for the right to operate Government Victorian State with the underground voltage high and maintain the 87-kilometre Victorian line supplying electricity to the transmission we entered the same time, At Wonthaggi. desalination plant in the desalination plant operator with into a 27-year agreement a for line in return and maintain the transmission to operate payment. monthly revenue 84 AUSNET SERVICES (i) Recoverable amountisthehigheroffair value lesscoststoselland value inuse. Measurement. marketdata.observable Therefore, theyare considered tobelevelthree withinthefair value hierarchy 13FairValue asperAASB depreciation andamortisationmultiples. Fair value lesscoststosellismeasured usinginputsthatare notbasedonsignificant Appropriate terminal values were calculated usingarange andmarketearningsbefore ofbothRABmultiples interest, tax, (ii) (CONTINUED) The followingCGUshavesignificant amountsofintangibleassetswithanindefinite life: NOTE C.4 IMPAIRMENT OF NON‑CURRENT ASSETS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INVESTING IN OUR BUSINESS SECTION C field (goodwill) services Commercial Energy Services – Geomatic Technologies(goodwill) Asset Solutionsbusiness(goodwill) Unregulated CGUs Gas distribution(distributionlicence) Electricity distribution(goodwill) (distribution licence) Electricity distribution Regulated CGUs

market determined riskadjusted discountrate thatisadjusted forspecific risksrelating totheCGU. The discountrate represents thepost‑taxdiscountrate appliedtothecashflowprojections. The discountrate reflects the five-year forecast periodconsideringthelong-term nature oftheGroup’s activities. into accountinflationandexpected customerconnectiongrowth rates. Itisconsidered appropriate tousecashflowsafter our information includedinourfive-year forecast. Cash flowsafter thatperiodare basedonanextrapolation oftheforecast, taking Victorian ElectricitySupplyIndustry Tariff Order and the Victorian GasIndustries Tariff Order respectively, together withother Regulated cashflowforecasts are basedonallowable returns onelectricityandgasdistributionassetsassetoutinthe

projection period(i) years 2018 Cash flow 20 20 20 5 - - years

2017 20 20 5 5 - - discount rate (ii) 2018 10.3 Post-tax 5.2 5.2 5.2 % 31 MARCH 2018 MARCH 31 - - 2017 10.2 5.0 5.0 7.4 % - - Carrying value 237.3 2018 117.2 19.0 16.5 $M - - 237.3 2017 117.2 23.7 11.8 $M - - ANNUAL REPORT 2018 85 9.4 $M $M 18.5 66.4 38.5 66.4 2017 2017 306.8 $M $M 31.1 47.3 14.0 92.4 92.4 2018 2018 340.5 COMMITMENTS

CAPITAL COMMITMENTS CAPITAL LEASE COMMITMENTS

Payable: Within one year Later than one year, but no later than five years than five but no later than one year, Later Later than five years than five Later Representing: leases Non‑cancellable operating Property, plant and equipment Property, NOTE C.5 NOTE Capital expenditure contracted for at the reporting date but not recognised as a liability is as follows: but not recognised date for at the reporting contracted expenditure Capital (A) Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities are as follows: are as liabilities but not recognised date for at the reporting contracted to leases Commitments in relation Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership substantially all the risks and rewards of the lease transfer whenever the terms leases as finance classified are Leases lease arrangements. do not have any finance We leases. as operating classified All other leases are to the lessee. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The as a liability. recognised incentives are such leases, into operating to enter received In the event that lease incentives are of the lease, the term basis over expense on a straight-line of rental as a reduction recognised of incentives are benefits aggregate the leased asset from in which economic benefits pattern of the time representative basis is more another systematic except where consumed. are Operating lease payments are recognised as an expense on a straight-line basis over the lease term unless another systematic systematic unless another the lease term basis over as an expense on a straight-line recognised lease payments are Operating of the benefit. of the time pattern representative basis is more cancellable operating leases. The leases have leases. under non‑cancellable operating network land and access sites vehicles, to premises, Our leases relate renegotiated. the leases are of the terms On renewal, rights. escalation clauses and renewal varying terms, (B) 86 AUSNET SERVICES R&CAB ratio oflessthan75percent. versus incomegenerating assets. We target anetdebtto business isfundingitscapitalexpenditure in terms ofdebt The movement ofthismetric over timedemonstrates howthe > > items: financial instruments. The R&CABconsistsofthefollowing is debtatface value (netofcash) excludinganyderivative indebtedness asapercentageoftheR&CAB. Indebtedness and Contracted Asset Base(R&CAB) ratio, determined as monitor ourcapitalstructure isthenetdebttoRegulated An importantcredit metricwhichassistsmanagementto cost ofcapitalinorder togenerate desired shareholder returns. Our policyistotarget an“A” range credit rating toensure low shareholder value. invest inopportunitiesthatgrow thebusinessandtoenhance the context ofourabilitytocontinueasagoingconcern, to capital structure anddividendpolicyregularly anddo soin current andfuture activitiesoftheGroup. We review our the appropriate capitalstructure inorder tofinance the Our capitalstructure consistsofdebtandequity. We determine those risksare managed. position andperformance, andhow they affect theGroup’s financial our exposure tofinancial risks, how relating toourcapitalstructure and This sectionprovides information NOTE D.1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D > > carrying value ofthedesalinationlicencereceivable. part oftheRABatnextregulatory period, as wellasthe This includesthe value ofnetworkassetsthatwillform returns are setthrough anegotiated orcompetitiveprocess. the value ofcontracted networkassetswhoserevenues and network; and determinesestimation astheAERultimately theRABofeach Regulated Asset Base(RAB), whichissubjecttosome

CAPITAL MANAGEMENT

$706 million ofhybridsecurities. This ratio doesnotincludeequity credits inrelation to follows: The netdebttoR&CABratio asatreporting date wasas to debt andinterest cover ratio. regularly monitor. These includefundsfrom operations (FFO) In addition, there are otherimportantcredit metricsthatwe facility. 12 months after thereporting date underan existingloan discretion torefinance orroll over theliabilityforatleast at least 12monthsafter thereporting date orhave thesole an unconditionalrighttodefer settlementoftheliabilityfor Borrowings are classified ascurrent liabilitiesunlesswehave value hedges. financial instrumentsthatare designated andqualifyasfair together withanychangesinthefair value ofderivative to the hedgedriskisrecorded intheincomestatement attributable tothehedgedrisk. The gainorlossattributable are recognised atamortisedcost, adjusted forthegainorloss Borrowings whichare partofafair value hedgerelationship method. the periodofborrowings usingtheeffective interest rate redemption amountisrecognised inthe incomestatement over difference betweentheproceeds (netoftransaction costs) and measured atamortisedcost, exceptasdetailedbelow. Any transaction costsincurred. Borrowings are subsequently Borrowings are initiallyrecognised atfair value, netof NOTE D.2 Net debttoR&CAB

BORROWINGS 31 MARCH 2018 MARCH 31 2018 66.7 % 2017 67.9 % ANNUAL REPORT 2018 87 - $M 62.6 93.0 2017 641.7 319.4 107.0 199.6 537.5 283.2 100.0 505.7 328.8 300.0 393.0 1,454.7 2,078.3 6,289.7 6,682.7 6,353.9 - - 4.5 $M 62.6 2018 741.0 319.4 107.0 199.6 537.5 Face Value (i) Face Value 283.2 100.0 505.7 658.2 542.0 2,012.4 7,202.7 2,329.8 6,544.5 6,660.7 - $M 62.3 93.0 99.8 2017 103.3 188.2 473.8 438.4 298.4 368.4 702.0 305.4 328.8 398.4 1,512.0 2,020.3 6,336.5 6,266.9 6,665.3 - - $M 4.0 63.4 99.9 2018 461.4 103.3 464.7 198.8 378.4 333.8 658.2 785.0 465.4 Carrying Value Carrying 7,565.1 7,099.7 2,063.8 2,608.6 6,906.9 FINANCIAL COVENANTS FINANCIAL

financial position. With the exception of borrowings outlined the exception of borrowings With position. financial to considered are amounts of these items the carrying above, value as at 31 March of their fair approximation be a reasonable as at 31 March 2018 of total borrowings value The fair 2018. million). $7,297.8 was $8,152.3 million (2017: (C) contain financial arrangements of certain financing The terms interest of specified maintenance that require covenants these covenants However, and gearing ratios. ratios coverage In ratings. changes in credit downward are only apply if there ownership and and/or change of control are there addition, with compliance monitor and report We provisions. default cross have been no There on a monthly basis. covenants our financial during the year. breaches date 2019 2024 2076 2076 2026 2020 2033 2029 2028 2030 Maturity Oct 2018 Jun 2018 2027 ‑ 2020 ‑ 2020 ‑ 2020 ‑ FAIR VALUES OF FINANCIAL INSTRUMENTS FINANCIAL OF VALUES FAIR FOREIGN FOREIGN CURRENCY TRANSLATION Face value represents the principal amount that has to be repaid on maturity, excluding any adjustments for loan fees, discounts any adjustments for loan fees, excluding on maturity, to be repaid the principal amount that has value represents Face with 100 per cent of the debt hedged for foreign at hedged FX rates, debt is translated currency Foreign cash flows. and interest down. risk at draw currency 2021. for hybrid securities is September call date The first

Bank debt facilities Current borrowings Current senior notes (GBP) Pound sterling Domestic medium-term notes Domestic medium-term borrowings current Total Non‑current borrowings Non‑current senior notes (GBP) Pound sterling Swiss franc (CHF) senior notes (CHF) franc Swiss Floating rate notes Floating rate Euro (EUR) senior notes (EUR) Euro Domestic medium-term notes Domestic medium-term senior notes dollar (HKD) Hong Kong Japanese yen (JPY) senior notes Japanese yen (JPY) US dollar (USD) senior notes US dollar (USD) Norwegian kroner (NOK) senior notes senior Norwegian (NOK) kroner (ii) hybrid securities US dollar (USD) Singapore dollar (SGD) hybrid securities (ii) dollar (SGD) Singapore Total borrowings Total cash and cash equivalents less: Net debt Total non‑current borrowings non‑current Total We have a number of financial assets and liabilities which are assets and liabilities which are number of financial have a We of statement value in the consolidated at fair not measured (B) The foreign currency risk associated with our foreign currency currency with our foreign risk associated currency The foreign swaps. currency the use of cross is hedged through borrowings D.3. to note Refer All foreign currency transactions including foreign currency currency including foreign transactions currency All foreign at for using the exchange rate accounted are borrowings monetary items balance date, At of the transaction. the date currency including foreign currencies, in foreign denominated existing at that at the exchange rate translated are borrowings, in the recognised are Resultant exchange differences date. except for exchange differences for the year, income statement in other recognised for qualifying cash flow hedges which are income. comprehensive (i) (ii) (A) 88 AUSNET SERVICES (CONTINUED) management techniques. The policy provides an analysis of a framework for ongoingevaluationandreview of risk our approach totreasury riskmanagementand toprovide The objectiveofthe Treasury Risk Policyistodocument for approval. periodically. Anymaterial changesare submitted totheBoard is reviewed bytheAuditandRiskManagementCommittee Treasury RiskPolicywhichis approved bytheBoard. The policy We manageourexposure totheserisksinaccordance withour > > > > Our activitiesexposeustoanumberoffinancial risks, including: The tablebelowdetailsthemovements intheGroup’s interest-bearing liabilitiesfortheyearended31March2018: (E) was provided tothird partiesat31March2018(2017: $5.6million). obligations. The subsidiarieshaveguarantee facilities withanumberofinstitutionsamountingto$15.0million, ofwhich$6.6million Certain entitiesare required toprovide bankguarantees intheformoftender bidbondsorperformanceforcontractual (D) NOTE D.3 NOTED.2 (CONTINUED)BORROWINGS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D Total Non-current Current > > > > derivative financial instruments. cash andequivalents, trade andotherreceivables and loss tousandarisesfrom ourfinancial assets, comprising will default onitscontractual obligationsresulting infinancial Credit risk obligations inanorderly manner. which willresult inusnotbeingabletomeetourpayment Liquidity risk denominated borrowings. adverse exchangerate movements onourforeign currency Currency risk revenues. the impactchangesininterest rates haveonourregulated an adversemovement ininterest rates onourborrowings or Interest rate risk

CHANGES IN LIABILITY ARISING FROM FINANCINGCHANGES ACTIVITIES IN LIABILITY OTHER BANK GUARANTEES

‑ theriskthatoneormore ofour counterparties FINANCIAL RISK MANAGEMENT ‑ ‑ theriskthatanunforeseen eventoccurs theriskthatwesuffer financial lossdueto 1 April2017 ‑ theriskthatwesuffer financial lossdueto 6,665.3 6,266.9 398.4

$M Cash flowmovements (financing activities) Proceeds 900.9 900.9 $M - Repayments (388.6) (388.6) $M -

