annual report 2009 - western power · met most of our key performance targets and have put in place...

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Chairman’s Introduction 1Highlights 2 Managing Director’s Review 4Our Performance 6 Our Business 10Network Enhancement 12Our Stakeholders 22Our People 28Sustainability 32Environment 34Climate Change 36Executive Team and Board 39

F I N A N C I A L R E P O R T

Directors’ Report and Governance Statement 42

Financial Statements 61

Corporate Compliance Disclosures 86

Glossary 88

GRI Index 89

A B O U T O U R R E P O R T

This annual report covers Western Power’s financial performance, statutory obligations and for the first time, our sustainability performance for the period 1 July 2008 to 30 June 2009.

It demonstrates our commitment to a sustainable future, reporting on a broad range of business issues complementary to those defined in the Statement of Corporate Intent agreed annually with the Minister for Energy, consistent with Electricity Corporations Act 2005 (WA) and Electricity Industry Act 2004 (WA). The content of this report is also influenced by the Global Reporting Initiative (GRI) guidelines version 3.0 and the Electricity Utility Sector Supplement.

Our aim is to provide insight into our broader business performance and aspirations, highlighting Western Power’s commitment to delivering sustainable energy solutions for our customers and the community.

This report also sets targets and strategies to further improve our understanding, measurement and reporting of key business issues.

To help us continue to improve our corporate reporting, we invite your feedback via email on [email protected]


On behalf of the Board of Directors, I am pleased to present the 2008/09 Western Power Annual Report.

When I joined the Board of Western Power as Chairman in 2006 I talked about the business positioning itself to meet the challenges of the future. Three years on and I am encouraged to see Western Power maturing as a business and clearly defining what it stands for, where the business is heading and how it is going to get there.

As part of the maturing process I have seen a significant shift in the culture of the organisation. Three years ago the business would have been described as siloed and inwardly focussed. Over the past year a great deal of effort has been invested in understanding customers’ needs better, and I have seen a noticeable shift towards placing the customer at the heart of everything the business does.

The strong customer focus is supported by our sustainability framework, which was implemented early this year. The framework ensures we are meeting the needs of current and future generations by considering environmental protection, social development and economic prosperity in our business activities and decisions. A great example is our partnership with the Denmark and Walpole communities on the iconic Green Town project where we collaborated with the community to

the energy utility sector in the areas of finance, treasury, accounting and risk management and was Chief Executive Officer of Alinta Infrastructure Holdings Ltd until February 2007 has replaced Jenny Seabrook as a non-executive director and Chair of the Finance and Risk Committee.

Sally’s expertise in economic regulation, risk management and strategic decision making in the utilities and infrastructure sector was extremely valuable, particularly in her position on the Finance & Risk Committee. Karen’s strong human resources and project management background proved invaluable in her roles both on the Board and as Chair of the People & Performance Committee. Jenny has contributed significantly to the development and continuous improvement of our approach to financial, risk and regulatory management, and brought exemplary diligence, professionalism and insight to her roles. I would like to take this opportunity to thank Karen, Sally and Jenny for their guidance and commitment during their three year tenure. We will miss their energy and expertise and we sincerely wish them all the very best in their next endeavours.

Western Power is preparing for a challenging year ahead as the impact of the deteriorating economic climate and ageing asset base places a number of demands on the business. I am confident the organisation will continue to seek new and innovative ways to deliver energy solutions for a sustainable future and embrace change to ensure its ongoing growth and long term success.

Peter Mansell Board Chair

C H A I R M A N ’ SI N T R O D U C T I O N

develop a mutually beneficial model that delivers energy solutions for the business and the community.

Western Power’s ability to deliver a $1.1 billion works program, achieving delivery of 96 per cent of projects on budget and 99 per cent of projects on time, demonstrates the result of clear focus and improvements in organisational capability.

Since we are heavily debt financed, a critical issue for the business is the financial constraints on the Government due to the economic crisis. The impact of underinvestment in our infrastructure will have a direct link to lesser levels of reliability that we will be able to deliver to our customers.

Our second Access Arrangement proposals were submitted to the Economic Regulation Authority in October 2008 and both parties are working together to agree appropriate business outcomes taking into consideration pricing, customer needs and delivery of a return to our shareholder.

I am pleased to announce three new appointments to the Western Power Board of Directors. Paul Underwood succeeds Sally Farrier as a non-executive director, bringing experience in corporate advisory, chartered accounting, and the oil and gas industry. Mark Barnaba has been newly appointed as a non-executive director, succeeding Karen Field. Mark is co-founder, Managing Director and co-executive Chairman of Azure Capital and was also a co-founder and Managing Director of GEM Consulting and Poynton & Partners, a corporate advisory and management consulting firm. He has also spent time working in industry, financial services and management consulting. John Cahill, who has more than 25 years experience working in



H I G H L I G H T SA C H I E V E M E N T S

2 Lowest Lost Time Injury Frequency Rate of 2.7 (In 2007/08 the rate was 4.3)

1 $1.1 billion spend with 96 per cent of projects completed on budget and 99 per cent of projects completed on time

7 Western Power’s leading edge network management system wins prestigious Engineering Excellence Award

5 Our investment in sustainable initiatives such as the Green Town project reduces energy consumption

3 Launch of our state-of-the-art 24hr Customer Service Centre ahead of schedule, delivering significant business efficiencies

4 Western Power’s inaugural Sustainability Policy endorsed by the Board

6 A record 195,846 poles inspected and pole replacements doubled from last year

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8 Our vision for safety and energy efficiency education commences as we engage with more than 40,000 primary school children

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C H A L L E N G E S

Earnings before tax . . . . $176.5m

Net profit after tax . . . . . $126.2m

Revenue . . . . . . . . . . . .$1,102.6m

Interim dividend . . . . . . . . $20.2m

Expected final dividend . . . .$6.9m

Capital investment . . . $1,021.5m

2 Improving contractor and employee safety

1 Securing Access Arrangements and performing to regulatory contract

7 Improving forecasting and infrastructure planning

5 Continuous improvement in sustainability performance and reporting

8 Maintaining service standards with declining funding

3 Increase in customer demand and load requirements

6 Contributing to state energy security following two gas pipeline supply incidents

4 An ageing network with 30 per cent of the network more than 40 years old

E C O N O M I C P E R F O R M A N C E


During the past financial year Western Power has committed to identifying and implementing change across our business to ensure we deliver value to our State and our shareholder and that we become a dynamic organisation that can provide sustainable energy solutions for our customers.

Since our inception in April 2006 we have continually assessed the way we operate. In 2007 we took our first steps towards a bold new strategic direction, acutely aware that without a reinvention, the business would not evolve at the pace required to meet changing expectations and remain relevant in the future.

I am pleased to report that we have met most of our key performance targets and have put in place strategies for 2009/10 to ensure we continue to lift our level of performance, aiming for even more challenging targets. As a core value to our business, safety has again been a priority. During the year we introduced a drug and alcohol policy, driver safety awareness campaign, fatigue management standards, fit for work program and a no-smoking policy. We achieved our lowest ever Lost Time Injury Frequency Rate (LTIFR) during

the March quarter, and although we failed to meet our All Medical Frequency Rate (AMFR) target of less than 14, we saw a reduction over the course of the year from 19.9 in 2007/08 to 14.4 in 2008/09.

This year we saw solid performance in most of our key focus areas. Higher than forecast capital contributions, resulting from work being completed by Western Power, contributed to us exceeding our full year forecast Earnings Before Tax (EBT) position of $75 million. Throughout the year we consistently recorded above target results for our customer charter, which details our performance in service responsiveness in six areas including streetlights, new connections and complaints. This result is due to several initiatives including new contact centre technology, improved allocation of crews for new connection work and improved data capture for streetlight issues resulting in better analysis and timely management.

The $1.1 billion works program was a significant achievement for the business this year. Exceeding targets and delivering 96 per cent of projects on budget and 99 per cent on time is an outstanding result.


M A N A G I N G D I R E C T O R ’ S R E V I E W


Wehavemetmostofourkeyperformancetargetsandhaveputinplacestrategiesfor2009/10toensurewecontinuetoliftourlevelofperformance,aimingforevenmorechallengingtargets.

A key challenge for the business has been the submission of our second Access Arrangement, or Western Power’s revenue and performance contract, to the Economic Regulation Authority (ERA). Securing the second agreement with the regulator will provide certainty around the investment in the network until 2011/12. The critical issue moving forward is the age of our assets (30 per cent of our assets are more than 40 years old) with increased investment necessary if we are to maintain the current levels of reliability at a time when funding sources are under significant pressure due to the global financial crisis.

For our part we need to achieve more with less, and so moving forward Lean Six Sigma (methodology to improve process efficiency) will be central to our business improvement strategy, supporting our regulatory contract and our journey towards genuine sustainability.

Western Power has taken the opportunity to develop and implement a sustainability framework that will deliver balanced outcomes for our customers and the environment and ensure the organisation is well positioned for the future. This year we implemented a number of initiatives to build our sustainability capability including the establishment of a Sustainability Branch, the adoption of our inaugural Sustainability Policy in September 2008 by the Board and the development and implementation of a sustainability framework. These measures will help embed sustainability in the way we do

business, thinking not only of short term solutions but solutions that have a strategic sustainable focus.

A significant challenge facing the energy industry has been access to and retention of the best, skilled people. We are continuing to grow our own talent and provide staff with opportunities to develop their capabilities, and we are starting to see the results of our cultural transformation and a willingness to view change as an opportunity. Our progress was reinforced by the results of our annual employee survey which showed a significant increase in engagement levels across the business. I thank all of our employees for their contribution to a strong performance in what has been a challenging year.

Doug Aberle Managing Director



O U R P E R F O R M A N C E

WesternPower’sperformanceistrackedagainstKeyPerformanceIndicators(KPIs)detailedintheWesternPowerStatementofCorporateIntent2008/09.

A SUMMARY OF WESTERN POWER’S 2008/09 PERFORMANCE

Targets approved by the Economic Regulation Authority (ERA) as part of the 2006 - 2009 Access Arrangement.

Note: contractor performance was not reported in 2006/07.

1 LTIFR and AMFR data includes statistics from Western Power’s workforce, incorporating both employees and contractors.

2 SAIDI target under review as part of Western Power’s Access Arrangement submission to the ERA.

SAFETY PERFORMANCE 2006/07 - 2008/09

5.0 –

4.5 –

4.0 –

3.5 –

3.0 –

2.5 –

2.0 –

1.5 –

1.0 –

0.5 –

0 –2006/07

LTIFR

2008/09

EMPLOYEES ONLYEMPLOYEES AND CONTRACTORS

2007/08

20 –

18 –

16 –

14 –

12 –

10 –

8 –

6 –

4 –

2 –

0 –2006/07

AMFR

2008/09

EMPLOYEES AND CONTRACTORS

2007/08

INDICATOR DESCRIPTION 2008/09 ACTUAL

2008/09 TARGET

Lost Time Injury Frequency Rate (LTIFR)1 (LTIs per million hours worked - workforce)

2.7 <3.5

All Medical Frequency Rate (AMFR)1

(AMs per million hours worked - workforce)14.4 <14

System Average Interruption Duration Index (SAIDI)2 (Total duration of interruptions per customers per year)

221 203

Customer Charter compliance (%) 91 85

Earnings Before Interest and Tax (EBIT) ($M) 381.4 301

Earnings Before Tax (EBT) ($M) 176.5 75.0

Net Profit After Tax (NPAT) ($M) 126.2 52.5

Major projects delivery (%) 99 95

Value of role in energy efficiency and sustainable solutions (%)

70 69

Corporate reputation (%) 67 65


S A F E T Y

To continue our focus on safety and health across all operations, agreed KPIs for 2008/09 safety performance consider the whole workforce, including contractors.*

Safety performance improved throughout 2008/09, delivering the biggest improvement in Lost Time Injury Frequency Rates (LTIFR) since disaggregation in 2006.

The workforce LTIFR dropped from 4.5 (injuries per million hours worked last year) to a record 2.7 in 2008/09 against a key performance indicator of 3.5. This is a significant improvement and whilst these figures indicate fewer incidents resulting in lost time injuries to our people, further work is required if we are to achieve our goal of becoming a zero harm business.

The workforce All Medical Frequency Rate (AMFR) was 14.4, a performance above our full year target of <14. This is a disappointing result, however our AMFR has improved over the course of the year, decreasing each quarter from 18.1 in quarter one to the full year performance of 14.4.

More information on safety and health at Western Power is available on page 29.

* Note: contractor LTIFR and AMFR was not included in 2006/07 and 2007/08 KPIs.

N E T W O R K P E R F O R M A N C E

There was an improvement in overall network performance for the 2008/09 financial year. System Average Interruption Duration Index (SAIDI) tracked at 221 minutes (total duration of power interruption in minutes per customer per year) a nine minute improvement on last year’s performance of 230 minutes.

The SAIDI result of 221 minutes is above the published annual target of 203 minutes, due primarily to changing economic conditions in Western Australia. SAIDI targets and associated work plans were established under a buoyant state economy, focussing expenditure on capacity expansion and public safety. The subsequent economic decline resulted in the completion date for some of the scheduled reliability and improvement work being pushed out to 2009/10.

Adjustments in the maintenance program throughout the year allowed us to achieve improvement on the 2007/08 performance. Overall there has been a reduction in outages caused by equipment failure, lightning, vegetation and vandalism, however we have seen an increase in outages caused by bushfires and vehicle damage.

NETWORK PERFORMANCE 2006/07 - 2008/09

232 –

228 –

224 –

220 –

216 –

212 –

208 –

204 –

200 –2006/07

SAIDI MINUTES INTERRUPTED

2008/09

TARGET

2007/08


C U S T O M E R C H A R T E R

Western Power’s Customer Charter (available on westernpower.com.au) details performance in a number of service measures to residential and small-use business customers, including new connections, telephone handling for faults and customer service, streetlight repairs, complaints and enquiries management.

Customer Charter compliance remained strong throughout the year in five of the six areas with 91 per cent compliance achieved against our overall KPI of 85 per cent. Streetlight repairs will continue to be an area of focus over the next 12 months with a new reporting and data capturing system expected to improve this traditionally challenging area of the business.

More information regarding customer service improvements is available on pages 23-25.

F I N A N C I A L P E R F O R M A N C E

Our Earnings Before Tax (EBT) position for the 2008/09 financial year was $176.5 million, a significant increase on our $75 million target.

This above target performance is due to higher than budgeted regulated revenue and lower than budgeted interest and depreciation. Combined with a discretionary cost review in response to the global financial crisis and the delayed second Access Arrangement (AA2), this has offset an operational expenditure overspend of $68.9 million.

The operational expenditure overspend is predominantly due to Western Power’s maintenance program, with preventative work for the bushfire season and network summer readiness coming in above budget.

Underlying EBT* is $79.1 million, which is $17.3 million below target for the year. This is due to the adjustment for the high level of regulated revenue ($118.7 million over budget) offset by an EBT position of $101.4 million higher than budget.

CUSTOMER CHARTER 2007/08 - 2008/09

2008/092007/08

% –

100 –

90 –

80 –

70 –

60 –

50 –

40 –

30 –

20 –

10 –

0 –

CUSTOMER CHARTER COMPLIANCE

$M –

180 –

160 –

140 –

120 –

100 –

80 –

60 –

40 –

20 –

0 –

EARNINGS BEFORE TAX 2006/07 - 2008/09

2006/07 2008/092007/08

* the measure of our underlying performance is a ‘normalised’ view of the performance of the business removing unanticipated variances due to energy consumption levels (which drive tariff revenue) and increased levels of capital contributions, debt and depreciation (due to higher customer funded activity). Western Power’s long term profitability is a function of its underlying performance although profitability varies in the short term in accordance with actual revenues and costs as they occur. Under the economic regulatory framework within which Western Power operates there are two particular mechanisms that compensate for these short term variations in revenue and costs:

• the ‘k-factor’ adjustment allows for an annual reconciliation of actual revenues (from tariffs and capital contributions) compared with those approved by the Economic Regulation Authority. Any under or over recovery of revenue is carried forward into the following year

• there is also the Investment Adjustment Mechanism (IAM) which comes into play at the end of each regulatory term (three yearly at the moment) which provides a mechanism to adjust the allowed revenue for any under or over capital expenditure. This is created by variations in customer-driven expenditure against that forecast at the start of each regulatory term


M A J O R P R O J E C T S D E L I V E R Y - A P P R O V E D W O R K S P R O G R A M ( A W P )

The second year of our largest ever works program was completed in June 2009 as part of our four year $3.5 billion capital investment program. A total of $1,021.5 million was invested in upgrading and expanding the network with $442.5 million spent on major projects.

Of our major projects, 96 per cent were completed under budget and 99 per cent were delivered on or ahead of schedule. A total of $313.9 million was spent on transmission works and $525.7 million on distribution. Expenditure on customer driven works was $400.5 million and $439.1 million was spent on new capacity, asset replacement, public safety work and other regulatory compliance programs.

More information regarding Western Power’s AWP is available on page 13.

C O R P O R A T E R E P U T A T I O N

In our 2009 corporate reputation survey we achieved an overall result of 67 per cent positive customer responses when customers were asked how they rate Western Power in the areas of safety, reliability, community engagement and customer experience.

This result is consistent with our 2008 corporate reputation performance. Analysis of the responses from residential and business customers shows an increase in positive perception among residential customers, but a decrease in the positive rating by business customers.

The 2009 survey identified three key areas that Western Power will focus on to improve corporate reputation, particularly with our business customers:

• dealing with complaints in a timely manner

• working together to respond to customer needs

• keeping the public informed about activities and plans to maintain or upgrade the network

SURVEY CATEGORY POSITIVE RESPONSES 2006/07

POSITIVE RESPONSES 2007/08

POSITIVE RESPONSES 2008/09

Residential customers 66% 65% 70%

Business customers 74% 69% 62%

Overall corporate reputation (Residential and business customers) target = 65%

70% 67% 67%

CORPORATE REPUTATION 2006/07 - 2008/09*

*source: Synovate May 2009

APPROVED WORKS PROGRAM INVESTMENT

2006/07 - 2008/09

1200 –

1000 –

800 –

600 –

400 –

200 –

0 –2006/07 2008/09

AWP CAPITALAWP MAINTENANCE

2007/08

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WORKS • $10 million committed to the Blackspot

Feeder Program

• State Underground Power Program connects 45 per cent of properties in the metro area to underground power

• Dampier to Bunbury gas pipeline expansions completed

SAFETY• Record $128 million Bushfire Readiness

Plan launched

• Workforce LTIFR - 4.3

• Workforce AMFR - 19.9

• Workplace Electrical Safety Initiative (WESI) introduced

• BodyFit program introduced to reduce incidents and soft tissue injury

Western Power is an energy solutions business for a sustainable future, responsible for the distribution and transmission of electricity in the south west of Western Australia.

We operate the largest interconnected network in Western Australia and one of the largest isolated networks in the world. We are responsible for the safe and reliable delivery of electricity to more than 965,000 homes and businesses and the powering of more than 150,000 streetlights.

O U R B U S I N E S S

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2 0 0 6 / 0 7BUSINESS • Western Power commences operation

• First Access Arrangement submitted to the ERA

• SAIDI 229 minutes

• EBT 99.3 million

• Historical peak 3,574 MW

BUSINESS • New strategic direction launched to meet

changing community expectations

• Disability Access and Inclusion Plan developed

• The South Coast Power Working Group established to address power capacity needs and energy efficiency in Denmark and Walpole

• SAIDI 230 minutes

• EBT $121 million

• Peak demand reaches 3,624 MW

SAFETY• Workforce LTIFR - 3.9

• Workforce AMFR - 19.8

• 100-Day Safety Plan established

• ShockProof! extended to kindergarten children

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Power generation

Electricity is generated Western Power begins theprocess of transmission and

distribution of electricityDistributiontransformer

Distributiontransformer

Low voltageunderground

cables


cables

Set-up transformer & terminal substation

Terminal substation Substation

Transmission line

Transmission line

Industrial/commercial customers

Residential customers

Distributed (local)generation

Esperance

Albany

Perth

Kalbarri

Kalgoorlie/Boulder

Western Power’s South West

Interconnected SystemHorizon Power network

Western Power’s South West Interconnected System

Horizon Power network

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To deliver effective sustainable energy solutions now and in the future, we have made significant changes to the way we operate. It is this commitment to change that is fundamental to us continuing to meet the expectations of our customers, the community and the state.

Our sole shareholder is the Western Australian Government. As a corporation, we make commercial decisions within a regulatory framework. Our head office is located in Perth, with depots across the south west of the state.

The following sections detail our performance in key areas, ensuring we create a sustainable electricity network for the South West Interconnected System (SWIS).

During the past year we have continued to develop and improve the network, delivering our essential maintenance and works program. As a business we have become more externally focussed and committed to establishing and developing relationships with key stakeholders.

