connecting Annual Report 2011 energy - TransGrid - · PDF file · 2015-06-26We are...

Annual Report 2011

connecting energy

connecting with our purpose

connecting through

performanceconnecting through our

networkconnecting by planning for our future

6 About TransGrid

6 TransGrid at a glance

8 Our network

10 How we fit into the market

11 Our direction

11 Our objectives

11 What we value

12 Our board

14 Our executive

16 Message from the Chairman

17 Message from the Managing Director

20 Our wins 2010/11

21 Our finances

22 Finance snapshot

26 Looking ahead 2011/12

27 Case study – Symphony is here

30 Network snapshot

32 Our network

34 Our wins 2010/11


35 Case study – Aerial photography in transmission line asset management

38 Our buiding program

39 Our future

40 Our wins 2010/11


41 Case study – Kempsey – Port Macquarie transmission line

Leading electricity transmission service provider

COVER IMAGE

Ken Kerslake, Electrical Fitter.

Letter to shareholders 31 October 2011

Dear Ministers,

We are pleased to submit the TransGrid Annual Report 2011 to Parliament. The Annual Report includes the Income Statement for the year ending 30 June 2011 and the Balance Sheet as at that date certified by the Auditor-General of New South Wales (NSW).

The Annual Report was prepared in accordance with the requirements of Section 24A of the State Owned Corporations Act 1989 and the Annual Reports (Statutory Bodies) Act 1984 and reporting guidelines issued by NSW Treasury.

Bruce Foy Peter McIntyre Chairman Managing Director

connecting with our

peopleconnecting with

safetyconnecting with our

environmentconnecting with our

community

connecting with our

responsibilities

44 People snapshot

45 Our people

48 Our wins 2010/11


49 Case study – 2011 Managing Director’s scholarship

52 Safety snapshot

53 Our safety

54 Our wins 2010/2011


55 Case study – Safety Day

58 Environment snapshot

59 Our environment

60 Our wins 2010/2011


61 Case study – 2010 Systems Excellence Awards

64 Our community

68 Our wins 2010/2011


69 Case study – BeSafeKidz

72 Corporate governance

82 Financials

118 Index

120 Glossary

above

Colin Shields, Grid Officer.

connecting with our

purpose

We own and manage one of the largest high- voltage transmission networks in Australia.

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TransGrid at a glance

Brings electricity to more than

3 millionhouseholds and businesses across NSW, the Australian Capital Territory and other States

Over

1,000employees

Transmission lines operating at

132kv, 220kv 330kv and 500kv

Delivering a five-year capital works program valued at

2.6 billion

36,349 structures

91 substations and switching stations

about TransGrid

TransGrid owns and manages one of the largest high-voltage transmission networks in Australia, connecting generators, distributors and major end-users in New South Wales (NSW) and the Australian Capital Territory (ACT).

Our network includes over 12,600 kilometres of transmission line and links to Queensland and Victoria, facilitating interstate energy trading.

Our people are crucial to our performance. They play a key role in delivering excellence in everything we do and make sure that we provide a reliable power supply across NSW.

6 ConneCting with our purpose > TrANSGrid ANNuAl repOrT 2011

389 distributor and direct customer connection points

6 interconnections to the transmission networks in Victoria and Queensland

14 customers connected through our network

Transported

74,889 gigawatt hours (Gwh) of energy during the year

72 generator connection points

above

Left to right – Michael Dunkley, Technical Support Officer, James Tanner, Trainee Engineering Officer.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our purpose 7

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NSW electricity transmission network

our network during 2010/11 we invested $378.6 million in our network. This regulatory period is characterised by major transmission line and underground cable works, combined with gas insulated switchgear substations.

OPERATING SYSTEM VOLTAGES 500kV Transmission Lines

330kV Transmission Lines




330kV Underground Cable

Customer Exchange Point

Interstate Exchange Point

500kV Substations

330kV Substations

220kV Substations

132kV Substations

INSET

Tomago

BHP (EA)

Eraring

Vales Point

Munmorah

Tuggerah

Sydney East

RegentvilleSydney West

Sydney South

NewcastleWaratah

West

Liverpool

Kemps Creek

Vineyard

Sydney North

Dapto

Ingleburn

Wallerawang

Yass Avon

Bayswater

Liddell

Beaconsfield West

Haymarket

INSET

TumutBurrinjuck

YassMarulan

Yanco

Griffith

Buronga

Broken Hill

FinleyDeniliquin

Darlington Point

AlburyHume

Cooma

Munyang

Snowy Adit

Queanbeyan

Canberra

Murrumburrah

Cowra

Kangaroo Valley

Panorama

Molong

Orange

Beryl

Parkes

Forbes

Wellington BayswaterLiddell

DaptoBannaby

Muswellbrook

Tamworth 330

Armidale

Dumaresq Lismore

Tamworth 132

Gunnedah

Narrabri

Moree

Inverell Glen Innes

Tenterfield

Koolkhan

Coffs Harbour

Nambucca

Kempsey

Port Macquarie

Taree

Balranald

Coleambally

Murray

Upper Tumut

Lower Tumut

ANM

Geehi

Jindera

Guthega

Mt Piper132

Wallerawang

Mt Piper500/330

Avon

Wagga Wagga North132

Wagga330

Redcliffs

Dederang

Wodonga

Bulli CreekMudgeeraba

Uranquinty

Gadara

Raleigh

Macksville

Boambee South

Capital Wind Farm

Mt Druitt (IE)

Mt Colah (EA)

Wollar


Tomago

BHP (EA)

Eraring

Vales Point

Munmorah

Tuggerah

Sydney East


Sydney South

NewcastleWaratah

West

Liverpool

Kemps Creek

Vineyard

Sydney North

Dapto

Ingleburn

Wallerawang

Yass Avon

Bayswater

Liddell

Beaconsfield West

Haymarket

INSET

Mt Druitt (IE)

Mt Colah (Ausgrid)

Macarthur

OPERATING SYSTEM VOLTAGES 500kV Transmission Lines




330kV Underground Cable

Customer Exchange Point

Interstate Exchange Point

500kV Substations

330kV Substations

220kV Substations

132kV Substations

INSET

Tomago

Eraring

Vales PointMunmorah

Tuggerah

Sydney East


Sydney South

WaratahWest

LiverpoolKemps Creek

Vineyard

Sydney North

Dapto

Ingleburn

Wallerawang

Yass Avon

Bayswater

Liddell

Beaconsfield West

Haymarket

Newcastle

beLow

Waratah West Substation.