Reclass- ification (537.5) 537.5 > > > > policies,other AusNetServices including: The Treasury RiskPolicyoperates inconjunction withseveral investing excessliquidity. mitigating risks, the useofderivativefinancial instrumentsand as wellwritten policiescovering specific areas, suchas Policy provides written principlesforoverall riskmanagement, co‑operation withtheGroup’s operating units. The Treasury Risk Our treasury team evaluates andhedgesfinancial risksinclose reporting riskstomanagementandtheBoard. and techniques formanagingtherisk, includingidentifyingand each typeofrisktowhichweare exposedandtheobjectiveof > > > > $M value oftheR&CAB atbalancedate. Group’s credit strength, suchasthepercentageof debttothe target ranges forthekeycredit metricsthatdetermine the Credit MetricsPolicy whichsetsout the AusNetServices period; and refinancing andhedgingstrategies over therelevant financial the Refinancing andHedgingStrategy whichsetsoutthe settlement processes andbankaccountoperations; and theoperations ofthe Treasury backoffice, suchas day Treasury front office processes suchascashmanagement the Treasury Operations Manualwhichsetsouttheday-to- and indemnities; hedging transactions, borrowings andissueofguarantees for suchthingsasinvestmentofsurplusfunds, executionof the AuthorityManualwhichsetsoutapprovals required - movements exchange Foreign Non-cash flowmovements 381.5 462.5 (81.0) 31 MARCH 2018 MARCH 31 $M

adjustment Fair value (0.6) 8.0 8.6 $M

Funding costs (2.0) (0.3) (1.7) $M

31 March 7,565.1 7,099.7 465.4 2018 $M ANNUAL REPORT 2018 89 $M 91.0 2017 231.1 (427.8) (6,254.9) - $M 2018 (727.2) 650.0 (6,475.5) INTEREST RATE RISK RISK RATE INTEREST The financial liabilities above include the impact of derivative financial instruments used to manage the interest rate and foreign and foreign rate instruments used to manage the interest financial include the impact of derivative liabilities above The financial that some fixed should be noted It the post hedge position. they represent Therefore, on those liabilities. exposures currency This is because the maturity profile for a portion of their term. only fixed are date as at reporting (post hedge) borrowings rate portion of this debt The remaining businesses. of the regulated profile refinancing the AER’s assumed from differs of borrowings these periods. the cost of debt to cover when the AER resets will be fixed

Floating rate instruments Floating rate Financial liabilities (i) instruments Fixed rate instruments Floating rate Financial assets instruments Fixed rate As at reporting date, we had the following financial assets and liabilities exposed to interest rate risk. The values disclosed below The risk. rate assets and liabilities exposed to interest we had the following financial date, at reporting As position. of financial to the statement values and as such do not agree the carrying from which differ the principal amounts, are We utilise interest rate swaps to manage our exposure to cash flow interest rate risk and achieve the targeted proportion of fixed of fixed proportion risk and achieve the targeted rate to cash flow interest swaps to manage our exposure rate utilise interest We interest rate and floating between fixed to exchange the difference we agree swaps, rate Under interest on our debt portfolio. rates rates risk of changing interest the enable us to mitigate Such contracts principal amounts. notional on agreed amounts calculated on debt held. The objective of hedging activities carried out by us in relation to interest rate risk is to minimise the exposure to changes in risk is to minimise the exposure rate to interest out by us in relation The objective of hedging activities carried is managed by The exposure debt with the cost of debt assumed by the regulator. by aligning the actual cost of rates interest total debt at a level between 90 per cent and 100 per cent for the relevant debt to rate maintaining the percentage of fixed The percentage of to be minimal for the Group. hedging activities, after exposure, rate consider net interest therefore We business. 98.3 per cent). as at 31 March 2018 was 98.8 per cent (2017: basis) debt to total debt (on a net debt rate fixed We are exposed to the risk of movements in interest rates on our borrowings. In addition, our regulated revenues for the revenues our regulated In addition, on our borrowings. rates in interest exposed to the risk of movements are We of the “building block” This is a result rates. by changes in interest impacted directly and distribution businesses are transmission cost of capital and average weighted of the regulatory input in the determination a major are rates interest where approach cost of capital. average to setting the weighted Portfolio approach Average Trailing The AER use a revenues. consequently regulated cost of capital is the average such, As each year. is refinanced assumes that 10 per cent of the debt for each network This approach account this assumed refinancing. each year to take into reset (A) The material financial risks associated with our activities are each described below, together with details of our policies for together with details each described below, with our activities are risks associated financial The material managing the risk. Together these policies provide a financial risk management framework which supports our objectives of finding the right balance our objectives of finding which supports risk management framework a financial these policies provide Together exposures. future and current and business performance while minimising profitability to enhance between risk and reward (i) 90 AUSNET SERVICES hedging techniques asapproved bytheBoard. Therefore, weconsiderourcurrency riskexposure tobeminimal. eliminate allforeign exchangeriskonfundingactivitiesandmaterial foreign exchange related transaction riskbyutilising various rate exposures are managedwithinapproved policyparameters. The objectiveofourcurrency riskmanagementprogram isto efficient fundingalternatives, aswellaresult ofundertakingcertain transactions denominated inforeign currencies. Exchange We are exposedtocurrency risk duetofundingactivitiesinoffshore debtmarketsasameansofproviding costeffective and (B) due toany valuation changeofderivativefinancial instrumentsincashflowhedgeswillunwind tozero atmaturityofthederivative. Therefore, theimpactofareasonably possiblemovement ininterest rates onnetprofit after taxisminimal. The impactonequity Due toourinterest rate riskmanagementpolicies, theexposure tointerest rate movements atanypointintimeisminimal. rates. bill swaprate. We considerthatpastmovements are atransparent basisfordetermining reasonably possiblemovements in interest expected outcomeshavingregard toactualhistorical interest rate dataover theprevious five yearsbasedonthethree-month bank The judgementsofreasonably possiblemovements were determined usingstatisticalanalysisofthe95thpercentilebestandworst (CONTINUED) increased/(decreased) asfollows: per centasat31March2018(2017: 0.80percent), withallother variables heldconstant, post‑taxprofit andequitywouldhave on movements inAustralian interest rates. As atreporting date, ifAustralian interest rates hadincreased anddecreased by 0.54 interest rate riskexposure onforeign currency debt. As aresult, thesensitivityanalysisbelowhasonlybeenperformedbased Our exposure tochangesininterest rates islimited toexposures denominated inAustralian dollarsduetoourpolicyofmitigating (A) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D held constant Decrease inAustralian interest rates withallother variables held constant Increase inAustralian interest rates withallother variables

CURRENCY RISK CURRENCY INTEREST RATE RISK (CONTINUED)

Net profit after tax 2018 (0.1) 0.5 $M 31 MARCH 2018 MARCH 31 2017 (1.4) $M 0.7 (hedge reserve) Equity after tax (205.1) 194.7 2018 $M (315.8) 293.4 2017 $M 91 ANNUAL REPORT 2018 At that time, any cumulative gain or loss existing that time, At in hedge reserve in the hedge reserve remains is transaction when the forecast and is recognised in the income statement. ultimately recognised is no longer expected transaction When a forecast the cumulative gain or loss that was to occur, in the hedge reserve is immediately reported in the income statement. recognised The effective portion is recognised directly in other directly portion is recognised The effective to The gain or loss relating income. comprehensive in immediately portion is recognised the ineffective the income statement. in the hedge reserve are Amounts accumulated when the hedged in the income statement recycled when (generally the income statement affects item takes place). that is hedged transaction the forecast in results transaction when the forecast However, the gains asset, of a non‑financial the recognition the hedge reserve from transferred and losses are of the initial and included in the measurement amount of the asset. carrying To mitigate the variability in cash flows attributable variability the mitigate To currency and/or foreign rate variable interest to or highly probable on borrowings movements transactions. forecast Cash flow hedges Cash To ensure derivative financial instruments qualify for hedge accounting we document, at the inception instruments qualify for hedge accounting we document, derivative financial ensure To as well as our risk between hedging instruments and hedged items, the relationship of the transaction, also document We hedge transactions. various for undertaking management objectives and strategy of whether the derivative financial both at hedge inception and on an ongoing basis, our assessment, in highly effective have been and will continue to be used in hedging transactions instruments that are values or cash flows of hedged items. offsetting changes in fair or when or is sold or terminated, Hedge accounting is discontinued when the hedging instrument expires for hedge accounting. a hedge no longer meets the criteria hedged asset the previously discontinuation, After for changes in fair or liability is no longer revalued value. Recognised immediately in the income statement, in the income statement, Recognised immediately value of the together with any changes in the fair attributable to the hedged asset or liability that are hedged risk. To mitigate the exposure to changes in fair value of to changes in fair the exposure mitigate To generally value hedges are Fair certain borrowings. of borrowings for the terms designated rate fixed for the periods outside of the price review that fall businesses. regulated Fair value hedges DERIVATIVE FINANCIAL INSTRUMENTS USED TO HEDGE INTEREST RATE AND CURRENCY AND RISKS RATE INTEREST HEDGE TO USED INSTRUMENTS FINANCIAL DERIVATIVE INSTRUMENTS FINANCIAL FOR ACCOUNTING

Documentation of the hedge relationship Discontinuation of hedge accounting Treatment of changes Treatment value of in fair qualifying hedges Objective of the hedge (I) hedges: value hedges or cash flow instruments as either fair derivative financial designates The Group (C) 92 AUSNET SERVICES for derivative financial instrumentsas at31March2018 is$38.2million (2017: $35.2 million). adjustments isrecognised progressively over theperiodtomaturity. The unamortised value ofthedeferred credit riskadjustment reporting date. The difference between thefair value ofderivatives andtheirtransaction price atinceptionduetocredit valuation each oftherelevant counterparties, with thebilateral credit riskapplieduniformly across allassetandliabilitypositionsasatthe credit default swap curves. Credit riskisobtaineddirectly credit from defaultwithinBloomberg the observable for swapcurves Credit riskisincludedinthefair value ofderivativefinancial instrumentsbasedonabilateral credit risk adjustmentobtainedusing of therecognition intheincomestatement dependsonthenature ofthehedgerelationship. immediately unlessthederivativefinancial instrumentisdesignated andeffective asahedginginstrument, inwhichcasethetiming subsequently remeasured totheirfair value ateachreporting date. The resulting gainorlossisrecognised intheincomestatement Derivative financial instruments are initiallyrecognised atfair value onthedate aderivativecontract isentered intoandare (CONTINUED) At reporting date, ourderivativefinancial instrumentpositionsare asdetailedbelow: 12 months, whichare classified ascurrent. As aresult, derivativefinancial instrumentsare classified asnon‑current, exceptforthoseinstrumentsthatmature inlessthan We classifyourderivativefinancial instrumentsbetweencurrent andnon‑current basedonthematuritydate oftheinstrument. (II) (C) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D Total derivativefinancial instruments > > > Consists of: Total derivativefinancial instruments Non‑current liabilities Current liabilities Non‑current assets Current assets 2018 Non‑current assets Current assets 2017 Total derivativefinancial instruments > > > Consists of: Total derivativefinancial instruments Non‑current liabilities Current liabilities > > > > > > not inahedgerelationship cash flowhedges hedges fair value not inahedgerelationship cash flowhedges hedges fair value

MEASUREMENT ANDMEASUREMENT CLASSIFICATION DERIVATIVE FINANCIAL INSTRUMENTS USED TO HEDGE INTEREST RATE RISKS AND(CONTINUED) CURRENCY

Interest rate swaps (107.1) (36.4) (36.4) (95.7) (81.5) (44.7) 28.2 28.2 114.1 59.8 (10.1) 73.3 (0.8) (0.5) 71.3 (0.4) 0.2 $M 5.7 31 MARCH 2018 MARCH 31 contracts currency Forward foreign (0.2) (0.2) (0.7) (0.7) (0.6) (0.5) (0.2) (0.4) (0.2) (0.7) $M 0.7 0.1 ------currency Cross‑ swaps 268.4 268.4 (153.7) (197.7) 430.2 (221.1) 168.5 (29.2) (29.2) (85.4) 422.1 191.9 (76.4) $M - - - - - instruments derivative Total net financial (303.1) (192.9) 306.0 (124.4) 231.8 231.8 326.2 501.6 (93.9) 123.1 (10.3) (77.8) (0.5) (0.4) (1.7) (1.7) 0.9 $M 5.7 ANNUAL REPORT 2018 93

(i) $M (1.7) $M (84.7) 316.5 148.0 231.8 (149.7) 29.9 5,715.4 13,105.6 Net amount of hedging instruments Nominal amounts

- - (i) $M 163.7 186.0 (163.7) (186.0) $M 0.5 (13.8) 215.0 arrangements Amounts subject to master netting to master ineffectiveness used to measure used to measure Change in value of Change in hedging instrument

$M (1.7) (i) 311.7 231.8 502.5 (313.4) (270.7) $M (0.5) 28.2 (216.0) ineffectiveness of hedged item of hedged item statements financial Change in value Gross amounts in the Gross used to measure used to measure Nominal amounts represent the total principal in each hedging instrument (derivative) in cash flow hedges. For hedging in cash flow hedges. hedging instrument (derivative) the total principal in each Nominal amounts represent split into multiplecomponents becoming hedging instruments in each hedge relationship. hedging purposes derivatives are value for all external The nominal based on these multiple hedging components. are The nominal amounts in the table above value hedges is $13,135.5 million. derivatives in both cash flow and fair KEY ESTIMATES AND JUDGEMENTS ‑ FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS INSTRUMENTS FINANCIAL DERIVATIVE OF VALUE FAIR ‑ JUDGEMENTS AND ESTIMATES KEY The fair value of derivative financial instruments is determined using valuation techniques and available market observablevaluation techniques using is determined instruments value of derivative financial The fair exchange foreign rates, interest These include industry standard based on active quotes. data as well as market corroboration included are costs and risk premiums transaction Appropriate Bloomberg. yield curves basis from sourced directly and currency value. of net fair in the determination Derivative financial instruments are recognised at fair value and are measured using market observable data, and, where where and, observable using market measured data, value and are at fair recognised instruments are Derivative financial level two within the deemed they are Therefore, basis risk. liquidity risk and currency risk, for credit adjusted are appropriate, . Measurement as per AASB 13 Fair Value value hierarchy fair The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure or for disclosure and measurement for recognition must be estimated liabilities assets and financial value of financial The fair purposes.