LEGEND AMFR – All Medical Frequency Rate

(number of injuries requiring medical attention per million hours worked)

EBT – Earnings Before Tax

ERA – Economic Regulation Authority

LTIFR – Lost Time Injury Frequency Rate (numbers of injuries resulting in lost time per million hours worked)

SAIDI – System Average Interruption Duration Index (total duration of power interruptions in minutes per customer per year)

WORKS • Largest ever works program delivered,

exceeding targets

• A record 195,846 poles inspected and replaced

• More than $1,021.5 million invested in upgrading and expanding SWIS

• More than 30 per cent of the network is over 40 years old with significant levels of investment required

• More than 46 projects totalling $97 million completed to ensure reliability of supply during the summer peak period

WORKS • Unprecedented $112 million committed to

Summer Ready works program

• ERA approves 330 kV transmission line from Eneabba to Moonyoonooka

• Over 30,000 new customer connections

• $800 million spent in first year of our largest ever works program

• Two landmark alliance agreements entered with industry

SAFETY• Lowest ever Workforce LTIFR of 2.7

achieved

• Workforce AMFR reduced to 14.4

• ShockProof! delivers safety message to over 40,000 children

BUSINESS • EBT - $176.5 million

• SAIDI - 221 minutes

• First sustainability policy introduced

• Network management system wins Engineering Excellence Award

• Western Power appointed lead role in Perth Solar City program

• Peak demand 3,746 MW

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Power generation

Electricity is generated Western Power begins theprocess of transmission and

distribution of electricityDistributiontransformer

Distributiontransformer


cables


cables

Set-up transformer & terminal substation

Terminal substation Substation

Transmission line

Transmission line

Industrial/commercial customers

Residential customers

Distributed (local)generation

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Our core objective is to provide a robust, flexible and sustainable network for our customers. Increasing network capacity and ensuring reliability are fundamental to achieving this, with infrastructure investment being delivered in a prudent and economically sustainable manner.

The Access Arrangement, our three-year contract with the Economic Regulation Authority (ERA) defines the investment and network development we can deliver during that period. It shapes the way we do business and allows us to deliver a works program to ensure sustainability of energy supply.

The works program and demand management initiatives outlined in this section have continued to ensure that we, together with our alliance partners*, deliver sustainable infrastructure investment for the short and long term needs of Western Australia.

* two service delivery alliances were established in April 2008: Power Alliance (Tenix and Downer) and Transfield Alliance

O U R B U S I N E S S N E T W O R K E N H A N C E M E N T

“Energysolutionsmeanstakingapractical,feasibleandsynergisticapproachtofindinganefficientsolutionforthecustomer,WesternPower,thecommunityandtheenvironment.”

ANNUAL PEAK (MW) TREND (MW)

1980 ‘81 ‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 90 ‘92 ‘91 ‘93YEAR

‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 2009

MW –

4000 –

3500 –

3000 –

2500 –

2000 –

1500 –

1000 –

500 –

0 –

ELECTRICITY CONSUMPTION GROWTH IN WA

AVERAGE GROWTH

10 Year Annual Average Growth 5%

28 Year Annual Average Growth 4.6%

18 Year Annual Average Growth 4.5%


In the 2008/09 AWP, the number of projects delivered on schedule exceeded targets for both capital and operational works. For capital expenditure projects, 94 per cent of transmission projects and 93 per cent of distribution projects were delivered on time, while the volume targets set for operational expenditure were exceeded in transmission and distribution. This is a significant improvement on the 2007/08 performance.

Total expenditure on the AWP for 2008/09 was $1,021.5 million.

Detailed within the AWP are a number of critical projects that form the Major Projects list. This is a selection of projects that are given the highest priority according to scale, risk of deferral, and network capacity/reliability impact.

In 2008/09 the Major Projects list comprised of 98 projects and a total spend of $442.5 million. Projects on the list included:

• Summer Ready projects• public safety projects• large scale reliability improvement

projects• State Underground Power Program• customer funded projects

> $10 million• ongoing projects with key

milestones in 2008/09

Of the 98 projects, 96 per cent were delivered on budget and 99 per cent were delivered on schedule. The case studies overleaf highlight some key projects delivered.

Approved Works Program (AWP) and Major Projects

The AWP details the complete schedule of works for the year, including all capital expenditure (network enhancement to increase capacity) and operational expenditure (maintenance and reliability improvement) for transmission and distribution projects.

A V A I L A B I L I T Y A N D R E L I A B I L I T Y O F S U P P L Y

$M –1,200 –1,100 –1,000 –

900 –800 –700 –600 –500 –400 – 300 – 200 –100 –

0 –

% –120 –110 –100 –

90 –80 –70 –60 –50 –40 – 30 – 20 –10 –

0 –TOTAL AWP CAPEX (Tx) OPEX (Tx)CAPEX (Dx) OPEX (Dx)

AWP EXPENDITUREAWP PROJECTS DELIVERED

ON SCHEDULE

ACTUAL YTDAWP TARGET

Majorprojectsdelivery,anindicatorwhichtracksprogressagainstoursignificantworksprogram,recordedanabovetargetresultof99percent.

(Dx) DISTRIBUTION(Tx) TRANSMISSION


Highlights of the transmission projects included: the replacement of one and installation of four new transformers to meet the summer peak; the installation of a large capacity transformer in Southern Terminal; and construction of a new substation in Kewdale.

Distribution Summer Ready included 27 projects with 26 delivered within agreed deadlines. Highlights of the distribution projects included feeder enhancements in the Northam, Spalding and Burracoppin regions, and the Yokine-Osborne Park offload to Yokine Substation, which will reduce load in the commercial Osborne Park area.

The results Successful completion of the majority of Summer Ready projects on time enabled the network to meet capacity for a new record peak on 2 February 2009 of 3746MW, a 122MW increase on the 2008 record.

S U M M E R R E A D Y P R O G R A M

The challenge The Summer Ready program is one of the most critical schedules of work for Western Power. During the summer months electricity consumption reaches a number of annual peaks, driven largely by increased air conditioning usage during hot weather. These peaks have increased by an average of 5 per cent per year over the last decade.

Should peak demand be greater than network capacity, there is a danger of power failure and a requirement to negotiate reduced electricity consumption with customers. Extensive infrastructure enhancement is required every year to ensure the network has the capacity to meet rising electricity demand.

The solution In 2008/09 the Summer Ready program involved a total of 46 projects across the transmission and distribution network, with a total cost of $97.6 million.

The transmission Summer Ready program included 19 projects scheduled for completion or major milestones during 2008/09. All 19 projects were delivered on schedule.

“Energysolutionsmeanslookingbeyondpolesandwires.”


I N C R E A S I N G P O W E R T O T H E B O D D I N G T O N G O L D M I N E

The challenge In 2006 the Boddington Gold Mine Management Company commissioned Western Power to provide electricity network infrastructure as part of its mine expansion plan. The mine required a 20 fold increase in power. Essential works during 2008/09 included the construction of a new switchyard and high capacity transmission line to ensure the customer’s growing energy demand was met.

The solution Western Power developed a solution comprising:

• a 72km, 330kV transmission line running from the Collie area to near Boddington

• a new 330/132kV Wells Terminal Station with two 490MVA transformers

• additional line works including a 132kV line from Boddington substation to the Boddington Gold Mine’s new substation

The project was delivered on time and below the $93 million budget. This was achieved while overcoming a number of challenges including:

• obtaining relevant ministerial and environmental approvals to construct the transmission line through state forest

• construction of a major terminal site and 5 km of unsealed road through rock and swamp areas enabling the transportation of the transformers during winter

S E C U R I N G N O R T H P E R T H ’ S P O W E R S U P P L Y

The challenge The growth of Perth’s northern suburbs has resulted in a load increase in that region of approximately 7 per cent per annum. Increase in demand, combined with the construction of a new power station at Neerabup meant considerable infrastructure investment was required to ensure the network has sufficient capacity to manage electricity supply.

The solution Construction of two new switchyards to feed off the former Pinjar to Wanneroo line and the Pinjar to Northern Terminal line. These were approved in January 2005, with energisation scheduled for 2009 to the existing transmission network.

The project was delivered on time and to budget, overcoming many challenges including material cost increases, essential redesigns and construction delays. The first switchyard was energised in April 2009 and the second in July 2009.

The resultsThe solution has relieved the heavily loaded transformers at the Northern Terminal, securing the supply of electricity in the area and connecting the Neerabup power station to the network. Now homes and businesses in the area benefit from a reliable electricity supply that has sufficient capacity to support further growth in the region.

• ensuring employees could safely access work areas on a mine site that was still in operation

• overcoming adverse weather conditions – April 2008 was one of the wettest on record in the area

Work was delivered in three stages throughout the year, with energisation being achieved in November and December 2008, and final works completed in March 2009.

The resultsThe staged approach to construction meant the site had power when most needed and mine expansion could progress as planned.

The customer can now access a greater volume of reliable power and use a contracted energy supplier, ensuring the mine can continue to expand and operate effectively, encouraging growth and investment in the region.


The solution Western Power installed WA’s first thyristor based Static Var Compensator (SVC) at the Southern Terminal Switchyard in Bibra Lake. The SVC is a device that maintains power stability, provides flexibility for transmission equipment outages and balances the increased flow of energy entering the network from new generators.

The SVC is so sensitive to changes in the network it is able to automatically correct imbalances within milliseconds, preventing voltage overload and subsequent collapse of the network.

The $35 million project began in 2006 and was delivered on time and under budget in July 2009.

During the installation, the main challenge facing the project team was finding space for the SVC in the Southern Terminal switchyard. The SVC required a 60 m x 60 m area and it was thought that the SVC may have to be located elsewhere. However, the team developed an innovative solution that meant the SVC could be installed at Southern Terminal, saving the business $3 million.

The result The SVC allows for additional generation to be added to the network without significantly disrupting load flow. The project provides customers with a more reliable power supply, and the network benefits from increased transmission capacity as the system can now operate at higher power levels.

S V C I N S T A L L A T I O N

The challenge An influx of new generators in the south west of the network created a need for Western Power to install technology that could monitor and control load flow in the region.

Adding several generators to the network in a concentrated area can cause significant disruption to electricity flow, potentially causing voltage overload and subsequent network failure. A solution was required that would allow generation to be added to the network safely.

“Deliveringenergysolutionsmeansresolvingenergyissuesthatarebetterfortheenvironment,residentsandbusinesses,whileconsideringfuturegenerations.”


P O L E R E P L A C E M E N T P R O G R A M

The challenge More than 30 per cent of Western Power’s network is more than 40 years old. The network includes 630,000 wooden poles that must be inspected and maintained to ensure public safety and reliability of supply. Regular inspection and cleaning is essential to help prevent pole-top fires, caused by the build up of dust and debris on top of wooden poles.

The solution In 2008/09 more than 195,000 poles were inspected throughout the network, almost 16,000 more than originally targeted. Of these, 9,409 wood poles were replaced at a cost of $46.8 million. Western Power also trialled a new bundling works program whereby several jobs in a region were bundled and allocated to one contractor.

R U R A L P O W E R I M P R O V E M E N T P R O G R A M

The challenge In 2004 the State Government approved a $60 million program that would improve the reliability and quality of electricity supply for approximately 43,000 customers in rural areas. The 2008/09 phase of the Rural Power Improvement Program focussed on:

• reducing the number of customers affected by individual faults

• reducing the time needed to locate and isolate faults, and a reduction in time to restore power to affected customers

• strengthening the rural network by improving existing powerlines and installing new powerlines and equipment

The solution In 2008/09 $23 million was invested in the Rural Power Improvement Program, delivering 22 projects across the north and south country on time and on budget. The major deliverables for these projects included:

• rebuilding 140 km of overhead lines• building approximately 10 km of

underground line• installing 52 reclosers• refurbishing more than 400 pole tops• installing 9 load break switches• reinforcing 2100 poles• building 4 communication base

stations and installing 24 telemetry devices

The result The program ensures reliability of supply in 35 rural areas from Jurien in the north to Albany in the south. Reliability in rural areas will be monitored over the next 12 months to measure the impact of the program.

The result The increased volume of inspections and maintenance contributed to a 60 per cent decrease in the number of pole top fires. The number of unserviceable poles replaced also increased by 100 per cent. A further benefit to Western Power was the reduction in pole replacement cost through the bundling approach, which saved the business $6.7 million.


4 0 W O R S T F E E D E R P R O G R A M

The four year 40 worst feeder program is a rolling maintenance schedule, focussing on reinforcing the 40 worst performing feeders in the network at any one time. At the outset of the program, 176 feeders were identified with a total of 11,421 conditions that required maintenance. In 2008/09, 61 feeders were reinforced at a cost of $18 million.

The program is nearing completion with 30 feeders, totalling 475 conditions remaining. All current 40 Worst Feeder projects are expected to be completed by the end of September 2009. It is estimated that the 40 worst feeder program has improved the reliability of the distribution network by 12 minutes over the past 12 months.

D P A I N S T A L L A T I O N I N E N M A C

The Electricity Network Management and Control (ENMAC) system allows system operators to monitor and manage the distribution network safely and efficiently from a central control centre in East Perth. The ENMAC system is able to trend load at any specific location to enable accurate future planning, such as identifying where mobile or fixed generation is required.

During 2009 the ENMAC system was further enhanced by the installation of a Distribution Power Analysis (DPA) function on the long rural feeder that supplies Denmark in the South West. This enhancement gives real-time information on where power is being used and provides a detailed model of how electricity should be flowing along the feeder. It is the world’s first installation of DPA on a long rural feeder and will allow peak usage in the Denmark area to be managed effectively, significantly reducing the risk of power outages.

“Poweringtheworldtoday,whileprotectingtheenvironmentfortomorrow.”


D E M A N D M A N A G E M E N T – T H E K E Y T O S U S T A I N A B I L I T Y

Electricity systems are designed to cater for peak usage or demand even though this occurs for only a few days a year. The peak demand in the SWIS is steadily increasing, meaning that network capacity to meet the peaks is diminishing.

We are responding to this challenge with initiatives that target the reduction of peak demand as well as the broader conservation and efficient usage of energy.

Working with customers and retailers, we are thinking differently about energy usage. For example:

• shifting energy usage to off-peak times

• agreements to reduce demand at peak times upon request

• substituting sources of generation• installing more efficient equipment• switching fuels• direct load control• energy efficiency education

programs

Initiatives such as Green Town and Beat the Peak are helping Western Power manage peak demand and extend the life of existing network assets.

2005/062006/07

0.2% 0.6% 1.0% 1.4% 1.8% 2.2%

PERCENTAGE OF TIME5 DAYS

2.6% 3.0%

% –

99 –

97 –

95 –

93 –

91 –

89 –

87 –

85 –

DEMAND DURATION CURVE

MANAGING INCREASING PEAK DEMAND

2.5 DAYS

2008/092007/08


• introduction of a fuel switching initiative providing a $400 rebate ($70,000 in total) to customers who replace existing electric storage hot water systems with gas boosted solar hot water systems

• average household saving of approximately $855 per year

The resultsWestern Power will continue to work with the Denmark and Walpole communities in 2009/10 to develop sustainable energy initiatives. A pre-feasibility study has been completed on a range of distributed generation options proposed by the community. A combination of battery storage and the proposed Denmark Community Wind Farm has been identified as the most viable solution following the study.

The Green Town project has cost effectively helped manage demand at peak times and improved the customer experience.

The benefits for the business are that the project demonstrates demand management is a feasible solution for creating a sustainable network. Network reliability in the region has improved and Western Power has been able to successfully influence sustainable energy use.

G R E E N T O W N

The challenge The Green Town project is a series of environmentally friendly energy initiatives developed by Western Power in partnership with the Denmark and Walpole communities and the South Coast Power Working Group (SCPWG). The project aims to raise awareness of energy use at peak times and reduce energy consumption by ten per cent (830KVA) by 2010.

The long term objective of Green Town is to influence energy efficient behaviours that will reduce demand on the network, increasing reliability and reducing the amount of infrastructure enhancement required.

The solution In Green Town we have engaged effectively with the two communities, via the SCPWG, to build trust and goodwill in exploring various ways of reducing peak demand. It is expected that we can apply these learnings to similar areas of the network to achieve sustainable energy solutions to reliability issues.

The project has resulted in the:

• installation of nearly 6,000 compact fluorescent light globes – the carbon equivalent to taking 730 cars off the road for a year

• surveying of 335 residences and 50 businesses to identify electrical appliances contributing to winter peak loads

“Energysolutionsisourapproachtoprovidingasustainableenergysupplynowandinthefuture.”



B E A T T H E P E A K

The increase in air conditioner use in WA over the past decade has significantly contributed to record peak loads in summer. On peak days 1,000 megawatts can be attributed to air conditioners – enough to power 400,000 homes.

In 2009, the ‘Beat the Peak’ advertising campaign encouraged the Perth community to ‘set air conditioners to 24ºC’ in order to reduce peak energy consumption. Survey results indicated 99 per cent of residents recalled this message and one third of residents who saw the advertising believed they have changed their behaviour. As a general trend, the campaign particularly resonated with the 18-34 age group.

O U R C U S T O M E R S

Our direct customers are generators and retailers. Generators and retailers pay for the use of the network and that cost is then passed onto their customers. Our end users are households and small businesses who use Synergy as a retailer, and large scale businesses and industry. Our large scale and industrial users are known as contestable customers, as unlike households and small businesses they can choose from a number of retailers for their electricity supply.

Customer service is a key focus for Western Power and is critical to our ability to deliver a sustainable network. During the past year we have implemented a number of improvements to make it easier for customers to connect to the network and communicate with us, these include:

• 24 hr Customer Service Centre• improved brochures detailing our

services• Distribution Access Project (DAP) • Transmission Access Process (TAP)• periodic payment scheme

S T A K E H O L D E R E N G A G E M E N T

Western Power’s strategic direction 2008-2016 identifies stakeholder engagement as a key priority in our transition towards an energy solutions business. By proactively and effectively engaging with our key stakeholders, we can better understand their needs and any risks and opportunities, to ensure we can deliver on our promises.

O U R B U S I N E S S O U R S T A K E H O L D E R S

“Energysolutionsmeansworkingcollaborativelytofindsustainablewaystomeetourfutureenergyneeds.”


T H E T R A N S M I S S I O N A C C E S S P R O C E S S ( T A P )

Launched in July 2008, the TAP project provides quicker and easier access to the network for Western Power transmission customers such as generators and mine sites. Improvements include Western Power’s active management of the queuing process, increasing visibility of queue position for customers and a review of the new facilities investment test (NFIT) to better meet the requirements of the Economic Regulation Authority (ERA). The project also included testing a new method of collecting transmission node data and drafting a commercial financial handbook, which has business rules for engaging with customers.

T H E D I S T R I B U T I O N A C C E S S P R O J E C T ( D A P )

The Distribution Access Project has enhanced Western Power’s delivery of distribution Customer Initiated Capital Works (CICW). Launched in July 2008, DAP examined the process for customers requesting and funding capital works. The project identified areas for streamlining the process, and the following improvements were delivered in June 2009:

• greater accessibility to CICW services, particularly in the area of new connections and upgrades

• simpler customer processes and gateways for customers to access Western Power

• clearer identification of roles and responsibilities within the areas of connections and upgrades for customers and internal staff

• clearer information on the Western Power website around CICW services

T H E P E R I O D I C P A Y M E N T S C H E M E

This scheme makes it easier and cost effective for customers in remote areas to connect to the network. The customer first connected in an area pays for the network extension, and when other customers join the network the initial customer receives rebates from the scheme as they make their connection payments.

The new periodic payment option allows commercial customers in country areas to pay off their connection works over a five year period.

W E S T E R N P O W E R A N N U A L R E P O R T 2 0 0 9| 2 3 |

WESTERN POWER’S STAKEHOLDER GROUPS

STAKEHOLDER ATTRIBUTES

Minister for Energy Shareholder on behalf of the people of Western Australia

Office of Energy Sets policy direction, balances energy with other Government portfolios and monitors expectations for organisational performance

Government departments, State and Federal parliamentarians

Are our finance lenders, collaborate on intersecting strategic objectives, represent our interests and challenge our assumptions

Employees Carry out the affairs of Western Power

Customers Connect to our network and report faults and issues

Community Directly experiences the impacts of our operations

Alliances and contractors Work with us to deliver and maintain our energy solutions

Regulators Regulate our industry (financial, environment and safety)

Industry associations Provide forums for industry debate

Supply chain and strategic partners Work with us to research and trial innovative new solutions

Media Provides information to the public and challenges our actions and assumptions

Academic and scientific community Provide information, conduct research and question our approaches

Community and special interest groups Raise concerns, provide feedback and challenge our actions


D I S A B I L I T Y A C C E S S A N D I N C L U S I O N P L A N

People with disabilities can find it hard to access information, facilities and services. Through our Disability Access and Inclusion Plan (DAIP) we are systematically identifying and overcoming barriers that restrict access to our services, events, buildings and facilities, information, complaint mechanisms and consultations.

In 2008/09, as part of our access plan we implemented the following:

Services - all employees and contractors that provide services or information to the public on Western Power’s behalf must follow the guidelines set out in our DAIP. In 2008/09 we included DAIP requirements in 3 new contracts and built a system to ensure that DAIP is introduced into existing contracts for customer-facing work.