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how we fit into the market

We have an important position in the National electricity Market (NeM) and work closely with our stakeholders so we can provide the best possible electricity transmission service. The diagram below shows how we fit into the electricity delivery process.

Australian Energy Market Commission (AEMC)A statutory commission, which is the rule maker and developer for the nation’s energy markets.

Australian Energy Market Operator (AEMO) Manages both wholesale and retail markets in electricity, gas and also overseas the system operations and security of the NEM.

Australian Energy Regulator (AER) Administers the National Electricity Rules and makes regulated revenue determinations for monopoly energy companies like TransGrid.

GeneratorsMake electricity at power plants, most using coal, gas, water or wind – Eraring Energy, Macquarie Generation, Delta Electricity, Snowy Hydro, Infigen Energy and Origin Energy.

TransmissionElectricity goes through TransGrid’s high voltage transmission lines and underground cables which stretch across NSW and the ACT.

DistributionElectricity travels through distribution lines, where smaller pole-top transformers reduce the voltage for use in homes – Ausgrid, Endeavour Energy, Essential Energy and ActewAGL.

End-users The electricity travels through wires inside the walls to the switches in homes and businesses.


our direction We are a leading electricity transmission service provider, committed to our people, their safety, our community and commercial success.

We use a balanced scorecard to communicate our strategies. We measure our performance against four major drivers for the business: financial, customers and stakeholders, internal process, and learning and growth.

Before we set out our strategies, we undertake scenario planning to make good decisions now which account for an uncertain future. This planning is a key building block to our strategies. What we have achieved to date has served us well but looking forward, we have developed a five-year plan to help transform our organisation.

our objectives TransGrid is a State-Owned Corporation (SOC) with its principal objectives stated in Section 6B of the Energy Services Corporations Act 1995 No 95:

> To be a successful business and to this end:– operate at least as efficiently as

any comparable businesses

– maximise the net worth of the State’s investment in it

– exhibit a sense of social responsibility by having regard for the interests of the community in which it operates.

> To protect the environment. > To exhibit a sense of responsibility towards regional development.

> To operate efficient, safe and reliable facilities for the transmission of electricity and other forms of energy.

> To promote effective access to those transmission facilities.

what we value our vision excellence in all we do.

our mission To provide safe, reliable and efficient transmission services to NSW, the ACT and the NeM.

our values Our values drive our decisions and affect how we conduct our business. Without commitment to our values, we cannot achieve our vision and mission. during the year, we undertook a review of our values to make them more relevant to our business.

TransGrid values are: > Committed: We deliver on our promises and are accountable for our actions.

> Enterprising: We embrace new ideas and are not afraid to challenge the norm.

> Collaborative: We work as one to achieve our vision.

> Caring: We treat all people with respect and dignity.

above

Left to right – Daniel Ryan, 3rd Year Apprentice Electrical Fitter, Bryan Boulding, Engineering Officer, Amie White, 4th Year Apprentice Electrical Fitter, Ross Allen, Engineering Officer, back row – Drew Angel, Apprentice Electrical Fitter.

We are facing more external pressures than ever before and have taken a fresh look at our direction. The challenge is to ensure that we have the right people and the right expertise to deliver our major investment program. We will achieve this by building a targeted leadership strategy to give our leaders the skills they need to drive change. Managing Director, Peter McIntyre


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our board

bruce Foy bComm, LLb, FaiCD

Director and Chairman

Bruce was appointed as TransGrid’s Chairman on 30 June 2009 and has been a TransGrid director since 15 december 2005.

Bruce held various positions over a 30 year career, retiring as Managing director Country Head of the iNG Bank N.V.

Currently, Bruce is also a director of the Financial planning Association of Australia ltd, a director of The doctors Health Fund ltd and investigator resources limited. Bruce was admitted as a barrister of the Supreme Court of New South Wales in 1989.

Bruce is also a Fellow of the Australian institute of Company directors. Bruce brings to the TransGrid Board extensive experience in corporate and financial management.

peter Mcintyre bsc, be (hons), Mba (technology Management), Fieaust, FaiCD, Faie

Executive Director and Managing Director

peter was appointed as Managing director of TransGrid from 27 April 2010.

As Managing director of TransGrid, peter is responsible for the development, operation and maintenance of the NSW high-voltage electricity transmission network.

peter has over 25 years experience in the electricity transmission industry, with particular expertise in policy development, asset management and regulatory strategy.

prior to his appointment as Managing director, peter held three executive positions with TransGrid: General Manager/System Operations, General Manager/Network performance and development and General Manager/Network development and regulatory Affairs.

He holds a degree in science, an honours degree in electrical engineering and an MBA.

peter is Chairman of Grid Australia, deputy Chairman of the Australian power institute and a director of the energy Network Association.

neville betts

Director

Neville was appointed to the TransGrid Board on 30 June 1998.

Neville is the Assistant Secretary of the electrical Trades union of Australia NSW branch and has been a union official since 1984. He is also a member of the divisional Council power industry Committee, Treasurer of the ACT utilities and light Manufacturer industry Training Advisory Board (iTAB), a member of the National Training Advisory Group (NTAG) for the electrical transmission and distribution industry and a member of the board of the ACT Training Fund Authority. He is former Vice president of unions ACT, a member of the ACT labor Council executive, and former member of the ACT Government industrial relations Advisory Committee.

Neville’s in-depth understanding of the electricity industry, and its associated industrial relations, training and union activities, is an invaluable resource of the Board.


John price aM, MaiCD, Jp, iMar eng, ieng, oFieaust

Director

John was appointed to the TransGrid Board on 5 February 2008.

prior to his appointment, John began his career at the State dockyard, leaving in 1982 as Assistant General Manager and engineering Manager to take up a consulting role. in 1984, he was elected to the NSW legislative Assembly, first as the Member for Waratah, and in 1999, as the Member for Maitland, retiring in 2007 as deputy Speaker. John’s previous directorships include Newcastle FM pty ltd and 2Hd Broadcasters pty ltd where he served as Chairman of both companies from 1997 to 1999. John is a former Chair of Hunter uni-Clinics proprietary limited and is a current member of the Council and deputy Chancellor of the university of Newcastle.

John brings to the Board a wealth of knowledge from his lengthy career in politics, along with a strong commercial and administrative background.

trevor Danos bec, LLb, MaiCD

Director

Trevor is a partner at law firm Corrs Chambers Westgarth and was appointed to the TransGrid Board on 6 September 2010.