Derivative financial liabilities Derivative financial 2017 assets Derivative financial Derivative financial liabilities Derivative financial 2018 assets Derivative financial Interest rate risk rate Interest Foreign currency risk – debt – risk currency Foreign Foreign currency risk – capital expenditure – risk currency Foreign (IV) CASH FLOW HEDGES CASH FLOW (IV) in cash flow designated and hedging instruments that were in the hedged items The following table summarises movements hedges during the year: (III) OFFSETTING DERIVATIVE FINANCIAL INSTRUMENTS FINANCIAL DERIVATIVE OFFSETTING (III) subject to enforceable are Certain derivative assets and liabilities basis. on a gross presented Derivative assets and liabilities are Notwithstanding that these financial subject to default. if they were counterparties with individual netting arrangements master applied to were netting arrangements if these on a net basis, presented for being assets and liabilities do not meet the criteria by $186.0 million respectively derivative assets and liabilities would be reduced the derivative portfolio as at 31 March 2018, to the below table: Refer $163.7 million). (2017: (i) 94 AUSNET SERVICES (i) The followingtablesummarisesthenetcashflowsreceivable/(payable) underourcashflowhedges: The followingtablesummarisesthehedgeditems includedinfair value hedgesandtheirimpactonthefinancial statements: (V) hedges ofhighlyprobable forecast transactions whichwillimpacttheincomestatement astheunderlyingassetisutilised. These amountswillimpacttheincomestatement inthesameperiodascashflowsare expected tooccur, withtheexceptionof (CONTINUED) The followingmovements haveoccurred duringtheyear, inthecashflowhedgereserve netofincometax: (IV) (C) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D denominated borrowings Foreign currency AUD denominated borrowings Closing balanceofcashflowhedgereserve Changes infair value ofcashflowhedges(excludingforeign currency basisspreads) Amounts recognised inothercomprehensive income, netofincometax: Opening balanceofcashflowhedgereserve Total amountsrecognised inothercomprehensive income, netofincometax Tax effect ofderivativesstep up Changes inforeign currency basisspreads Amounts reclassified tointerest expenseforeffective hedges Greater than5years 2 – 5years 1 – 2years Less than1year Borrowings: 2 – 5years 1 – 2years Less than1year Highly probable forecast assetpurchase:



Nominal amountsrepresent thetotalprincipalineachhedginginstrument (derivative) in fair value hedges. Forhedging derivatives inboth cash flowandfair value hedgesis$13,135.5 million. The nominalamounts inthetableabove are hedgingcomponents. basedonthesemultiple The nominal value for allexternal purposes derivatives are hedging componentsbecominghedging instrumentsineachhedge relationship. splitintomultiple FAIR VALUEHEDGES CASH FLOWCASH HEDGES (CONTINUED) DERIVATIVE FINANCIAL INSTRUMENTS USED TO HEDGE INTEREST RATE RISKS AND(CONTINUED) CURRENCY

Carrying amount of thehedged (5,397.4) (2,167.7) item $M adjustments on hedged items Accumulated

amount of fair value (327.8) (61.5) $M remeasurement of hedgeditem Gain/(loss) on 31 MARCH 2018 MARCH 31 (55.3) 18.1 $M remeasurement Gain/(loss) on instruments of hedging 31.7 (9.9) $M (159.2) (99.3) (117.1) (39.8) (36.9) 2018 2018 (17.8) 49.8 21.9 61.0 37.6 (0.2) (0.2) (0.1) 3.0 $M $M 0.1 7.1 instruments of hedging amounts Nominal 10,132.9 1,093.0 (329.7) (145.4) $M (80.9) (80.7) (59.3) (23.6) (44.3) 2017 2017 (17.8) 63.1 72.4 (0.7) (0.3) (0.2) (0.2) 8.9 $M $M 5.4 (i)

ANNUAL REPORT 2018 95 CONTRACTUAL CASH FLOWS CONTRACTUAL LIQUIDITY RISK

Liquidity risk is managed based on net contracted and forecast and forecast Liquidity risk is managed based on net contracted and investing financing operating, inflows and outflows from cash The following table summarises the contractual activities. assets and flows of our non‑derivative and derivative financial maturities. earliest contractual liabilities based on the remaining principal based on undiscounted cash flows are The contractual at the exchange rates and foreign commitments, and interest date. reporting (I) Financing facilities will be put in place at least six months will be put in place at least six months Financing facilities new of the case or in replaced being debt of the maturity before “In place” funding is required. debt at least six months before has been completed as meaning all documentation is defined or if settlement has not occurred and settlement has occurred funding is bank debt facilities) but undrawn committed (e.g. adverse change in and is not subject to a material committed the market. The liquidity management policies ensure that we have a The liquidity management policies ensure of maturity and in terms portfolio of debt, well‑diversified one source on any reliance reduces which significantly source, our investment- In addition, of debt in any particular year. access to both domestic and ready ensures rating credit grade capital markets. offshore We manage liquidity risk by maintaining adequate cash adequate manage liquidity risk by maintaining We reserve and borrowing facilities banking committed reserves, and actual forecast and by continuously monitoring facilities of financial the maturity profiles cash flows and matching by our governed are These practices assets and liabilities. which include Board-approved liquidity management policies, debt of long-term volume the maximum guidelines covering the minimum number of years over maturing in any one year, and the timing of spread to be which debt maturities are bank debt and commercial short-term In addition, refinancing. percentage of than an agreed more papers must not represent the total debt portfolio. (D) 96 AUSNET SERVICES (i) (CONTINUED) (I) (D) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D Net cashoutflow > > Forward foreign currency contracts Cross‑currency swaps Interest rate swaps Derivative financial liabilities SGD hybridsecurities(i) > > USD hybridsecurities(i) NOK seniornotes EUR seniornotes JPY seniornotes CHF seniornotes GBP seniornotes USD seniornotes Floating rate notes Trade andotherpayables Non‑derivative financial liabilities Financial liabilities Forward foreign currency contracts Cross‑currency swaps Desalination licencereceivable Accounts andotherreceivables Cash andcashequivalents Non‑derivative financial assets Financial assets 2018 HKD seniornotes Domestic mediumterm notes Bank debtfacilities Interest rate swaps Derivative financial assets > > > >

Outflow Inflow Outflow Inflow

The tableabove assumesthattheGroup willexerciseatthefirst calldate inSeptember 2021. LIQUIDITY RISK (CONTINUED) LIQUIDITY CONTRACTUAL FLOWS CASH (CONTINUED)

31 MARCH 2018 MARCH 31 Notes B.3 B.3 C.3 Principal at face value 2,329.8 2,012.4 658.2 505.7 100.0 283.2 183.0 234.4 537.5 199.6 107.0 319.4 741.0 193.1 62.6 $M 4.5

Carrying amount 8,070.2 2,608.6 2,063.8 1,536.8 785.0 658.2 333.8 430.2 378.4 198.8 183.0 234.4 464.7 103.3 107.9 461.4 161.8 193.1 99.9 63.4 71.5 0.8 4.0 $M 1.0 Total contractual cash flows (8,292.9) 9,552.4 1,259.5 2,846.4 2,670.2 1,027.1 489.0 658.2 382.9 586.7 138.0 183.0 106.9 234.4 237.0 433.1 321.7 131.4 (16.6) 197.1 (12.4) 89.7 66.7 13.2 17.6 $M 4.5 6.1 Less than1year 1,064.9 (216.0) 848.9 489.0 658.2 183.0 234.4 (35.2) (12.4) 53.5 94.6 (11.3) 23.9 26.4 33.2 10.6 10.9 13.0 18.3 12.0 67.2 28.1 0.9 $M 4.5 3.4 3.4 4.2 1 – 2years (1,105.1) 1,219.6 378.7 103.5 142.5 114.5 444.1 53.5 28.4 76.2 10.6 18.3 19.9 28.1 14.6 (3.0) 11.0 0.9 $M (1.1) 3.3 3.4 1.2 - - - - - 2 – 5years (2,639.9) 2,739.8 806.8 530.5 923.5 128.8 215.1 99.9 63.8 39.8 56.5 26.8 10.2 31.7 (1.2) $M 3.6 2.5 1.3 ------Greater than (4,331.9) 5 years 4,528.1 1,815.9 1,324.7 380.2 196.2 729.4 (38.5) 221.4 114.4 49.6 62.4 51.5 13.3 $M ------ANNUAL REPORT 2018 97 ------$M 13.3 51.5 62.4 49.6 114.4 221.4 (38.5) 729.4 196.2 380.2 1,324.7 1,815.9 4,528.1 5 years (4,331.9) Greater than than Greater ------1.3 2.5 3.6 $M (1.2) 31.7 10.2 26.8 56.5 63.8 39.8 99.9 215.1 128.8 923.5 530.5 806.8 2,739.8 (2,639.9) 2 – 5 years – 2 - - - - - 1.2 3.4 3.3 (1.1) $M 0.9 11.0 (3.0) 14.6 28.1 19.9 18.3 10.6 76.2 28.4 53.5 444.1 114.5 142.5 103.5 378.7 1,219.6 (1,105.1) (1,105.1) 1 – 2 years – 1 4.2 3.4 3.4 4.5 $M 0.9 28.1 67.2 12.0 18.3 13.0 10.9 10.6 33.2 26.4 23.9 (11.3) 94.6 53.5 (12.4) (35.2) 234.4 183.0 658.2 489.0 848.9 (216.0) 1,064.9 Less than 1 year Less 6.1 4.5 $M 17.6 13.2 66.7 89.7 (12.4) 197.1 (16.6) 131.4 321.7 433.1 237.0 234.4 106.9 138.0 183.0 586.7 382.9 658.2 489.0 1,027.1 2,670.2 2,846.4 1,259.5 9,552.4 (8,292.9) cash flows Total contractual contractual Total 1.0 $M 4.0 0.8 71.5 63.4 99.9 193.1 161.8 107.9 461.4 103.3 464.7 234.4 183.0 198.8 378.4 430.2 333.8 658.2 785.0 1,536.8 2,063.8 2,608.6 8,070.2 amount Carrying

4.5 $M 62.6 193.1 741.0 319.4 107.0 199.6 537.5 234.4 183.0 283.2 100.0 505.7 658.2 2,012.4 2,329.8 value face Principal at C.3 B.3 B.3 Notes CONTRACTUAL CASH FLOWS (CONTINUED) CASH FLOWS CONTRACTUAL LIQUIDITY (CONTINUED) RISK The table above assumes that the Group will exercise at the first call date in September 2021. in September call date will exercise at the first assumes that the Group The table above

Inflow Outflow Inflow Outflow

> > > > 2018 GBP senior notes CHF senior notes HKD senior notes JPY senior notes EUR senior notes NOK senior notes USD hybrid securities (i) SGD hybrid securities (i) liabilities Derivative financial swaps rate Interest swaps ‑currency Cross contracts currency foreign Forward > > Net cash outflow Financial assets assets Non‑derivative financial and cash equivalents Cash Accounts and other receivables Desalination licence receivable assets Derivative financial swaps rate Interest swaps ‑currency Cross contracts currency foreign Forward > > Financial liabilities liabilities Non‑derivative financial and other payables Trade Bank debt facilities notes Domestic medium term notes Floating rate USD senior notes NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) MANAGEMENT RISK FINANCIAL D.3 NOTE (D) (I) (i) 98 AUSNET SERVICES (i) (CONTINUED) (I) (D) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D Net cashoutflow > > Forward foreign currency contracts Cross‑currency swaps Interest rate swaps Derivative financial liabilities SGD hybridsecurities(i) USD hybridsecurities(i) NOK seniornotes EUR seniornotes JPY seniornotes HKD seniornotes CHF seniornotes GBP seniornotes USD seniornotes Floating rate notes Domestic medium-term notes Bank debtfacilities Cash andcashequivalents Non‑derivative financial assets Financial assets 2017 Accounts andotherreceivables Trade andotherpayables Non‑derivative financial liabilities Financial liabilities > > Forward foreign currency contracts Cross‑currency swaps Interest rate swaps Derivative financial assets Desalination licencereceivable > > > >

Outflow Inflow Outflow Inflow

The tableabove assumesthattheGroup willexerciseatthefirst calldate inSeptember 2021. LIQUIDITY RISK (CONTINUED) LIQUIDITY CONTRACTUAL FLOWS CASH (CONTINUED)

31 MARCH 2018 MARCH 31 Notes B.3 B.3 C.3 Principal at face value 2,078.3 1,754.7 202.0 328.8 505.7 100.0 283.2 233.2 537.5 199.6 107.0 319.4 641.7 214.1 93.0 62.6 $M

Carrying amount 1,056.6 2,020.3 7,211.9 1,817.4 202.0 328.8 702.0 368.4 298.4 438.4 473.8 233.2 188.2 103.3 119.8 191.9 221.1 214.1 99.8 93.0 62.3 91.6 $M 0.7 - - - - - Total contractual cash flows (7,875.3) 8,923.2 2,260.3 2,255.4 1,047.9 909.9 405.6 328.8 470.0 342.8 233.2 618.8 189.9 657.3 135.6 371.5 234.1 101.8 214.1 111.0 (27.7) 65.0 93.0 (13.1) 13.8 (1.8) $M 1.8 Less than1year (356.3) 328.8 382.7 913.4 233.2 557.1 214.1 93.0 29.8 (19.1) 43.0 28.3 29.3 24.6 10.3 23.1 (5.0) 21.2 (1.8) 0.8 4.0 $M 5.3 8.7 3.4 3.4 7.6 1.8 1 – 2years (788.0) 440.7 801.1 134.2 (20.6) 80.8 20.5 43.0 28.3 23.2 18.9 10.3 13.2 13.1 (3.8) 0.8 4.0 4.0 $M 3.6 3.4 9.7 ------2 – 5years (3,135.1) 3,319.8 363.5 562.2 810.6 245.2 184.7 104.0 779.2 213.5 181.9 52.3 58.1 74.3 10.3 29.1 17.6 (4.3) $M 4.5 2.5 ------Greater than (3,595.9) 3,888.9 5 years 1,358.8 1,017.6 293.0 320.0 239.6 359.2 618.4 (40.3) 118.5 60.9 35.5 93.7 $M ------

