For Personal Use Only Use Personal for but Now Offer Our Industry Leading Services to Small Businesses
Total Page:16
File Type:pdf, Size:1020Kb
27 September 2013 The Manager Company Announcements Office Australian Securities Exchange Via Electronic Lodgement Attached are the following documents: 1. The Annual Report including Financial Statements and Directors’ Report for the year ended June 2013. 2. Notice of annual general meeting and shareholder proxy form. 3. The ERM Power Update. These documents are being sent to shareholders in accordance with their election as to the receipt of printed reports. Peter Jans Group General Counsel & Company Secretary ERM Power Limited For further information Garry West Corporate Communications Manager Phone: +61 7 3020 5165 Mobile: +61 457 140 650 Email: [email protected] About ERM Power ERM Power is a dynamic Australian energy company with interests in electricity sales and generation, and gas production and exploration. Trading as ERM Business Energy and founded in 1980, we have grown to become the 4th largest electricity retailer in the National Electricity Market with operations in every state. We initially focused on larger businesses For personal use only but now offer our industry leading services to small businesses. We have equity interests in 442 megawatts of low emission, gas fired peaking power stations in Western Australia and Queensland, sell conventional gas and condensate from onshore discoveries in Western Australia, and have gas exploration operations in Western Australia and New South Wales. www.ermpower.com.au ERM POWER LIMITED ERM POWER ANNUAL REPORT | ANNUAL REPORT 2013 REPORT | ANNUAL For personal use only ERM POWER ERM Power (ASX code: EPW) is a dynamic Australian energy company with interests in electricity sales and generation, and gas production and exploration. For personal use only CONTENTS Chairman’s and Managing Director’s Report 2 Management Discussion and Analysis 4 Directors’ Report 16 Remuneration Report 22 Corporate Governance Statement 30 Annual Financial Statements 34 Directors’ Declaration 100 Independent Auditor’s Report 101 Share and Shareholder Information 103 Corporate Directory Inside Back Cover ERM Power Limited (ERM Power, Company, Group, we, our) was listed on the For personal use only Australian Securities Exchange on 10 December 2010. This review is for the year ended 30 June 2013 with comparison against the previous corresponding period ended 30 June 2012 (previous year or previous period). All reference to $ is a reference to Australian dollars unless otherwise stated. Individual items and totals are rounded to the nearest appropriate number or decimal. Some totals may not add down the page due to rounding of individual components. INTRODUCTION CHAIRMAN’S We are pleased to report that ERM Power performed strongly in FY 2013, despite challenging market conditions. At the same time, we laid the platform for future growth, particularly in electricity sales AND MANAGING to the small to medium enterprise (SME) segment of the market. Highlights of the year included strong and profitable growth from our electricity sales business, another significant earnings contribution from our generation business, the evolution of our gas DIRECTOR’S REPORT business from explorer to producer, and a successful capital raising. Our electricity sales business, which trades as ERM Business Energy, set new standards for customer service and continued to expand its market share around Australia as it became the fourth1 largest supplier of electricity in the National Electricity Market and prepared to enter the SME market. Our generation assets maintained their outstanding availability and reliability while continuing to reduce debt, and our gas business began production of gas and condensate in our tenements in the Perth Basin. Importantly, we maintained our outstanding safety record and supported the local communities in which we operate. PERFORMANCE The Company continued its strong financial performance since listing on the ASX with EBITDAIF2 and underlying NPAT3 in FY 2013 well up on FY 2012 when significant items and a one-off gain in FY 2012 are excluded. Shareholders were rewarded with another increase in dividends. The electricity sales business achieved 34% growth in sales volumes and 36% growth in earnings with the highest sales growth rates in New South Wales and Victoria at 69% and 129% respectively. The growth was driven by our competitive advantages in customer service and operations and was assisted by the launch of the first marketing campaign to increase awareness of the ERM Business Energy brand around Australia. For the second consecutive year, ERM Power was independently rated number 14 for service to business electricity customers in Australia, setting new records for customer satisfaction well above all other energy retailers. Our generation business remained a major profit contributor, performed safely and achieved high reliability at our 83.33%-owned Oakey Power Station in Queensland and our 50%-owned Neerabup Power Station in Western Australia. For personal use only 1 Based on ERM Power’s forecast league table for volume of electricity sold in the National Electricity Market for FY 2013. The analysis draws on 2011 SRES scheme liability data, ERM Power signed contracts and broad assumptions about the market and participants. This is not an independently verified forecast. 2, 3 Refer to non-IFRS measures in the Management Discussion and Analysis for definitions. 4 Utility Market Intelligence (UMI) survey of the retail electricity industry by independent research company NTF Group in 2012 (17th year of Survey). Research based on interviews with 495 business customers. Five major electricity retailers participated. PAGE 2 ERM POWER ANNUAL REPORT | 2013 We are assessing all options for Oakey when the current off-take The Company raised about $58m net of transaction costs through contract ends in December 2014, at which point it is scheduled to a placement of new shares with institutional and sophisticated be debt free and in near-new condition. investors and another $10m through a share purchase plan. The primary purpose of the capital raising was to support expansion Our gas business became a producer with the commissioning of the into the SME market and repay a corporate unsecured debt facility. Red Gully gas and condensate facility starting at the end of FY 2013. Other growth opportunities being pursued include leveraging We also took a strategic foothold in the east coast gas market our electricity customer base and competitive advantages to through the acquisition of interests in prospective tenements in grow earnings by enhancing our product and service offering the Clarence Moreton Basin in New South Wales, with options with gas and metering. to acquire up to 100%. We also continue to pursue a potential demerger of our gas STRATEGY exploration and production business to create an entity with a greater capacity to realise its various exploration opportunities Although ERM Power is a diversified energy business, our while limiting our ongoing capital commitments. aspiration is very simple. We aspire to be the preferred supplier of energy to business PEOPLE AND THE COMMUNITY customers across Australia. We had another safe operating year with no lost time or Our strategic focus is on creating, maintaining and growing our recordable injuries, which continued our enviable safety record competitive advantage such that we can offer better service and of no permanent injuries over 33 years of operations. value to business customers, grow market share and expand the Similarly, there were no reportable environmental incidents or product and services we offer. breaches of our environmental licences. As well, we continued Competitive sourcing and pricing, innovative products, to support the communities in which we operate through personalised service, accurate and on time billing and customer sponsorships and other community activities. information, and highly efficient and low cost operations are our Underpinning our performance are our people and, on behalf of key competitive advantages. the board, we would like to thank the management team and all Diversification and resilience is also a key strategic focus area staff for their outstanding efforts over the past year. with the Company developing, retaining and enhancing its ability We also acknowledge the support and significant contribution of to operate in all parts of the energy supply chain from exploration, our fellow directors and, in particular, the Company’s founder and through production to retailing of electricity and gas to the end user. Deputy Chairman, Trevor St Baker. OPPORTUNITIES OUTLOOK The most significant opportunity that we are pursuing is the ERM Power is well positioned to continue to grow its electricity expansion of our electricity sales business from large business sales business, maintain reliable earnings from its generation customers to all business customers by entering the SME market. assets, and realise additional value from its gas exploration and Expanding into the small business market increases our potential production gas business. earnings pool by a factor of four and provides a customer base The Company remains committed to enhancing shareholder value with significantly higher margins to complement the commercial and achieving its vision of being the preferred energy supplier to and industrial customers that operate on significantly lower margins. business customers across Australia. In FY 2013 we completed preparations to enter this market and secured one of the largest multi-site deals in Australia