For over 30 years, Trevor has specialised in domestic and international corporate finance, structured and asset-based finance including leasing and project finance, as well as procurement and probity. Trevor is a board member of the Civil Aviation Safety Authority and the Sydney local Health district. Trevor is a member of the Cooperatives research Centres (CrC) Committee. He was the inaugural chair and continues as a director of Cure for life Foundation. He is a past president of the Science Foundation for physics and a past deputy Chair of the Human research ethics Committee at the university of Sydney. Trevor has a passion for science and is currently completing a Graduate diploma in Science in the History and philosophy of Science.

Michael nugent FCpa

DirectorMichael was appointed to the TransGrid Board in August 2008 and is also currently a director of electrometals Technologies limited, an ASX-listed company which is a provider of mineral extraction equipment and related technology.

He was formerly a non-executive director of eraring energy, rail Access Corporation, Snowy Mountains engineering Corporation in the energy and infrastructure sector and a director of liveCorp, a provider of services to the live animal export sector. Michael was previously the Chief executive and an executive director of Goodman Fielder limited (1990 to 1994) and the Managing director of elders Agribusiness and an executive director of its parent company Fosters Brewing Group limited (1983 to 1990). He also held a number of general management, marketing and financial positions in the food, transport and vehicle industries respectively with Henry Jones iXl limited, Brambles, Ansett and the British leyland Motor Corporation (1965 to 1982). early in his career he worked for peat Marwick, now KpMG (1961 to 1965), completing his professional accounting training in 1968 and is currently a FCpA.

Michael is an experienced company director and brings to the TransGrid Board a broad range of skills and experience in management, strategy, governance, marketing and finance. He also has experience in infrastructure management and the execution of large capital projects across a broad range of industries.

Matina papathanasiou bComm, LLb

Director

Matina was appointed to the TransGrid Board on 13 december 2004 and resigned in May 2011.


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Shareholders

Executive General Manager/ Network Planning and Performance

Stephen Clark

Executive Director and Managing Director

peter Mcintyre

Director and ChairmanBruce Foy

Executive General Manager/ Finance and Information Systems

Tony Meehan

Director Neville Betts

Executive General Manager/People, Strategy and Corporate Services

Michael Gatt

our executive

stephen Clark beng (hons), peng

Executive General Manager/ Network Planning and Performance

Stephen is responsible for making investment decisions associated with the planning and development of the transmission network, including its supporting infrastructure and systems, the associated regulatory processes, network performance and monitoring. Stephen is also responsible for setting our approach to asset management and network access.

Michael gatt adv Cert electrotechnology, Dip elec engineering, bComm (business)

Executive General Manager/People, Strategy and Corporate Services

Michael actively represents TransGrid as a corporate entity and manages how we interact with internal and external stakeholders (including the community). Michael is also responsible for corporate and regulatory strategy, property, legal, procurement, human resources and the cultural change necessary to deliver a more flexible and adaptive workforce.

tony Meehan bComm (accounting, Finance and systems), FCpa

Executive General Manager/ Finance and Information Systems

Tony is primarily responsible for the financial operations of the organisation including corporate accounting, treasury, taxation and insurance areas. Tony manages our corporate governance across through audit and risk, information communications and technology, board secretary and revenue reset functions.

organisation chart

our board

our executive


Executive General Manager/ Network Services and Operations

Lionel Smyth

Director Michael Nugent

Executive General Manager/ Capital Program Delivery

Gerard reiter

Director Trevor danos

General Manager/ Strategic Projects

paul phillips

Director John price

paul phillips beng (hons), bsc, MMgt

General Manager/Strategic Projects

paul is responsible for driving a number of critical improvement projects across the business, after which point they are incorporated into “business as usual” practices. paul is also responsible for quality and the organisation’s policies and strategies for the environment, health and safety.

gerard reiter beng (hons), CppD, rpeQ

Executive General Manager/ Capital Program Delivery

Gerard is the project manager of our sizeable capital works program and is primarily responsible for the timely and efficient delivery of our capital works, contract management, engineering design, project development and environmental impact assessments.

Lionel smyth beng (elec), grad Mgt Qual, gaiCD

Executive General Manager/ Network Services and Operations

lionel’s primary responsibility is to manage TransGrid’s high voltage transmission assets and associated protection, metering, communication, property, easements, field management and field services. lionel also manages the commissioning of major capital projects and oversees external work consistent with our network expertise and capabilities.

We have a strong history of delivering on our strategic objectives and the future will be no exception. Chairman, Bruce Foy


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message from the chairman

it is my pleasure to be able to present you with the 2011 Annual report. As we review the year that has passed, i am able to reflect on many achievements and milestones delivered across the business, building on previous year’s successes.

The 2010/11 year delivered great results and has demonstrated once again, TransGrid’s commitment to be a successful business and operate as efficiently as any comparable business, whether publicly or privately owned. every year, our focus is to strengthen our results and increase our business efficiencies and productivity.

We continue to deliver strong commercial results. The majority of TransGrid’s revenue is subject to regulation by the Australian energy regulator (Aer). regulated income for the year increased to $739.4 million, which reflects the additional income allowed by the Aer to fund our capital works program and to maintain our growing network. Total income for 2010/11 was $758.3 million, with a profit after tax of $167.4 million.

The organisation continues to focus on ensuring the safe and reliable operation of its transmission network in NSW and the ACT. We again achieved a strong outcome of $8.4 million under the Australian energy regulator’s availability and reliability incentive schemes, reinforcing good management practices of planned outages and reliable plant performance. reliability of energy supply to customers was excellent once again with performance above 99.999%.

Our network requires ongoing investment in order to replace old assets, which is important to maintain the safety and reliability of the network. Additionally, new investments are required for development of the network to meet growing demand. in 2010/11, we made capital investment of $378 million in the NSW transmission network.

We are acutely conscious of the pressure of electricity prices on our connected customers and the community more broadly. As such, the Board is committed to ensuring that all expenditure is made in the most efficient and prudent manner possible. TransGrid continues to be amongst the world’s most efficient transmission networks, as assessed by international benchmarking.

We have a strong history on delivering on our strategic objectives and the future will be no exception. Our focus over the next three to five years will be to continue to deliver reliable and efficient transmission services and to get the best outcome for our customers, our shareholders and the people of NSW and the ACT.

i thank my fellow board members and the executive leadership team for their commitment and dedication to delivering on our charter.

i invite you to read our report to better understand our strategy, the progress we are making, how we are going about it and what the road ahead looks like.

Bruce Foy Chairman

above

Bruce Foy, Chairman.


message from the managing director

i’d like to take this opportunity to reflect on the 2010/11 year. This report is not just about looking back at our results but also looking forward and planning for a stronger future for the people of NSW.

it is with great pride i lead this organisation and its talented workforce to deliver another year of strong results.