ANNUAL REPORT 2018 99

------$M 93.7 35.5 60.9 118.5 (40.3) 618.4 359.2 239.6 320.0 293.0 1,017.6 1,358.8 5 years 3,888.9 (3,595.9) Greater than than Greater ------2.5 4.5 $M (4.3) 17.6 29.1 10.3 74.3 58.1 52.3 181.9 213.5 779.2 104.0 184.7 245.2 810.6 562.2 363.5 3,319.8 (3,135.1) 2 – 5 years – 2 ------9.7 3.4 3.6 $M 4.0 4.0 0.8 (3.8) 13.1 13.2 10.3 18.9 23.2 28.3 43.0 20.5 80.8 134.2 (20.6) 801.1 440.7 (788.0) 1 – 2 years – 1 1.8 7.6 3.4 3.4 8.7 5.3 $M 4.0 0.8 (1.8) 21.2 (5.0) 23.1 10.3 24.6 29.3 28.3 43.0 (19.1) 29.8 93.0 214.1 557.1 233.2 913.4 382.7 328.8 (356.3) Less than 1 year Less 1.8 $M (1.8) 13.8 (13.1) 93.0 65.0 (27.7) 111.0 214.1 101.8 234.1 371.5 135.6 657.3 189.9 618.8 233.2 342.8 470.0 328.8 405.6 909.9 1,047.9 2,255.4 2,260.3 8,923.2 (7,875.3) cash flows Total contractual contractual Total - - - - - 0.7 $M 91.6 62.3 93.0 99.8 221.1 214.1 191.9 119.8 103.3 188.2 233.2 473.8 438.4 298.4 702.0 368.4 328.8 202.0 1,817.4 7,211.9 2,020.3 1,056.6 amount Carrying

$M 62.6 93.0 214.1 641.7 319.4 107.0 199.6 537.5 233.2 283.2 100.0 505.7 328.8 202.0 1,754.7 2,078.3 value face Principal at C.3 B.3 B.3 Notes CONTRACTUAL CASH FLOWS (CONTINUED) CASH FLOWS CONTRACTUAL LIQUIDITY (CONTINUED) RISK The table above assumes that the Group will exercise at the first call date in September 2021. 2021. in September call date will exercise at the first assumes that the Group The table above

Inflow Outflow Inflow Outflow

> > > > 2017 GBP senior notes CHF senior notes HKD senior notes JPY senior notes EUR senior notes NOK senior notes USD hybrid securities (i) SGD hybrid securities (i) liabilities Derivative financial swaps rate Interest swaps ‑currency Cross contracts currency foreign Forward > > Net cash outflow Financial assets assets Non‑derivative financial and cash equivalents Cash Accounts and other receivables Desalination licence receivable assets Derivative financial swaps rate Interest swaps ‑currency Cross contracts currency foreign Forward > > Financial liabilities liabilities Non‑derivative financial and other payables Trade Bank debt facilities notes Domestic medium-term notes Floating rate USD senior notes NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) MANAGEMENT RISK FINANCIAL D.3 NOTE (D) (I) (i) 100 AUSNET SERVICES to beminimal. on thiscustomer. Therefore, we considerthecredit riskexposure do notbelievethat there isanysignificant credit riskexposure in themarket. Duetothenature ofthisnetworkagreement, we our transmission networktotransmit electricity toparticipants whereby wereceive networkcharges from AEMO fortheuseof Victoria. Anetworkagreement isinplacebetweenbothparties director ofaugmentationthedeclared shared networkin andtheplanner,network services authoriser, contractor and electricity in Victoria, whereas AEMOistheprovider ofshared 26 percent) ofourtotal revenues. We are licensedtotransmit electricity transmission segment, represents 29percent(2017: customer, AEMO(whichismajorityGovernment owned), inour amongst approved counterparties. Revenuesfrom asingle the aggregate values oftransactions concludedare spread ratings ofourcounterparties are continuouslymonitored and from defaults (refer tonote B.3). Ourexposure andthecredit appropriate, asameansofmitigating theriskoffinancial loss counterparties andobtainingsufficient collateral where We haveadopted apolicyofonlydealingwithcreditworthy instruments. equivalents, trade andotherreceivables andderivativefinancial and arisesfrom ourfinancial assets, comprisingcashand on itscontractual obligationsresulting inafinancial losstous Credit riskrefers totheriskthatacounterparty willdefault (E) (CONTINUED) we had thefollowingcommitted financing facilities available: We target aminimumnetliquidity, defined asavailableshort-term fundsandcommitted financing facilities. As atreporting date, (II) (D) NOTE D.3 FINANCIAL RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCING OUR BUSINESS SECTION D Total financing facilities > > agreement: Unsecured bank loanfacility with various maturitydates and whichmaybeextended bymutual > > Unsecured working capitalfacility, reviewed annually: > > Unsecured bankoverdraft facility, reviewed annuallyandpayableatcall: Financing facilities (face value) > > > > > > Amount unused Amount used Amount unused Amount used Amount unused Amount used

CREDIT RISK FINANCING FACILITIES RISK (CONTINUED) LIQUIDITY

over theperiodtomaturity. due tocredit valuation adjustmentsis recognised progressively fair value ofderivativesandtheirtransaction priceatinception using credit default swapcurves. The difference betweenthe instruments basedonabilateral credit riskadjustmentobtained Credit riskisincluded inthefair value ofderivative financial banks. swaps with‘A’ rated orhigherAustralian andinternational deposit and$393.0millionofcross currency andinterest rate agencies. At balancedate wehad$650.0millionon term with highcredit ratings assignedbyinternational credit rating instruments islimited becausethecounterparties are banks The credit riskon liquidfundsandderivativefinancial Policy. parameters setbytheBoard asoutlinedinthe Treasury Risk Officer andtheManagingDirector andmustbewithin the or theircredit limitsmustbeapproved bytheChiefFinancial Management Committee andanychangestocounterparties limits are reviewed andapproved bytheAuditandRisk of Standard & Poor’sorMoody’scredit rating. Counterparty counterparties eachhaveanapproved limitbasedonthelower In accordance withthe Treasury RiskPolicy, treasury 31 MARCH 2018 MARCH 31 450.0 552.5 100.0 450.0 2018 95.5 2.5 $M 4.5 2.5 - - 525.0 100.0 525.0 627.5 2017 93.0 2.5 $M 2.5 7.0 - - ANNUAL REPORT 2018 101 2.7 3.2 5.4 6.4 2.6 $M $M 0.2 (0.7) 12.8 18.2 (19.1) (21.8) 2017 2017 184.4 193.6 284.1 328.8 302.3 0.1 3.7 3.4 3.6 $M $M 0.2 (1.2) 12.2 15.4 97.7 15.9 (13.4) (16.9) 2018 2018 445.8 308.6 283.9 299.8 NET FINANCE COSTS FINANCE NET

Finance income comprises interest income on funds invested and the return on the desalination licence receivable (refer to note to note (refer on the desalination licence receivable and the return income on funds invested Finance income comprises interest asset. yield on the financial effective taking into account the as it accrues, income is recognised Interest C.3). gains/losses on hedging instruments exchange gains/losses, foreign expense on borrowings, Finance costs comprise interest of defined in respect cost and the net interest unwinding of discount on provisions in the income statement, recognised that are other method, rate interest using the effective in the income statement recognised costs are All borrowing obligations. benefit capitalised into the cost of that asset. attributable to a qualifying asset which are costs directly than borrowing assets is the costs to be included in the cost of qualifying the amount of borrowing used to determine The capitalisation rate at the end of the period. applicable to our outstanding borrowings 5.0 per cent) of 4.6 per cent (2017: rate interest average 

Other finance charges – non‑cash – charges Other finance (iii) charges finance Capitalised costs Net finance Finance costs (ii) expense Interest cash – charges Other finance value hedges on fair Loss/(gain) portion of cash flow hedges (Gain)/loss on ineffective Unwind of discount on provisions (income)/expense net interest benefit Defined costs finance Total Loss/(gain) on transactions not in a hedge relationship on transactions Loss/(gain) Total finance income finance Total Finance income (i) income Interest Return on desalination licence receivable Financial assets and other credit exposures Financial assets and other credit swaps currency Cross swaps rate interest AUD NOTE D.4 NOTE Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any statements, in the financial assets recorded of financial amount the carrying the following table, Except as detailed in values in the market values disclosed below represent The risk. to credit exposure our maximum represents allowances for losses, to the values and as such do not agree the carrying from which differ values), (in the money market the event of early settlement the particular counterparty. liabilities with financial values below exclude any offsetting The position. of financial statement (i) (ii) (iii) 102 AUSNET SERVICES (B) equity asadeduction, net oftax, from proceeds. Ordinary shares are classified asequity. Incremental costsdirectly attributabletotheissueofnewshares oroptionsare shownin meetings. ordinary shares are entitledtoone vote onashowofhandsorone vote foreachordinary share heldonapollatshareholders’ inproportion tothenumberofandamountspaidonsharesproceeds onwindingupofAusNetServices issued. Holdersof Ordinary shares authorisedandissuedhavenopar value. Ordinary shares entitletheholdertoparticipate individendsandthe (A) (CONTINUED) NOTE D.5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (i) excluded fortheearningspershare calculation innote B.2. Services. Accordingly, theshares heldbythetrustare consolidated intotheGroup’s financial statements. The shares havebeen The share trustisheldby Computershare PtyLtd andforaccountingpurposesthetrustisdeemedtobecontrolled byAusNet rights. Duringtheyear, 5,958,915shares were acquired onmarketatanaverage priceof$1.73pershare. the Short Term IncentivePlandeferred equityrightsfortheManagingDirector andtheLong Term IncentivePlan(LTIP) performance In FY2018theGroup establishedanemployee share trustusedasadelivery mechanismtosatisfyfuture vesting entitlementsfor (C) FINANCING OUR BUSINESS SECTION D Date Total contributed equity Shares heldbyemployee share planstrust Ordinary shares Contributed equity 1 April2017 27 June2017 21 December2017 31 March2018 1 April2016 22 June2016 22 December2016 31 March2017

The value ofDRPisnettransaction costs. MOVEMENTS IN ORDINARY SHARE CAPITAL ORDINARY SHARES SHARES HELD BY EMPLOYEE SHARE PLANS TRUST

EQUITY ‑ fullypaid

Details Opening balance Dividend ReinvestmentPlan(i) Dividend ReinvestmentPlan(i) Closing balance Opening balance Dividend ReinvestmentPlan(i) Dividend ReinvestmentPlan(i) Closing balance

Issue price $1.86 $1.69 $1.52 $1.43 31 MARCH 2018 MARCH 31 Number ofshares 3,614,346,765 3,603,155,012 (a), (b) 3,603,155,012 3,537,635,150 Notes 27,822,058 37,697,804 (c) 3,977,444 7,214,309 5,162.5 5,172.8 2018 (10.3) $M 5,153.2 5,153.2 5,172.8 5,057.3 5,153.2 5,153.2 2017 53.7 42.2 12.2 $M $M 7.4 - ANNUAL REPORT 2018 103 $M $M $M 36.0 2017 167.2 (26.4) 156.9 158.6 150.9 361.8 307.8 dividend Total dividend Total $M 32.4 2018 4.265 1.000 4.630 4.400 4.400 8.665 10.030 Cents per share Cents per share Date paid Date paid Date 27 June 2017 27 June 2017 22 June 2016 21 December 2017 22 December 2016 AusNet Services AusNet Services AusNet Services AusNet Services AusNet Services Paid by Paid by Paid DIVIDENDS

FRANKING ACCOUNT FRANKING

Total dividends Total Interim FY2018 dividend Interim Total dividends Total Final FY2017 dividend - special - Final FY2017 dividend Interim FY2017 dividend Interim Final FY2017 dividend - ordinary - Final FY2017 dividend Final FY2016 dividend Franking credits available to shareholders available to shareholders credits Franking Dividends Dividends NOTE D.6 NOTE In relation to the dividends paid in the current financial year of $361.8 million (2017: $307.8 million), $19.6 million (2017: $95.9 $95.9 $19.6 million (2017: million), $307.8 million (2017: year of $361.8 financial paid in the current to the dividends In relation costs. net of transaction issued under the Dividend Reinvestment Plan (DRP), allotment of new shares was utilised in the million) (A) The following dividends were approved and paid by AusNet Services to shareholders during the current and previous financial years: financial and previous and paid by AusNet Services during the current to shareholders approved were The following dividends The above available amounts are based on the balance of the dividend franking account at year end adjusted for the increase in the increase for account at year end adjusted based on the balance of the dividend franking available amounts are The above at 31 March 2018. of the income tax provision that will arise on payment credits franking 104 AUSNET SERVICES (i) The Group’s financial statements incorporate theassets, liabilitiesandresults ofthefollowingsubsidiaries: Unrealised lossesare alsoeliminated unlessthetransaction provides evidenceoftheimpairmentassettransferred. Intercompany transactions, balancesandunrealised gainsontransactions betweenentitieswithintheGroup are eliminated. that control ceases. Subsidiaries are fullyconsolidated from thedate onwhichcontrol istransferred totheGroup andare deconsolidated from thedate potential voting rightsthatare presently exercisableorconvertibleare takenintoaccount. its involvement withtheentityandhasabilitytoaffect thosereturns through itspowerover theentity. Inassessingcontrol, Subsidiaries are entitiescontrolled bytheGroup. Control existswhentheGroup isexposedto, orhasrightsto, variable returns from entities andrelated partytransactions. impacts theresults oftheGroup asawhole, includingdetailsofcontrolled The followingsectionprovides informationonourstructure andhowthis NOTE E.1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE SECTION E AusNet Services Finance AusNet Services Trust InsuranceAusNet Services Ltd Geomatic Technologies PtyLtd Geomatic HoldingsPtyLtd AusNet FinancePtyLtd AusNet Transmission Group PtyLtd (Transmission)AusNet Services PtyLtd (i) Select SolutionsGroup PtyLtd PtyLtdAusNet GasServices AusNet (No. 9) PtyLtd AusNet (No. 8) PtyLtd PtyLtdAusNet Asset Services PtyLtdAusNet ElectricityServices HoldingsPtyLtdAusNet Services AusNet Holdings(Partnership) Ltd Partnership AusNet HoldingsGeneral Partner PtyLtd AusNet LDP(No.2) Ltd AusNet LDP(No.1) Ltd AusNet DistributionGroup PtyLtd (RE) PtyLtdAusNet Services (i) (Distribution) PtyLtdAusNet Services (i) LtdAusNet Services Name ofentity

These entitiesconverted toproprietary companiesduring FY2018.

