FINANCIAL INFORMATION Abridged Income Statements_part3 docx

__________________________________________________________________________________ EnergyAustralia Auditor-General’s Report to Parliament 2009 Volume Three _________________________________________ 49 Financial Performance Year ended 30 June Actual 2009 2008* 2007 2006 Earnings before interest and tax ($m) 596.0 574.4 594.1 527.2 Return on average equity (%) (a) 12.4 12.1 12.4 14.4 Return on average assets (%) (b) 7.1 7.5 7.6 8.4 Debt to equity (%) 276.9 207.1 144.6 162.8 Interest cover (times) 2.2 2.5 2.7 2.9 Total distributions to government ($m) (c) 272.0 272.1 277.7 304.0 Capital expenditure ($m) (excluding capital contribution) 1,291.0 951.1 783.5 603.9 N.B. Targets from the 2008-09 Statement of Corporate (SCI) Intent have not been included due to the SCI excluding the retail business of the Corporation. * 2008 has been adjusted for a change in accounting policy that recognises superannuation actuarial gains and losses directly in equity. (a) Profit after income tax expense divided by average equity. (b) Profit before tax and interest expense divided by average assets. (c) Dividend + income tax expense EnergyAustralia’s results for 2009 exceeded the financial performance of the previous year. A significant contribution to the result came from lower than expected electricity wholesale purchases throughout the year. FINANCIAL INFORMATION Abridged Consolidated Income Statements Year ended 30 June Consolidated Parent 2009 2008* 2009 2008* $’000 $’000 $’000 $’000 TOTAL REVENUE 3,339,200 3,136,300 3,339,200 3,177,900 PROFIT BEFORE FINANCE COSTS, DEPRECIATION, AND TAX 889,500 907,600 889,500 949,200 Finance costs 265,300 256,600 265,300 256,600 Depreciation and amortisation 293,500 277,600 293,500 277,600 PROFIT BEFORE TAX 330,700 373,400 330,700 415,000 Income tax equivalent expense 99,400 105,300 97,100 120,100 PROFIT AFTER TAX 231,300 268,100 233,600 294,900 Dividend provided 172,900 183,500 172,900 183,500 * Revenue in 2008 has been adjusted for a change in accounting policy that recognises superannuation actuarial gains and losses directly in equity. This is trial version www.adultpdf.com EnergyAustralia __________________________________________________________________________________ 50 _________________________________________ Auditor-General’s Report to Parliament 2009 Volume Three Total revenue of $3.3 billion ($3.1 billion in 2008) includes $3.2 billion ($2.9 billion) for the sale and delivery of energy (electricity and gas) to retail customers, public lighting system charges and community service obligation refunds. Revenue from the sale of electricity increased after regulatory network and retail price increases came into effect on 1 July 2009. Costs associated with the distribution of energy totalled $2.7 billion ($2.5 billion). The wholesale price of electricity was marginally lower than in the previous year. Profit after tax declined mainly due to unrealised losses from the fair value movements in financial instruments, $22.7 million loss ($29.3 million gain in 2008). The profit after tax excluding the unrealised losses was $247 million ($248 million). Abridged Consolidated Balance Sheets At 30 June Consolidated Parent 2009 2008 2009 2008 $’000 $’000 $’000 $’000 Current assets 747,100 761,500 747,200 761,600 Non-current assets 8,201,000 7,159,200 8,201,000 7,159,200 TOTAL ASSETS 8,948,100 7,920,700 8,948,200 7,920,800 Current liabilities 2,110,700 1,909,200 2,110,700 1,911,500 Non-current liabilities 5,054,200 4,076,800 5,054,200 4,076,800 TOTAL LIABILITIES 7,164,900 5,986,000 7,164,900 5,988,300 NET ASSETS 1,783,200 1,934,700 1,783,300 1,932,500 A decrease in current assets was largely due to the fair value movements of energy derivatives that saw their value decrease by $63.0 million to $43.0 million at 30 June. Non-current assets recorded an increase in the value of property, plant and equipment of approximately $995 million that largely related to expenditure on capital projects. Property, plant and equipment totalled $7.7 billion at year end. Total liabilities increased mainly due to increased borrowings of $894 million required to fund capital projects. Borrowings increased to $4.9 billion at year end. ENTITY ACTIVITIES See the ‘Electricity Industry Overview’ section appearing earlier in this report for general industry comment. EnergyAustralia, a statutory State owned corporation, was established in March 1996 under