Building on our commitment in 2009/10 to develop and train our leaders to motivate and empower our people, a new leadership program was launched. Our executive team have participated in the program which has seen a strong level of engagement right across the business.

it is with deep regret i have to report we had a fatality during the year. On 16 September 2010, one of our contractors died while undertaking work at our Sydney east Substation. Corrective and preventive actions were taken based on lessons learned from a comprehensive incident investigation. We are working to ensure this never happens again. We continue to strive for zero incidents so everyone can return home safely every day.

The challenge for us is to ensure contractor safety improves to match the safe outcomes of our permanent workforce.

We continue to work with local communities, understanding the importance of communicating effectively on our major projects. Building transmission lines is core to our business and we acknowledge the different perspectives held by property owners and the community at large. We have a Corporate Social responsibility policy in place to guide our behaviours and demonstrate our commitment to ensuring social, environmental and economic responsibilities are met.

We launched new tools to ensure our employees feel engaged and can have their say and be heard, and continually challenge the way in which we stay motivated, inspired and committed to excelling in all we do. Our people have been instrumental in sustained performance for the organisation.

This year i am pleased to welcome two new executive General Managers (eGMs) to the team – Gerard reiter as eGM/Capital program delivery and Stephen Clark as eGM/Network planning and performance. Both Gerard and Stephen bring to TransGrid a fresh perspective on our industry.

At the time of preparing this report, we have embarked on a new strategic direction for the next three to five years. This direction is built on a new set of strategic themes detailing objectives, initiatives, performance targets and measures – providing us with the framework to excel in all we do. i am confident we have the right plans in place to help deliver on our objectives.

i’d like to thank the Board for their continued support and look forward to many more achievements in years to come.

Peter McIntyre Managing Director

above

Peter McIntyre, Managing Director.


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above

Left to right – Robert Smith and Brett Hasenkam, Communications and Control Technicians.

performanceconnecting through

Through the expertise of our people and smart investment in our network we continued to deliver strong results all round.

perform

ance

above

Left to right – Louise Birkman, Senior Accounting Analyst, Gavin McCormack, Corporate Accountant and Scienta Lau, Insurance Accounting Officer.

Achieved network reliability exceeding

99.999%Benchmarked

world-wide as a top electricity transmission service performer

Further embedded our

community and sponsorships program across NSW

Increased operating profit by

$18.5 million

Continuing to deliver our biggest ever investment program, a

$2.6 billion capital works program over the 2009/2014 regulatory period

Delivered

16 major capital work projects

our wins 2010/11

20 ConneCting through perForManCe > TrANSGrid ANNuAl repOrT 2011

above

Caption to go hree, to be provided by TransGrid

our finances

We have been actively managing our financial position and achieved a profit of $243.5 million, which is $18.5 million above our annual target. The strong focus on controlling expenditure has seen earnings before interest and tax grow to $394.6 million, exceeding the annual target by $7.6 million. The composition and duration of the instruments in the debt portfolio have been proactively managed for the market conditions and the funding requirement of the capital works program.

$18.5 million above the annual operating profit target

TrANSGrid ANNuAl repOrT 2011 > ConneCting through perForManCe 21

perform

ance

$758.3

finance snapshot

$394.6$32.2M (8.9%) increase Exceeded annual target by $7.6M

$63.3M (9.1%) increase Exceeded annual target by $7.2M

$243.5$18.2M (8.1%) increase Exceeded annual target by $18.5M

$133.9$1.2M (0.9%) decreaseExceeded annual target by $8.9M

Earnings before interest and tax EBIT ($M)

Income ($M)

Profit before tax ($M)

Dividend ($M)


71.5

105.9

120.2

135.1 133.9

20112010200920082007

141.6

190.6

217.4225.3

243.5

20112010200920082007

240.8

290.5

320.5

362.4

394.6

20112010200920082007

506.7573.0

652.8695.0

758.3

20112010200920082007

The 2010/11 year delivered great results and has once again demonstrated TransGrid’s commitment to be a successful business and operate as efficiently as any comparable business.


perform

ance

0.1% improvement on 2009/10 results

Stable with 2009/10 results2.6

Interest cover (times)

8.3Return on Regulated Asset Base (RAB) (%)

48.0Gearing Ratio (%)

0.4% decrease

finance snapshot continued


8.2

7.0

8.1 8.2 8.3

20112010200920082007

46.1 46.750.0 48.4 48.0

20112010200920082007

2.4

2.9 3.0

2.6 2.6

20112010200920082007

We continue to deliver strong commercial results whilst ensuring the safe and reliable operation of the transmission network.


perform

ance

Our strong results in 2010/11 are testament to our commitment in delivering a world class service. TransGrid plans to efficiently deliver programs to customers in a timely manner and is focussed on streamlining our project delivery processes. Managing Director, Peter McIntyre

above

Copy of TransGrid Corporate Plan 2011-16.

Following a review of TransGrid’s operating environment, five key strategic themes have been developed for the 2011 to 2016 period. under each strategic theme are detailed strategic objectives, initiatives, performance targets and measures milestones.

> Foster a performance culture.

> Service the market. > improve and innovate. > Contribute to our community.

> increase business value.

looking ahead 2011/12


symphony is hereproject Symphony, TransGrid’s business transformation project, is expected to make significant changes to our daily work practices and will present us with ways to improve our business.

The project aims to reduce business complexities, optimise efficiencies and provide a consistent organisational view of projects, assets and people. Key areas the project covers include people management, asset management and maintenance, capital planning, project delivery, procurement, material management and finance, as well as upgrades of the ellipse and Oracle enterprise resource planning systems.

The project will provide better integration of our business systems and create an authoritative source of corporate information, presenting smarter ways to work through innovation and ongoing improvement.

case study

above

Symphony Project Team.


perform

ance

networkconnecting through our

above

Ryan Cox, Electrical Fitter.

during 2010/11 we invested $378.6 million in our network.

network

Transmission availability improved by 0.82% 98.99%

Availability*

Asset base increased by $242.9M (4.1%)$6,182.0

Asset base ($M)

Exceeds 99.9996% reliability 2.24

Reliability (system minutes lost)

network snapshot

* Cumulative Circuit Availability as a percentage based on TransGrid owned transmission lines rated at 132kV and above for planned, forced and emergency outages.