SUBSIDIARIES

incorporation Country of Guernsey Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia UK UK 31 MARCH 2018 MARCH 31 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Class of shares n/a n/a n/a 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2018 Equity holding % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2017 % ANNUAL REPORT 2018 105 - - $M $M 26.1 26.1 2017 2017 357.1 357.1 225.9 200.2 5,153.2 5,153.6 5,379.5 5,353.4 - 5.7 $M $M 25.6 25.6 172.4 2018 2018 207.0 334.0 334.0 5,162.5 5,159.2 5,366.2 5,340.6 PARENT ENTITY INFORMATION PARENT

STATEMENT OF FINANCIAL POSITION FINANCIAL OF STATEMENT CONTINGENT LIABILITIES CONTINGENT STATEMENT OF COMPREHENSIVE INCOME COMPREHENSIVE OF STATEMENT

Profit for the year Profit the year income for comprehensive Total current liabilities Non‑current equity Contributed Retained profits Current assets Current assets Non‑current liabilities Current liabilities Total Reserves equity Total Total assets Total NOTE E.2 NOTE (A) We are not aware of any contingent liabilities of the parent entity as at 31 March 2018 (2017: $0). entity as at 31 March 2018 (2017: contingent liabilities of the parent of any not aware are We (C) (B) 106 AUSNET SERVICES Group’s Key ManagementPersonnel fortheyearended31March 2018. The Remuneration ReportwithintheDirectors’ Reportcontainsdetailsoftheremuneration paidorpayabletoeach memberofthe (CONTINUED) (B) our capitalportfolio. These agreements haveaterm oftwoyearswithanoptiontoextend foroneyear. To ensure continuedcapitalinvestmentandnetworkgrowth, Zinfra (asubsidiaryofJemena) isappointed asadeliverypartneron under thenewagreements. performed onJemena’selectricitynetworkwaspartiallyterminated, to continuetobeprovided withmetering andtechnical services performed onJemena’sgasnetworkwasterminated on29September 2017whereas theagreement related totheservices under anumberofoperational arrangements related totheirelectricityandgasnetworks. The agreement related totheservices During theyear, weprovided metering services, and technical services totheJemenaGroup vegetation managementservices (I) OPERATIONAL AGREEMENT WITH JEMENA Corporations Act2001. Jemena) are considered toberelated partiesofAusNetServices. These entitiesare notconsidered related partiesunderthe Under applicableaccountingstandards, Temasek anditssubsidiaries(includingSPI) andState Gridanditssubsidiaries(including (Temasek). State Gridhasacontrolling stakeinJemenaAsset ManagementPtyLtd (referred toasJemena). International Pte Ltd (SPI) andState GridCorporation ofChina(State Grid). parent SPI’sultimate is Temasek Holdings(Private) Ltd LtdAusNet Services hastwoshareholders withasignificant investmentandboard representation, beingSingapore Power (A) NOTE E.3 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE SECTION E Termination benefits Other long‑term benefits Equity‑based payments Post‑employment benefits Short‑term employee benefits

KEY MANAGEMENT PERSONNEL MAJOR SHAREHOLDERS

RELATED PARTY TRANSACTIONS

31 MARCH 2018 MARCH 31 8,441,868 6,796,678 1,196,906 364,354 83,930 2018 $ - 10,572,673 6,970,077 2,195,997 395,441 446,941 564,217 2017 $ ANNUAL REPORT 2018 107 38 2017 2017 9,157 3,247 2,965 $’000 $’000 77,265 21,546 22,346 104,645 192 2018 2018 3,133 8,313 2,792 $’000 $’000 15,162 27,473 171,746 108,298 TRANSACTIONS WITH RELATED PARTIES WITH RELATED TRANSACTIONS Includes outstanding amounts from the provision of electricity distribution and electricity transmission services which are of electricity distribution and electricity transmission the provision Includes outstanding amounts from by the AER. regulated Represents revenues from the provision of electricity distribution and electricity transmission services which are regulated by services regulated which are distribution and electricity transmission of electricity the provision from revenues Represents the AER.

Current payables and other liabilities (purchase of goods) payables Current Jemena Dividends paid, net of DRP Dividends paid, Jemena (i) Sales of goods and services (i) revenue Regulated plant and equipment (construction services) Property, (sale of goods and services) receivables Current Power entities Singapore Services revenue Purchases of goods and services Other expenses The following transactions occurred with related parties within the Singapore Power and State Grid groups for the financial year: for the financial Grid groups and State Power parties within the Singapore with related occurred The following transactions We also provide electricity distribution and electricity transmission services to Jemena. AusNet Services earns a regulated return AusNet Services return earns a regulated services to Jemena. electricity distribution and electricity transmission also provide We of these services by the AER. as these services regulated the provision from are We engage in a wide variety of transactions with entities in the Temasek Group in the normal course of business on terms similar on terms in the normal course of business Group Temasek with entities in the transactions variety of engage in a wide We services to telecommunication not limited and leasing include but are Such transactions customers. to those available to other an arm’s between the parties which reflect negotiated out on terms carried are party transactions related These of properties. the excluded from have been Power Group other than the Singapore interests Temasek with transactions a result, As length basis. below. disclosures (C) (i) No allowance for impairment loss has been raised in relation to any outstanding balances due from related parties. related due from to any outstanding balances in relation No allowance for impairment loss has been raised (i) parties within the Singapore with related to transactions in relation date at the reporting outstanding The following balances are Grid groups: Power and State 108 AUSNET SERVICES (i) During theyearfollowingfees provided were paidorpayableforservices byKPMG and itsrelated practices: order tocomplywithaccountingstandards andotherpronouncements. performance andpositionoftheGroup, oritems required tobedisclosedin This sectionincludesotherinformationtoassistinunderstandingthefinancial NOTE F.1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER DISCLOSURES SECTION F Other assurance, taxationandadvisoryservices Other services Total remuneration forauditandreview services Audit ofregulatory returns (i) Audit andreview offinancial statements Audit andreview services Total remuneration ofauditors Total remuneration forotherservices

audit services andwegainefficiencies are performedbythesameauditfirm.audit services whentheservices It isourpolicytoemploy KPMGtoperformtheauditofregulatory returns asthesereturns represent anextension ofstatutory

REMUNERATION OF AUDITORS

31 MARCH 2018 MARCH 31 $’000 1,939 2,231 1,439 2018 500 292 292 $’000 2,385 2,126 1,620 2017 506 259 259 ANNUAL REPORT 2018 109 7.1 7.4 $M 0.3 32.2 46.5 2017 299.5 (267.3) 6.2 $M 5.0 (1.2) 51.9 20.6 2018 312.9 (261.0) DEFINED BENEFIT OBLIGATIONS BENEFIT DEFINED

Remeasurement gains recognised during the year in OCI gains recognised Remeasurement Total Net interest (income)/expense on defined benefit obligation benefit on defined (income)/expense Net interest Total amount included in the statement of financial position in respect of the defined of the defined position in respect of financial amount included in the statement Total plans is as follows: benefit obligations benefit value of defined Present plans benefit of the defined in respect in the income statement Amounts recognised follows: as are service cost Current Fair value of plan assets Fair obligations benefit defined Net asset arising from NOTE F.2 NOTE The defined benefit superannuation plans are administered by a trust that is legally separated from the Group. The trustees The trustees the Group. from by a trust that is legally separated administered plans are superannuation benefit The defined by the scheme rules. governed whom are all of chair, and an independent representatives and employer consist of both employee of plan strategy. of plan assets and for the definition for the administration responsible are The trustees The defined benefit sections of the Equipsuper plans are closed to new members. All new members receive defined contribution, contribution, defined All new members receive members. closed to new plans are sections of the Equipsuper benefit The defined accumulation style benefits. We make contributions to two defined benefit superannuation plans that are managed by Equipsuper. The funds provide defined defined The funds provide managed by Equipsuper. that are plans superannuation benefit make contributions to two defined We mostly in are Benefits disablement or withdrawal. death, upon retirement, or their dependants amounts to employees benefit also members are benefit defined in some cases, although, salary, average final based on the employee’s the form of a lump sum consistent. are and conditions of the two plans The terms eligible for pension benefits. We expect to make contributions to the defined benefit plans during the next financial year at a consistent level to FY2018. The level to FY2018. year at a consistent plans during the next financial benefit to make contributions to the defined expect We contribution the employer Funding method, Target the Under the contribution rates. Funding method is used to determine Target years. liabilities within five equalling 105 per cent of the plans’ assets in the plans’ to result is set at a level which is expected rate and market risk. rate interest plans expose us to additional actuarial, superannuation benefit The defined When the calculation of the net obligation results in a benefit to the Group, the recognised asset is limited to the net total of any limited asset is the recognised to the Group, a benefit in When the calculation of the net obligation results in the plan or reductions from refunds of any future value actuarial losses and past service unrecognised costs and the present contributions to the plan. future Remeasurements comprise actuarial gains and losses and the return on plan assets (excluding interest). They are recognised in full recognised They are on plan assets (excluding interest). comprise actuarial gains and losses and the return Remeasurements income. in other comprehensive presented in the period in which they occur and are profits in retained directly The discount rate is the yield at the balance date on corporate bonds that have maturity dates approximating the terms of our the terms approximating bonds that have maturity dates on corporate is the yield at the balance date The discount rate method. unit credit actuary performs the calculation using the projected A qualified obligations. Our net obligation in respect of the defined benefit superannuation funds is calculated by estimating the amount of future benefits benefits by estimating the amount of future funds is calculated superannuation benefit of the defined Our net obligation in respect its to determine is discounted That benefit and prior periods. for their service have earned in return in the current that employees plan assets. value of any deducting the fair after value and recognised present Each year we engage an independent actuary to perform actuarial reviews of the AusNet Transmission Group Pty Ltd and AusNet Pty Ltd Group Transmission of the AusNet Each year we engage an independent actuary to perform actuarial reviews funds. benefit defined Electricity Services Pty Ltd 110 AUSNET SERVICES Plan assetscanbebroken downintothefollowingmajorcategories ofinvestments: (B) The actualreturn onplanassetswasagainof$27.8 million (2017: gainof$33.5million). Plan assetsdonotcompriseany oftheGroup’s ownfinancial instrumentsoranyassets used byGroup companies. (CONTINUED) (A) NOTE F.2 DEFINED BENEFIT OBLIGATIONS (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER DISCLOSURES SECTION F Closing fair value ofplanassets Benefits, taxesandpremiums paid Contributions byplanparticipants Contributions from theemployer Actual return onfundassetslessinterest income Interest income Opening fair value ofplanassets Movements inthefair value ofplanassetswere asfollows: Closing defined benefit obligations Benefits, taxesandpremiums paid Actuarial gain Contributions byplanparticipants Interest cost Current cost service Opening defined benefit obligation Movements inthepresent value ofthedefined benefit obligationswere asfollows: Cash Defensive alternative Growth alternative Property Unquoted investments: Fixed interest securities International equities Australian equities Investments quoted inactivemarkets:

ANALYSIS OF ASSETS PLAN MOVEMENT IN DEFINED BENEFIT OBLIGATION

31 MARCH 2018 MARCH 31 2018 299.5 261.0 267.3 312.9 (20.9) (20.9) 2018 10.4 16.2 100 11.6 (4.4) $M 6.2 2.4 2.4 4.1 19 16 16 15 % 17 8 9 298.0 299.5 286.7 267.3 (22.5) 2017 2017 (27.8) (27.8) 24.0 100 9.8 9.5 $M 4.4 2.7 2.7 29 7.1 10 19 % 12 12 9 9

ANNUAL REPORT 2018 111 % 4.1 $M 3.8 (8.2) 13.0 2017 Decrease % 3.7 $M 3.8 8.5 (12.1) 2018 Increase Defined benefit obligation benefit Defined % 3.5 3.8 2017 % 4.1 3.8 2018 Defined benefit expense benefit Defined ACTUARIAL ASSUMPTIONS ACTUARIAL SENSITIVITY ANALYSIS DEFINED CONTRIBUTION EXPENSE EXPENSE CONTRIBUTION DEFINED