the Energy Services Corporations Act 1995. Its principal function is to distribute electricity in the national electricity market. For further information on EnergyAustralia, refer to www.energy.com.au . This is trial version www.adultpdf.com __________________________________________________________________________________ EnergyAustralia Auditor-General’s Report to Parliament 2009 Volume Three _________________________________________ 51 CONTROLLED ENTITIES The following controlled entities have not been reported on separately as they are not considered material by their size or the nature of their operations to the consolidated entity. Entity Name EnergyAustralia Pty Limited Downtown Utilities Pty Limited This is trial version www.adultpdf.com 52 _________________________________________ Auditor-General’s Report to Parliament 2009 Volume Three Integral Energy Australia AUDIT OPINION The audit of Integral’s financial report for the year ended 30 June 2009 resulted in an unqualified Independent Auditor’s Report. KEY ISSUES Restructure of Electricity Industry The Government is proposing to sell Integral’s retail operations. See the ‘Electricity Industry Overview’ section appearing earlier in this report for details on the sale and the Government’s final policy position on its ‘Energy Reform Strategy’ announced in September 2009. PERFORMANCE INFORMATION Operational Performance Statistics provided by Integral show: Year ended 30 June Target Actual 2009 2009 2008 2007 Customer satisfaction index (%) 82-84 83.0 83.0 83.4 Network reliability –average minutes customers were without supply 93.0 89.3 97.8 94.1 Lost time Incidents 14 17 19 na Reportable environmental incidents 2 4 Total customer connections 849,827 859,519 853,328 842,315 The customer satisfaction index remained steady with the previous financial year and within the target range. This is the percentage of customers surveyed who rated Integral as ‘good’ or ‘very good’ in relation to certain aspects of its performance. Network reliability measures the number of minutes customers are, on average, without electricity each year. In 2008-09, Integral reported a result of 89.3 minutes against a target of 93 minutes. This is an 8.7 per cent improvement over last year’s 97.8 minutes. Integral advised its capital investment over the last five years has significantly contributed to the improvement in reliability. It is targeting a further improvement to 80 minutes by 2013-2014 to meet New South Wales Government licence conditions. There were 4,145 interruptions in 2008-09 (4,285 in 2007-08), 806 caused by adverse weather, 1,360 due to defective equipment, and 575 caused by lightning. Environmental Performance Integral’s proportion of energy purchased from sources other than coal fired power stations has declined over the last four years from 15 per cent in 2005 to 12 per cent in 2009. The energy for these alternative sources is created from natural gas, land fill gas, methane gas from coal mines, wind and water. While the volume of energy purchased from sources other than coal fired powers stations has remained relatively stable the total volume of energy sold has increased. A supply problem also impacted on the proportion during 2008-09. This is trial version www.adultpdf.com __________________________________________________________________________ Integral Energy Australia Auditor-General’s Report to Parliament 2009 Volume Three _________________________________________ 53 Under the Commonwealth’s Renewable Energy Electricity Act 2000, Integral needs to comply with the Mandatory Renewable Energy Target (MRET). The aim of the MRET scheme is to ensure 20 per cent of Australia’s electricity comes from renewable sources by 2020. In meeting its annual target, Integral acquires Renewable Energy Certificates (RECs) from third parties who create the RECs through the use of eligible energy sources such as solar, wind, biomass or hydroelectricity. As a retailer of electricity, Integral is unable to produce RECs through its own operations. Integral will need to significantly increase its purchase of RECs over the next few years as shown in the following graph. As at 30 June 2009, Integral is already contracted to purchase a net 1.2 million RECs with a value of $62.0 million over the next two years. Integral’s obligations under the New South Wales Greenhouse Reduction Scheme (GGAS) are met through existing generation contracts. The Commonwealth government