30 ConneCting through our network > TrANSGrid ANNuAl repOrT 2011

98.4498.17

99.4499.47

98.54

98.99

2010/112008/09 2009/102007/082006/072005/06

0.42

1.311.19

0.68

0.37

2.24

2010/112008/09 2009/102007/082006/072005/06

3,929.04,220.6

5,170.9

5,939.16,182.0

20112010200920082007

TrANSGrid ANNuAl repOrT 2011 > ConneCting through our network 31

network

Facing new challenges in the neM

The regulatory arrangements for electricity transmission in the NeM are of fundamental importance to TransGrid’s future. The National electricity rules largely define TransGrid’s service obligations for its role as a transmission network service provider. These rules and the overarching National electricity law also set out the arrangements for regulating TransGrid’s revenues from the provision of these services.

We continue to see calls for changes to NeM arrangements. Various bodies are driving this change, including NeM participants, regulators, interest groups, participant bodies and Governments. We strive to ensure our positions on transmission issues are effectively presented and the best long-term outcome for transmission customers is achieved.

We closely monitor the NeM and actively participate in the development of new rules and policy reviews initiated by the Ministerial Council on energy (soon to be the Standing Council on energy and resources), the Australian energy Market Commission (AeMC), and the Australian energy regulator (Aer) to ensure the most efficient and effective role for our business.

engaging neM stakeholders

effective stakeholder engagement is essential to the way we do business in the NeM. We aim to build trusting relationships with our stakeholders and to provide them with credible and open information on transmission service-related issues which affect them.

We use a multi-stakeholder engagement process, which recognises the different roles that the Government, market and community play in the delivery of our works.

during the year, our stakeholder engagement strategy included:

> providing input into NeM policies and associated regulatory processes.

> Face-to-face meetings with market participants, including generators, distributors, end-use customers and the Australian energy Market Operator (AeMO).

> liaising directly with affected landowners, Government departments and councils on our capital projects.

> implementing demand management initiatives where commercially viable.

electricity price increases

increasing power prices continue to be a key concern for customers and policy makers. Network prices are heavily driven by increased investment to replace assets coming to the end of their economic life and build new assets to meet increasing demand.

While reports by the independent pricing and regulatory Tribunal (ipArT) have largely attributed this to increases in electricity distribution charges and a range of schemes to promote the use of renewable energy sources, there are additional price pressures emerging from the generation sector. Together, these factors are expected to deliver electricity price increases at a significantly higher rate than general price movements for at least the next few years.

Transmission price increases are a small component of the overall price increases seen by households, but we are still sensitive to community concerns. This is why we continue to ensure we are operating as efficiently as possible. Transmission investment can, and does, contribute to lower electricity prices to consumers by providing improved access to market by the most competitive generators.

The facts show TransGrid’s current and future underlying price increases to be among the lowest for electricity network businesses operating in the NeM.

Transmission investment has a unique role in that it can encourage lower wholesale electricity prices and access to new low-carbon emission sources of generation. For network businesses, such as TransGrid, there is an important role to play in ensuring efficient practices are rewarded and required capital investment can be funded on a commercial basis.

Transmission price increases are a small component of the overall price increases seen by households, but we are still sensitive to community concerns. This is why we continue to ensure we are operating as efficiently as possible. Managing Director, Peter McIntyre

our network


Demand management initiatives

during the 2010/11 financial year TransGrid strengthened its ties and activities with distributors in the field of innovation demand Management (dM), signing a Memorandum of understanding (MOu) with all NSW and ACT distributors.

The MOu is designed to promote innovative initiatives in the dM area which include demand side response, embedded generation and energy efficiency initiatives, which have the potential to reduce peak demand and enhance consumer education and information in this area.

TransGrid is also working with universities and tertiary research institutions on dM research projects. The scope of these activities and initiatives covers a wide range of projects including:

> energy and demand audits of various classes of customers to develop and share a dM Triage database with NSW network service providers.

> review of residential load control. > energy surveys focused on customer education.

> Air conditioning cycling – control of residential and SMe installations.

> Base load profile – signal to customers to reduce demand below their baseline on peak days.

> replacement of existing lights with energy efficient lamps (led) on commercial premises.

> Joint research project on demand response with the university of Queensland.

> Co-funding a project (High rise low energy) by the Warren Centre for Advanced engineering at the university of Sydney.

TransGrid, together with the distributors, will be funding the innovation demand Management programs, over a five year period 2010 to 2014.

Carbon pricing

The Government has led discussions on placing a price on carbon through subsidies, a carbon tax, or through an emissions trading scheme. policies to manage greenhouse gas emissions are expected to require additional transmission system development over time. These policies include renewable energy target schemes and the proposed price on carbon emissions. Their objective is to encourage new electricity generation sources that lower the average level of greenhouse gas emissions.

Over time new generators may need to be connected to the transmission grid. This is expected to result in additional transmission investment to connect new generators and/or extend the network to new locations. it may also result in investment to increase interconnection capability between regions within the NeM.

Current regulatory arrangements enable these developments to be undertaken by TransGrid on a commercial basis. Accordingly, policies to contain greenhouse gas emissions may provide business growth opportunities for TransGrid over the medium to long-term.

above

Left to right – Michael Dunkley, Technical Support Officer and James Tanner, Trainee Engineering Officer.


network

responding to changes in electricity demand

every year, TransGrid compares its forecast and projections to ensure the needs of NSW are met through timely and cost-effective investments. Our Annual planning report (Apr), published on 30 June each year, provides energy and demand projections, a statement of the nature of emerging constraints in the NSW electricity network and proposed network developments over the next five years.

Whilst we have seen peak demand in NSW continue to increase every year, annual average electricity consumption is showing signs of slower growth. We will continue to revise forecasts annually to ensure the optimal timing of investments and defer capital expenditure wherever possible.

The 2011 Apr projects peak electricity demand in NSW will increase by two per cent annually on average for the next 10 years.

Factors influencing demand include:

> NSW’s population is forecast to grow by six per cent in three years.

> people are using more electricity than previously, with 81 per cent of households now having air conditioners.

> The increased use of computers, laptops and plasma televisions.

Our network connects to some of the fastest growing communities.

Our wins 2010/11 > improved transmission circuit availability by 0.82%. > demand Management strengthened through signing of Memorandum of understanding (MOu).

> introduced aerial survey using digital photography and light detection and ranging (lidAr) – refer to opposite page.

Looking ahead 2011/12 > improve environmental approvals and easement access processes to ensure timely delivery of capital projects.

> develop and implement cross-business processes for developing and delivering Negotiated Transmission Services.

> implement an improved capital management process, including a more sophisticated project prioritisation framework.

> expand the number of projects requiring application of the regulated investment and Transmission Test (riT-T).

> prepare frameworks and documentation for the 2014 to 2019 revenue reset.

above

Don McKay, Network Controller.


extensive risk assessments were undertaken on TransGrid’s aerial inspection program. each year, TransGrid patrols its 12,600km of transmission lines to identify potential faults. This year TransGrid trialled the use of aerial photography to identify potential power line defects.