KEY ESTIMATES AND JUDGEMENTS ‑ DEFINED BENEFIT PLANS BENEFIT DEFINED ‑ JUDGEMENTS AND ESTIMATES KEY The net liability from defined benefit obligations recognised in the consolidated statement of financial position will be affected position will be affected of financial statement in the consolidated recognised obligations benefit defined The net liability from rates. and/or interest in investment returns movement by any significant A number of estimates and assumptions are used in determining defined benefit assets, obligations and expenses. These obligations and expenses. assets, benefit defined used in determining and assumptions are A number of estimates in other will be recognised in estimates Any difference of return. earnings and rates future include salary increases, estimates the income statement. not through income and comprehensive Key assumptions Key Discount rate rate salary increase Expected Defined benefit obligation benefit Defined (0.5 per cent movement) Discount rate (0.5 per cent movement) rate salary increase Expected The following were the principal actuarial assumptions at the reporting date (expressed as weighted averages). as weighted (expressed date at the reporting the principal actuarial assumptions The following were (C) Changes in the relevant actuarial assumptions as at reporting date, with all other variables held constant, would result in an result would variables held constant, all other with date, assumptions as at reporting actuarial Changes in the relevant as shown below: obligation benefit value of the defined in the increase/(decrease) (D) As at 31 March 2018, the weighted average duration of the defined benefit obligation was 8 years (2017: 8 years). obligation was 8 years (2017: benefit of the defined duration average the weighted at 31 March 2018, As During the year, we contributed $17.5 million of defined contribution benefit to employees (2017: $19.7 million). $19.7 million). (2017: to employees contribution benefit million of defined $17.5 we contributed During the year, (E) When calculating the above sensitivity analysis, the same method has been applied as when calculating the defined benefit liability benefit the same method has been applied as when calculating the defined sensitivity analysis, When calculating the above position. of financial statement in the consolidated recognised 112 AUSNET SERVICES (i) settled share-based payments. An expenseof$2.847 millionhasbeenrecognised fortheyearended31March 2018(2017: $1.773million) in relation toequity- (CONTINUED) The Group hasthefollowinggrants onfootat31March2018: the Remuneration Reportforfurtherdetail). Settlementofthe performancerightsismadeinordinary shares. on thegrant ofperformancerights(PRs) that vest intoshares atnocostto theemployee subjecttoperformancehurdles (refer to We haveaLong Term IncentivePlan(LTIP) forexecutivesandotherseniormanagementidentified bytheBoard. The planisbased (A) vesting, thecumulativecharge totheincomestatement isinaccordance with the vesting conditions. on thedate that relevant employees becomeentitledtotheaward (the vesting date). At eachsubsequentreporting date until The costofequitysettledtransactions isrecognised over theperiodinwhichconditionsare fulfilled (the vesting period), ending certain conditions. transactions) inorder toalignshareholder outcomes. The granting ofsuchshares orrightsmaybesubjecttosatisfaction of whereby partofanemployees’ remuneration isormaybeprovided inexchangeforshares orrightsover shares (equitysettled We provide benefits tosomeofouremployees (includingKey ManagementPersonnel) intheformofshare-based payments, following inputsforeachtranche ofrights: The fair value ofeachperformancerightisestimated onthegrant date usingtheBlack‑Scholesmodel. This modelusedthe NOTE F.3 Reconciliation ofequityrightsonissue: actual volatility.reflect The expected volatility isbasedontheGroup’s historical volatility andisdesignedtobeindicativeoffuture trends, whichmaynot NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER DISCLOSURES SECTION F Closing balance Vested duringtheyear (i) Modified duringtheyear Lapsed duringtheyear Granted duringtheyear Opening balance Plan Share priceatgrant date LTIP 2017 Exercise price LTIP 2016 Expected volatility LTIP 2015 Risk‑free interest rate Dividend yield Expected life ofperformancerights

rights willbeissued shares from theemployee share planstrustinMay2018. The 2015Grant vested to85.9percentbasedonthe vesting assessmentperformedat31March2018. Participants with vested LONG TERM INCENTIVE PLAN

SHARE‑BASED PAYMENTS

Grant date 1 April2017 1 April2016 1 April2015

3,196,449 3,327,515 (131,066) Vesting date 31 March2020 31 March2019 31 March2018 Grant 2017 - - -

36 months 2,925,063 2,714,835 (210,228) 5.75% 1.70% Grant 2016 $1.77 2017 20% $0.0 LTIP 31 MARCH 2018 MARCH 31 - - -

3,031,521 (2,411,113) (620,408) Grant 2015 PRs granted 36 months 3,768,821 3,542,013 3,327,515 - - -

6.00% 1.61% $1.56 2016 20% $0.0 LTIP 5,956,584 5,911,284 3,327,515 (2,411,113) (961,702) FY2018 Total -

at grant date Value ofPRs $4,026,293 $3,612,853 $3,768,821 36 months 5,956,584 (1,039,292) 3,542,013 3,725,213 (271,350) FY2017 6.00% 2.05% $1.48 Total 2015 20% $0.0 LTIP -

ANNUAL REPORT 2018 113 $M 134.6 281.3 921.4 597.0 1,015.0 3,522.1 8,995.2 8,073.8 Adjusted $M 0.9 0.9 47.5 33.9 33.0 (14.5) (33.9) (33.9) AASB 15 Impact of $M 87.1 611.5 280.4 920.5 Before Before 1,048.9 8,961.3 3,556.0 8,040.8 AASB 15 adoption of REVENUE FROM CONTRACTS WITH CUSTOMERS NEW ACCOUNTING STANDARDS NOT YET ADOPTED NOT YET STANDARDS ACCOUNTING NEW CONTINGENT LIABILITIES AND CONTINGENT ASSETS CONTINGENT AND LIABILITIES CONTINGENT

AASB 15 Total equity Total Non‑current liabilities Non‑current revenue Deferred Total current liabilities current Total tax liabilities Deferred liabilities non‑current Total liabilities Total EQUITY Retained profits LIABILITIES liabilities Current other liabilities and Payables NOTE F.5 NOTE NOTE F.4 NOTE Consolidated statement of financial position as at 31 March 2018: of financial statement Consolidated The Group will adopt AASB 15 from 1 April 2018, applying the cumulative effect transition method. Under this method, there will be there Under this method, method. transition applying the cumulative effect will adopt AASB 1 April 2018, The Group 15 from in earnings will be adjusted opening retained Instead, or notes. statements in the financial figures of comparative no restatement Based on this review, as at 31 March 2018. of customer contracts Management has performed a detailed review period. the current to AASB 15 is summarised below: the impact of transition The primary impact of transition to AASB 15 has been the deferral of certain regulated excluded services excluded unregulated of certain regulated and to AASB 15 has been the deferral The primary impact of transition Some of these ‑30 years. 25 over infrastructure access to transmission provides the Group primarily where revenue, transmission comprise of a single performance obligation these contracts Under AASB 15, ‑ended. front that are profiles have invoicing contracts less AASB Had 15 always been applied, term. the contract evenly over to be recognised is required and revenue time over satisfied associated and revenue The assets periods. in future revenue and more periods, in previous would have been recognised revenue Base. Asset in our Regulated not included with this adjustment are AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces It replaces is recognised. how much and when revenue whether, for determining framework AASB 15 establishes a comprehensive Interpretations. and associated AASB 111 Construction Contracts including AASB 118 Revenue, guidance, recognition existing revenue (A) The following accounting standards, amendments to accounting standards and interpretations have been identified as those which as have been identified and interpretations amendments to accounting standards The following accounting standards, period annual reporting for early adoption for the Group’s available They were in the period of initial adoption. will impact the Group report: this financial in preparing but have not been applied beginning 1 April 2017, Other than as listed above, we are not aware of any contingent liabilities or assets as at 31 March 2018 (2017: $0). or assets as at 31 March 2018 (2017: of any contingent liabilities not aware we are above, Other than as listed AusNet Services is involved in various legal and administrative proceedings and various claims on foot, the ultimate resolution of the ultimate resolution various claims on foot, and proceedings various legal and administrative in AusNet Services is involved of operations results position, financial on the consolidated effect have a material will not Services, in the opinion of AusNet which, or cash flows. 114 AUSNET SERVICES (CONTINUED) the Singapore Stock Exchangedelistinginprogress. DRP willbesuspended forthefinal FY2018 dividendasaresult of be paidon28June2018. The final dividendwillbeunfranked. The final dividendfor2018of$167.0 million(4.62centspershare) to Since theendoffinancial year, theDirectors have approved a (A) intend onearlyadoptingthisnewleaseaccountingstandard. 16from 1April2018.to earlyadoptAASB does not AusNetServices recognition would beapproximately $100millioniftheGroup were renewal assumptions, theright ‑ofuse assetandleaseliability and interest expense. Basedonthe current leasepopulationand approximately $11 million, with offsettingincreases indepreciation 16 wouldbeareduction inoperating leaserental expenseof population. Basedonthisreview, theimpactoftransition toAASB Management performedareview oftheGroup’s operating lease of priorperiodsare madeunderthismethod. lease liability. Noadjustmentstoretained earningsorrestatements results in the right‑ofuseassethavingsame value asthe recognised applyingthesimplified transition approach which discounted topresent value. Aright-of-useassetwillbe outstanding cashflowsundertheGroup’s operating leases, lease liabilitybalancewillberecognised basedontheremaining cumulative catchuptransition method. Under thismethod, a 16fromThe Group 1April2019, willadoptAASB applyingthe expenses willberecognised asdepreciation andinterest expenses. treatment currently appliedtooperating leases. Inaddition, lease low- value leases, thereby removing theoffbalancesheet on balancesheet, withlimited exceptionsforshort-term and 16willrequireAASB therecognition ofallleasesforalessee (A) Consolidated incomestatement fortheyearended31March2018: impact ontheFY2019results willnotbematerially different totheFY2018impact. 15wasineffectIf AASB duringtheFY2018year, theimpactwouldhavebeenaspresented below. Management expectsthatthe (B) NOTE F.6 NOTE F.5 NEW ACCOUNTING STANDARDS NOT YET ADOPTED (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER DISCLOSURES SECTION F Revenue Profit before incometax Income taxexpense Profit fortheyear

DIVIDEND AASB 15 AASB AASB 16 AASB

LEASES EVENTS OCCURRING AFTER EVENTS OCCURRING AFTER REVENUE FROM CONTRACTS WITH CUSTOMERS WITH CONTRACTS FROM REVENUE THE SHEET BALANCE DATE

(CONTINUED) (c)  (b)  (a)  significantly affect: issue ofthisfinancial report thathassignificantly affected ormay circumstance thathasarisensince31March2018uptothedate of Other thanoutlinedabove, there hasbeennomatter or (C) the Australian register). (andquoted ontheASX Facility by16July2018; theirshares otherwise willbe transferred to will havetheoptiontoselltheirshares undertheShare Sale toholdsuchageneralAusNet Services meeting. SGXshareholders andtheListingManualofSGXdonotrequire of theASX shareholders tothedelistingasListingRules AusNet Services No general meetingwillbeconvenedtoobtaintheapproval of is unaffected bythisannouncement. (SP)’s shares are andtherefore heldonthe ASX SP’s shareholding to affect Singapore institutionalinvestorappetite. Singapore Power share registertotal AusNetServices anddelistingisnotexpected Currently theSGXlistingisapproximately three percentofthe efficiency. to reduce administrative costs, simplifyourprocesses anddrive asawhole.Services The delistingwasidentified asaninitiative concluding thatthedelistingisinbestinterests ofAusNet and disadvantagesofourshares beinglisted ontheSGX, took thedecisiontodelist, havingconsidered boththeadvantages voluntarily delistfrom theSGXeffective 16July2018. The Board announceditsintention to On 2May2018AusNetServices (B) Before adoption

31 March 2018, oftheGroup. the state ofaffairs, infinancial yearssubsequent to 31 March2018oftheGroup; the operations infinancial yearssubsequentto the results ofthoseoperations; or OTHER MATTERS SINGAPORE STOCK EXCHANGE (SGX) DELISTING of AASB 15 of AASB 1,909.8 (125.2) 416.6 291.4 $M 31 MARCH 2018 MARCH 31 Impact of AASB 15 AASB (2.0) (2.9) (2.9) 0.9 $M

Adjusted 1,906.9 289.4 (124.3) 413.7 $M ANNUAL REPORT 2018 115 Nino Ficca

complying with Australian Accounting Standards and the Accounting Standards complying with Australian and Regulations 2001; Corporations giving a true and fair view of the consolidated entity’s view of the consolidated giving a true and fair 2018 and of its position as at 31 March financial ended on that date; year performance for the financial

the financial report also complies with International also complies with International report the financial and as disclosed in section A; Financial Reporting Standards the financial statements and notes set out on pages 63 to set out on pages 63 to and notes statements the financial contained in that are disclosures and the remuneration 114, set out on pages 37 to 58 in the report the Remuneration with the Corporations in accordance are Report, Directors’ including: Act 2001, there are reasonable grounds to believe that the Company grounds reasonable are there become due will be able to pay its debts as and when they and payable. (i)  (i)  (ii) Managing Director Managing Chairman Melbourne 13 May 2018 Mason AM Peter Signed in accordance with a resolution of the Directors. resolution with a Signed in accordance The Directors have been given the declarations by the Chief the declarations have been given The Directors by section required Officer and Chief Financial Executive Officer Act 2001. 295A of the Corporations (a)  (a)  (b)  (c) In the opinion of the Directors of AusNet Services Ltd (the of AusNet ServicesIn the opinion of the Directors Ltd Company):

DECLARATION DIRECTORS’ 116 AUSNET SERVICES Regulations Standards • that performance for 31 March Group's • 2001, including Corporations the Actaccordance with We conducte Basis for opinion Report Financial opinion,In our accompanying the Company). (the Ltd Services AusNet of Report Financial the We have audited Opinion Report onthe the audit of Financial Report shar To the Report Auditor’s Independent ( Accountants Professional requirements of We ar audit Our evidence w have complying withAustralian giving a responsibilities date; a fulfill of e independent t

he FinancialReport financial position as at truea 2018 an ed our a nd e nd the 2001. d have obtained eholders : our nd fair t Company the of is in t other he Accounti he year

d Corporations audit o under Inte network of independent member firms affiliated with KPMG KPMG, an Australian partnership and a member firm of the KPMG of f i rnational Cooperative (“KPMG International”), aSwiss entity. view ts financial ethical t

should beupdated toread pages37to58. references withrespect toourReportontheRemuneration ReportassetoutintheDirectors’ report the financial statement havebeenpresented inthecontext oftheannualreport initsentirety: page on 13May2018. Page references shouldberead asfollowstoreflect thecorrect references nowthat This istheoriginal version oftheauditreport over thefinancial statements signedbythedirectors he in

ended on of of those standards t accordance he Code) t i Group " of is sufficient Accounting Ltd Services AusNet ng Professional section of

in responsibilities the with n accordance hat wit

our a

nd appropriatet ar . Standards Auditing h Australian are The Fin • 31 March2018 • changes i of flows f • financial year. year. financial from end or time year controlled the time at to during the The Gr • policies e report.