Buildings - seven Western Power facilities were identified as being accessed by the public on a weekly basis. An accessibility audit has been conducted on six, with access improvements scheduled for 2009/10.

Information - changes were made to Western Power’s letterhead, invoice and electronic presentation templates, application forms, brochures and customer information cards ensuring they are easy for customers to access and that they comply with the State Government Access Guidelines for Information, Services and Facilities.

Complaints - a brochure was developed explaining the complaint handling process. The brochure is written in simple language and encourages customers to provide feedback in a number of ways, including phone, telephone typewriter (TTY), Telephone Interpreting Service (TIS), email, online form and post. We are able to receive and respond to complaints in alternative formats including Braille.

Service Quality - Customer Service Centre employees are required to complete access and inclusion training to ensure they have the right knowledge and tools to provide a consistently high standard of service to all customers.

N E W C U S T O M E R S E R V I C E C E N T R E

The challenge When Western Power disaggregated in 2006, the new business was not equipped to receive customer service fault calls and TTY enquiries (Telephone Typewriter for speech or hearing impaired people). Synergy’s call centre continued to receive these calls whilst a new customer service centre was established by Western Power.

The solution Western Power’s new Customer Service Centre began operating on 1 April 2009, managing all the day-to-day fault calls and TTY enquiries.

The new call centre, located on level 4 of the Perth head office operates 24 hours a day, seven days a week and brings all customer service resources into one location, connecting people and enhancing Western Power’s ability to respond to customers’ needs more efficiently.

The centre’s technology includes an Interactive Voice Response (IVR) system which logs calls and despatches crews to restore faults and outages within a minute of the premises or area losing power, providing customers with an instant response.

The results The efficiency of the new Customer Service Centre was demonstrated during the May 2009 storms, which caused 62,000 customers to lose power. During the three days of storms, Western Power received 127,089 calls. Of these, 21,755 were handled by operators and 105,334 calls were handled via the IVR.


N E T C I S

A new customer care and billing system called NetCIS was installed this year. Previously, Western Power had separate billing systems for customers who buy energy from Synergy (franchise customers) and those who buy energy from any of the other 14 energy retailers (contestable customers), making invoicing difficult.

The NetCIS system provides a single, efficient method for managing data from all our customers, allowing us to bill major retail customers with greater accuracy and control.

C O N N E C T I N G W I T H T H E C O M M U N I T Y

We recognise the need to continually establish and develop relationships with the community and stakeholder groups. A significant part of establishing a relationship is the exchange of information. We recognise that in the past we have not been proactive in this area and this may have contributed to the resistance received from communities to the proposed construction of infrastructure.

In 2009 Western Power reviewed its Land Access process. This resulted in a new approach for community engagement, incorporating sustainability assessments in the process for planning and delivering all major projects. This helps manage the impact Western Power’s infrastructure has on the community including visual amenity, heritage, clearing land and land value. At the core of this approach is a commitment to driving public participation.

Community engagement – Perth to Geraldton lineMuch of Western Power’s infrastructure work has a direct impact on communities. The development of a 370 km long transmission line from Perth to Geraldton will impact many communities as the line route passes through a number of farms and private land. When selecting a line route for this major project, we engaged with the local communities and landowners affected by the line, who expressed dissatisfaction at the way Western Power had accessed assets on rural land in the past.

To address this issue, the Working Together Project Team was formed, and a series of workshops were conducted with farmers and other community members to identify areas of the process requiring improvement. Issues raised included a failure to properly notify landowners when we entered rural land, leaving gates open and driving through mature crops.

As a direct result of these workshops we have committed to a series of action items that will be introduced and monitored in our community engagement approach for 2009/10:

These action items include:

• creating a working together policy• developing training for those who

access land on behalf of Western Power

• establishing a stakeholder reference group

• ongoing community consultations• establishing a code of conduct

“Energysolutionsareaboutcontinuallystrivingtoprovideinnovativeproductsandservicestoaddressourcustomers’energyneeds.”


Our popular Solar Model Challenges (boat and car) for primary and secondary schools educate students about the role of renewable energy, help develop science skills and increase energy awareness. The Solar Model Challenges allow students to apply their ideas about renewable energy practically, driving interest and providing exposure to the energy solutions of the future. The experience of working in teams combined with the project planning process, aids the development of skills and personal attributes in students that are sometimes not possible in the classroom.

E N E R G Y E D U C A T I O N I N T H E C O M M U N I T Y

We are committed to educating young Western Australians about new ways to use energy at home, school and work. We want communities to stay safe around electricity and our assets, and develop energy efficient behaviours to reduce our impact on the environment.

Our ShockProof! safety program reached more than 40,000 primary school students over the past year, educating them on how to use electricity safely around the home and the dangers of playing near powerlines and substations.

“Energysolutionsallowustobesmarteraboutthewayweuseenergyinourdailylives.”


We have enjoyed a long relationship with FESA, Volunteer Bush Fire Brigade and the Royal Lifesaving Society of Western Australia. Every year bushfires in regional Western Australia threaten communities and impact the reliability of the electricity network. In conjunction with FESA, we provide essential support to regional WA by allocating $80,000 each year in community grants to the Volunteer Bush Fire Brigade. Our partnership with the Royal Life Saving Society WA provides first aid safety services, free swim assessments and delivers the Rescue and Revive program to schools and community groups, increasing awareness of aquatic safety.

We also have a long-standing partnership with Scitech that helps create awareness about science and energy for all ages. The new Energy Zone, launched in July 2009, provides interactive and educational exhibits about energy awareness and efficiency and will reach approximately 245,000 members of the Western Australian community per year.

P A R T N E R S H I P S A N D S P O N S O R S H I P S

Western Power invests more than $1.5 million a year in community initiatives and sponsorships. Our sponsorship strategy considers charitable gifts, community investments and commercial initiatives with our community investment activities addressing a number of key social issues such as health and safety, environmental management and urban graffiti.

In 2008/09 we partnered with Artrage to address urban graffiti issues on the Berlin Building in Northbridge, and created the Western Power/Artrage Street Gallery. The building was offered as a canvas for urban artists, resulting in the creation of a distinctive mural that has become an art icon in Perth. Western Power spends around $700,000 a year removing graffiti on network assets. The Artrage project was an opportunity to demonstrate how working with community groups can produce an outcome that will protect our assets and significantly reduce the spend on managing graffiti.

S C H O L A R S H I P S

Western Power’s commitment to providing scholarships is helping to create the engineers of tomorrow who will manage and develop future networks.

Each year the Bruce Kirkwood Memorial Scholarship supports one full-time first year engineering student, and the Stuart Morgan Scholarship provides the opportunity for two year 12 students in regional Western Australia to gain an engineering degree at a Perth university.

Western Power also has a five year partnership with the University of Western Australia to provide scholarships to 20 electrical engineering students each year until 2011. In addition, we have committed $900,000 over five years to jointly fund a new bursary program with Curtin University.

O U R B U S I N E S S O U R P E O P L E


Our ability to deliver effective energy solutions and remain sustainable is directly linked to our culture and the performance of our employees. In 2008, we embarked on a cultural change program, Unlocking our potential, to generate a shift within the business towards a high performing culture. The Unlocking our potential program aims to create a workplace where our employees feel passionate about their work and their personal values are aligned with Western Power’s values:

Put safety firstin everything we do, we are committed to putting safety first

Respect our customerswe stay connected to our customers to achieve the best energy solutions

Work togetherwe work collaboratively to achieve consistent results that are in Western Power’s and the customers’ collective interests

Make a positive differencewe are focused on being innovative and creative when adding value to customers and accept accountability for delivering results

Earn trustwe work to earn the trust of others and deliver on commitments

Act like it’s our own businessWestern Power is our business and our actions will always reflect this

“Energysolutionsmeanscreatingagreener,saferandmorereliablealternativetomeettheeverincreasingdemandforelectricalenergy.”

An organisation’s culture is the principal driver of performance related behaviours. Our Organisation Culture Inventory (OCI) provides a greater understanding of Western Power’s culture.

Our current culture is shown in the left hand circle, illustrating a highly oppositional and avoidant culture. The right hand circle illustrates the culture of a highly successful company, an organisation willing to meet all challenges and ever increasing demands of customers and the community.

Western Power’s cultural inventory is not dissimilar to that of engineering companies globally. An internal cultural change program is underway to increase employee engagement.

The OCI will be conducted again in November 2009 to measure how significant our cultural shift has been.

E M P L O Y E E E N G A G E M E N T

To gauge employee opinions and attitudes towards their work, Western Power conducts the ‘Pulse’ employee feedback survey every six months. The results of the survey are used to identify and address issues facing employees and the business, creating a better working environment for everyone.

The survey includes 29 questions covering key areas of leadership, training, communication, performance and remuneration. The most recent survey revealed an improvement in the Organisational Health Indicator (a measure of employee engagement) from 66 per cent in April 2008 to 71 per cent in April 2009, demonstrating that activities implemented around the business to assist the cultural transformation have had a positive effect. The results also revealed an improvement in attitudes towards safety from 87 per cent favourable in April 2008 to 90 per cent in April 2009, which is 8 per cent higher than the industrial sector benchmark.

H E A L T H , S A F E T Y A N D W E L L B E I N G

Safety is an integral part of all activities and we are committed to becoming a zero harm organisation.

Traditionally, we have measured safety performance with lag indicators including Lost Time Injury Frequency Rate (LTIFR) and All Medical Frequency Rate (AMFR). There has been a sustained reduction in LTIFR and AMFR over the year (see page 7 for 2008/09 safety performance). As we continue our drive towards safety excellence we are continually looking at proactive

measures to manage safety, using ‘lead’ measurements such as incident reporting and identifying hazards. These lead measures combined with existing lag indicators (such as LTIFR and AMFR) will allow us to move closer to achieving zero harm. As part of this drive, a new incident investigation process was introduced in 2008 to improve the quality and effectiveness of corrective actions following safety incidents.

The wellbeing of our employees, contractors and alliance partners is paramount. In 2008 we introduced the following programs to help create a workforce that is united and focussed on safety and health:

• Employee Assistance Program - a free, confidential counselling service offered by professional counsellors off site and available to all employees

• Fitness for Work Standard ensuring employees arrive for work in a condition where they are able to perform their duties safely. The program includes an extensive education on vital fitness issues including fatigue, alcohol and drug management and a program of random drug and alcohol testing


POWER

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WESTERN POWER CURRENT CULTURE

HISTORICALLY PREFERRED IDEAL CULTURE


R E C R U I T M E N T

Strategic goals can only be achieved with effective leadership and engaged employees. We have developed and implemented a number of strategies to recruit people with skills and attitudes that match our business needs and culture. These strategies include developing the Western Power brand as an attractive proposition for potential employees, by promoting business values, career progression opportunities, competitive remuneration and flexible working arrangements. We have also implemented strategies to address workforce planning, succession and talent management, flexible working arrangements and phased retirement.

D E V E L O P M E N T

Western Power’s leadership framework is designed to provide guidance and support for formal leaders through a series of leadership development modules. The objective of the leadership framework is to help employees fulfil their potential and create the business leaders of tomorrow.

In July 2008, as part of this framework we launched leadership success profiles, which combined with Personal Appraisal Development Planning (PADPs) and interview guides for leadership roles, form the basis of Leadership Development Centres.

These profiles are used to assist professional development, coaching and recruitment and are a benchmark for measuring core competencies. Western Power’s success profiles outline clear expectations for leaders in the following areas:

• Organisational Knowledge - what I know

• Experiences/Job Challenges - what I have done in the past

• Competencies - what I am capable of

• Personal Attributes - who I am

In 2008/09, 243 formal leaders attended Leadership Development Centres where they were observed undertaking tasks and making decisions in a simulated working environment. A full debrief was provided highlighting strengths and development areas in relation to the success profile. An organisational view of the outcomes is used to shape coaching and tailor leadership development activities.

EMPLOYEE STATISTICS 2006/07 - 2008/09

2006/07 2007/08 2008/09

Employee headcount 2,246 2,509 2,813

Number of new starters 346 457 485

Employee turnover 8.17% 9.82% 7.15%

Number of employees recruited via referral program na na 35

% of employees covered by collective bargaining agreements

59% 52% 49%

Absenteeism 3.8% 4.2% 4.1%


D I V E R S I T Y A N D E Q U A L I T Y

We are committed to providing a safe, equitable and inclusive workplace, free from discrimination, harassment and bullying. A diversity policy and supporting guidelines were introduced in 2008 to provide information on how everyone in the workforce can contribute to an inclusive culture that values diversity.

A copy of the full Diversity Policy can be found at westernpower.com.au

C O L L E C T I V E A G R E E M E N T S

We are committed to the fair and equitable treatment of employees. On 1 October 2008 Western Power and the Communications Electrical Plumbing Union (CEPU) agreed a new five-year collective agreement for ‘wages’ employees. Key to the success of the negotiations was a focus on improved roster arrangements and working hours. The agreement ensures that employees have remuneration levels that are consistent with the market and will allow a better work life balance.

Negotiations with the Australian Services Union (ASU) on the collective agreement for salaried employees are continuing. Negotiations commenced in August 2008 and no agreement had been reached by 30 June 2009. A non-union Employee Collective Agreement was rejected in an employee poll in June 2009.

A sustainability scorecard is being developed to track implementation of the policy. Next we will establish key performance indicators to measure our performance. We will reference the Global Reporting Initiative G3 Guidelines, the esaa* Sustainable Practice Framework and the Corporate Responsibility Index.

* Electricity Supply Association of Australia

The consequences of climate change, depletion of non-renewable sources of energy, biodiversity loss and growing inequities in living standards are at the forefront of local and global political debates. Individuals, companies, governments and international bodies are recognising the urgency to respond to these significant challenges.

In September 2008 we adopted our inaugural Sustainability Policy. It addresses sustainability issues relevant to our business and acts as a roadmap for embedding sustainability into our business.

Fundamental to progressing sustainability in Western Power is embedding the sustainability principles into core business activities and our decision making processes. In the last year we have developed and commenced implementation of a sustainability framework to integrate these principles throughout the organisation. Our desired culture, characterised by constructive behaviours combined with innovation, leadership and collaboration, is at the heart of the framework, driving sustainable change and assisting us in achieving our strategic direction.

O U R B U S I N E S S S U S T A I N A B I L I T Y


“Forme,energysolutionsmeansplanninganddecision-makingwithabroadandlongtermperspectivetoensurewerespondtothechangesdrivenbyclimatechange.”


DRIVER ISSUE

Energy security and system management

Energy security is paramount to sustainable development. Security depends on a combination of factors including diversity of energy supply, capacity of the network to connect this supply and market signals to drive change. From a networks perspective, this means ensuring our ability to not only connect diverse generation sources, but also effectively manage the load on the system.

Managing peak demand To ensure network reliability, maximum network capacity must be sufficient to meet peak demand. Peak demand, however, changes during a day and across seasons as people use more or less energy. Peak demand on the SWIS is becoming increasingly ‘peaky’, largely due to the high penetration of residential air conditioners. Significantly greater capital investment in the network is required to meet this demand, which only occurs a few days a year. This is economically inefficient and unsustainable. Reducing consumption patterns at peak times and improving energy efficiency is therefore a priority.

Infrastructure investment and development of a smart grid

The SWIS network was developed to meet the needs of large, predominantly carbon-based generation technologies located remotely from demand centres.

The drive for lower-carbon, distributed and intermittent generation technologies, combined with greatly improved efficiency on the demand side, will require a smart grid. This is an intelligent, bi-directional energy and information web, including smart meters, to manage energy flows.

Climate change The concerns about climate change are driving innovation in low carbon clean tech energy solutions. Solutions are likely to include generation from renewable sources, smart grids to facilitate two-way transport of electricity and consumption data, demand side management solutions and consumer energy efficiency.

Community impacts Similar to other utility and infrastructure sectors, the energy sector is experiencing increasing pressure from the community for a more inclusive and participatory engagement model. Western Power’s ability to respond is directly reflected in our reputation, and therefore poses both risk and opportunity.

SUSTAINABILITY ISSUES RELEVANT TO THE ENERGY INDUSTRY

“Understandingthecustomer’sneedanddeliveringitinconsultationwiththemisthekeytoprovidingenergysolutions.”


Central to our sustainability approach is our Environmental Policy, which establishes environmental objectives against which all actions are measured. We aim to promote a culture of responsible environmental management to comply with environmental laws and aspire to higher standards within the business.

An Environmental Management System (EMS), based on international EMS standard ISO 14001 has been built. The EMS is a structured process for achieving continuous improvement in environmental performance and allows us to capture, assess and

report on business performance in the environmental space. The EMS is supported by an electronic documentation system that facilitates the management of corporate due diligence.

Our aim is to strengthen environmental commitment, direction, resources and through training and education, improve environmental performance across the business.

Several environmental risk areas for the business have been identified in the table below.

O U R B U S I N E S S E N V I R O N M E N T

IDENTIFIED AREAS OF ENVIRONMENTAL IMPACT

ENVIRONMENTAL RISK AREAS

Disturbance of Aboriginal heritage sites

Removal or disturbance of native vegetation, declared rare flora, fauna and habitat

Spread of dieback

Spread of environmental weeds through ecosystems

Noise pollution

Visual impact

Pollution of ground and surface water


M A N A G I N G E N V I R O N M E N T A L I M P A C T S

We are working to reduce the environmental impact of our capital works and maintenance program. During 2008/09 4.18 ha of native vegetation was cleared for the construction of new transmission and distribution powerlines. We applied sustainability principles to limit clearing to 0.75 ha in biodiverse areas and offset this with replanting and preserving other areas of biodiversity. Approvals were secured from environmental regulators in every case.

We recognise the cultural heritage of Aboriginal communities and regularly consult with local groups when planning for new transmission and distribution lines. In 2008/09 consultation was conducted on 18 projects with 49 groups. Through discussion and adaptation, successful outcomes were achieved in all projects with only five requiring a determination by the Department of Indigenous Affairs.

IMPACT ON BIODIVERSITY 2008/09

ENVIRONMENTAL INDICATOR MEASUREMENT

Total native vegetation cleared (new corridors) 4.18 ha

Native vegetation cleared in area of significant biodiversity value

0.75 ha

Total native vegetation offset 1.5 ha + sponsorship

IMPACT ON ABORIGINAL HERITAGE 2008/09


Number of archaeological surveys conducted 12 surveys

Number of ethnographic surveys conducted 18 surveys

Number of formal meetings with Aboriginal representatives

49 meetings

Number of applications made to disturb sites under the Aboriginal Heritage Act 1972

6 applications

Number of approvals to disturb sites under the Aboriginal Heritage Act 1972

5 approvals*

* sixth approval negotiated directly with site representatives

ENERGY AND WATER CONSUMPTION


Electrical purchases for office & depots 12,918,036 kWh

Water consumption in head office 33.25 ML

Fuel consumption 6,508 kL

POLLUTION


Total number of notifiable pollution incidents to regulatory authorities

2

Number & monetary value of fines for environmental non-conformance

0

Climatechangeisoneofthegreatestchallengesofthe21stCentury.AstheprincipalnetworkoperatorinWesternAustraliawewillworkwithourstakeholderstodevelopaco-ordinatedresponsetothechallengesofclimatechange.

O U R B U S I N E S S C L I M A T E C H A N G E


Electricity markets worldwide are addressing climate change by embracing new technologies and changing energy use behaviours, requiring collaboration across the energy sector.

On a national level Western Power is participating in the Australian Energy Market Commission’s Review of Energy Market Frameworks. On a local level Western Power is participating in the Renewable Energy Working Group, comprised of stakeholders in the Wholesale Electricity Market (WEM) of Western Australia, assessing potential market issues within the WEM.

Western Power supports the installation of small scale renewable energy systems and energy efficiency measures to reduce greenhouse gas emissions from fossil fuels.

R E N E W A B L E E N E R G Y – P E R T H S O L A R C I T Y

The Australian Government’s Solar Cities Project brings together industry, business, governments and communities to rethink the way we produce, use and save energy. The Solar Cities Project is trialling practical and creative ways to be smarter about energy use. Information gathered during the project will be used to help Australia develop more sustainable energy solutions for the future.

In 2009 Western Power was appointed the lead proponent role of the Perth Solar City program, on behalf of the Federal Government. The program will launch in late 2009 and run until 2013.

Working with consortium members, we will drive the adoption of solar energy through the installation of solar hot water heating, photovoltaic electricity generation and behavioural change through energy assessments and education in the East Perth Metropolitan Region.

As part of the Perth Solar City Project, Western Power will trial the implementation of a smart grid and the associated data management infrastructure, which will allow for the installation of 8,500 smart meters. Smart meters provide extremely accurate, automated meter reading, collecting data over short time periods and will allow Western Power to trial the impact of load control and photovoltaic saturation on the network.