has plans for a Carbon Pollution Reduction Scheme (CPRS) and a national Emission Trading Scheme (ETS). The proposed ETS scheme may commence in July 2011 but its exact structure is uncertain. The GGAS scheme will be terminated when a national trading scheme is introduced. While the timing of this termination is still uncertain Integral considers it is ready to cope with any changes including the introduction of a national ETS scheme. Financial Performance Year ended 30 June Target Actual 2009 2009 2008 Earnings before interest and tax ($m) 335.2 355.7 367.3 Return on equity (%) (a) 11.4 14.6 14.6 Return on assets (%) (b) 8.0 8.7 9.2 Debt to equity (%) 2.3 2.5 1.8 Interest cover (times) 2.8 2.4 2.9 Total distributions to Government ($m)(c) 131.3 167.1 191.7 Capital expenditure ($m) 542.7 442.9 373.5 (a) Profit after tax divided by average equity. (b) Earnings before interest and tax divided by average total assets. (c) Dividend + income tax expense This is trial version www.adultpdf.com Integral Energy Australia __________________________________________________________________________ 54 _________________________________________ Auditor-General’s Report to Parliament 2009 Volume Three Earnings before interest and tax are above the budget and the 2008 result due to tariff increases, customer mix, and increased volume of electricity sold, partly driven by increased customer numbers in Queensland. Total distributions to Government were better than target due to net profit exceeding target. While capital expenditure was below target, there was a significant increase on the prior year. Factors contributing to the increase in capital expenditure included pressure to meet increased demand from the New South Wales electricity industry generally. OTHER INFORMATION Integration and De-integration with Eraring On 1 August 2008, Integral's retail business was transferred to a new subsidiary of Eraring Energy following receipt of a Ministerial Direction issued under section 20P of the State Owned Corporations Act 1989 (NSW) and the approval of the voting shareholders under section 20Y of the State Owned Corporations Act 1989 (NSW). On 1 September 2008, integration agreements were terminated with Eraring Energy with effect from 1 August 2008, thereby placing each party in the position they would have been in had the agreements not been executed. Whilst there was a legal transfer of Integral’s retail business on 1 August 2008, in substance control of the retail business was not passed from Integral to the Eraring Energy subsidiary. Therefore management prepared the financial statements for Integral for the year ended 30 June 2009 as though there was no transfer. We agreed that this treatment was appropriate as there was no effective transfer. Entry into Queensland Market On 14 May 2007, Integral entered the small retail energy market in Queensland. Since then Integral has gained more than 130,000 customers against an initial target of 73,000. In 2008-09 Queensland added approximately $112 million to Integral’s revenue compared to $33.2 million in 2007-08. Valuation of Property, Plant and Equipment In accordance with Australian Accounting standards, Integral values its assets at market or fair value. Integral last revalued its physical assets on 1 July 2005 and will need to revalue its assets with effect from 1 July 2010. Bad Debts The Global Financial Crisis has had little impact on Integral’s level of bad debts. Bad debts written off have increased by approximately $800,000 over the past three years, from $5.7 million to $6.5 million. However, bad debts written off have been falling as a percentage of sales revenue over the last three years. This is trial version www.adultpdf.com __________________________________________________________________________ Integral Energy Australia Auditor-General’s Report to Parliament 2009 Volume Three _________________________________________ 55 FINANCIAL INFORMATION Abridged Income Statement Year ended 30 June 2009 2008 $’000 $’000 TOTAL REVENUE 1,998,374 1,848,121 PROFIT BEFORE BORROWING COSTS, DEPRECIATION, AMORTISATION AND TAX 492,817 496,761 Borrowing costs 150,075 128,233 Depreciation and amortisation 137,107 129,456 PROFIT BEFORE TAX 205,635 239,072 Income tax equivalent expense 63,445 66,695 PROFIT AFTER TAX 142,190 172,377 Dividend provided 103,619 124,992 Total revenue included $1.5 billion in electricity sales ($1.4 billion in 2008) and $382 million in network use of