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ERGON ENERGY Annual Stakeholder Report 2011/12 CONTENTS

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ERGON ENERGY Annual Stakeholder Report 2011/12 CONTENTS ERGON ENERGY Annual Stakeholder Report 2011/12 CONTENTS ABOUT OUR REPORT 2 ERGON ENERGY IN PROFILE 3 THE YEAR IN SUMMARY 6 CHAIRMAN’S MESSAGE 10 CHIEF EXECUTIVE’S REPORT 11 REVIEW OF OPERATIONS 13 CUSTOMER-DRIVEN 14 Details the emphasis we’re placing on being customer-driven, on being more cost-efficient and delivering increasing customer value and choice. ASSET MANAGEMENT EXCELLENCE 22 Showcases how we’re lifting our asset management capability to deliver more reliable, efficient and sustainable energy supply solutions. HIGH-PERFORMANCE ORGANISATION 28 Outlines our success in realising greater efficiencies and effectiveness, and the role information technology will increasingly play in supporting our people. OUR ECONOMIC AND FINANCIAL PERFORMANCE 39 OUR CORPORATE GOVERNANCE STATEMENT 43 LOOKING FOR MORE INFORMATION? This Annual Stakeholder Report and the Annual Financial Statements for Ergon Energy Corporation Limited and its Controlled Entities (including the Directors’ Report and our Financial Statements), as well as previous year’s reports, are available online at www.ergon.com.au/annualreport Additional statistics, abbreviations and industry measures are provided on page 56. Ergon Energy recognises that the rising price of electricity is a concern for our customers. Addressing this issue is at the core of our strategic plan, as well as the achievements and challenges highlighted in this report. We are committed to doing everything we can to positively affect the price our customers pay for electricity – whether this is by managing electricity demand during peak times to make better use of our assets or reducing our own costs through business efficiency and improvements. At the same time we know we have to keep pace with the growing demand for electricity and that our customers expect to have a safe and reliable electricity supply. It’s about finding the balance – and working together to find smarter, more efficient ways to ensure a bright future for regional Queensland. ABOUT OUR REPORT Our Annual Stakeholder Report 2011/12 presents a holistic insight into the organisation’s overall performance for the financial year and demonstrates the contribution that Ergon Energy is making towards the broader sustainability challenges facing regional Queensland. The report covers Ergon Energy Corporation Limited and its subsidiary Ergon Energy Queensland Pty Ltd, as well as commentary on our other subsidiaries and joint venture. p43 Publishing performance Enhances readers’ against set goals builds understanding of the confidence in the sustainability challenges organisation’s governance. WHY WE we can contribute to. report WHAT Ensures we meet our Reporting transparently WE DO stakeholders’ expectations builds understanding, of our corporate reporting trust and our reputation. standards. WHY WE REPORT WHAT WE DO At Ergon Energy we believe that To assist us to continually improve It is our aim through this report to reporting from both a financial and our reporting we invite your feedback demonstrate to our stakeholders non-financial perspective helps us through our online Feedback Form, that Ergon Energy is a professional, develop a shared understanding of also found at accountable, outcomes-driven our common objectives, and our www.ergon.com.au/annualreport, organisation. broader challenges. This in turn or you can contact our Community encourages the adoption of more Engagement and Advocacy team Our stakeholders are our customers, the appropriate, sustainable practices on 13 10 46. communities we work in and serve, our and actions by our employees, and by employees (including their representative our industry, and by our stakeholders unions), our government shareholders, more broadly. the industry’s regulators, our suppliers and industry associates. p53 The content of this report has also been guided by the Australasian Reporting Ergon Energy is active in assessing our Awards criteria for best-practice stakeholders’ needs and expectations, reporting, as well as the Energy Supply and feeding this understanding into Association of Australia’s Sustainable business decision-making both at an Practices Framework. The Global operational and strategic level; these Reporting Initiative’s (GRI) G3 Principles insights have been used to reassess of Sustainability Reporting have also the materiality of the information been used to enhance the comparability provided in this report. We are of our reporting. To easily locate committed to continuously improving information about specific GRI indicators the transparency and relevance of in this report, refer to the index online at our stakeholder communications. www.ergon.com.au/annualreport 2 ABOUT OUR REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2011/12 ERGON ENERGY IN PROFILE Ergon Energy supplies electricity across a service area of more than one million square kilometres – 97% of the state of Queensland. Boigu Is. Saibai Is. Dauan Is. Stephens Is. Yorke Is. Darnley Is. Mabuiag Is. TORRES STRAIT Yam Is. Murray Is. Badu Is. Coconut Is. Bamaga Warraber Is. Kubin, Moa Is. Hammond Is. Mapoon Thursday Wasaga, Horn Is. Lockhart Is. Napranum River TORRES STRAIT Aurukun Coen Pormpuraaw Kowanyama Cooktown Key Administration Centre Gununa, Mornington Is. Mossman Distribution Network Cairns Mareeba Depot/Workshop Burketown Atherton Normanton Innisfail Barcaldine Power Station Doomadgee Ravenshoe Tully Georgetown Isolated Supply Ingham Palm Island Townsville Home Hill Camooweal Julia Creek Charters Towers Bowen Mt Isa Cloncurry Richmond Hughenden Proserpine Pinnacle Mackay NORTHERN Sarina Winton Moranbah St Lawrence Clermont CENTRAL Boulia Middlemount Yeppoon Rockhampton Emerald Longreach Barcaldine Blackwater Gladstone Springsure Bedourie Biloela Miriam Vale Jundah Blackall Monto Moura Gin Gin Bundaberg Theodore Childers Windorah Biggenden Hervey Bay Mundubbera Birdsville Gayndah Maryborough Charleville Proston Kilkivan Quilpie Wandoan Murgon Roma Kingaroy Chinchilla Yarraman SOUTHERN Tara Toowoomba Dalby Cunnamulla St George Millmerran Brisbane Warwick Stanthorpe ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2011/12 3 ERGON ENERGY IN PROFILE OUR BUSINESS Ergon Energy’s retailer is only permitted, Ergon Energy’s other subsidiary is Ergon Ergon Energy is a Queensland by legislation, to sell electricity at the Energy Telecommunications Pty Ltd, Government-owned corporation. Queensland Government’s Notified trading as Nexium Telecommunications. Our principal operating companies Prices. The Queensland Competition This business services Ergon Energy’s are Ergon Energy Corporation Authority (QCA) oversees these tariffs. communications needs and, as a licensed telecommunications carrier, offers the Limited, responsible for the distribution This enables Queenslanders to access Queensland marketplace wholesale business, and the subsidiary Ergon the same uniform electricity tariffs, high-speed data services. Energy Queensland Pty Ltd, an wherever they live, even though the electricity retailer. cost to supply may be different. Ergon Energy is also a shareholder The distribution business – the ‘poles Customers in regional Queensland in a joint venture with Energex and wires’ – largely remains a monopoly, can choose, however, to purchase their Limited (our south-east Queensland and is regulated by the Australian electricity from another retailer in the counterpart), SPARQ Solutions Energy Regulator (AER). The AER sets competitive market – at a price set by Pty Ltd, which provides information the revenue Ergon Energy is allowed that retailer – and still be supplied from and communications technology to collect for our distribution services. Ergon Energy’s distribution network. (ICT) solutions and services to These charges are just one of the both organisations. components that make up the price of electricity. ELECTRICITY INDUSTRY SUPPLY CHAIN Although not a major generator, Ergon Energy A range of energy sources operates a 55MW gas-fired power station at Barcaldine. It supplies power into the statewide (coal-fired, biomass, gas, hydro electricity grid and the National Electricity Market. and wind) is used by private and We also have 33 stand-alone power stations, government-owned operators to with local distribution networks, that supply communities isolated from the main grid in generate Queensland’s electricity. Western Queensland, the Gulf of Carpentaria, Cape York, various Torres Strait Islands and Palm Island. Powerlink Queensland, as a government-owned The transmission network consists corporation, operates the high-voltage transmission network that extends along of lines that carry electricity from the Queensland coastline. They utilise Ergon the point of generation over long Energy’s regional capability to help provide distances and feed it into the and maintain these assets cost-effectively. Ergon Energy also has its own 220kV network distribution network. in the Mount Isa region. Electricity is delivered across regional Queensland through Ergon Energy’s network of ‘poles and wires’. Around 70% of our powerlines run through Distribution lines then carry rural Queensland, covering vast distances, and in electricity directly to Queensland’s many cases relatively unpopulated areas. Much of homes and businesses. this part of our network, around 65,000 kilometres of line, uses the electricity distribution technology known as SWER (Single Wire Earth Return). A number of electricity retailers operate in regional Queensland – they buy electricity from the generators and on-sell it to customers.
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