Additionally, a trial photographic inspection of all transmission lines and structures in TransGrid’s network was carried out in between July and September 2010.

The aerial inspection trial used lidAr (light detection and ranging) technology

for measurement of vegetation clearances in close proximity to transmission lines. The lidAr works by comparing data gathered with plS-CAdd® models of the transmission lines.

in the past, patrol staff have had to estimate the additional sag between structures in order to compare vegetation height with transmission line sag during high temperatures. This determined whether vegetation might infringe on the necessary clearances.

This was extremely challenging, as the operating temperature of the transmission line had to be estimated. in comparison the plS-CAdd® models were presented in spreadsheet and Google earth

formats, allowing the location of defect vegetation to be easily identified.

TransGrid has determined it will adopt routine aerial photography inspections and routine lidAr inspections as standard practice.This allows for ongoing monitoring of the lines, and historical condition snapshot records which will reduce costs in the long term.

to support improvements in decision making

for transmission line asset management

case study

use of aerial photography and lidAr


network

above

Left to right – Roslyn Ryan, Online Communications and Brand Co-ordinator and Peter French, Project Coordinator.

futureconnecting by planning for our

future

We are committed to delivering our capital works program on a sustainable basis.

future

our building program

TransGrid’s regulated capital works program for the 2009 to 2014 regulatory period is $2.6 billion – almost double that of the capital works program from the 2004 to 2009 regulatory period. This period is characterised by major transmission line and underground cable works, gas insulated switchgear (GiS) substations, and significant Supervisory Control and data Acquisition (SCAdA) and secondary systems works.

Capital works completed 2010/11 2009/10

Transmission lines 6 3

Substations 5 7

Transformer addition and replacement projects

4 8

Total 16 18

regulatory test number of projects planned to go

through regulatory test during 2010/11

number of projects that completed

the regulatory test 2009/10

New small network assets 2 2

New large network assets 2 2

619.9

428.7

218.2

158.6

355.0378.6

2010/112008/09 2009/102007/082006/072005/06

$378.6Capital Investment ($M) 2010/11

The 2009 to 2014 period is further characterised by a number of major projects which collectively account for over 50 per cent of the total expenditure of $2.6 billion. These projects are listed below:

1. Western Sydney Supply Network Augmentation to accommodate load growth in the inner metropolitan area and to meet reliability objectives.

2. Far North NSW–Dumaresq to Lismore Transmission line network augmentation to help maintain a safe and reliable electricity supply for communities across far north NSW.

3. Tomago–Tarro–Stroud 132kV Transmission line network augmentation to meet load growth in the mid north coast of NSW and to meet reliability objectives.

4. Supply to the ACT Network Augmentation to meet jurisdictional regulation (supply security to the ACT).

A key focus in the 2010/11 period was the development of a capital program prioritisation framework, as well as a focus on capital efficiency.

38 ConneCting by pLanning For our Future > TrANSGrid ANNuAl repOrT 2011

above

Left to right – Amarjit Chawla, Warick Schroder, Joseph Treacy, Darrin Ansell and Kathy Pate.

Major capital works expenditure

in terms of the five-year (2009 to 2014) Aer allowance of $2.6 billion, close to 30 per cent of the program so far has been delivered.

TransGrid has undergone a restructure to improve delivery of the entire capital works program. The main objective is to amalgamate project groups by organising three work groups focusing on design and project services. These new groups will focus on:

> Transmission lines and cables design – to better meet changing needs over the next few years.

> Substation design and changing technology to meet the needs of the community.

> project services – ensuring data is timely and accurate.

This strengthens TransGrid’s capacity to deliver the capital program on time and on budget.

balancing environmental needs with the needs for network reliability

TransGrid is required to maintain its network in a sustainable manner that provides safe and reliable supply of electricity to NSW and the ACT. in order to achieve these objectives, TransGrid replaces its assets once their useful life is reached and augments the network to address constraints which emerge from changing demand. This replacement and augmentation process provides opportunities to increase efficiencies through the use of modern equipment and alternative technologies.

in doing this, TransGrid is required to balance the need for of new equipment and infrastructure against the potential risks and impacts to the environment and community, whilst ensuring the efficient expenditure of capital.

This balance is usually reached through a staged process of examining options to solve particular needs with a final assessment of environmental impacts of the options and preferred solution undertaken in the accordance with a regulated assessment process. This is completed in accordance with the Environmental Planning and Assessment Act 1979 No 203 and the associated environmental planning and Assessment regulation 2000.

our future

TrANSGrid ANNuAl repOrT 2011 > ConneCting by pLanning For our Future 39

future

Our wins 2010/11 > improved project reporting including cumulative cash flow and risk, as well as risk mitigation, allowing project managers to focus on the main risk issues as well as improving cost control.

> improved project and portfolio-based Kpis. portfolio Kpis give senior management a quick view of the delivery of the capital program. issues are resolved quickly and efficiently, and the capital program can continue without stop–start problems.

> reviewed strategic procurement and established new procurement practices.

> Finalist in two categories at the engineering excellence Awards.

Looking ahead 2011/12 > improve secondary system design and delivery. > review and strengthen transmission line design. > improve program management to align work and improve efficiencies.

> Create a substation contractor panel to liaise with a smaller pool of contractors, ensuring quality, technical design, and correct standards for health, safety and environment.

projects completed or in service at 30 June 2011

substations completed transmission lines completed

transformers/capacitor bank additions or replacements

other

> Orange 132/66kV substation. > Bannaby substation (part of Western 500kV development substation already in service March 2010, but transmission line works completed 2010/11).

> Queanbeyan Substation (substation commissioned June 2010, but transmission line works completed 2010/11).

> Tomago 330/130kV substation stage 1.

> dapto fault level upgrade. > Sydney North fault level upgrade.

> lismore control room replacement.

> Armidale to Coffs Harbour 132kV transmission line uprate.

> Tamworth to Armidale 330kV transmission line uprate.

> Tamworth to Gunnedah line rebuild (was in service March 2010, project including dismantling old line completed January 2011).

> Haymarket Ausgrid 132kV cable.

> Sydney North No. 5 transformer.

> Sydney South No. 4 transformer.

> Waratah West No. 1 transformer.

> Beryl second capacitor bank.

> Series reactor – Sydney South Substation.

> Communications network upgrade at 85 sites.

above

Left to right – Lionel Smyth, EGM/Network Services and Operations, Michael Gatt, EGM/People, Strategy and Corporate Services, Peter McIntyre, Managing Director.