system charges ($342 million). Abridged Balance Sheet At 30 June 2009 2008 $’000 $’000 Current assets 583,396 472,967 Non-current assets 3,722,319 3,445,746 TOTAL ASSETS 4,305,715 3,918,713 Current liabilities 1,159,894 922,417 Non-current liabilities 2,234,841 1,958,038 TOTAL LIABILITIES 3,394,735 2,880,455 NET ASSETS 910,980 1,038,258 The increase in total assets is due to Integral’s capital expenditure program, $432 million was added to the electricity network in 2008-09 ($356 million). Borrowings as at 30 June 2009 were $2.3 billion ($1.9 billion).The majority of the borrowings are from New South Wales Treasury Corporation. The increase in borrowing assisted in financing the capital expenditure program. Total expenditure commitments as at 30 June 2009 were $2.5 billion ($2.6 billion). The majority of this amount is for an electricity purchase contract, due to expire in 2027. This is trial version www.adultpdf.com Integral Energy Australia __________________________________________________________________________ 56 _________________________________________ Auditor-General’s Report to Parliament 2009 Volume Three CORPORATION ACTIVITIES See the ‘Electricity Industry Overview’ section earlier in this report for general industry comment. Integral is a statutory State owned corporation constituted by the Energy Services Corporations Act 1995. Its principal functions are to establish, maintain and operate facilities for the distribution and supply of electricity and other forms of energy. The voting shareholders are the Treasurer and the Minister for Finance. For more information on Integral, refer to www.integral.com.au . This is trial version www.adultpdf.com Auditor-General’s Report to Parliament 2009 Volume Three _________________________________________ 57 TransGrid AUDIT OPINION The audit of TransGrid’s financial report for the year ended 30 June 2009 resulted in an unqualified Independent Auditor’s Report. PERFORMANCE INFORMATION TransGrid is responsible for providing accessible, efficient, safe and reliable facilities for transmitting electricity in New South Wales. The following are some of the key indicators it uses to assess its performance. Operational Performance Energy Maximum Demands Energy use in New South Wales has increased at about 1,222 gigawatt hours (GWh) per annum over the past ten years. TransGrid reported a peak winter demand of 14,274 megawatts (MW) in July 2008 (14,054 MW 2007-08). In February 2009, it recorded a peak summer demand of 14,106 MW (12,954 MW in 2007-08). TransGrid has spent $1.4 billion on its capital works program over the five year regulatory period from 1 July 2004 to 30 June 2009 to meet increasing electricity demand. A significant proportion of this amount, $620 million, was spent in 2008-09. TransGrid borrowed $457 million to fund the capital expenditure, increasing total debt to $2.0 billion. Reliability of Transmission Network The Australian Energy Regulator (AER) monitors the performance of transmission networks against AER targets set for the regulatory period 2004 to 2009. TransGrid’s performance for the years ended 31 December 2006 to 2008 was: Year ended 31 December Target Actual 2004-2009 2008 2007 2006 Transmission circuit availability (%) 99.50 98.54 99.38 99.57 Transformer availability (%) 99.00 98.53 97.46 98.84 Reactive plant availability (%) 98.60 99.00 99.23 98.92 Frequency of lost supply events greater than 0.05 mins 5 2 4 2 Frequency of lost supply events greater than 0.40 mins 1 1 Average outage duration (minutes) 1,500 869 788 824 Source: Australian Energy Regulator and TransGrid. TransGrid has generally performed well against its targets. Actual circuit and transformer availability were below target due to TransGrid’s upgrade and asset replacement capital works programs, and did not indicate a reduction in network reliability during the period. This is trial version www.adultpdf.com . to Parliament 2009 Volume Three _________________________________________ 55 FINANCIAL INFORMATION Abridged Income Statement Year ended 30 June 2009 2008 $’000 $’000 TOTAL REVENUE. electricity wholesale purchases throughout the year. FINANCIAL INFORMATION Abridged Consolidated Income Statements Year ended 30 June Consolidated Parent 2009 2008* 2009 2008* $’000. the financial performance of the previous year. A significant contribution to the result came from lower than expected electricity wholesale purchases throughout the year. FINANCIAL INFORMATION