ELECTRICITY GENERATED FROM RENEWABLE ENERGY SOURCES IN THE SWIS EXCLUDING SOLAR PV*

1000 –

800 –

600 –

400 –

200 –

0 –

RENEWABLE GENERATED ELECTRICITY (GWh)MARKET SHARE

2008/092007/08

– 5%

– 4%

– 3%

– 2%

– 1%

– 0%

RENEWABLE ENERGY CAPACITY ADDED FROM SOLAR PV**

5000 –

4000 –

3000 –

2000 –

1000 –

0 –2006/07 2008/09

TOTAL KW CAPACITY ADDED

2007/08

* renewable energy generation by market participants decreased due to less wind resource and grid operational requirements

source: IMO

source: DEWHA - Solar Homes and Communities Plan

** the Federal Solar Homes and Communities Plan $8,000 rebate led to a dramatic increase in applications and installations of residential solar PV


2006/07 2007/08 2008/09

Tree planting 14,500 39,985 40,015

Natural power 627 587 594

Switch to biodiesel na 122 153

Switch to CFL - - 2,897

W O R L E Y P A R S O N S P A R T N E R S H I P

Our vision is to work with our customers and the community to deliver sustainable energy solutions. The partnership with Worley Parsons provides world class renewable energy expertise to research the viability of establishing an advanced solar plant in Western Australia.

W E S T E R N P O W E R ’ S C A R B O N F O O T P R I N T

The ability to understand our footprint is crucial when reducing carbon emissions. In 2008/09 the majority of Western Power’s direct emissions came from fuel consumption by its fleet, which emitted 14,806 tonnes of CO2

-e (carbon equivalent) from consumption of 5,954 kL of fuel. Mobile generator units, which are deployed for emergency power support, emitted 1,487 tonnes of CO2

-e consuming 554 kL of fuel. A further 2,532 tonnes of CO2

-e resulted from emitted SF6, an insulating gas used in electrical equipment.

Indirect emissions included 10,644 tonnes of CO2

-e from electricity purchases and 953,885 tonnes of CO2

-e from network losses, commonly referred to as line losses, which includes electricity lost during transmission and distribution. Line losses constitute approximately 97 per cent of Western Power’s carbon emissions.

Work commenced in 2008 under our Greenhouse Challenge Plus Program to investigate line loss abatement opportunities and the findings will feed into the development of a greenhouse strategy to facilitate carbon reduction initiatives.

Our carbon abatement and offset strategy helps reduce our carbon footprint. We planted more than 100,000 trees to offset 40,015 tonnes of greenhouse gases emitted. The seedlings will offset carbon emissions and directly benefit the environment by restoring biodiversity and addressing the problems of salinity

and land degradation. Investigation is also continuing into lower emission vehicles and fuels and enhancing monitoring practices for SF6 usage to detect leaks quicker and reduce emissions.

CARBON INVENTORY* IN TONNES OF CO2-e

OFFSETS AND ABATEMENT IN TONNES OF CO2-e

2006/07 2007/08 2008/09

Direct emissions

Fleet fuel use 14,018 14,357 14,806

Mobile generator fuel use 521 2,348 1,487

SF6 2,998 2,124 2,532

Indirect emissions

Network losses 895,351 903,574 953,885**

Electricity purchase 11,260 14,633 10,644

Total 924,148 937,036 983,354

* Emissions in 2008/09 were calculated in accordance with the National Greenhouse & Energy Reporting Determination. Emissions in 2006/07 and 2007/08 were collated under the requirements of the Greenhouse Challenge Plus program, a voluntary program run by the Department of Environment, Water, Heritage and the Arts to quantify and reduce carbon emissions across the country.

** For the period April 2008 to May 2009


O U R E X E C U T I V E S

Western Power’s executive team is responsible for delivering the accountability requirements agreed annually with the Minister for Energy as outlined in the Statement of Corporate Intent (SCI). They are also responsible for setting our future direction as an energy solutions business that delivers a sustainable energy supply for our customers and the community. Our executive team headed the following eight divisions in the 2008/09 financial year:

Customer Services Responsible for managing Western Power’s customer relationships with generators and retailers, network planning and development, standards, policy and data quality, network performance, delivery of major projects and environment and land management.

Service Delivery Responsible for network construction, communication and maintenance services, as well as operational support and training for Western Power and external customers.

E X E C U T I V E T E A M A N D B O A R D

Front Row L–R: Doug Aberle Managing Director

John Pease General Counsel and Company Secretary, Legal and Governance

Malcolm Peacock Chief Financial Officer

Back Row L–R: Ken Brown General Manager System Management

Greg Monkhouse General Manager Human Resources

Mark de Laeter General Manager Customer Services

Anne-Marie Clark General Manager Service Delivery

Phil Southwell General Manager Strategy and Corporate Affairs

Kevin Gaitskell Director Enterprise Solutions Partner

System Management Responsible for Western Power’s planning and market operations, network operations, system operation control and network information systems. This division takes a lead role in all emergencies that affect the Western Power network.

Human Resources Responsible for Western Power’s recruitment, employment relations, safety and health, human resource operations and organisational development.

Strategy and Corporate Affairs Responsible for Western Power’s company-wide strategic development, internal and external communication support, marketing, regulation, pricing and sustainability.

Enterprise Solutions Partner Responsible for providing support in areas such as program coordination, reporting, change management, communications, and the management of resource impacts and competing priorities so that teams can focus on project delivery.

Legal and Governance Responsible for providing advice and support to Western Power’s directors, senior management and all other areas of the business in relation to legal matters and compliance services, internal audit and public interest disclosure. It provides corporate governance and secretariat in supporting the Board, its two committees (the Finance & Risk Committee and the People & Performance Committee) and the Executive.

Chief Financial Officer Responsible for business analysis, accounting and taxation, information technology, risk management, treasury and commercial management of Western Power’s operations.

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For biographies of the Western Power Board, refer to the Directors’ Report on page 43.

The Board has established two committees to assist in the discharge of its responsibilities. These are the:

• Finance & Risk Committee; and • People & Performance

Committee

Each of the committees has its own terms of reference that describe its role and duties as set out in the Board Charter.

* Succeeding Sally Farrier, who served as independent, non-executive director from 1 April 2006 until 25 May 2009

** Succeeding Jenny Seabrook, who served as independent, non-executive director from 1 April 2006 until 31 July 2009

*** Succeeding Karen Field, who served as independent, non-executive director from 1 April 2006 until 21 April 2009

O U R O R G A N I S A T I O N A L S T R U C T U R E

O U R B O A R D

Peter MansellBoard Chair, Independent, non-executive director

Special responsibilities: member of the People and Performance Committee

Doug AberleManaging Director

Paul Underwood Independent, non-executive director*

Special responsibilities: member of the Finance and Risk Committee

John CahillIndependent, non-executive director**

Special responsibilities: Chair of the Finance and Risk Committee

Mervyn DaviesIndependent, non-executive director

Special responsibilities: member of the Finance and Risk Committee

Mark BarnabaBoard Deputy Chair, Independent, non-executive director***

Special responsibilities: Chair of the People and Performance Committee

DOUG ABERLEManaging Director

JOHN PEASEGeneral Counsel &

Company Secretary Legal & Governance

GREG MONKHOUSEGeneral Manager Human Resources

PHIL SOUTHWELLGeneral Manager

Strategy and Corporate Affairs

MALCOLM PEACOCKChief Financial Officer

ANNE-MARIE CLARKGeneral Manager Service Delivery

MARK DE LAETERGeneral Manager

Customer Services

KEVIN GAITSKELLDirector

Enterprise Solutions Partner

KEN BROWNGeneral Manager

System Management

E L E C T R I C I T Y N E T W O R K S C O R P O R A T I O N T R A D I N G A S W E S T E R N P O W E R

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F I N A N C I A L R E P O R T

F O R T H E Y E A R E N D E D

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C O N T E N T S

WESTERN POWER FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

Directors’ Report 43

Corporate Governance Statement 53

Income Statement 62

Statement of Recognised Income and Expense 62

Balance Sheet 63

Cash Flow Statement 64

Notes to the Financial Statements 65

Summary of Significant Accounting Policies 79

Directors’ Declaration 83

Corporate Directory 84

Independent Auditor’s Report 85

Corporate Compliance Disclosures 86

Glossary 88

Global Reporting Initiative Index 89


3 0 J U N E 2 0 0 9| 4 3 |

The Directors of Electricity Networks Corporation (‘the Corporation’) trading as Western Power, appointed by the Governor on the nomination of the Minister for Energy (‘the Minister’) under Section 8(1) of the Electricity Corporations Act 2005 (WA) (‘the Act’), present their report for the year ended 30 June 2009.

DIRECTORS

The names and details of the Directors in office during the year ended 30 June 2009 and up to the date of this report were:

P Mansell – Chair (reappointed 20 April 2009) D Aberle M Barnaba (appointed 21 April 2009) J Cahill (appointed 1 August 2009) M Davies S Farrier (resigned 25 May 2009) K Field (resigned 21 April 2009) J Seabrook (resigned 31 July 2009) P Underwood (appointed 25 May 2009)

PRINCIPAL ACTIVITIES

The principal continuing functions of the Corporation are:

• to manage, plan, develop, expand, enhance, improve and reinforce electricity transmission and distribution • to provide and improve electricity transmission and distribution services • to provide access to services of network infrastructure facilities as required and authorised by the Electricity Industry Act 2004 Part 8 (which relates to network access) • to provide services as required and authorised by the Electricity Industry Act 2004 Part 9 (which relates to the wholesale electricity market) • to provide services that improve the efficiency of electricity supply and the management of demand on electricity transmission and distribution systems • to provide ancillary services

The Corporation, in performing its functions, must act in accordance with prudent commercial principles and endeavour to make a profit consistent with maximising its long-term value.

There have been no changes in the nature of the principal activities in the year ended 30 June 2009.

OPERATING RESULTS

The Corporation achieved a net profit after income tax of $126,239,000 for the year to 30 June 2009 (2008: $85,009,000).

D I R E C T O R S ’ R E P O R TDIVIDENDS

The Corporation paid a final dividend of $16,552,500 on 24 February 2009 in respect of the year to 30 June 2008 (2008: $17,573,500) and an interim dividend of $20,221,705 on 30 June 2009 (2008: $26,400,000) in respect of the year to 30 June 2009. In addition to these dividends, since the end of the financial year the Directors have recommended, subject to the approval of the Minister, the payment of a final dividend of $6,917,295 in respect of the year to 30 June 2009.

REVIEW OF OPERATIONS

Information on the operations and financial position of the Corporation and its business strategies and prospects is set out in the review of operations and activities on pages 6 to 9 of this Annual Report.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Since 30 June 2009, no matter or circumstance has occurred that has significantly, or may significantly, affect:

• the Corporation’s operations in future financial years • the results of those operations in future financial years • the Corporation’s state of affairs in future financial years

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the Corporation that were not finalised at the date of this report include the matters set out below.

The Corporation has committed to a significant investment program in order to meet its safety, reliability and efficiency requirements. The Corporation is reliant on shareholder approval to fund these and any additional regulatory requirements.

The Corporation submitted its proposed new access arrangement, which will define how the business will operate, to the Economic Regulation Authority (ERA) on 1 October 2008 to cover the period from 1 July 2009 to 30 June 2012. A draft response has been received from the ERA which requests amendments to the proposed access arrangement. The Corporation is responding to the ERA, providing feedback on the viability of the requested amendments and further supporting the Corporation’s initial position. Further negotiations will be required before ERA approval of the access arrangement is granted. When approved, this determination will regulate the Corporation’s affairs, including regulatory prices, for the three year period.

The Directors have not included in this report any further information on the likely developments in the operations of the Corporation and the expected results of those operations in future years as this would be likely to result in unreasonable prejudice to the Corporation.


3 0 J U N E 2 0 0 9 | 4 4 |

BORROWING LIMIT

The maximum amount of borrowings permitted by the Department of Treasury and Finance (DTF) for the year to 30 June 2010 is currently $4.688 billion. The Corporation’s current forecast of gross borrowings is $4.684 billion. Given this limited margin there is a possibility that the Corporation will require additional borrowings above the DTF borrowing level.

QUALIFICATIONS AND EXPERIENCE OF DIRECTORS

DIRECTOR

EXPERIENCE

COMMITTEE RESPONSIBILITIES

PETER MANSELL

Board Chair

Year of birth: 1946

Independent, non-executive director B.Comm LL.B

Appointed with effect from 1 April 2006. Current term expires on 20 April 2010.

Experience and expertise Mr Mansell has practised as a business lawyer for 34 years and has a wide range of experience in corporate matters. He was a corporate and resources partner of legal firm Freehills from 1988 to 2004 and at various times was the Freehills National Chairman (1995-2000), Managing Partner of the Perth Office (1992-2002) and a member of the firm’s National Board (1989-2002). He has extensive experience as a non-executive director and as a Board Chair. In addition to his current directorships, Mr Mansell has previously held positions on West Australian Newspaper Holdings Ltd (also Chair), Zinflex Ltd (also Chair) and also served as a non-executive director on the former Western Power Corporation.

Current directorships Non-executive director of Great Southern Ltd (in administration) since 24 November 2005, OZ Minerals Ltd since 20 June 2008, Ferngrove Vineyards Ltd (also Board Chair), ThinkSmart Ltd since 12 April 2007, Bunnings Property Management Ltd, the responsible entity for the Bunnings Warehouse Property Trust, since 4 June 1998 and Nyrstar NV since 31 August 2007.

People and Performance Committee member

MARK BARNABA

Board Deputy Chair

Year of birth: 1961 Independent, non-executive director B.Comm MBA CitWA

Appointed with effect from 21 April 2009, Appointed as Board Deputy Chair with effect from 1 August 2009.

Experience and expertise Mr Barnaba is co-founder and co-executive Chairman of Azure Capital. He was also the co-founder and Managing Director of GEM Consulting and Poynton & Partners, a corporate advisory and management consultancy firm. Prior to Poynton & Partners, Mr Barnaba spent time working in industry, financial services and management consulting and spent a long period of time with McKinsey & Company in Australia, the UK and RSA. He has previously been a non-executive director of Alinta Infrastructure Holdings Pty Ltd and is also an Adjunct Professor in Investment Banking and Finance with the University of Western Australia’s Business School.

Current directorships Director of Azure Capital Pty Ltd since 2004 (also Co-executive Chair), Edge Employment Solutions Pty Ltd since 2004 (also Board Chair), West Coast Eagles Football Club since 2000 (currently Board Chair) and UWA Business School since 2002 (also Chair).

Chair: People and Performance Committee

D I R E C T O R S ’ R E P O R T ( C O N T I N U E D )


3 0 J U N E 2 0 0 9| 4 5 |

DIRECTOR

EXPERIENCE


DOUG ABERLE

Managing Director

Year of birth: 1953

Executive Director B.E (Hons) M.Eng.Sc

Appointed with effect from 1 April 2006. Current term expires on 30 June 2010.

Experience and expertise Mr Aberle has a detailed knowledge of all aspects of the electricity industry having formerly filled the positions of General Manager for Networks, Chief Operating Officer, General Manager for Generation and General Manager for Transmission within Western Power Corporation. He was also Chairman of Integrated Power Services, a company jointly owned by Western Power Corporation and Halliburton, and was CEO of the South West Development Commission during a six-month secondment. He is also a qualified psychotherapist and a clinical member of the Australian Association of Relationship Counsellors and a College Member of Gestalt Australia & New Zealand.

Current directorships Australian National Committee of CIGRE since 2007 (also Deputy Chair).

None

MERVYN DAVIES

Year of birth: 1944 Independent, non-executive director B.E (Hons) M.Eng.Sc B.Comm

Appointed with effect from 1 April 2006. Current term expires on 30 June 2010.

Experience and expertise Mr Davies has worked in all areas of electricity distribution and has extensive experience in managing both the financial and technical performance of such businesses. He has held senior management positions at Energy Australia, Australia’s largest electricity distribution company. Since leaving Energy Australia, Mr Davies has established and operated an engineering consultancy practice, specialising in electricity distribution system management. He has worked for electricity distributors in New South Wales and Queensland, the Independent Pricing and Regulatory Tribunal in New South Wales and for the Australian Competition and Consumer Commission. He also served as a non-executive director of the former Western Power Corporation.

Current directorshipsDirector of Anrig Pty Ltd since 15 March 2004 (also Board Chair), Girna Engineering Management Services Pty Ltd since December 1983 (also Board Chair) and NT Power and Water Corporation since 15 May 2009 (also Board Chair).

Finance and Risk Committee member

PAUL UNDERWOOD

Year of birth: 1955 Independent, non-executive director

B.Bus ACA GradDipAppFin

Appointed with effect from 25 May 2009, replacing Ms S Farrier. Current term expires on 24 May 2012.

Experience and expertise Mr Underwood has over 30 years experience in chartered accounting and corporate advisory. He has 21 years experience in oil and gas, including 11 years as (founding) Chief Executive Officer/Managing Director of Tap Oil Limited until January 2008, when he became non-executive director. He retired from the latter role in June 2009. Mr Underwood was a board member for Australian Producers and Explorers Association between 1998 and 2006, being Vice Chairman for the latter two years.

Current directorshipsNot currently a director of any other entity.

Finance and Risk Committee member


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DIRECTOR

EXPERIENCE


JOHN CAHILL

Year of birth: 1956 Independent, non-executive director B.Bus GradDipBus

Appointed with effect from 1 August 2009, current term expires on 31 July 2011.

Experience and expertise Mr Cahill has more than 25 years experience working in the energy utility sector in the areas of finance, treasury, accounting and risk management. He was the Chief Executive Officer of Alinta Infrastructure Holdings Ltd between 2005 and February 2007 and prior to that, he was the Chief Financial Officer of Alinta Ltd.

Current directorshipsNon-executive director of Emeco Holdings Ltd (since 2008), and CPA Australia Ltd (since 2007, also Deputy President).

Chair: Finance and Risk Committee

KAREN FIELD

Year of birth: 1948 Independent, non-executive director B.Ec

Appointed with effect from 1 April 2006. Ms Field’s term as a director completed on 20 April 2009.

Experience and expertise Ms Field has spent more than three decades in the mining industry and has a strong background in human resources and project management. She has held executive roles in a variety of mining industry sectors throughout Australia and South America. Prior to returning to Australia to develop consultancy and directorship roles, she was President of Minera Alumbrera Ltd, an Argentine based management company established to develop and operate a large scale copper/gold mining project in north western Argentina.

Current directorships Non-executive director of Sipa Resources Ltd, Water Corporation, Centre for Sustainable Resource Processing and Amana Living Incorporated (formerly Anglican Homes Inc)

Formerly Chair People and Performance Committee

SALLY FARRIER

Year of birth: 1963 Independent, non-executive director B.Eng (Hons) MBA GradDipAppFin

Appointed with effect from 1 April 2006. Ms Farrier’s term as a director completed on 24 May 2009.

Experience and expertise Ms Farrier has 20 years experience in advising governments and corporations on industry restructuring and privatisation, economic regulation, and strategic business and risk allocation issues. She commenced her career as a consulting engineer and subsequently moved to management consulting and corporate advisory, specialising in the utilities industry.

Current directorships Non-executive director of Hydro Tasmania since December 2003, director Farrier Swier Consulting since June 1999, National Water Commissioner since September 2008, Member of the Victoria Water Trust Advisory Council since June 2003 and a member of the Independent Panels for the Gippsland and Western Regions Sustainable Water Strategies since August 2009.

Formerly Finance and Risk Committee member


QUALIFICATIONS AND EXPERIENCE OF DIRECTORS (CONTINUED)


3 0 J U N E 2 0 0 9| 4 7 |

QUALIFICATIONS AND EXPERIENCE OF COMPANY SECRETARY

DIRECTOR EXPERIENCE

JOHN PEASE

LL.M

Mr Pease has been practising law since the mid 1980s and has substantial commercial, as well as litigation experience in a broad range of subject areas, including intellectual property, banking and finance, debt recovery, insolvency, trade practices, higher education and energy and infrastructure. He also has substantial in-house legal practice management experience.

Prior to joining Western Power, Mr Pease has practised as a barrister at Western Australia’s independent Bar and also held various in-house, private practice and government positions.

MEETINGS OF DIRECTORS

The number of meetings of the Board (including meetings of Committees) and number of meetings attended by each of the Directors for the year to 30 June 2009 are as follows:

ATTENDEE BOARD MEETINGS

PEOPLE AND PERFORMANCE COMMITTEE

FINANCE AND RISK COMMITTEE

ATTENDED ELIGIBLE ATTENDED ELIGIBLE ATTENDED ELIGIBLE

D Aberle M Barnaba M Davies S Ferrier K Field P Mansell J Seabrook P Underwood

10 2 11 10 8 11 11 1

11 3 11 10 8 11 11 1

7 0

n/a n/a 6 7 7

n/a

7 1

n/a n/a 6 7 7

n/a

7 n/a 8 7

n/a n/a 8 1

8 n/a 8 7

n/a n/a 8 1

DIRECTOR

EXPERIENCE


JENNY SEABROOK

Formerly Board Deputy Chair Year of birth: 1957 Independent, non-executive director B.Comm

Appointed with effect from 1 April 2006. Ms Seabrook retired as a director with effect from 31 July 2009.