Consolidated incomestatement,C financial positionas of at Consolidated statement Notes including Directors' declaration. an relevant comprehensive income, further d accordance Ethical or consists of of oup consists

ancial Report the n t t described i he Corporations Act equity, a o

our year Standards o provide wit audit a summary of significantaccounting t hen ended nd Consolidatedstatement h t n comprises: comprises:

he Code. of the Companythe t a Board’s APES he " Professional Standards Legislation. Liability limited by a scheme approved under basisfor th Consolidated Financial e Financial Auditor’s We

and 2001 and our believe onsolidated statement and the entities it and the responsibilities

R opinion. 110 eport eport statement ethical ethical the that C ode a. We in Australi

of t he audit of cash Ethics of for

the

for 101 ANNUAL REPORT 2018 117

nd 102 to a Final the o which

t regulated Energy Reset ncluding specialists amounts he metering he Group’s regulatory price he Gas he time the t t customers

Revenue he revenue process o t nd t for echnology transmission n he Australian process; i t periods; of historical performance relevant as a whole, and whole, a in as of rates 2017 a of

revenue recognition against charged t New accounting New not standards omparing relevant controls ransmission he Group’s revenue, i April nformation t i are those our that, in matters n rates determinations; on t n respect i during billing he impact he key controls within the billing system he appropriateness of Note F.5 Note F.5 tariff 2017; he Group’s billing he reconciliation between t recorded, c approved tariff issued i were provided; with our apital and nd testing t testing key analysing revenue against involving our and advisory specialists regulatory working evaluating t comparing performing sample testing Distribution Access Arrangement Distribution Access issued in November considering t determinations developments Regulator’s (AER) T Decision regulator services regulatory price including t and the validation of and the billing system, systems metering data invoices and cash receipts; and gas calculate electricity distribution revenue based on t a revenues accounting policies for accounting standard requirements; • • • • • • • These matters These the contextin ofwere ouraddressed ofaudit the FinancialReport a thereon,we not do provide and our opinion forming matters.these on opinion separate Our proceduresincluded: How the matter was addressed in our audit our in addressed was matter the How KeyAudit Matters in judgement,significance were ofprofessional most ReportFinancial period. of theof current ourthe audit

changes Note B.3 Working c B.3 Note Working . Contracts expected he expected t d be adopted at from ese disclosures. Revenue, additional th will o for we are: identified

tricity and gas, and he significance of Revenue

hen it oup disclose w 15 applied t

iven t he Gr was AASB of 2018. G effort

t addition, the inherent complexity in the in the Group’s inherent complexity customerbillings processes to estimate to determine and the consumed energy relevant tariff rates. theofapplication tariff regulator approved for the customers to bill used are which rates, ofdistribution elec transmission ofelectricity Victoria.in The determinations regulatoryprice Group’s by regulatory promulgated arevarious bodies and revised; routinely Recognition ofRecognition revenue of non-current Valuation assets, including forexpenditure Accounting project related Valuation and accounting for derivatives • • impact 1 April to accounting standards audit In with Customers, Thematter audit key keyrecognitionto due a matter audit is Revenue and regulatoryframework thenature of the process for thebilling distribution of electricity andgas, and transmission of electricity in Victoria,which adds complexity to our audit particular: In approach. Recognition ofRecognition (AUD$1,909.8m)revenue results, Segment toB.1 Note Refer KeyAudit Matters The Key Audit Matters • • equipmentintangible property,and and plant assets • • of the Financial yetadopted of theReport Financial 118 AUSNET SERVICES key audit matter due to the: due to key audit matter is a assets non-current of The valuation key audit matterThe assets Financial the current of Report. ReferNote C.1 andto Plant Equipment, Property, C.2 andAssets, non- C.4 of Intangible Impairment 0.1 assetsintangible $55 (AUD Valuation of non- • • • business the of and monitoring management the which belong they based on CGUs the to to goodwill of allocation considerationour Group’s the of year, the businessnecessitating during Services Energy Commercial its within In a determinations, returns operating t challenges associated withauditing complexity a framework for complex natureof market regulatory flow terminal values, assumptions assumptions involved. each CGU for Group’s looking standard requirements; t he Group’s he Group’sregulated addition, addition, nd discount nd expenditure model . changes, a from assumptions applied discounted cashflow Group restructured Group restructured the expenditure, change, t

i having n l ong- future regulatory rates; included those auditing t given t determining revenue inflation, g expected capital current assets current applicable t term nd t regard t he regulatory echnology and

he significant accounting T CGUs; e forecast cash he forward- he xpected

rowth rates o emerging main o relating t o the each of m) models , including property,plant and equipment (AUD $10,

a nd

to How thematter was addressed in our audit Our • • Plan, which form forecasts; cash flow the basis of Board approval testing t assessin procedures included: procedures • • • • • • • • he key g 15 and compar AASB of impact transitional the with accordance in evaluate change, the revenue recognitionif any, in types to contract customer of reading a sample t and asset multiples of comparable entities; multiples of and asset data, such market available appropriateness for comparing relating t a considering comparable t involving our published byregulatorya using our checkin contracts andhistoricaltrends; to customer comparing regulatory determinationsrelevant comparing regulatedcashflow 5-year requirements forecast forecast cash flow period; assess t changes t he Group’s he reasonableness he impact nd evaluating regulated assets, controls f of Financial Plan; key g he reasonableness against accounting standard against o t on thoseassumptions; industry he relevant cost carrying valuesof unregulated cash of assumptions a cash flow

to the Group’s the to disclosure. ing valuation specialists and valuation technology, m by considering or t of he economic of t he cashflow debt knowledge a using of assessing the cash flow model t a he discount market nd cost nd other a nd t

l ong- as impliedearnings of arket flow industry regulated CGUsto assumptions assumptions he 5-year assumptions models, including nd information assumptions to rate term forecasts of a

assumptions bodies to m) and291.8m) t nd regulatory equity; o rates by information cash flow the practice assessing Financial t by: and o and the 103 ANNUAL REPORT 2018 119 104 n nd oup o ng

he Group’s t

nature of

base. term

determination of carrying values ofof carrying determination values sset ong- he l ion of new projects; ion : our projects, proceduresincluded nd t regulated a a m total additions) total m 02.6 dance withdance standards. accounting 7 r s. . authorisat against expenditureproject of actual monitoring budgeted expenditureapproved ; between and allocation i expenditureoperating capital acco mparingthe allocation of indirect costs against historical • • • andards; o inform the areas on whichon the theareas current in to inform o focus st : for controls testing the key the financialyear; against of CGUs the accounti the requirements assessing the ofappropriateness the relatedfinancial the Energy of analysed the Commercial restructure We thebusiness Group’sand Services reporting internal t the Group’s of assess monitoringmanagement and activities,and theconsistency of the allocation of Goodwill toCGU assessing the accuracy of previous forecasts of the Gr t the assessing Group’s evaluating thesensitivitys Group’ inanalysis respect of the key assumptions, including the identification of areas of estimationuncertainty and reasonably possible changes in key assumptions; statement disclosuresstatement against accounting standard requirements; trends co analysing the indirect labourcorporate overhead, (e.g. cost analysing and finance cost) allocation methodology by challenging theBased in applied Activity assumptions theunderlying Costingsurvey capitalised and finance charge a models, • • • • • • • For a sample of sample Fora How the matter was addressed in our audit our in addressed was matter the How Our procedures included: nd he , ng e le

statement of , toboth the statement ) program, ) new and farm wind aintaining safe and reliab runswick and runswick Melbourne, West t Earth apid Fault CurrentLimiter rojectsincluding the terminalmajor the complexity in auditing judgements auditing in the complexity B R (REFCL assets; and stationrebuilds at Richmond p Number of significant ongoi Number significance of capital and operating a respectof building expenditure, in m networks financialposition incom and statement; • • • Thematter audit key key a expenditureis Projectrelated due to matter the:audit Accounting for project related expenditure (AUD $ (AUD expenditure related project for Accounting Property, equipment and of Report. theplant toFinancial C.1 Note Refer 120 AUSNET SERVICES involved and Financial our Instrument we matter, audit key this assessing In is matter a the: due to key audit derivatives for accounting and Valuation key audit matterThe ReferNote D.3to Financial the Financial of management Report. risk Valuationaccountingand for • • • related hedging activities. hedging and related val ap complexityinherent r portfolios and creating new impact year the during activities management Group undert the rate floating and A curren foreign swapscy and hedging rate interest and currency cross in particular portfolios, derivative sizeGroup’s the of and complexity made of in respect ; and elationships fixed denominated dollar ustralian • • • • accounting principles in t in principles accounting plying uation and disclosure of derivative of disclosure and uation lives of capitalised assets. capitalised lives of determinationthe useful the of st accounti accordance with oper a capital between allocated wer labour and overheads indirecta costs whether such benefitsfuture Group; the to capitalwhether projects represent ex operati and capitalised between classification the andards; and andards; penditure; the Group’s derivative ing on the ating i expenditure d aking capital aking ebt : and judgement i and judgement

; ng n hedge ng e derivatives assets; (AUD$502.5m AUD$270.7m liabilities nd s he n s specialists, included:procedures our Wit How thematter was addressed in our audit • • • • • • • • accepted techniques; valuation industry market inputsindependent and observable ng usi valuations fair derivative of a sample evaluating accounting standards; benef tandard requirements;standard accounti against activities hedging for accounting and r accounting policies, standa and accounting cap Group’s the assessmentuseful the lifeof t evaluating of w comparingactual budgets to costs. approved actual project spendspend budgeted by to the assessing d assetof retirements expense on a depreciation impact the impairments, asset individual of consideration to as capitalised costs of nature the assessing the Group’s documented Treasury RiskManagement Group’sthe documented Treasury doc hedge designati evaluating adequacy the of curve pricing credit and spreads basis currency curves, rate exchangeforeign including rates, currency interest spot and data credit sets independently sourced market inputs andmarket assumptionscomparedt assu challeng and assessing appropriatenessmethodologies the valuation of evaluating equirements. ; provisions ecommissioning h the assistance of our Financial Instrument and Treasury Financial our and of assistance Treasury h the Instrument as conducted to assess: to as conducted • • for consistency, for Group’s the with assets italised umentation for a sample hedgesfor new inof umentation relation t accordance with Grouppolicy accordance with authoris t additional future whether t benefits costs represent mptions underlying the valuation of derivatives. We derivatives. of valuation the underlying mptions he Groupcapab s; criteria in the in its the to criteria Group inwith accordance and allocat and ation le of capitalisation; and capitalisation; of le ing the Group’s market inputsGroup’s a market ing the

ion ion of overspend inof .

r on d o

ng testi This futur ) nd

e ng nd o o he 105 ANNUAL REPORT 2018 121 or 106 t and he he ed the ng date of Repor do not on of the e e o nformation, i t reporting which w nformation. In he Auditor's i t responsible for hairman’s Message Other e of Operating and he Financial he excepti C annual

s AustralianAccounting he h t this

he Other it e dat ccordingly, with t of th

obtained prior was t Directors are e read t nd, a w Highlights, o t comparing these to accounti The a Financiala Reportthat gives truea hereon, w us after 018 t Report o t e misstatement The 2 . nformation a i t

in AusNet Services Ltd’ availabl nformation that i e conclusion e responsibility is materially inconsistent material this Auditor’s whether due to fraud, whetheror error todue he Other mad our t he Auditor’s Report. t Thisincludes disclosing, applicable,as matters related to he Other assuranc o be inancialinstruments and inancialrisk management disclosuresagainst accounting ecords; there is a and cover policy and accounting and requirements; policy f obtaining independent confirmations from from independent obtaining counterpartiesconfirmations with borrowings the which Group has or derivativ evaluatingthe appropriateness of the classification and presentationof derivative financial instruments and relat f requirements. standard r of

he date of • • ed t nformation is i o t not report. t ars to be materially misstated. to be materially otherwise appears form o

ability to continue as a going concern going a whether and abilityas to continue the of use t

Remuneration Repor d Remuneration r Report assurance opinion. expect does any ng t for the FinancialReport are he Other t conclude that the Financial Report, nd non-financial information related eport, an nothi e on or a Report of he audit, o w R ed on t have performed t obtained prior if he Financial e n have t opini e

w nd our e o audit whether a w or to cease operations, or have no realistic alternative but toso. do alternative orrealistic tono cease or have operations, report Corporations Act 2001 Act Corporations audit o responsible for: responsible , Directors’ an he Financial Company's and Group ddition t he work Report ReportDirector’s

t

Report a consider n e nformation w i nformation. i and the and express nformation is financial i so, w nowledge obtained i opinion on t Managing not k Auditor’s

ng concern basis ofappropriate. accounting is basis concern ng connection with our e are required t assessingthe implementing necessary internal control to enable the preparationof enable internal implementingnecessary controlto preparing the Financial accordancein Report truetheview preparing fair Financial a and that gives with nd based on he Other n doing W a our this goi t eithertothey of intend liquidate accounting unless basis concern the going using and concern going Company Groupand I • will Remuneration andfair view and freeis from material misstatement Standards • • Report. Our The Directorsare and Responsibilities of theDirectors Other Information Other Treasuryspecialists, who have industry experience detailed and specific accounting ofknowledge the complex requirements. Financial Review The Other t is provided i 122 AUSNET SERVICES Act with year KPMG Report In Opinion Report on the Remuneration Report Auditor’sforms Thisour of part description Report. Assuran and responsibilities description our of A audit the Report further Financial for the of Report Financial this basis of users influence taken economiconthe to decisions the could they beexpected of aggregate, reasonably the in or individually if, material considered are They error. or fraud from arise can Misstatements with accordance b assurance, of level is a high assurance Reasonable • error; or fraud due to andmisstatement, whether • objective Our is: Auditor’s responsibilities for the audit the of Report Financial to issue an Auditor’s Report that includes that Auditor’s issueto opinion. our Report an material from is free as a whole Report Financial the obtain whether reasonableto about assurance our 2001. ended 31 Section 300A of the Corporations opinion, t

of Ltd s Ltd Service AusNet ce Standards Board Standards at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. website ce March he Remuneration exists. it when misstatement a material detect always will Standards Auditing Australian 2018, complies . for t he

Australian Report, b Our 31 March2 pages We haveauditedtheRemunerationReportincludedin Our accordance withSection300A preparation a Directors’ The Directors 1 Melbourne Partner J McDonald Paul 3

May 2018 responsibility ist responsibilities 21 to41of

ased r ut isut ana not that auditguarantee conducted in Auditing Standards.