40 ConneCting by pLanning For our Future > TrANSGrid ANNuAl repOrT 2011

Overview of the project

The project increases the capacity of the electricity supply to the port Macquarie area by replacing the existing single circuit, twin wood pole, 132kV transmission line built in the early 1980s, with a new double circuit, single concrete pole, transmission line.

Milestones achieved during 2010/11

> By September 2010, one third of the new line’s first circuit from the Kempsey end was energised, enabling that section of the old line to be dismantled.

> By April 2011, all poles for the project were erected, with only the guy-wire foundations in flooded areas remaining to be installed.

Milestones planned for 2011/12

> By September 2011, the complete first circuit to port Macquarie is scheduled to be energised and the old line dismantled.

> By december 2011, the second new circuit is scheduled to be energised and the project completed.

Project management and technical expertise associated with the project

project management and technical expertise was required to maintain the single circuit electricity supply to the port Macquarie area throughout the construction period.

This included modifications to the original project concept to enable:

> installation of foundations whilst the existing line was in-service (the “close approach” method).

> energising of parts of the newly constructed line progressively, rather than all at once upon completion. This reduced pressure on the critical path towards the project’s end.

Examples of how we considered safety, the environment and the community

Safety, environment and community issues were considered from the beginning of project development through to completion.

environmental and community issues featured heavily in the original preferred project decision to take on the more complex task of rebuilding the existing line within the existing easement. This action minimised environmental impact and satisfied local landowners by staying within the footprint of the existing transmission line.

Safety remains a high priority and was considered through our well-developed processes covering worker inductions, work method statements and safety audits. due to much of the work being conducted in close proximity to an existing in-service line, a specific “close approach” work method was developed to ensure worker safety.

Examples of innovative techniques that were employed on the project

One of the techniques employed by our contractor powerServe Australia pty ltd to mitigate the delays arising from the extensive wet weather and resulting poor ground, conditions over many months, was to install swamp grade access tracks to sites using “geotextile” fabric.

The challenges we faced and how we overcame them

The project progress was adversely affected by the severe rain events and resultant flooding experienced on the north coast of NSW during this period.

Notwithstanding the delays, powerServe and TransGrid worked closely to monitor ground conditions and re-allocated resources as required to mitigate costs.

Specialised plant able to work more effectively on wet ground was brought in by powerServe.

Guy anchor foundations in especially wet ground and constrained sites were redesigned to suit the conditions and enable an earlier completion.

Kempsey – Port Macquarie transmission line

case study

TrANSGrid ANNuAl repOrT 2011 > ConneCting by pLanning For our Future 41

future

above

Left to right – Bob Hart, Land Access Manager – Valuation, Kenson Ho, Senior Land Economist.

peopleconnecting with our

people

Our people drive our success each and every day. We value them and empower them to be the best they can be.

peop

le

people snapshot

17.0 17.3 years

Average years in service 2010/11

Average years in service 2009/10

5.0%5.7%

Annual turnover rate 2010/11

Annual turnover rate 2009/10

Staff profile

42.4 42.4 years

Average age in years 2010/11

Average age in years 2009/10

Staff numbers by category numbers as at 30 June 2011*

Staff numbers by gendernumbers as at 30 June 2011

Category Description 2011 2010 2009

Administrative Officer 158 151 150

Apprentice 42 48 63

engineering Officer 296 291 269

line Worker 30 32 33

Operator 23 22 22

professional Officer 256 252 227

power Worker 39 40 44

Senior Contract Officer 89 91 90

Network Team leader 19 18 17

Tradesperson 78 72 76

Total 1,030 1,017 991

* Staff numbers do not include six Industrial Students and three Managing Director’s scholarship holders.

Description 30 June 2011 30 June 2010

Female 161 155

Male 869 862

Total 1,030 1,017

Senior contract staff by gendernumbers as at 30 June 2011

Description 30 June 2011 30 June 2010

Female 9 9

Male 80 82

Total 89 91

44 ConneCting with our peopLe > TrANSGrid ANNuAl repOrT 2011

our people

our diversity

equal employment opportunity (eeO) disclosuresTrends in the representation of EEO Groups*

eeo group percentage (%) of total staff

benchmark or target

2011 2010 2009

Women 50 15.9 15.4 14.9

Aboriginal people and Torres Strait islanders

2.6 0.8 0.8 0.8

people whose first language is not english

19 19.5 19.6 20

people with a disability N/A 5.4 5.5 5.6

people with a disability requiring work-related adjustment

1.5 0.5 0.5 0.5

Trends in the distribution of EEO Groups**

eeo group percentage (%) of total staff

benchmark 2011 2010 2009

Women 100 94 94 94

Aboriginal people and Torres Strait islanders

100 N/A N/A N/A

people whose first language is not english

100 109 106 105

people with a disability 100 99 102 106

people with a disability requiring work-related adjustment

100 N/A N/A N/A

Notes

* A distribution index of 100 indicates that the centre of the distribution of the eeO group across salary levels is equivalent to that of the other staff. Values less than 100 mean that the eeO group tends to be more concentrated at lower salary levels than is the case for other staff. The more pronounced this tendency is, the lower the index will be. in some cases the index may be more than 100, indicating that the eeO group is less concentrated at lower salary levels.

** The distribution index is not calculated where eeO group or non-eeO group numbers are less than 20.

Leadership development

in the 2010/11 year, 17 participants completed the Certificate iV in Frontline Management and eight completed the diploma of Management. A further 14 employees are finishing their studies in these areas. This training is provided in-house through an external training provider.

Our people are our most valuable assets which is why we invest in their development.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our peopLe 45

peop

le

Multicultural policies and services program (Mpsp)

in 2010/11 we continued to implement our eeO Management plan 2010 to 2013, which considers cultural and religious diversity across broad areas and is driven by the principles of multiculturalism outlined in the Principles of Multiculturalism Act 2000 (NSW). These are integrated within our MpSp.

The key results of the plan include:

> planning: integrating multicultural policy goals into our overall business planning.

> Consultation and feedback: policy development and service delivery driven by consultation and feedback, complaints and participation on advisory boards and significant committees.

> leadership: Our Managing director and senior leaders actively promoting the plan and implementing multiculturalism within the wider community.

> Human resources: improving our skills by employing and training people with linguistic and cultural expertise.

> Access and equity: putting in place programs that reduce the barriers for people from cultural, linguistic and religiously diverse backgrounds.

> Communication: using a range of communication channels to educate people from culturally and linguistically diverse backgrounds about our services.