Experience and expertise Ms Seabrook has practised as an investment banker, capital markets adviser and chartered accountant for over 25 years. She is currently a Special Adviser to Gresham Partners Limited and a non-executive director of a number of listed and unlisted corporations. She is also a member of the Federal Government’s Takeovers Panel and the Markets Policy Group for the Financial Services Institute of Australia. Ms Seabrook has previously held non-executive board positions on West Australian Newspapers Holdings Limited, Western Power Corporation, BWA Managed Investments Limited & St Andrew’s Superannuation Services Ltd.

Current directorships Non-executive director of MG Kailis Holdings Pty Ltd since 25 January 2008, Iluka Resources Limited since May 2008, IRESS Market Technology Ltd (since 20 August 2008 and Bank of Western Australia Ltd since 19 December 2008.

Formerly Chair: Finance and Risk Committee

Formerly People and Performance Committee member


3 0 J U N E 2 0 0 9 | 4 8 |

REMUNERATION REPORT The remuneration report is set out under the following main headings:

A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Service agreements

A. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION The Corporation’s remuneration policy is to:

• provide market competitive remuneration to employees having regard to both the level of work assigned and the personal effectiveness in its performance • allocate remuneration to employees on the basis of merit and performance • adopt individual performance measures that are linked to the Corporation’s objectives

Non-Executive Directors

The Minister approves the remuneration of all non-executive directors. The remuneration framework for non-executive directors incorporates a fixed remuneration and superannuation component.

Managing Director and Executives

The Board, subject to the concurrence of the Minister, approves the remuneration of the Managing Director. The Board, on recommendation of the Managing Director, approves the remuneration of all General Managers and Chief Financial Officer.

The Managing Director and Executive Remuneration Framework is based on a Total Remuneration Structure which consists of two components:

• a fixed remuneration component administered as total fixed remuneration • a variable remuneration component administered as short-term incentives

Fixed Remuneration Component

This includes a base salary, superannuation and benefits to reflect the level of work, responsibility and personal competency in the role. This component may be delivered as a combination of cash and prescribed non-financial benefits at the individual’s discretion. Fixed Remuneration is reviewed annually on the basis of competitive market movement and personal performance.

There are no guaranteed Fixed Remuneration increases included in any senior executives’ contracts.

Variable Remuneration Component

This component is a cash-based incentive based on a three-tier performance target (two-tier in respect of the Managing Director) designed to drive successful performance outcomes and team congruence. Incentive payments are not guaranteed and are contingent on meeting the pre-determined performance targets agreed by the Board and senior management. Qualifying incentive payments are made annually in September.

Each year the Board will assess management’s overall performance in meeting agreed performance targets and determine the level of payment to be awarded.



3 0 J U N E 2 0 0 9| 4 9 |

B. DETAILS OF REMUNERATION REMUNERATION OF DIRECTORS

NAME

YEAR

SALARY AND FEES

$’000

SHORT-TERM INCENTIVE PAYMENTS

$’000

NON-MONETARY BENEFITS

$’000

POST EMPLOYMENT

SUPER-ANNUATION

BENEFITS $’000

OTHER LONG-TERM

BENEFITS $’000

TERMINATION BENEFITS

$’000

TOTAL BENEFITS

$’000

D Aberle 2009 351 94 32 64 10 - 551

2008 331 62 35 56 9 - 493

M Davies 2009 - - - 60 - - 60

2008 - - - 60 - - 60

S Farrier 2009 50 - - 4 - - 54

2008 55 - - 5 - - 60

K Field 2009 - - - 49 - - 49

2008 36 - - 24 - - 60

P Mansell 2009 120 - 1 11 - - 132

2008 120 - 1 11 - - 132

J Seabrook 2009 69 - 1 12 - - 82

2008 75 - 1 7 - - 83

M Barnaba 2009 11 - - 1 - - 12

P Underwood 2009 6 - - 1 - - 7

TOTALS 2009 607 94 34 202 10 - 947

2008 617 62 37 163 9 - 888

The short-term incentive payments for 2009 are in respect of amounts earned for the year ended 30 June 2009. Mr D Aberle is entitled to a further short-term incentive amount (not exceeding $5,605) to be assessed following dicussions with the Minister).

All amounts included for Mr D Aberle are subject to the approval of the Minister.


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REMUNERATION OF KEY EXECUTIVES

NAME

YEAR

SALARY AND FEES

$000

SHORT-TERM INCENTIVE PAYMENTS

$000

NON-MONETARY BENEFITS

$000

POST EMPLOYMENT

SUPER-ANNUATION

BENEFITS $000

OTHER LONG-TERM

BENEFITS $000

TERMINATION BENEFITS

$000

TOTAL BENEFITS

$000

K Brown 2009 128 68 24 152 7 – 379

2008 106 40 25 140 6 – 317

A-M Clark 2009 288 81 40 28 8 – 445

2008 260 47 50 27 7 – 391

K Gaitskell 2009 182 59 2 68 6 – 317

M de Laeter 2009 270 73 19 30 7 – 399

2008 236 37 35 29 7 – 344

G Monkhouse 2009 198 65 2 95 7 – 367

2008 172 39 5 101 6 – 323

M Peacock 2009 283 76 26 35 8 – 428

2008 267 49 28 30 7 – 381

J Pease 2009 230 60 15 22 6 – 333

2008 184 39 26 45 6 – 300

P Southwell 2009 232 66 36 45 7 – 386

2008 218 40 38 40 7 – 343

TOTALS 2009 1,811 548 164 475 56 – 3,054

2008 1,443 291 207 412 46 – 2,399

The short-term incentive payments for 2009 are in respect of amounts earned for the year to 30 June 2009.


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C. SERVICE AGREEMENTS

The remuneration and other terms of employment for the Directors, Managing Director and senior executives are formalised in fixed term service agreements. The terms of these agreements relating to remuneration are set out below.

POSITION TERM OF AGREEMENT

P Mansell, Chair of the Board and non-executive director The Governor approved the reappointment of Mr Mansell for a further one year term commencing on 21 April 2009 and expiring on 20 April 2010.

J Cahill, non-executive director Term of agreement commencing on 1 August 2009 and expiring on 31 July 2011.

M Davies, non-executive director Term of agreement commencing on 1 July 2007 and expiring on 30 June 2010.

M Barnaba, non-executive director Term of agreement commencing on 21 April 2009 and expiring on 20 April 2012.

P Underwood, non-executive director Term of agreement commencing on 25 May 2009 and expiring on 24 May 2012.

D Aberle, Managing Director On 8 May 2007 the Governor reappointed Mr Aberle as a director for a three-year term commencing on 1 July 2007.

K Brown, General Manager System Management

M de Laeter, General Manager Customer Services

P Southwell, General Manager Strategy and Corporate Affairs

A-M Clark, General Manager Service Delivery

G Monkhouse, General Manager Human Resources

M Peacock, Chief Financial Officer

K Gaitskell, Director Enterprise Solutions Partner

J Pease, General Counsel and Company Secretary

Ongoing employment agreements commencing from 1 April 2006.


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INSURANCE OF OFFICERS The Corporation holds a Directors and Officers Liability Insurance Policy. This cover will pay on behalf of the Corporation or Directors and Officers of the Corporation, losses arising from a claim or claims made against them jointly or severally during the period of insurance by reason of any wrongful act (as defined by the policy) in the capacity of Director or Officer of the Corporation.

At the date of this report no claims have been made against the Directors and Officers component of the Policy.

AUDITOR

Under the Act, the Parliament has appointed the Auditor General for Western Australia as its independent auditor. The Act provides that the auditor can conduct audits in the manner he sees fit and is not subject to direction by any person about the way in which those powers are exercised.

NON-AUDIT SERVICES

Details of the amounts paid or due and payable to the Office of the Auditor General for the year are set out below. The Office of the Auditor General has not provided any non-audit services during the year.

2009 $’000

2008 $’000

Fees for the annual audit 330 299

This report is made in accordance with a resolution of the Board of Directors.

Signed in Perth this 2nd day of September 2009.

P Mansell D Aberle Chair of the Board Managing Director



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1. CORPORATE GOVERNANCE IN THE CORPORATION

The Corporation is committed to a high level of corporate governance and fostering a culture that values safety, ethical behaviour, integrity and respect.

This Statement reports on the Corporation’s key governance principles and practices. These principles are reviewed regularly and revised as appropriate to reflect changes in law and industry best practice.

The Corporation must comply with the Act and other Australian laws. While the Corporation is not listed on the Australian Securities Exchange (‘ASX’), it seeks to comply, to the extent applicable and not inconsistent with the requirements of the Act, with the ASX Corporate Governance Principles and Recommendations released by the ASX Corporate Governance Council (second edition, August 2007) (‘ASX Principles’).

The ASX Principles require the Board to consider the development and adoption of appropriate governance policies and practices that are founded on the principles set out therein. Details of the Corporation’s compliance with the ASX Principles are set out below and in the compliance checklist found on pages 59 to 60 of this report and are published in the Corporate Governance section of the Corporation’s website (www.westernpower.com.au).

2. BOARD OF DIRECTORS

2.1 BOARD ROLE AND RESPONSIBILITIES (ASX PRINCIPLE 1.1)

As a statutory corporation, the respective duties and responsibilities of the Board and senior executives are substantially set out in the Act. Further details are provided below.

Subject to the provisions of the Act, the Board has overall responsibility for performing the functions, determining the policies and controlling the affairs of the Corporation. The Board’s central role is to set the Corporation’s strategic direction and to oversee its management and commercial activities.

The Board has approved a Board Charter (a copy of which is available in the Corporate Governance section of the Corporation’s website) detailing its role, powers, duties and functions. In addition to matters required by law to be approved by the Board, the following matters are also reserved to the Board:

• appointments to the position of the Chief Executive Officer (CEO) – subject to the Minister’s endorsement – and oversight of appointments of the CEO’s direct reports • providing strategic direction, approving policies and reviewing major decisions, including capital expenditure proposals • approving budgets and financial performance • monitoring senior executives’ performance

• overseeing compliance with internal processes and regulatory requirements • assessing Board performance to ensure the Board’s effectiveness

Responsibility for the management of the Corporation’s day-to-day operations is delegated to the CEO, who is accountable to the Board. The Board has also delegated a number of responsibilities to its committees. The responsibilities of these committees are detailed in section 3 of this report.

2.2 BOARD COMPOSITION (ASX PRINCIPLES 2.1, 2.2, 2.3 & 2.6)

In accordance with the Act, the Board must comprise not less than four and not more than six directors. Directors are appointed by the Governor of Western Australia on the nomination of the Minister. In making nominations, the Minister is required to consult with the Board. The Board may also recommend new directors to the Minister if a Board vacancy occurs.

The Board considers that all of the non-executive directors, including those offering themselves for reappointment, collectively bring the range of skills, knowledge and experience necessary to direct the Corporation. In assessing the composition of the Board, the Directors have regard to the following criteria:

• the Chair and the Deputy Chair must be independent, non-executive directors • the role of the Chair and the CEO cannot be filled by the same person • the CEO is to be resident in, or near, the town in which the Corporation’s head office is located • the majority of the Board should comprise independent directors • the Board should have the required blend of qualifications, experience and expertise

Further details of the process for evaluating the range of skills, experience and expertise that will best complement Board effectiveness, with a view to ensuring that it has a proper understanding of, and the competence to deal with, the current and emerging issues of the Corporation’s business are available in the Corporate Governance section of the website.

C O R P O R AT E G O V E R N A N C E S TAT E M E N T


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2.3 DIRECTOR INDEPENDENCE (ASX PRINCIPLE 2.1 AND 2.6)

The structure and composition of the Board is prescribed by the Act. The independence of directors is therefore not a matter entirely in control of the Board, however, the Board Charter provides that in nominating candidate directors to the Minister, the Board will have regard to the independence of prospective directors.

The Board Charter further outlines the criteria to be considered in assessing director independence, which are based on the premise that a director must be independent of management and free of any business or other relationship that could materially interfere, or could reasonably be perceived to interfere, with the exercise of the director’s unfettered and independent judgment.

The test of whether a business, or other, relationship is material is based on the nature of the relevant relationship and on the circumstances of the individual director. Materiality is considered from the perspective of the Corporation, the persons or organisations with which the director has an association and from the perspective of the director. The Board considers that a customer, or supplier, is material where the amount receivable or payable, respectively, by the Corporation in any 12 month period exceeds $1.5 million. This threshold is not conclusive and the Board will examine both the qualitative and quantitative nature of a director’s relationship with any particular customer or supplier when assessing director independence. If the threshold is exceeded, the Board will consider whether or not that materially affects the impartiality of the judgment of the director.

The Board has considered the independence of each of the directors in office at the date of this report and its determination is set out in the director profiles on pages 44 to 46 of this report. None of the non-executive directors is considered to have a business, or other, relationship that could materially interfere, or could reasonably be perceived to interfere, with the exercise of the director’s unfettered and independent judgment.

2.4 CONFLICTS OF INTEREST

Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with the Corporation’s interests. The Board has developed procedures to assist directors on disclosing potential conflicts of interest1.

A director with an actual or potential conflict of interest in relation to a matter before the Board is required to withdraw from the meeting while the matter is considered.

2.5 BOARD SUCCESSION PLANNING

The People & Performance Committee (‘P&PC’) assists the Board with succession planning. The P&PC reviews the size and composition of the Board and the mix of existing and desired competencies across members and reports its conclusions to the Board annually.

Non-executive directors are appointed for a period of up to three years and are eligible for reappointment, but may be removed from office by the Governor at any time.

When a non-executive director position is vacant, the Governor appoints a replacement on the nomination of the Minister, who must consult with the Board. The Minister is not bound by any Board recommendation. Prior to making a recommendation, the Board (via the P&PC) assesses the range of skills, expertise and competencies represented (and required) in the Board’s composition and seeks to identify candidates who best complement the Board’s composition.

Criteria considered by the P&PC when evaluating prospective candidates are contained in the Board Charter, which is available in the Corporate Governance section of the Corporation’s website.

2.6 TERMS OF APPOINTMENT, INDUCTION TRAINING AND CONTINUING EDUCATION (ASX PRINCIPLES 1.1 )

Under the Act, a director holds office for such period, not exceeding three years, as is specified in the instrument of his or her appointment, and is eligible for reappointment. Periods of appointment will be structured to ensure that approximately one-third of directors retire each year.

The Board has recommended to the Minister that the Act be amended to provide a mechanism to support more effective transition between a retiring director and his or her replacement. The Minister has indicated support for the recommendation and legislative amendment is pending.

All non-executive directors are provided with a letter of appointment that sets out the terms of their appointment. For new appointments, the Corporation intends that each letter of appointment will contain all of the information recommended by the ASX Principles (including duties, rights and responsibilities, the time commitment envisaged and the Board’s expectations regarding involvement with committee work). Not all of the letters of appointment provided to the inaugural non-executive directors contained all of the recommended content. This is because either:

• at the time of appointment of the relevant directors, the Corporation’s policy of compliance with the ASX Principles had not been fully implemented

• being the inaugural directors of the Corporation, the information did not exist at the relevant time, e.g. details of meetings, committee work required, details of fellow directors

C O R P O R AT E G O V E R N A N C E S TAT E M E N T ( C O N T I N U E D )


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• as a statutory corporation, the information is contained in the Corporation’s enabling legislation, namely the Act, or is not relevant e.g. it does not have a constitution, disclosure of material person interests, powers and duties and trading policy (see part 4.2 of this governance statement)

The inaugural non-executive directors have since been given this information where it is relevant to the Corporation. The recommended information has been provided to all subsequently appointed directors.

The P&PC oversees establishment and implementation of an effective induction process for new directors and reviews that process regularly. The induction process includes discussions with the CEO, senior management and the external and internal auditors and provision of information on key corporate and Board policies and strategic plans.

All directors are expected to undertake professional development to maintain the skills required to discharge their duties. Where this involves industry seminars and approved education courses, the Corporation pays the cost, subject to the Chair’s approval. In addition, where skill gaps are identified, directors will be provided with appropriate resources and training.

2.7 PERFORMANCE EVALUATION (ASX PRINCIPLE 1.2, 1.3 & 2.5)

The performance of the Board as a whole and each of its committees are reviewed on a regular basis (at least annually) against the requirements of their respective charters. In addition, the individual performances of the Board Chair and the directors are also reviewed. The P&PC determines the evaluation process for the Board and individual directors.

The performance evaluation of the Board as a whole and individual directors was conducted over June and July 2009 and comprised:

• a self-evaluation survey completed by individual directors • a questionnaire/feedback from senior executives in relation to their dealings and interface with the Board • individual discussions between the Board Chair and all directors and senior executives, using the summarised results of the completed surveys • a confidential report to the Board of the collated results of the process for discussion/consideration

Further details of the Board and director evaluation process are available in the Corporate Governance section of the Corporation’s website.

The Board reviews the performance of its committees annually, at its last meeting for each calendar year. In this reporting period, the Board reviewed reports from each of its committees in December 2008. The reports included the respective committees’:

• assessment of its performance against the requirements

of its charter • goals and objectives for the coming year • recommendations for any improvements to its charter deemed necessary or desirable

The Board also informally reviews its performance on an ongoing basis, by way of a meeting critique conducted by a member of the Board at the close of each Board and Board committee meeting.

The P&PC reviews and makes recommendations to the Board on the process for reviewing the performance of the CEO. The CEO’s performance is judged against the approved strategic plan and the corporate and personal key performance indicators established for the CEO on an annual basis. The same process is adopted in the case of other senior executives, except that their performance is also judged against additional key performance indicators relating to their respective divisions.

A description of the process for performance evaluation of the Board, its committees, individual directors and the Corporation’s senior executives appears in the Corporate Governance section of the Corporation’s website.

During July and August 2008 the performance of the CEO and other senior executives was evaluated in accordance with the process disclosed on the Corporation’s website.

2.8 BOARD ACCESS TO INFORMATION AND PROFESSIONAL ADVICE (ASX PRINCIPLE 2.6)

Directors have direct access to members of the Corporation’s management and information.

Directors may, in carrying out their duties owed to the Corporation, seek external professional advice. They are entitled to reimbursement of all reasonable costs where a request for advice is approved by the Chair. Where the Chair proposes to seek external advice, he or she will consult the Chair of the P&PC.

2.9 DIRECTORS’ REMUNERATION (ASX PRINCIPLE 8.2)

The P&PC is responsible for, among other matters, assisting the Board in establishing remuneration policies and reviewing their effectiveness. The remuneration of non-executive directors is determined by the Minister.

The Corporation has a remuneration policy that distinguishes between the structure of non-executive and executive directors’ remuneration. Details of remuneration policy, together with details of the remuneration paid to directors (executive and non-executive) and all executive officers of the Corporation are set out on pages 49 to 50 of this report.

There are no schemes for retirement benefits, other than superannuation, provided for any non-executive director.


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2.10 CHAIR (ASX PRINCIPLES 2.2 & 2.3)

The Board Chair, Mr P Mansell, is an independent non-executive director. Under the Act, the Governor appoints the Chair and Deputy Chair from the non-executive directors on the nomination of the Minister.

In compliance with the Act, the Board Chair and the CEO are not the same person. The Chair is responsible for leadership of the Board, for the efficient organisation and conduct of the Board’s function and for the promotion of relations between Board members and between the Board and management that are open, cordial and conducive to productive co-operation. The Chair’s responsibilities are set out in more detail in the Board Charter.

Mr Mansell is also Chair/director of the companies listed on page 44 of this report. The Board considers that neither his chairmanship of the companies listed, nor any of his other directorship commitments as listed, interfere with the discharge of his duties to the Corporation. The Board is satisfied that he commits the time necessary to discharge his role effectively.

2.11 COMPANY SECRETARY (ASX PRINCIPLE 2.5)

The Company Secretary is Mr J Pease, who is also its General Counsel. The qualifications and experience of Mr Pease are set out on page 47. The appointment and removal of the Company Secretary is a matter for decision by the Board. The Company Secretary is responsible for ensuring that Board procedures are complied with and that governance matters are addressed. All directors have access to the Company Secretary’s advice and services.

2.12 BOARD MEETINGS (ASX PRINCIPLE 2.6)

The Board meets at least eight times per year to address strategic issues and as needed to address urgent issues. During the year ended 30 June 2009, the Board held 11 Board meetings. Details of directors’ attendance at these meetings are set out on page 47 of this report.

The Board has adopted rules and procedures which govern the proceedings of Board meetings in addition to the provisions in Schedule 1 of the Act.

In summary the procedure is as follows. The Chair sets the agenda for each meeting in consultation with the CEO. Any director may request additional matters to be placed on the agenda. Members of senior management attend meetings of the Board by invitation, but sessions are also scheduled at the beginning of each formal Board meeting for non-executive directors to meet without management present.

Copies of Board papers are circulated electronically in advance of meetings. Directors are entitled to request additional information where they consider the information is necessary to support informed decision-making.