018. esponsibilities nd presentationof

of on o t

he Companyponsibl areres the Directors’reportforyearended ur o expressa audit

conducted i of t n he RemunerationReport the opinion is located at the Auditing the at is located Corpora n accordance with on t tions Act e he Remuneration for the the 2001. in 107 ANNUAL REPORT 2018 123 Gigawatt hour, a unit of energy equal to a unit of energy Gigawatt hour, one billion watt hours dollar Hong Kong Quality and Environment Health and Safety, High voltage ratio cover Interest Financial Reporting Standards International (“SGSPAA”) Pty Ltd Assets SGSP (Australia) or as “Jemena” and its Subsidiaries trading (as applicable) Group” “Zinfra Japanese yen management personnel Key performance indicator Key auditors of AusNet external The current Services equal to one voltage a unit of Kilovolts, thousand volts time injury Lost incentive plan Long-term Managing Director injury Medical treatment Inc. Moody’s Investors Services, Non-executive Director National Electricity Rules Guarantee National Energy National Electricity Market Reporting and Energy National Greenhouse Act 2007 (Cth) Norwegian kroner tax after Net profit income Other comprehensive equal to one a unit of energy Petajoules, joules quadrillion (1015) Marker Energy The Australian Commission’s competitive framework and lead innovation designed to promote that to investment in advanced meters valued by consumers at a deliver services willing to pay. price they are as assessed value, the The RAB represents network of past regulated by the AER, value on which This is the investments. the AusNet Services can expect to Group of its the economic life over earn a return network assets. Limiter Rapid Earth Fault Current Base. Asset and Contracted Regulated Includes the RAB as well as contestable the for example, assets, transmission Victorian desalination contract. GWh HKD HSEQ HV ICR IFRS Jemena JPY KMP KPI KPMG kV LTI LTIP MD MTI Moody’s NED NER NEG NEM NGER NOK NPAT OCI PJ Power of Choice RAB REFCL R&CAB Australian Accounting Standards Board Accounting Standards Australian Company Number Australian Competition and Consumer Australian Commission Market Commission Energy Australian Market Operator Energy Australian and Ethical Standard Accounting Professional Regulator Energy Australian Meeting Annual General Infrastructure Advanced Metering Audit and Risk Management Committee ASX or the securities exchange Limited which it operates Office Taxation Australian dollar Australian rate Compound annual growth Cost Allocation Methodology ServicesCommercial Energy charges finance Capitalised vehicle funding Common or central unit Cash-generating franc Swiss Governments Council of Australian under which the restructure The corporate Entities became wholly Stapled previous owned by AusNet Services Ltd of Australia Act 2001 (Cth) Corporations of the legislation federal Indicates Commonwealth of Australia year ended 31 December Calendar Dividend Reinvestment Plan charge Distribution use of system depreciation tax, interest, Earnings before and amortisation Electricity Distribution Price Review Earnings per share Essential Services Commission Euro Fixed annual remuneration operations Funds from exchange Foreign Financial year ended 31 March Review Gas Access Arrangement Pound sterling – service level payments Guaranteed penalties for unplanned outages Goods and services tax

AASB ACN ACCC AEMC AEMO APES AER AGM AMI ARMC ASX or Australian Securities Exchange ATO AUD CAGR CAM CES CFC CFV CGU CHF COAG Corporate Restructure Act Corporations (Cth) CY DRP DUoS EBITDA EDPR EPS ESC EUR FAR FFO FX FY GAAR GBP GSL GST

OF TERMS OF GLOSSARY GLOSSARY 124 AUSNET SERVICES (CONTINUED) OF TERMS GLOSSARY VWAP Government Victorian State WACC USD USAIFI USAIDI USA UK (Vic) TUoS TSR TRR Temasek STPIS STI Stapled Group State Grid Poor’s Standard & SPI Group Singapore Power SGX orSGX-ST SGD ROE RIFR RES ROIC the day then dividingbythetotalshares traded for by number of sharesmultiplied traded) and dollars traded foreverytransaction (price benchmark calculated byaddingupthe Volume-weighted average price, atrading The government oftheState of Victoria Weighted average costofcapital United States dollar Frequency Index Unplanned System Average Interruption Duration Index Unplanned System Average Interruption United Stated ofAmerica United Kingdom of Victoria Indicates state legislationoftheState Transmission useofsystem Total Shareholder Return Transmission RevenueReset Temasek Holdings(Private) Ltd Scheme Service Target Performance Incentive Short-term incentive Finance Trust asacombinedentity. (Transmission) Ltd andAusNetServices (Distribution) Ltd, AusNetServices comprisingAusNetServices Services The formercorporate structure ofAusNet State GridCorporation ofChina division oftheMcGraw-Hill Companies, Inc. Standard & Poor’sRatingServices, a Singapore PowerInternational Pte Ltd Subsidiaries Singapore PowerLimited andits it operates Limited orthesecuritiesexchangewhich Singapore ExchangeSecurities Trading Singapore dollar Return onequity Recordable injuryfrequency rate Regulated Energy Services Return oninvested capital

ANNUAL REPORT 2018 125 3.74 0.33 0.56 0.02 % of % 95.35 Shares 100.00 3,614,346,765 Issued Capital 13,781 Holders Shares 867,513 11,850,749 20,245,468 135,148,962 3,446,234,073 3,614,346,765 265 5,124 1,592 2,691 4,109 13,781 Total holders Total

Total 5,001 - 5,001 - 10,000 100,001 and over Range Class Ordinary Shares Ordinary 1 - 1,000 1,001 - 5,000 10,001 - 100,000 DISTRIBUTION OF SHARES OF DISTRIBUTION ISSUED CAPITAL ISSUED VOTING RIGHTS VOTING A distribution schedule of the number of holders of shares is set out below: of shares A distribution schedule of the number of holders For the avoidance of doubt, any person named in the Central Depository (Pte) Limited of Singapore (“CDP”) as a person on whose (“CDP”) of Singapore Limited Depository (Pte) any person named in the Central of doubt, For the avoidance virtue of their status as a CDP by vote does not have any right to (“CDP Account Holder”) shares behalf CDP holds one or more Account Holder. Subject to any rights or restrictions attaching to our shares, on a show of hands each shareholder present at a meeting of present on a show of hands each shareholder shares, attaching to our or restrictions Subject to any rights each fully paid share for vote has one on a poll, and, vote has one attorney or representative in person or by proxy, shareholders held. The shareholder information set out below was compiled from AusNet Services’ register of shareholders as at 17 May 2018. of shareholders register AusNet Services’ from information set out below was compiled The shareholder There is no current on-market buy-back. is no current There The number of shareholders holding less than a marketable parcel of shares was 413, holding 27,928 shares based on the closing shares holding 27,928 was 413, holding less than a marketable parcel of shares The number of shareholders market price on 17 May 2018.

INFORMATION SHAREHOLDER SHAREHOLDER 126 AUSNET SERVICES (CONTINUED) employee share trustatanaverage priceof$1.73pershare. period atanaverage pricepershare of$1.72. Inaddition, 5,958,915shares were purchasedon-marketbytheAusNetServices Pursuant toAusNetServices’ General Employee ExemptShare Plan455,673 shares were purchasedon-marketduringthereporting asat17May2018,substantial holdingnoticesreceived byAusNetServices are listed below: The namesofAusNetServices’ substantialholdersandthenumberofshares inwhicheachhasarelevant interest, asdisclosedin SHAREHOLDERS EMPLOYEE INCENTIVE SCHEME ON SUBSTANTIAL HOLDERS INFORMATION SHAREHOLDER Rank State GridInternational Development Limited anditsassociates Singapore PowerInternational Pte Ltd anditsassociates 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Total RemainingHoldersBalance Total Top 20holdersoffullypaidordinary shares Name Singapore PowerInternational Pte Ltd HSBC Custody Nominees(Australia) Limited State GridInternational Australia DevelopmentCompanyLimited J PMorgan NomineesAustralia Limited Citicorp NomineesPtyLimited The Central Depository(Pte) Limited National NomineesLimited BNP Paribas NomsPtyLtd BNP Paribas NomineesPtyLtd IOOF Investment Management Limited IOOF InvestmentManagementLimited Citicorp NomineesPtyLimited Bainpro NomineesPtyLimited CPU Share PlansPtyLtd LTI AMP Life Limited HSBC Custody Nominees (Australia) Limited - A/C2 HSBC Custody Nominees (Australia) Limited IOOF Investment Management Limited IDPS IOOF InvestmentManagementLimited Aotearoa InvestmentCompanyPtyLimited

- MARKET PURCHASES 3,369,293,013 1,124,061,844 1,124,061,844 245,053,752 209,628,882 719,255,007 719,255,007 748,145,948 118,786,330 shares held 257,478,457 shares held 26,049,937 20,406,724 72,540,768 10,970,570 12,192,508 17,916,030 4,268,408 2,049,785 3,390,754 5,958,915 2,943,329 5,974,071 4,557,401 2,717,345 No. of No. of

Percentage of issued shares Voting Power 19.90% 31.10% 93.23 20.70 19.90 31.10 0.08 0.08 0.50 5.80 0.09 0.06 0.30 0.56 0.34 6.77 3.29 0.72 0.16 0.13 2.01 0.12 0.17 7.12 ANNUAL REPORT 2018 127 AUSNET SERVICES AUSNET REGISTERED OFFICE REGISTERED SECRETARY COMPANY AUDITOR STOCK EXCHANGE LISTING EXCHANGE STOCK INFORMATION (“TFN”) NUMBER FILE TAX NAME OR ADDRESS OF CHANGE AusNet Services Ltd (ABN 45 603 317 559) AusNet Services Ltd 2 Southbank Boulevard 31, Level Victoria 3006 Southbank, 3 9695 6000 +61 Telephone: 3 9695 6666 +61 Facsimile: Hamilton Ms Claire KPMG Two Tower Collins Square 727 Collins Street Victoria 3008 Melbourne, 3 9288 5555 +61 Telephone: 3 9288 6666 +61 Facsimile: The shares are listed under the name “AusNet Services” Services” “AusNet under the name listed are The shares and on Exchange, Stock the Australian on and code “AST” under the code “AUSNET Exchange Limited the Singapore House in the Clearing participate The shares SERVICES”. (“CHESS”). System Subregister Electronic announced its intention On 2 May 2018 AusNet Services Ltd Exchange. Stock the Singapore delist from to voluntary TFN, a to provide While it is not compulsory for shareholders AusNet Services dividends to is obliged to deduct tax from supplied such who have not in Australia holders resident you TFN, supplied your have not already If you information. may wish to do so by writing to Computershare. in immediately, should notify Computershare A shareholder address is any change in his or her registered if there writing, or name.

1300 850 505 (within Australia) +61 3 9415 4000 (outside Australia) 3 9415 +61 2500 3 9473 +61 3 9695 6000 +61 3 9695 6666 +61 [email protected]

ENQUIRIES AND INFORMATION AND ENQUIRIES ANNUAL GENERAL MEETING GENERAL ANNUAL FINANCIAL CALENDAR FINANCIAL Telephone: Computershare Investor Services Pty Limited Computershare 452 Johnston Street Falls, Yarra Victoria 3067 Abbotsford, GPO Box 2957 Victoria 3001 Australia Melbourne, Computershare Investor Services Pty Limited (“Computershare”). Investor Services (“Computershare”). Pty Limited Computershare of shares a transfer For enquiries about AusNet Services shares, contact: or dividends, AusNet Services Investor Relations Telephone: AusNet Services’ register of shares is maintained by of shares register AusNet Services’ contact: For enquiries about AusNet Services, to: Or write Investor Relations AusNet Services 2 Southbank Boulevard 31, Level Victoria 3006 Australia Southbank, Facsimile: Facsimile: Email: Exhibition Centre & Melbourne Convention Auditorium Melbourne Convention and Exhibition Centre Street, 2 Clarendon 2, Level Australia Victoria, Melbourne, Southbank, The Annual General Meeting of AusNet Services will be held The Annual General The location of the Annual Thursday 19 July 2018. at 2.00pm Meeting is: General 31 March 2019 end Year 2018/19 Financial 14 November 2018 14 November Results announced Year 2018/19 Half 30 September 2018 30 September end Year 2018/19 Financial Half 19 July 2018 Meeting 2018 Annual General

INFORMATION COMPANY Designed and produced at www.twelvecreative.com.au at produced and Designed AUSNET SERVICES

Level 31 2 Southbank Boulevard Southbank VIC 3006

T +61 3 9695 6000 F +61 3 9695 6666

Locked Bag 14051 Melbourne City Mail Centre Melbourne VIC 8001 www.ausnetservices.com.au

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