3. BOARD COMMITTEES

3.1 COMMITTEES, MEMBERSHIP AND CHARTERS (ASX PRINCIPLES 2.4, 2.6, 4.1, 4.2, 4.3, 4.4, 8.1 & 8.3)

The Board has established two committees to assist in the discharge of its responsibilities. These are:

• the Finance & Risk Committee (‘F&RC’) • the People & Performance Committee (‘P&PC’)

Each of the committees has its own terms of reference that describe its role and duties. The Company Secretary provides secretariat services for each committee.

Minutes of all committee meetings are provided to the Board and the proceedings of each meeting are reported by the respective committee chair at the next Board meeting. A director may attend committee meetings even if he or she is not a member of the committee.

The number of committee meetings held during the year, and members’ attendances at these meetings, are set out on page 47 of this report.

3.2 FINANCE & RISK COMMITTEE (ASX

PRINCIPLES 4.1, 4.2, 4.3 & 4.4)

The role of the F&RC is to assist the Board to meet its oversight responsibilities in relation to the Corporation’s financial reporting, application of accounting policies, financial management and treasury function, internal control, risk management and compliance systems and the internal and external audit function. In doing so, the committee is to maintain free and open communication with the WA Auditor General, the internal auditors and management of the Corporation.

The committee’s terms of reference, detailing its duties, are available in the Corporate Governance section of the Corporation’s website.

The members of the F&RC are Mr J Cahill (Chair), Mr M Davies and Mr P Underwood. Prior to their respective retirement dates, Ms J Seabrook chaired, and Ms S Farrier was a member of the committee.

A representative of the Office of the Auditor General, CEO, Chief Financial Officer (‘CFO’), Manager Risk Assurance and Audit and General Counsel & Company Secretary attend committee meetings by invitation.

3.3 PEOPLE & PERFORMANCE COMMITTEE (ASX PRINCIPLES 2.4, 2.6, 8.1 & 8.3)

The role of the P&PC is to assist the Board to meet its oversight responsibilities in relation to the Corporation’s governance practices, review Board composition and succession planning for the Board and CEO and assist the Board in establishing remuneration, incentives and human resources policies and a performance review framework.



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The committee’s terms of reference, detailing its duties, are available in the Corporate Governance section of the Corporation’s website.

The members of the P&PC are Mr M Barnaba (Chair) and Mr P Mansell. Prior to their respective retirement dates, Ms K Field chaired and Ms J Seabrook was a member of the committee.

The CEO General Manager Human Resources and General Counsel & Company Secretary attend committee meetings by invitation.

4. PROMOTING RESPONSIBLE AND ETHICAL BEHAVIOUR

4.1 CODE OF CONDUCT AND WHISTLEBLOWER POLICY (ASX PRINCIPLES 3.1 & 3.3)

The Board has approved a code of conduct for directors and executive officers to promote ethical and responsible decision-making.

The Board has also approved a code of conduct setting out minimum standards of conduct for all officers and employees of the Corporation, as well as a legislative and regulatory compliance policy and a conflict of interest policy. The code of conduct outlines the Corporation’s position on a range of ethical and legal issues and summarises its policies on matters such as compliance with laws, occupational health and safety, corporate opportunity, confidentiality, protection of corporate assets and diversity in the workplace and responsibility for the environment.

A copy of these codes of conduct and policies is available in the Corporate Governance section of the Corporation’s website. The codes of conduct and the policies:

• guide compliance with the Corporation’s legal and other obligations to its stakeholders, including the Minister and the Government, employees, customers, the community, unions and regulatory authorities • are designed to reflect the Corporation’s commitment to appropriate corporate practices

Compliance with the principles contained within these documents will also assist the Corporation in effectively managing risks and meeting its legal and compliance obligations.

The Corporation also has a policy on whistleblowing. The purpose of the policy is to help detect and address misconduct, help provide an environment in which persons feel able to raise issues of concern to them and the Corporation and help protect people who report misconduct in good faith.

In accordance with the Act, the Board has also adopted minimum standards of merit, equity and probity applicable to management of the Corporation’s staff and a joint policy on staff transfers. The latter has been approved by the Minister and ensures that staff of the Corporation and the

other electricity corporations created by the Act have the opportunity to move between the corporations and their respective subsidiaries without loss of entitlements.

4.2 OWNERSHIP AND DEALING IN SECURITIES (ASX PRINCIPLE 3.2)

The Corporation is not a listed entity and has no transferable securities. The potential for issues in relation to trading in other companies’ shares while in possession of inside information is addressed in the statutory duties contained in the Act and further explained in an outline of the duties and obligations of directors and executive officers, a copy of which is provided to all directors and officers of the Corporation. The Corporation’s conflict of interest policy also highlights the potential for issues to arise in this regard.

5. SHAREHOLDER

5.1 SHAREHOLDER COMMUNICATION (ASX PRINCIPLES 6.1 & 6.2)

The Minister for Energy is the only shareholder of the Corporation. As the Corporation’s governing body, the Board is responsible to the Minister for its performance. The Minister has various rights set out in the Act in relation to certain aspects of the Corporation, such as Board nominations, approvals for certain transactions and access to information about the Corporation.

The Act also imposes certain reporting obligations on the Corporation. It must produce a strategic development plan (‘SDP’) and a statement of corporate intent (‘SCI’) each year. The SDP sets out the Corporation’s five-year economic and financial objectives, strategic result areas and associated performance targets, as well as strategies. The SCI sets out the Corporation’s scope of activities, objectives and performance targets for the coming financial year and is consistent with the SDP. The SCI is tabled in Parliament after it has been agreed with the Minister and has received the Treasurer’s endorsement.

In addition, the Corporation provides quarterly and annual written reports to the Minister detailing its performance and progress made in fulfilling the agreed targets set in the SCI. The Minister and the Board must, at the request of either, consult on any aspect of the Corporation’s operation.

The Corporation has established a formal protocol to ensure comprehensive and effective communication with the Minister and the Minister’s office. The protocol reflects the particular relationship between the Corporation (being a statutory corporation) and the Government and recognises that the Minister must receive information to enable him to discharge his ministerial duties.


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5.2 CONTINUOUS DISCLOSURE AND MARKET COMMUNICATIONS (ASX PRINCIPLES 5.1 & 5.2)

The Corporation is not a listed company and is not subject to disclosure obligations under the ASX Listing Rules, however, the Act imposes requirements on the Corporation to report on a range of matters to the Minister.

The F&RC monitors the systems and processes the Corporation has in place to achieve compliance with, among other matters, its reporting requirements. In December 2006 the Board approved a legislative and regulatory compliance policy that is designed to ensure that all Corporation employees are aware of its various legislative obligations, including those relating to disclosure and reporting. The policy establishes a framework that, when fully implemented, will:

• identify the relevant obligations and allocate responsibility for compliance • provide education for all affected staff to ensure that there is an awareness of the compliance requirement • ensure that compliance breaches are reported and remedial action monitored • review the effectiveness of the framework on a regular basis

6. FINANCIAL REPORTING (ASX PRINCIPLES 4.1 & 7.3)

The Act requires the Board to declare annually that the Corporation’s financial statements give, in all material respects, a true and fair view of its financial position and that its financial condition and operating results are in accordance with relevant accounting standards.

The CEO and the CFO have assured the Board that the Corporation’s financial reports present a true and fair view, in all material respects, of its financial condition and operational results and are in accordance with relevant accounting standards and that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

7. EXTERNAL AUDITOR RELATIONSHIP (ASX PRINCIPLE 4.4 & 6)

The Act requires that the Corporation’s financial statements are audited by the Auditor General by 30 September each year. The Auditor General also reports to the Minister on whether he or she is of the opinion that the financial report is in accordance with the Act.

The F&RC oversees communications between the Board, senior financial management, Risk Assurance and Audit and the Auditor General in order to ensure that all assistance that is necessary to complete the audit by the Auditor General is provided.

The Corporation does not have control over the appointment (or selection) of the external auditor because this is a matter prescribed by the Act.

8. RISK MANAGEMENT (ASX PRINCIPLES 7.1& 7.2)

The Corporation has a comprehensive framework to manage its strategic, operational, regulatory and reporting risks. The corporate risk management policy sets out a methodology and process for identification of risks, outlines the accountabilities of management and contains procedures for reporting on risk issues throughout the Corporation. A description of the corporate risk management policy and internal control systems is available in the Corporate Governance section of the Corporation’s website.

Divisional general managers are responsible for identifying risks and implementing strategies to mitigate them. The F&RC oversees the risk management framework and reviews the effectiveness of key mitigation strategies. Risk reviews are conducted at least annually to ensure emerging risks, such as those from changes in market structure and design, organisational restructures and operational issues are identified and responses developed.

The CEO and the CFO have assured the Board that the Corporation’s management of its material business risks is effective.

In accordance with the Act, the Treasury Branch makes recommendations to the Board on the appropriate level of insurance cover for the Corporation. Financial risk issues are managed through a treasury policy statement that requires regular reporting to the F&RC on treasury activities.

9. ENVIRONMENTAL RESPONSIBILITY

(SCHEDULE 4, CLAUSE 11(1)(F) OF THE ACT)

The Corporation recognises the importance of the environment in which it operates and that effective environmental management is vital to the sustainability of its business. Corporate policies and strategies are in place encompassing environmental management principles, administered through a formal Environmental Management System. These principles include community consultation, planning, compliance and sustainable development with continuous improvement objectives. Adherence to environmental policies and implementation of the Environmental Management System are audited.

All of the Corporation’s sites are subject to a range of environmental regulations, both State and Federal, and some are also covered by specific Ministerial conditions and environmental operating licences issued by the State. All performance obligations under these regulations, conditions and licences are monitored, audited and reported, and may be subject to Government agency audit or inspection from time to time.



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10. ASX PRINCIPLES CHECKLIST

As the Corporation has chosen to comply with the ASX Principles, it will also report on the extent that it has complied with them. The following table reports on the extent to which the Corporation has complied with the ASX Principles and explains the reasons for any non-compliance.

ASX PRINCIPLE DESCRIPTION REFERENCE COMPLY

Principle 1

1.1

1.2

1.3

Lay solid foundations for management and oversight

Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

Disclose the process for evaluating the performance of senior executives.

Provide the information indicated in the guide to reporting on ASX Principle 1.

2.1, 2.6, 3.1

2.7

2.7

Note 1

➔

➔

Principle 2

2.1

2.2

2.3

2.4

2.5

2.6

Structure the Board to add value

A majority of the board should be independent directors.

The board chair should be an independent director.

The roles of the board chair and CEO should not be exercised by the same individual.

The board should establish a nomination committee.

Disclose the process for evaluating the performance of the board, its committees and individual directors.


2.2, 2.3

2.2, 2.3, 2.10

2.2, 2.10

3.1, 3.3

2.2, 2.3, 2.5, 2.8, 2.12, 3.1, 3.3

➔

➔

➔

Note 2

➔

Principle 3

3.1

3.2

3.3

Promote ethical and responsible decision-making

Establish a code of conduct and disclose the code or a summary of the code as to:

3.11 the practices necessary to maintain confidence in the company’s integrity;

3.12 the practices necessary to take into account the Corporation’s legal obligations and the reasonable expectations of its stakeholders

3.13 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary of the policy.


4.1

4.2

4.1, 4.2

➔

Note 3

➔

Principle 4

4.1

4.2

4.3

4.4

Safeguard integrity in financial reporting

The board should establish an audit committee.

Structure the audit committee so that it consists of:

(i) only non-executive directors; (ii) a majority of independent directors; (iii) an independent chair, who is not the board chair, and; (iv) at least 3 members.

The audit committee should have a formal charter.


3.1, 3.2

3.1, 3.2

3.1, 3.2

3.1, 3.2, 7, Note 4

➔

➔

➔

➔


3 0 J U N E 2 0 0 9 | 6 0 |

10. ASX PRINCIPLES CHECKLIST (CONTINUED)

ASX PRINCIPLE DESCRIPTION REFERENCE COMPLY

Principle 5

5.1

5.2

Make timely and balanced disclosure

Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.


5.1, 5.2

5.1, 5.2

Note 5

Note 5

Principle 6

6.1

6.2

Respect the rights of shareholders

Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose the policy or a summary of the policy.


5.1, 7, Note 6

5.1, 7, Note 6

➔

➔

Principle 7

7.1

7.2

7.3

7.4

Recognise and manage risk

Establish policies for the oversight and management of material business risks and disclose a summary of those policies.

The board should require management to design and implement the risk management and internal control system to manage the Corporation’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Corporation’s management of its material business risks.

The board should disclose whether it has received assurance from the CEO and the CFO that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.


8

6, 8

8

➔

➔

➔

Principle 8

8.1

8.2

8.3

Encourage enhanced performance

The board should establish a remuneration committee.

Clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.


3.1, 3.3

Remuneration report

3.1, 3.3, Remuneration report

➔

➔

➔

1. The letter of appointment given to the current, inaugural, directors of the Corporation did not contain all of the information recommended in this ASX Principle (see section 2.6 of the corporate governance report).

2. Parts of recommendation 2.4 of the ASX Principles are not applicable to the Corporation to the extent that the composition of the Board is ultimately determined by the Governor (on recommendation from the Minister).

3. ASX Principle 3.2 has no relevance to the Corporation as it is not a publicly listed entity (see section 4.2 of the corporate governance report).

4. The independence of committee members is influenced by the process of appointment of the directors to the Board by the Governor and, therefore, the committee may not always have a majority of independent members, however, it currently does have the required majority. Under the Act, the Corporation’s external auditor is the WA Auditor General. Therefore, recommendations in the ASX Principles as to independence and evaluation of the external auditor are not relevant.

5. ASX Principle 5 has no relevance to the Corporation as it is not a publicly listed entity and therefore is not subject to the ASX Listing Rules (see section 5.2 of the corporate governance report).



3 0 J U N E 2 0 0 9| 6 1 |

F I N A N C I A L S T A T E M E N T S

WESTERN POWER FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 Income Statement 62

Statement of Recognised Income and Expense 62

Balance Sheet 63

Cash Flow Statement 64

Notes to the Financial Statements 65

Summary of Significant Accounting Policies 79

Directors’ Declaration 83

Corporate Directory 84

Independent Auditor’s Report 85

Electricity Networks Corporation is incorporated and domiciled in Australia. Its registered office and principal place of business is 363 Wellington Street, Perth WA 6000.

A description of the nature of the Corporation’s operations and its principal activities is included in the review of operations and activities on pages 12 to 21 of the Annual Report and in the Directors’ Report on pages 43 to 52.

The financial report covers the Electricity Networks Corporation as an individual entity. These financial statements were authorised for issue by the Directors on 2nd September 2009. The Directors’ have the power to amend and reissue the financial report.

Through the use of the internet we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Corporation. All press releases, financial reports and other information are available by request at the above address and at the website www.westernpower.com.au.


3 0 J U N E 2 0 0 9 | 6 2 |

FOR THE YEAR ENDED 30 JUNE 2009

NOTES

2009 $’000

2008 $’000

Revenue 1 1,102,639 938,359

Raw materials and consumables used (389,815) (358,987)

Employee benefit expenses (116,891) (109,950)

Payments to defined contribution plans (20,435) (16,702)

Cost of defined benefit plans 8 (d) (124) 822

Operating lease payments (5,804) (4,506)

Payments for audit services (358) (300)

Other expenses (17,553) (11,786)

Total expenses (550,980) (501,409)

Earnings before interest, taxes ,depreciation and amortisation 551,659 436,950

Depreciation and amortisation expense 5 (c) (170,318) (144,718)

Borrowing costs 2 (204,884) (172,630)

Profit before income tax expense 176,457 119,602

Income tax expense 3 (a) (50,218) (34,593)

Profit for the year 126,239 85,009 All activities relate to continuing operations.


NOTES

2009 $’000

2008 $’000

Net (losses)/gains taken to equity in respect of cash flow hedges 9 (596) 983

Actuarial losses on retirement benefit obligations 9 (577) –

Income and expense recognised directly in equity (1,173) 983

Profit for the year 126,239 85,009

Total recognised income and expense for the year 125,066 85,992 This statements should be read in conjunction with the attached notes to the financial statements set out on pages 65 to 82.

I N C O M E S TAT E M E N T

S TAT E M E N T O F R E C O G N I S E D I N C O M E A N D E X P E N S E


3 0 J U N E 2 0 0 9| 6 3 |

AS AT 30 JUNE 2009

NOTES

2009 $’000

2008 $’000

Current assets

Cash and cash equivalents 4 (a) 26,661 8,521

Trade and other receivables 4 (a) 136,105 132,903

Inventories 83,288 65,618

Derivative financial instruments 4 (a) 373 322

Current tax assets – 7,778

Total current assets 246,427 215,142

Non-current assets

Trade and other receivables 4 (a) 200 151

Property, plant and equipment 5 5,091,847 4,246,206

Intangible assets 5 26,120 34,094

Derivative financial instruments 4 (a) 214 997

Total non-current assets 5,118,381 4,281,448

Total assets 5,364,808 4,496,590

Current liabilities

Trade and other payables 4 (a) 201,587 174,829

Current tax liabilities 23,793 –

Provisions 7 18,321 15,329

Derivative financial instruments 4 (a) 1,881 2,287

Deferred income 6 100,926 226,922

Total current liabilities 346,508 419,367

Non-current liabilities

Borrowings 4 (a) 3,927,497 3,118,398

Retirement benefit obligations 8 752 276

Trade and other payables 4 (a) 10,742 11,409

Provisions 7 17,677 14,679

Deferred tax liabilities 3 (d) 45,843 18,968

Derivative financial instruments 4 (a) 1,130 550

Deferred income 6 8,186 1,413

Total non-current liabilities 4,011,827 3,165,693

Total liabilities 4,358,335 3,585,060

Net assets 1,006,473 911,530

Equity

Contributed equity 9 820,022 813,371

Reserve 9 (610) (14)

Retained profits 9 187,061 98,173

Total equity 1,006,473 911,530 This statement should be read in conjunction with the attached notes to the financial statements set out on pages 65 to 82.

B A L A N C E S H E E T


3 0 J U N E 2 0 0 9 | 6 4 |

C A S H F L O W S TAT E M E N T


NOTES

2009 $’000

2008 $’000

Cash flows from operating activities

Profit before taxation 176,457 119,602

Adjustments for:

Depreciation 170,318 144,718

Gains on disposal of property, plant and equipment (2,021) (3,720)

Non-cash capital contributions (71,961) (20,315)

(Increase) in trade and other receivables (4,582) (37,568)

(Increase)/decrease in inventories (17,670) 1,356

(Decrease)/increase in trade payables (96,991) 39,083

Cash generated from operations 153,550 243,156

Income taxes received/(paid) 8,791 (7,938)

Net cash generated from operating activities 162,341 235,218

Cash flows from investing activities

Purchase of property, plant and equipment (905,536) (756,898)

Proceeds from sale of property, plant and equipment 9,214 7,004

Net cash used in investing activities (896,322) (749,894)

Cash flows from financing activities

Proceeds from long-term borrowings 1,983,500 2,530,368

Repayments of long-term borrowings (990,835) (1,783,823)

Interest received 1,280 987

Interest paid (211,701) (192,147)

Proceeds from contributed equity 9 6,651 6,000

Distributions to equity holder 9 (36,774) (43,973)

Net cash generated from financing activities 752,121 517,412

Net increase in cash and cash equivalents 18,140 2,736

Cash and cash equivalents at beginning of the year 8,521 5,785

Cash and cash equivalents at end of the year 4 (a) 26,661 8,521 This statement should be read in conjunction with the attached notes to the financial statements set out on pages 65 to 82.


3 0 J U N E 2 0 0 9| 6 5 |

1. REVENUE

2009 $’000

2008 $’000

Revenue from continuing activities

Network services revenue 807,968 775,604

Developer and customer contributions 288,469 155,358

Interest received 1,280 987

Net gain on sale of property, plant and equipment 2,021 3,720

Other income 2,901 2,690

1,102,639 938,359

(A) UNDERLYING EARNINGS

Annual network target revenue as reported in the Performance Review section of the Annual Report is made up of Electricity Transmission Revenue and Developer and Customer Contribution Revenue. Electricity Transmission Revenue is earned at tariff rates approved by the Economic Regulatory Authority. Variations from this target revenue can occur as a result of variations in:

• volume of electricity transported across the network • actual developer and customer contributions received

The financial impacts of these variations are adjusted in future network charges.

The revenue reported in these financial statements does not include any revenue adjustments arising from variations occurring in the previous financial year as these price adjustments are included in the distribution and transmission charges to customers in future periods. These adjustments are included in the Underlying Earnings of the Corporation, which are reported in the Performance Review section of the Annual Report.

2. BORROWING COSTS

NOTES

2009 $’000

2008 $’000

Interest expense 218,951 184,650

Capitalised interest 5 (a) (14,067) (12,020)

204,884 172,630

Borrowing costs represent interest charges on the borrowings of the Corporation. Only interest charges that were incurred on qualifying projects are capitalised.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S


3 0 J U N E 2 0 0 9 | 6 6 |

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S ( C O N T I N U E D )

3. INCOME TAX

(A) INCOME TAX EXPENSE

2009 $’000

2008 $’000

Current tax 26,230 5,317

Deferred tax 24,610 29,779

Adjustment for current tax of prior periods (622) (503)

50,218 34,593

(B) NUMERICAL RECONCILIATION OF INCOME TAX TO PRIMA FACIE TAX PAYABLE

2009 $’000

2008 $’000

Profit from continuing operations before income tax expense 176,457 119,602

Tax at the Australian rate of 30% (2008: 30%) 52,937 35,881

Tax effect of:

Non deductible expenses 231 172

Tax exempt income – (540)

Tax incentives (2,328) (212)

Recognition of previously unrecognised tax losses – (205)

Adjustment for current tax of prior years (622) (503)

50,218 34,593

(C) ACCOUNTS RECOGNISED DIRECTLY IN EQUITY

2009 $’000

2008 $’000

Deferred tax 946 (422)

946 (422)

The balance in deferred tax liabilities comprises temporary differences attributable to:

(D) DEFERRED TAX

2009 $’000

2008 $’000

Provisions for employee benefits 20,120 18,052

Property, plant and equipment (66,163) (36,308)

Contributory Extension Scheme (2,920) (3,371)

Other temporary differences 2,174 3,081

Amounts recognised in the income statement (46,789) (18,546)

Actuarial adjustment to retirement benefit obligations 247 –

Other temporary differences 699 (422)

Amounts recognised directly in equity 946 (422)

Total amounts recognised (45,843) (18,968)


3 0 J U N E 2 0 0 9| 6 7 |

4. FINANCIAL INSTRUMENTS

The Corporation uses a range of financial instruments such as borrowings, trade and other payables and receivables, cash and derivative financial instruments to support the operations of the business.

(A) FINANCIAL ASSETS AND LIABILITIES

NOTES

2009 CURRENT $’000

2009 NON-CURENT $’000

2008 CURRENT $’000

2008 NON-CURENT $’000

Financial assets

Cash and cash equivalents 26,661 – 8,521 –

Trade and other receivables 136,105 200 132,903 151

Derivative financial instruments 373 214 322 997

Interest rate swaps – – 194 974

Forward exchange contracts 373 214 128 23

Total financial assets 163,139 414 141,746 1,148

Financial liabilities

Trade payables and accruals 161,347 – 139,043 –

Other payables 36,064 – 32,097 –

Contributory Extension Scheme 4 (b) 4,176 10,742 3,689 11,409

Trade and other payables 201,587 10,742 174,829 11,409

Borrowings 4(c) – 3,927,497 – 3,118,398

Derivative financial instruments 1,881 1,130 2,287 550

Interest rate swaps 350 790 – –

Forward exchange contracts 1,531 340 2,287 550

Total financial liabilities 203,468 3,939,369 177,116 3,130,357 The only item above where the carrying amount differs from fair value is the liabilities for the Contributory Extension Scheme which is recorded at amortised cost. The fair value of these non-interest bearing liabilities at 30 June 2009 is $19,021,000 (30 June 2008: $19,805,000).

The fair value of derivative financial instruments is determined as the amount at which the instrument could be exchanged, or liability settled in a current transaction between willing parties, after allowing for transaction costs.

(B) CONTRIBUTORY EXTENSION SCHEME

Contributory Extension Scheme payables represent contributions received from customers to extend specific electricity supplies. These contributions are refunded at the end of the contribution period unless other customers connect to the extensions. By 2023, when the scheme finishes, all scheme members will have their contributions refunded.

(C) BORROWINGS

Borrowings include accrued interest and are governed by a facility agreement that provides the Corporation with the full discretion to refinance all or any part of maturing debt. Accordingly, borrowings with a maturity date of less than 12 months have been classified as non-current borrowings. It is intended to refinance all domestic currency loans maturing over the next 12 months under the facility agreement.

The Corporation has a borrowing facility with Western Australian Treasury Corporation with a limit of $7,000,000,000 (30 June 2008: $4,000,000,000). As at 30 June 2009 the unused portion of this facility was $3,116,400,000 (30 June 2008: $881,600,000). The planned usage of the facility is governed by the Strategic Development Plan (SDP) agreed with the Minister of Energy. Actual borrowings at 30 June 2009 were $210,800,000 (30 June 2008: $134,800,000) below the budgeted borrowings in the SDP. The maximum amount of borrowings permitted by the Department of Treasury and Finance for the year to 30 June 2010 is currently $4,688,200,000 (2009: $3,883,700,000).


3 0 J U N E 2 0 0 9 | 6 8 |


(D) FINANCIAL RISK MANAGEMENT

The Corporation uses a range of derivative financial instruments to hedge cash flow exposures to movements in interest rates, exchange rates and commodity prices that arise from its operational activities. Credit, liquidity and market risk management is carried out in accordance with Board approved policies which are reviewed annually.

(E) FINANCIAL RISK FACTORS

Credit RiskCredit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Corporation provides credit on 14 and 30 day instalment payment terms. Credit risk is actively managed through the use of credit ratings, approved policies and monthly reporting to the Board. The Corporation manages the quality of financial assets and its concentrations of credit risk by reference to external credit ratings, where available, or to historic information on counterparty default rates. Unconditional bank guarantees or cash deposits are also obtained where necessary. The carrying amounts of financial assets recognised in the balance sheet best represent the Corporations maximum exposure to credit risk at the reporting date.

The Corporation uses a formalised process to manage the collection of debts through regular reminders and renegotiations. This process allows appropriate legal action to be taken where necessary. Financial assets past due and not impaired An analysis of financial assets past due and not impaired is provided in the following table.

FINANCIAL ASSETS PAST DUE

2009 $’000

2008 $’000

Trade and other receivables

Less than 60 days overdue 3,557 3,755

Less than 90 days overdue 302 637

More than 90 days overdue 3,963 17,746

7,822 22,138

The change in value of the financial assets determined as impaired due to uncertainty of collection is provided in the following table.

FINANCIAL ASSETS PAST DUE AND IMPAIRED

TRADE AND OTHER RECEIVABLES $’000

At 1 July 2007 1,490

Provision for impairment recognised during the year 746

Amounts written off during the year as uncollectable (241)

At 30 June 2008 1,995

Provision for impairment recognised during the year (135)

Amounts written off during the year as uncollectable (727)

At 30 June 2009 1,133

There is no collateral security in place in respect of these amounts. There are no material amounts of past due financial assets whose terms have been renegotiated. Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Corporation is governed by the Treasury Management Framework which requires active management of cash and ensures adequate facilities are in place to satisfy ongoing funding requirements.


3 0 J U N E 2 0 0 9| 6 9 |

(E) FINANCIAL RISK FACTORS (CONTINUED)

FIXED RATE

BORROWINGS $’000

FLOATING RATE

NOTES $’000

INTEREST RATE

SWEEPS $’000

CONTRIBUTORY EXTENSION

SCHEME $’000

OTHERS $’000

TOTAL $’000

As at 30 June 2009

Weighted average interest rate 6.3% 4.8% -0.9% 12.8% –

Undiscounted contractual cash flows maturing:

within one year 848,899 191,521 1,229 2,892 195,907 1,240,448

between 2-5 years 2,131,791 332,893 583 8,473 – 2,473,740

in more than 5 years 1,234,426 – – 13,287 – 1,247,713

Total contractual cash flows 4,215,116 524,414 1,812 24,652 195,907 4,961,901

Effect of discount rates (666,981) (31,680) (48) (9,734) – (708,443)

Total financial liabilties 3,548,135 492,734 1,764 14,918 195,907 4,253,458

As at 30 June 2008

Weighted average interest rate 6.4% 7.0% 0.6% 12.4% –

Undiscounted contractual cash flows maturing:

within one year 591,056 140,785 (787) 3,689 173,427 908,170

between 2-5 years 1,603,043 512,474 (849) 8,570 550 2,123,788

in more than 5 years 1,012,517 – – 14,074 – 1,026,591

Total contractual cash flows 3,206,616 653,259 (1,636) 26,333 173,977 4,058,549

Effect of discount rates (715,434) (89,169) 150 (11,235) – (815,688)

Total financial liabilities 2,491,182 564,090 (1,486) 15,098 173,977 3,242,861

Borrowing facilities are in Australian dollars. Funds may be drawn at any time with an average maturity of 3.4 years (2008: 2.3 years) Market Risks Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Corporation has exposures to movements in interest rate, commodity and exchange rate markets. Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Corporation has a debt management strategy to minimise the cost of borrowing through the active management of interest rate exposures. Debt maturity guidelines are set to ensure that the Corporation is not exposed to excess risk from interest rate volatility. Interest rate forecasts are continuously monitored and, where appropriate, exposures to interest rates are managed through the use of Board-approved hedging instruments. Commodity Risk Commodity risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. Commodity risk arises from variability in commodity prices contained in commercial transactions and managed through the use of forward contracts. The fair value of instruments relating to commodities was not material at reporting date. Currency RiskCurrency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk in the Corporation arises from future commercial transactions expressed in foreign currency, principally the purchase of capital equipment. The Corporation’s foreign exchange risk management strategy aims to provide certainty of prices at the most efficient cost. Foreign currency exposures are managed through the use of foreign exchange contracts. The Corporation’s exposure to foreign currency risk at the reporting date is as follows:


3 0 J U N E 2 0 0 9 | 7 0 |



30 JUNE 2009 30 JUNE 2008

EURO $000

US DOLLARS

$000

SWEDISH KRONE

$000

CANADIAN DOLLARS

$000

EURO $000

US DOLLARS

$000

SWEDISH KRONE

$000

CANADIAN DOLLARS

$000

Weighted average exchange rate

0.5582

0.7375

5.4488

0.8703

0.5652

0.8852

5.4707

n/a

Forward exchange contracts maturing:

within one year

between 2-5 years

24,954

12,420

901

–

7,475

–

325

–

28,583

20,589

4,902

–

12,655

996

–

–

Sensitivity AnalysisThe following tables summarise the potential impact on financial assets and financial liabilities of the Corporation to movements in interest rate risk and foreign currency risk. The assumptions used are based on management’s best estimate of a reasonably possible movement given current market conditions.

INTEREST RATE RISK FOREIGN CURRENCY RISK

AS AT 30 JUNE 2009

CARRYING AMOUNT

$’000

IMPACT ON POST-TAX PROFIT +/- 1%

$’000

IMPACT ON EQUITY +/- 1% $’000


$’000


Financial assets

Cash and cash equivalents

26,661

250

(250)

250

(250)

–

–

–

–


136,105

–

–

–

–

–

–

–

–

Derivatives – FX contracts²

587

–

–

–

–

–

–

(1,359)

1,661

Derivatives – Interest rate swaps³

–

–

–

–

–

–

–

–

–


Trade payables and other payables

212,329

–

–

–

–

–

–

–

–

Borrowings¹ 3,927,497 (4,930) 4,930 (4,930) 4,930 – – – –


1,871

–

–

–

–

–

–

(2,668)

3,261


1,140

53

(53)

62

(62)

–

–

–

–


3 0 J U N E 2 0 0 9| 7 1 |


INTEREST RATE RISK FOREIGN CURRENCY RISK

AS AT 30 JUNE 2008

CARRYING AMOUNT

$’000


$’000



$’000


Financial assets

Cash and cash equivalents

8,521

80

(80)

80

(80)

–

–

–

–


132,903

–

–

–

–

–

–

–

–


151

–

–

–

–

–

–

(1,252)

1,531


1,168

54

(54)

160

(160)

–

–

–

–


Trade payables and other payables

186,238

–

–

–

–

–

–

–

–

Borrowings¹ 3,118,398 (5,630) 5,630 (5,630) 5,630 – – – –


2,837

–

–

–

–

–

–

(4,257)

5,204


–

–

–

–

–

–

–

–

–

1. In line with the Board approved Treasury Policy, the majority of the Corporation’s borrowings are at fixed interest rates. Interest rate risk exposure is limited to the Corporation’s floating rate borrowings of $493.3m (2008: $563.3m).

2. Derivatives – FX contracts are all designated as cash flow hedges and used to hedge against foreign exchange risk arising from the future purchase of capital equipment in foreign currencies. There is no profit and loss sensitivity as the hedges are 100% effective.

3. Derivatives – Interest rate swaps are all designated as cash flow hedges and used to hedge against floating interest rate exposures. All interest rate swaps have remained 100% effective throughout the financial year. A shift in interest rates of +/- 1% results in an impact on derivative valuation of $62k/$(62k) and on realised receipts/(payments) during the period of $53k/ $(53k).

4. Derivatives – Commodity contracts have not been included in the sensitivity analysis due to the fair value not being material at reporting date.


3 0 J U N E 2 0 0 9 | 7 2 |


5. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

LAND $’000

BUILDINGS $’000

PLANT AND EQUIPMENT

$’000

WORKS UNDER

CONSTRUCTION $’000

PROPERTY, PLANT &

EQUIPMENT $’000

INTANGIBLE

ASSETS $’000

Cost at 1 July 2007 66,228 52,697 3,082,176 555,049 3,756,150 35,933

Correction to prior years – – – (8,492) (8,492) –

Restated balances as at 1 July 2007 66,228 52,697 3,082,176 546,557 3,747,658 35,933

Additions (notes a,b) 10,691 5,990 529,508 233,524 779,713 31,076

Disposals – – (6,736) – (6,736) –

Cost at 30 June 2008 76,919 58,687 3,604,948 780,081 4,520,635 67,009

Additions (notes a,b) 27,947 13,804 890,032 75,028 1,006,811 10,592

Disposals – – (14,697) – (14,697) (657)

Cost at 30 June 2009 104,866 72,491 4,480,283 855,109 5,512,749 76,944

Accumulated depreciation at 1 July 2007 – 5,281 144,396 – 149,677 14,278

Depreciation charge for the year (note c) – 4,573 123,631 – 128,204 18,637

Disposals – – (3,452) – (3,452) –

Accumulated depreciation at 30 June 2008 – 9,854 264,575 – 274,429 32,915

Depreciation charge for the year (note c) – 4,658 149,535 – 154,193 18,348

Disposals – – (7,720) – (7,720) (439)

Accumulated depreciation at 30 June 2009 – 14,512 406,390 – 420,902 50,824

Net book value at 30 June 2009 104,866 57,979 4,073,893 855,109 5,091,847 26,120

Net book value at 30 June 2008 76,919 48,833 3,340,373 780,081 4,246,206 34,094

Net book value at 1 July 2007 66,228 47,416 2,937,780 546,557 3,597,981 21,655

(A) CAPITALISED BORROWING COSTS

Additions include borrowing costs of $14,067,597 (2008: $12,020,235) attributable to assets in the course of construction and capitalised in the year at a weighted average interest rate of 6.1 per cent (2008: 6.5 per cent).

(B) CONTRIBUTED ASSETS

The Corporation receives non-cash capital contributions in the form of gifted network assets. The fair value of the non-cash capital contributions included in additions to works under construction in the year was $71,961,263 (2008: $20,315,000).

(C) DEPRECIATION CHARGE

Depreciation charges represent charges to operating expenses of $170,318,000 (2008: $144,718,000) together with capitalised depreciation charges of $2,223,000 (2008: $2,123,000).


3 0 J U N E 2 0 0 9| 7 3 |

6. DEFERRED INCOME

$’000

At 1 July 2007 189,730

Additions in the year 193,963

Earned in the year (155,358)

At 30 June 2008 228,335

Additions in the year 169,246

Earned in the year (288,469)

At 30 June 2009 109,112

Deferred income balances relate to contributions received in advance from customers. These balances are analysed between current and non-current as follows:

2009 $’000

2008 $’000

Current 100,926 226,922

Non-current 8,186 1,413

109,112 228,335

7. PROVISIONS

EMPLOYEE BENEFITS $’000

ENVIRONMENTAL PROVISIONS (NOTE A) $’000

TOTAL $’000

At 1 July 2007 25,612 5,171 30,783

Additions in the year 4,535 – 4,535

Utilised in the year (3,772) (1,538) (5,310)

At 30 June 2008 26,375 3,633 30,008

Additions in the year 8,609 – 8,609

Utilised in the year (2,274) (345) (2,619)

At 30 June 2009 32,710 3,288 35,998

Provisions are analysed between current and non-current as follows:

2009 $’000

2008 $’000

Current 18,321 15,329

Non-current 17,677 14,679

35,998 30,008

(A) ENVIRONMENTAL PROVISIONS

The environmental provisions relate to estimated costs on essential safety expenditure. The assessment of these costs is subject to periodic reviews that may result in the amount being revised. It is currently estimated that substantially all of this provision will be utilised within the next two years.


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8. RETIREMENT BENEFIT OBLIGATIONS

2009 $’000

2008 $’000

Present value of unfunded defined benefit obligations 740 276

Present value of funded defined benefit obligations 1,272 1,335

Fair value of plan assets (1,260) (1,808)

Plan assets not recognised – 473

Recognised liability for defined benefit obligations 752 276

(A) DEFINED BENEFIT OBLIGATIONS

The Corporation contributes to both defined contribution and defined benefit sections of the Pension Scheme, the Gold State Superannuation Scheme and the Western Power Superannuation Fund.

Contributions to the defined contribution sections of these schemes are fixed and the Corporation’s legal and constructive obligation is limited to these contributions.

The defined benefit sections provide either a pension or lump sum benefit based upon years of service and final average salary, averaged over a number of years in accordance with the relevant governing rules. Each of the defined benefit sections is closed to new members and the Western Power Superannuation Fund was closed to further contributions from its existing members from 18 May 2006. The Corporation settled its liability in respect of past service entitlements to members of these funds with a contribution of $35,818,343 to the Government Employees Superannuation Board on 17 November 2007. The only remaining obligation in respect of these funds is in respect of current service entitlements earned by members after 17 November 2007.

The Corporation also funds a defined benefit scheme for seven members administered by AustralianSuper. At 30 June 2009 the present obligations of the scheme attributable to these members of $1,272,000 exceeded the attributable assets by $12,000 (2008: $473,000 surplus). The assets of this scheme consist of the following:

2009 $’000

2008 $’000

Equity securities 718 1,157

Property 151 181

Bonds 114 217

Other securities 252 217

Cash 25 36

1,260 1,808


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(B) MOVEMENT IN THE LIABILITY FOR DEFINED BENEFIT OBLIGATIONS

Changes in the present value of the defined benefit obligations are as follows:

UNFUNDED PLANS FUNDED PLANS

2009 $’000

2008 $’000

2009 $’000

2008 $’000

Balance at the beginning of the year 276 37,165 1,335 1,888

Amounts transferred out – (36,067) – –

Past service cost – (1,098) – –

Current service cost 246 276 – –

Interest cost 18 – 76 –

Actuarial losses for the year 200 – (138) –

Benefits paid – – (1) (553)

Net liability in the balance sheet 740 276 1,272 1,335

(C) MOVEMENT IN PLAN ASSETS

2009 $’000

2008 $’000

Funded plans

Fair value of plan assets at the beginning of the year 1,808 2,264

Benefits paid by the plan (1) (553)

Expected return on plan assets 216 97

Actuarial losses for the year (763) –

Fair value of plan assets at the end of the year 1,260 1,808

(D) AMOUNTS RECOGNISED IN THE INCOME STATEMENT

2009 $’000

2008 $’000

Past service cost – (1,098)

Current service cost 246 276

Interest cost 94 –

Expected return on plan assets (216) –

Total included in employee benefit expenses/(income) 124 (822)

(E) AMOUNTS RECOGNISED DIRECTLY IN EQUITY

2009 $’000

2008 $’000

Net actuarial losses recognised in the year 825 –

Total included in employee benefits expense 825 –


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(F) PRINCIPAL ACTUARIAL ASSUMPTIONS

The principal actuarial assumptions used, expressed as weighted averages, were as follows:

2009 2008

Discount rate 5.3% 5.7%

Expected return on plan assets 7.0% 13.7%

Expected future salary increases 4.5% 5.3%

Expected future pension increases 2.5% 2.5%

9. CONTRIBUTED EQUITY AND RESERVES

CONTRIBUTED EQUITY $’000

HEDGING RESERVE $’000

RETAINED PROFITS $’000

TOTAL $’000

At 1 July 2007 as previously reported 807,161 (997) 58,649 864,813

Adjustment to accrued income – – 14,485 14,485

Adjustment to property, plant and equipment – – (5,973) (5,973)

Adjustment to deferred tax liabilities – – (10,024) (10,024)

At 1 July 2007 as restated 807,161 (997) 57,137 863,301

Profit for the financial year – – 85,009 85,009

Contributions received in the year 6,210 – – 6,210

Distributions to equity holder – – (43,973) (43,973)

Gains on cash flow hedges – 983 – 983

At 30 June 2008 813,371 (14) 98,173 911,530

Profit for the financial year – – 126,239 126,239

Contributions received in the year 6,651 – – 6,651

Distributions to equity holder – – (36,774) (36,774)

Gains on cash flow hedges – (596) – (596)

Actuarial adjustments to retirement benefit obligations – – (577) (577)

At 30 June 2009 820,022 (610) 187,061 1,006,473

(A) CONTRIBUTED EQUITY

Contributed equity represents subsidies made by the State Government for the Regional Power Investment Program and the Headworks Program. No shares have been allotted or issued.

(B) HEDGING RESERVE

The hedging reserve represents the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet matured.

(C) RETAINED PROFITS

Distributions to equity holder are in respect of dividends declared in the period on retained profits for year to 30 June 2008 and an interim dividend on 30 June 2009 in respect of the year to 30 June 2009.


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10. RESTATEMENT OF PRIOR PERIODS

The following adjustments arise from errors in information available in 2008 and result in a restatement of prior period earnings of $2,408,000 after tax.

TRADE AND OTHER

RECEIVABLES $’000

PROPERTY, PLANT AND EQUIMENT

$’000

CURRENT TAX

ASSETS $’000

DEFERRED INCOME

$’000

DEFERRED TAX

LIABILITIES $’000

RETAINED PROFITS

$’000

As previously reported 122,496 4,255,939 10,534 236,620 8,944 100,581

Adjustment to accrued income 20,105 – (6,032) – – 14,073

Adjustment to property, plant and equipments – (9,733) 3,276 – – (6,457)

Adjustment to deferred tax liabilities – – – – 10,024 (10,024)

Adjustment to trade receivables (9,698) – – (9,698) – –

Restated balance at 30 June 2009 132,903 4,246,206 7,778 226,922 18,968 98,173

Adjustment to accrued income This adjustment increases the estimate for unbilled revenue at 30 June 2008.

Adjustment to property, plant and equipment This adjustment removes the cost of customer funded projects that had been abandoned at 30 June 2008.

Adjustment to deferred tax liabilities This tax effect adjustment corrects an overstatement in the treatment of capitalised repair costs.

Adjustment to trade receivables This adjustment removes amounts receivable which were incorrectly recognised at quotation at 30 June 2008

11. COMMITMENTS

(A) LEASE COMMITMENTS

The Corporation leases premises under a non-cancellable operating lease expiring within five years. The Corporation also leases motor vehicles and equipment under cancellable operating leases requiring no more than six months notice of termination.

Commitments to minimum lease payments in relation to non-cancellable operating leases are as follows:

OPERATING LEASES

2009 $’000

2008 $’000

Payable within one year 612 583

Payable later than one year but not later than 5 years 2,026 2,636

2,638 3,219

(B) CAPITAL COMMITMENTS

Capital expenditure on property, plant and equipment contracted for at the reporting date but not recognised as liabilities is as follows:

2009 $’000

2008 $’000

Payable within one year 286,222 182,575

Payable later than one year but not later than 5 years 26,676 36,374

312,898 218,949


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(C) OTHER EXPENDITURE COMMITMENTS

The Corporation has the following commitments to pay Tariff Equalisation Contributions:

2009 $’000

2008 $’000

Payable within one year 122,100 72,000

Payable later than one year but not later than 5 years 432,332 –

554,432 72,000

The Corporation is required to make annual payments into the Tariff Equalisation Fund used to compensate other power utilities. A new arrangement commenced on 1 July 2009 covering a four year period.

12. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

The Corporation submitted its proposed new three year access arrangement to the ERA on 1 October 2008. A draft response has been received from the ERA which requests amendments to the proposed access arrangement. The Corporation is responding to the ERA, providing feedback on the viability of the requested amendments and further supporting the Corporation’s initial position. Further negotiations will be required before ERA approval of the access arrangement is granted. When approved, this determination will regulate the Corporation’s affairs, including regulatory prices, for the three year period.

There are no matters or circumstances that have arisen in the interval between the end of the reporting period and the date of this report that are likely, in the opinion of the Directors, to affect significantly the operations of the Corporation, the results of those operations, or the state of affairs of the Corporation, in subsequent financial years.



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The accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the reporting periods presented unless otherwise stated.

BASIS OF PREPARATION

The financial report is a general purpose financial report, which has been prepared in accordance with Australian Accounting Standards (‘AIFRS’) and Urgent Issue Group Interpretations adopted by the Australian Accounting Standards Board (‘AASB’) and the disclosure requirements of Schedule 4 of the Act. The Corporation has been determined to be a not-for-profit entity and accordingly applies the not-for-profit elections available in the Australian Accounting Standards where applicable.

Historical cost convention These financial statements have been prepared under the historical cost convention except for derivative financial instruments, that are measured at fair value, and certain non-current financial assets and liabilities that are measured at amortised cost.

Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Corporation’s accounting policies. There are no areas considered to require a high degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements.

Functional and presentation currency This financial report is presented in Australian dollars, which is the functional and presentation currency of the Corporation.

RoundingAll financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

Comparative amountsComparative amounts are for the year to 30 June 2008.

Working capitalAt 30 June 2009, the Corporation reported a working capital deficiency of $100,081,000 (30 June 2008: $204,225,000). Current liabilities include deferred income relating to developer and customer contributions to the value of $100,926,000 (30 June 2008: $226,922,000) which will not require an outflow of cash resources. When these amounts are excluded, working capital shows current assets exceeding current liabilities by $845,000 (30 June 2008: $22,697,000).

FOREIGN CURRENCIES

Transactions in currency other than the functional currency of the Corporation are translated at the rates of exchange prevailing on the dates of the transactions.

At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at closing exchange rates. All foreign currency translation differences are recognised in the income statement except when deferred in equity for translation differences of qualifying cash flow hedges.

REVENUE RECOGNITION

Revenues primarily represent the sales value derived from the transmission and distribution of electricity and the provision of related services and is measured at the fair value of the consideration received or receivable.

The Corporation is subject to a regulatory agreement, which determines the revenues receivable for its services. No liabilities are recognised when revenues received or receivable exceed the maximum amount permitted by regulatory agreement and adjustments will be made to future prices to reflect this over-recovery. Similarly, no assets are recognised when a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery of permitted revenues.

Developer and customer contributionsThe Corporation receives developer and customer contributions toward the extension of electricity infrastructure to facilitate network connection. Contributions can be in the form of either cash contributions or handover works (gifted network assets). Cash contributions received are initially deferred and subsequently recognised as revenue when the customers or developers are connected to the network in accordance with the terms of the contributions. Gifted assets are recognised as revenue at the point of handover and are measured at their fair value. The network assets resulting from contributions received or handover works are recognised as property, plant and equipment and depreciated over their expected useful life.

INCOME TAX

Income taxes on the profit or loss for the reporting period comprise current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Current tax is the expected tax payable on the taxable income for the reporting period and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the tax balances relate to the same taxation authority.

S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S


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GST

Amounts in the income statement are shown excluding GST. Amounts in the balance sheet and cash flow statement are shown inclusive of any related GST.

LEASES

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

INVENTORIES

Inventories are stated at the lower of weighted average purchase cost and net realisable value.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. Historical cost includes all expenditure directly attributable to the acquisition or construction of the asset.

No depreciation is provided on freehold land and assets in the course of construction. Depreciation is calculated on all other assets at rates estimated to write off their costs using a straight-line method over the following estimated useful economic lives. The assets received on disaggregation of Western Power Corporation are depreciated over their residual useful economic lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains and losses on disposal are recognised in the income statement.

DEPRECIATION PERIODS FOR CATEGORIES OF ASSETS YEARS

Buildings 40

Substation plant, overhead lines and cables 50

Protection, control and communication equipment 40

Plant and equipment 10

Leasehold improvements 10

Computer equipment 3

Office equipment up to 10

Motor vehicles 5

INTANGIBLE ASSETS

Intangible assets represent identifiable internal capitalised software costs and are recorded at historic cost less accumulated amortisation and any provision for impairment.

Internally generated intangible assets are recognised only if an asset is created that can be identified; it is probable that the asset created will generate future economic benefits; and that the development cost of the asset can be measured reliably. Where no internally generated asset can be recognised the development expenditure is recorded in the income statement.

Capitalised software is amortised on a straight-line basis over two and a half years. This rate is reviewed on an annual basis.

An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains and losses on disposals are recognised in the income statement.

IMPAIRMENT OF ASSETS

At each reporting date, the Corporation considers any indicators of impairment to its assets. Impairments are calculated as the difference between the carrying value of each individual asset and its recoverable amount, if lower. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. Value in use is determined using the depreciated replacement cost of the asset.

Impairment losses are recognised in the income statement and, where material, are disclosed separately.

S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )


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FINANCIAL ASSETS AND LIABILITIES

Cash and cash equivalents comprise cash at bank and other short-term deposits that have an original maturity of three months or less and bank overdrafts.

Trade and other receivables are non-interest bearing, unsecured and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment.

Trade and other receivables are determined to be impaired when there is objective evidence that the Corporation will not be able to collect all amounts due. The amount impaired is the difference between the carrying value of the receivable and the net present value of estimated future cash flows discounted at the original effective interest rate. Amounts impaired are reflected in the income statement. When a trade receivable for which an impairment provision has been recognised becomes uncollectible in a subsequent period it is written off against the provision account. Subsequent recoveries of amounts written off are credited in the income statement.

Trade and other payables are non-interest bearing, unsecured and are initially recognised at fair value and subsequently measured at amortised cost.

Borrowings are initially recognised at fair value net of transaction costs incurred and are then subsequently measured at amortised cost using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (being assets that necessarily take a substantial period of time to get ready for their intended use or sale) are added to their cost. Such additions cease when the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement as an expense when incurred.

Derivative financial instruments are initially recognised at fair value and are subsequently remeasured to their fair value at each reporting date. Changes in the fair value of derivative financial instruments are included in the income statement to the extent that hedge accounting is not applied. Fair value is based on quoted market prices at the reporting date.

Financial instruments are derecognised when the Corporation no longer controls the contractual rights that comprise the financial instrument.

HEDGE ACCOUNTING AND DERIVATIVE FINANCIAL INSTRUMENTS

For all derivative transactions designated as a cash flow hedge, the portion of gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. The ineffective portion is recognised in the income statement immediately. When the cash flows occur, the amount that has been deferred is transferred either to the carrying value of the asset, in the case of non-financial assets, or the income statement as appropriate.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss recognised in equity is immediately transferred to the income statement.

PROVISIONS

Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. The discount rate used to determine the present value reflects the market assessments of the time value of money and the risks specific to the liability.

EMPLOYEE BENEFITS

Wages and salaries, annual leave Liabilities arising in respect of employee benefits that are expected to be settled within 12 months of the reporting date are recognised in other payables and are measured at their nominal amount based on remuneration rates that are expected to be paid when the liabilities are settled.

Long service leave The liability for long service leave is recognised in the provision for employee benefits (note 7) and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Expected future payments are discounted using the Commonwealth Bond rates whose terms most closely match the terms of the related liabilities.


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S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T I N U E D )

RETIREMENT BENEFIT OBLIGATIONS

Contributions to defined contribution plans are recognised in the income statement as they become payable.

A liability or asset in respect of funded defined benefit superannuation plans is recognised in the balance sheet and is measured as the present value of the defined benefit obligation at the reporting date less the fair value of the funds assets at that date and any unrecognised past service cost.

The retirement benefit obligations recognised in the balance sheet represent the present value of the defined benefit obligations at the reporting date. The cost of providing benefits in respect of defined benefit superannuation plans is determined using the projected unit credit method with actuarial valuations being carried out at each balance sheet date. Current service cost is recognised in full in the income statement in the period in which the obligation increases as a result of employee services. Actuarial gains and losses are recognised directly in equity.

DIVIDENDS

Dividends approved but not distributed at the reporting date are recognised in the reporting period in which the dividends are authorised by the Minister.

NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Corporation’s assessment of the impact of these new standards and interpretation is set out below.

Revised AASB101 Presentation of Financial Statements A revised AASB101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of recognised income and expense but will not affect any of the amounts recognised in the financial statements. If the Corporation makes a prior period adjustment or reclassifies items in the financial statements it will need to disclose a third statement of the restated financial position at the beginning of the comparative period. The Corporation intends to apply the revised standard from 1 July 2009.

Revised AASB123 Borrowing Costs The revised AASB123 is applicable to annual reporting periods commencing on or after 1 January 2009. It removes the option to expense all borrowing costs and when adopted will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact from this revision on the financial report of the Corporation as the existing policy of the Corporation is to capitalise borrowing costs relating to qualifying assets.


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In the Directors’ opinion:

(a) the financial statements and notes comply with the accounting standards

(b) the financial statements and notes give a true and fair view

(c) there are reasonable grounds to believe that the Corporation will be able to pay its debts as and when they become due and payable

(d) the financial statements comply with Schedule 4 of the Electricity Corporations Act 2005.

This declaration is made in accordance with a resolution of the Directors dated 2 September 2009.

Mr P Mansell Mr D Aberle Chair of the Board Managing Director

D I R E C T O R ’ S D E C L A R AT I O N


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C O R P O R AT E D I R E C T O R Y

DIRECTORS

Peter Mansell Chair of the Board

Doug Aberle Managing Director

Mark Barnaba

John Cahill

Mervyn Davies

Paul Underwood

GENERAL COUNSEL AND COMPANY SECRETARY

John Pease

DIVISIONAL GENERAL MANAGERS

Ken Brown General Manager System Management

Anne-Marie Clark General Manager Service Delivery

Kevin Gaitskell Director Enterprise Solutions Partner

Mark de Laeter General Manager Customer Services

Greg Monkhouse General Manager Human Resources

Malcolm Peacock Chief Financial Officer

Phil Southwell

General Manager Strategy and Corporate Affairs

PRINCIPAL REGISTERED OFFICE IN AUSTRALIA

363 Wellington Street Perth, Western Australia 6000 Telephone (08) 9326 4911

AUDITOR

Office of the Auditor General 2 Havelock Street West Perth, Western Australia 6000

BANKERS

Commonwealth Bank of Australia 150 St Georges Terrace Perth, Western Australia 6000

WEBSITE ADDRESS

www.westernpower.com.au


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I N D E P E N D E N T A U D I T O R ’ S R E P O R T


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C O R P O R AT E C O M P L I A N C E D I S C L O S U R E S

FREEDOM OF INFORMATION

Under the Freedom of Information Act 1992 (FOI Act) Western Power is, subject to certain exceptions in the FOI Act, required to provide access to its documents where an application for access is made. The FOI Act also requires Western Power to publish an up-to-date Information Statement about the organisation. An up-to-date Information Statement, and a guide on how to make an application under the FOI Act for access to Western Power’s documents, are published on Western Power’s website and can be inspected on the website free of charge at any time. The website address is www.westernpower.com.au

ELECTRICITY LICENCES

The licensing framework under the Electricity Industry Act 2004 (WA) came into operation on 1 January 2005, and consequently an electricity supply licence is required for participants in the electricity industry who generate, transmit, distribute or sell electricity.

The Economic Regulation Authority has granted Western Power a transmission and a distribution licence for the construction and operation of transmission and distribution systems in the licence area covered by the South West Interconnected System.

Particular requirements of the licences include performance auditing, an Asset Management System and auditing, reporting and provision of information.

OBSERVANCE OF THE CODE OF CONDUCT FOR WESTERN POWER

Section 33 of the Electricity Corporations Act 2005 (WA) (“Act”) requires the Board of Western Power (“Board”) to provide to the Minister, at the same time as delivering its Annual Report, a separate report on the observance of its Code of Conduct by members of staff.

The Board confirms that consistent with section 31 of the Act, Western Power’s Code of Conduct was developed after consultation with the Commissioner for Public Sector Standards and was adopted by the Board at its meeting on 24 March 2006.

The Code of Conduct has been circulated to employees of Western Power and is available on the Western Power website for employee reference.

The Board under delegated authority, assign accountability through the Chief Executive Officer to formal leaders in the organisation to ensure observance of the standards of conduct and integrity by members of staff.

STATE RECORDS ACT 2000

Western Power maintains and supports quality record keeping practices in its day-to-day business activities. All records are managed according to the requirements of the State Records Act 2000 (WA) and Western Power’s approved Record Keeping Plan. Regular reviews are conducted of the corporate record keeping systems and practices to ensure their efficiency and effectiveness.

New staff and contractors are provided with information on the record keeping systems both at induction and at compulsory training in the use of the system. The training programs are reviewed on an ongoing basis to ensure they reflect any new business requirement.


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PUBLIC INTEREST DISCLOSURE ACT 2003

The Public Interest Disclosure Act came into effect on 1 July 2003. The Act facilitates the disclosure of public interest information and provides protection for those who make disclosures and those who are the subject of disclosures.

Western Power is committed to the aims and objectives of the Act. In support of this, a policy approved by the Board, and internal procedures have been developed that outline the manner in which Western Power will comply with its obligations under the Act. The Western Power Public Interest Disclosure policy and internal procedures are published on the company’s intranet for staff to review. In addition, Public Interest Disclosure information is referenced in the Western Power induction program. The Manager Risk Assurance and Audit has been appointed as the Public Interest Disclosure Officer for Western Power.

There were no public interest disclosures made in the financial year ended 30 June 2009.

ENVIRONMENTAL LICENCE

One Western Australian Department of Environment and Conservation licence is held by Western Power’s facilities.

ENVIRONMENTAL DUE DILIGENCE

Western Power’s operational sites are subject to State and Federal environmental legislation, and some require State environmental licences. Complying with all regulatory and licence requirements is an integral part of Western Power’s commitment to practical environmental care at all times.

Environmental due diligence and continual improvement in our environmental performance is provided by a corporate Environmental Management System (EMS).

The EMS is driven by an intranet based documentation and management tool to facilitate the process of environmental governance and management in the company. It is used to assist in the prevention, control and reduction of pollution and environmental harm, and support the protection and management of the environment.


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G L O S S A R Y

ACCESS ARRANGEMENT

ACCESS CODE

AMFR

CFL

CICW

DAIP

DAP

DPA

EBIT

EBT

EMS

ENERGYSAFETY

ENMAC

esaa

GRI

ERA

IAM

IMO

IVR

KPI

kV

LTIFR

MARKET RULES

NFIT

NPAT

The financial rules and policies submitted by Western Power to the ERA that set out the terms and conditions under which the business will facilitate access to its network during the regulatory period from July 2006 to June 2009.

Electricity Networks Access Code 2004. The code under which access to the South West Interconnected Network (SWIS) is regulated by the ERA.

All Medical Frequency Rate

Compact Fluorescent Light globes

Customer Initiated Capital Works

Disability Access and Inclusion Plan

Distribution Access Project

Distribution Power Analysis

Earnings Before Interest and Tax

Earnings Before Tax

Environmental Management System

Part of the Department of Consumer Protection. EnergySafety licenses electrical contractors and sets technical guidelines for the electricity network in relation to safety.

Electricity Network Management And Control

Electricity Supply Association of Australia

Global Reporting Initiative

Economic Regulation Authority - an independent body, which reports directly to Parliament. The ERA reviews Western Power’s budget, how we perform as business, how the network performs and our technical standards.

Investment Adjustment Mechanism

The Independent Market Operator controls the supply and trading of energy and electricity capacity in WA’s Wholesale Electricity Market.

Interactive Voice Response

Key Performance Indicator

(Kilo volt) a measure of energy transfer

Lost Time Injury Frequency Rate

A code of conduct relating to the operation of the WA Wholesale Electricity Market, introduced by the Minister for Energy and updated, as required, by the Independent Market Operator.

New Facilities Investment Test

Net Profit After Tax


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G L O B A L R E P O R T I N G I N I T I AT I V E I N D E X

The table below summarises the Global Reporting Index disclosures addressed by this annual report. This is part of Western Power’s commitment to reporting best practice.

For more information about GRI reporting visit www.globalreporting.org

GRI CONTENT INDEX

SECTION FULL DISCLOSURE PARTIAL DISCLOSURE

About Our Report 3.1, 3.2, 3.3, 3.4, 4.12

Chairman’s Introduction 1.1

Highlights 2.10

Managing Director’s Review 1.1

Our Performance EU29 EC1, PR5

Our Business 2.1, 2.2, 2.4, 2.6, 2.7, EU3

Network Enhancement EU6, EU7, EU8, EN5, EN6, EU23

Our Stakeholders EU23, EU24 4.16, 4.17, EU19, SO1,

Our People DMA*, EU14, LA4, LA8, LA11, LA1, LA2, LA7

Sustainability DMA, 4.8, 4.12, EC2, EN6

EnvironmentDMA, EN3, EN4, EN5, EN12, EN13, EN16, EN26, EN28, EN8, EN14, EN18, EN23

Climate Change EU8, EU12, EN6,

Executive Team and Board 2.3, 4.1, 4.2, 4.3

GRI Content Index 3.12

*DMA – Disclosure of Management Approach

G L O S S A R Y

OCI

OFFICE OF ENERGY

PADP

PV

SAI DI

SCI

SCPWG

SVC

SWIS

TAP

WEM

Organisation Culture Inventory

This body sets the guiding rules for the ERA and sets overall energy policy for Western Australia.

Personal Appraisal Development Planning

Photovoltaic

System Average Interruption Duration Index – or the total duration of interruptions per customer over a 12 month period.

Statement of Corporate Intent – Western Power’s annual strategic planning document.

South Coast Power Working Group

Static Var Compensator

South West Interconnected System

Transmission Access Process AA

Wholesale Electricity Market, introduced on 21 September 2006.

annual report 2009 - western power · met most of our key performance targets and have put in place...

Documents