> Social and economic development: putting programs and services in place to develop the skills of a culturally diverse population for the social and economic benefit of the NSW.

diversity is a key initiative of the 2011 to 2016 Corporate plan. The deliverables for 2011/12 include:

> The development of a diversity and inclusion Strategic Framework to guide progress towards diversity targets.

> implementing greater measures of effectiveness of diversity and inclusion Strategies.

> delivering a communication program for all employees and managers on the benefits of diversity and inclusion.

employee survey Making TransGrid a great place to work

in September 2010, TransGrid undertook an employee survey to better understand the needs of its current workforce and to help identify improvement opportunities. The survey achieved a good participation rate and whilst TransGrid scored above the Australian and utilities engagement average score (Hewitt engagement survey benchmark), we are continually seeking to improve on our results.

Survey responses showed that we are doing extremely well in some areas, such as safety and a sense of accomplishment. employees also reported they appreciate the benefits and conditions we offer, particularly the support we provide in times of real need.

We are committed to acting on the survey results and collaborating with employees to make TransGrid an even better place to work. We are now focusing on the areas that need improvement and building on our strengths. TransGrid will continue to increase engagement across the organisation and maintain safety as our priority. The next staff engagement survey is to be completed in late 2012.

above

Left to right – Gemma Holdsworth, Payroll Officer, Kayle Mabagos, Human Resources Advisor and Stacey Faux, HR Systems Advisor.


women@transgrid survey Improving working conditions for women

TransGrid’s Women@TransGrid Committee provides a mechanism for communication between management and female employees on issues of interest to, or affecting, the recruitment, development and career progression of women within TransGrid.

TransGrid’s women had the opportunity in February 2011 to share their views on development and career aspirations via the “Your future, Your say” survey.

The objectives of the survey were to collect statistical and qualitative data that would quantify the diversity, career development and work/life issues that impact on women working at TransGrid.

The survey was well received with a response rate of 74 per cent, with the majority listing TransGrid as a great place to work.

The committee is developing action plans, focusing on a range of areas including career planning, a mentoring program and leading culture change for the equitable treatment of women.

Leadership Development program Fostering our leadership talent

in line with our commitment to helping our people develop their leadership skills, TransGrid launched a new leadership development program. The program aims to promote our leadership capability so that we can deliver our strategic business goals now and into the future.

The program has three levels:

Emerging leaders: for those employees who have not yet had a leadership role in the workplace although they may have taken on informal leadership roles in teams, projects or outside the workplace.

Advancing leaders: for those employees who are currently in a team leader/project management position with previous experience in similar roles.

Senior leaders: for those participants who hold positions, such as group manager, section head, or have extensive experience as a team leader, senior project leader or similar.

The program is designed to develop employees from across all levels of the organisation.

young professionals program Encouraging young talent

The new three-year Young professionals program commenced in February 2010. The inaugural program included the first two cohorts (total of 24 graduates) participating in the engineering education Australia/TransGrid partnership Graduate program. A total of 40 employees attended as potential mentors.

The graduates participated in several modules, including mentoring, communi-cation skills and presentation skills.

All new graduates attended a two-week induction program, which included an introduction to the organisation and business units, safety training, communication skills and a two-day site visit.

The graduates have attended many internal seminars, some of which include Operating the Network and operational response to emergencies and stakeholder management. The component of the Young professionals program that involves the partnership with engineering education Australia and TransGrid is in the final stage for an award with the engineering Australia excellence Awards (education).

above

Left to right – Lupco Kotevski, Benefits Manager and Kevin Bertao, Graduate Communications Officer.


peop

le

Our wins 2010/11 > increased deployment of the performance management process due to roll out of online system.

> rolled out reward and recognition guidelines. > Broadened the Women@TransGrid program. > Successfully launched leadership program. > Strengthened our training framework. > rolled out a new online induction process.

Looking ahead 2011/12 > Strengthen performance management process within the business.

> develop a whole-of-business reward and recognition system.

> embed the corporate values into the organisation. > improve diversity across the organisation. > Conduct a comprehensive Organisational Census to improve strategic workforce planning.

> Continue development of leadership capability across the organisation in all areas including technical leadership.

registered training organisation Transitioning to the Australian Skills Quality Authority

The TransGrid registered Training Organisation was subject to a full system compliance audit in June 2011. Our registration and course accreditations were transitioned to the new Australian Skills Quality Authority (ASQA).

planned innovations and efficiencies in the training area include:

> implementation of a new learning management system allowing TransGrid to deliver more effective elearning and blended learning course material.

> redevelopment of the entire suite of training materials relating to our post-trade programs.

> New methodology for delivering post-trade programs to reduce time to competence.

The Women@TransGrid survey has given us valuable insight into what TransGrid needs to do to improve the development programmes and opportunities for women. Executive General Manager/ People, Strategy and Corporate Services, Michael Gatt.

above

Rachana Amin, Professional Engineer.


By taking on the scholarship i hope to be able to develop my knowledge and become a professional engineer. i am looking forward to the university life and the networking that comes along with it. The experienced staff that i have worked with have helped me learn and develop. Michael Cross

2011 Managing director’s

scholarshipSince its inception in 2006, the Managing director’s scholarship has been awarded annually to a TransGrid apprentice who has shown high academic achievement, leadership qualities and an interest in furthering their studies. The scholarship is a great way for our apprentices to reach new heights in their careers.

Michael Cross was awarded the 2011 scholarship. Through the scholarship

program, Michael will now begin a Bachelor of engineering (electrical) at the university of Sydney. Michael was previously employed as an Apprentice electrical Fitter in our central region. The scholarship has allowed Michael to reap the benefits of his hard work and commitment. We commend Michael on his dedication and wish him all the best on his future career.

case study

above

Left to right – Peter McIntyre, Managing Director, Michael Cross, Managing Director’s Scholar.


peop

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above

Amie White, 4th year apprentice electrical fitter.

safetyconnecting with

Safety is our number one priority. Our approach to health and safety is woven into business decisions, processes and everyday activities. safety

13.3Contractor safety lost time injury frequency rate (LTIFR)

1Employee safety lost time injury frequency rate (LTIFR)

safety snapshot

Lost time injury frequency rate

Total number of lost time accidents for the year x 1,000,000

Average number of full-time equivalent employees x 2,000 hours

=

Annual LTIFR decreased by 3

Annual LTIFR increased by 4.3

5

9

11

89

13.3

2010/112008/09 2009/102007/082006/072005/06

7

4

3

7 7

1

2010/112008/09 2009/102007/082006/072005/06

52 ConneCting with saFety > TrANSGrid ANNuAl repOrT 2011

our safety

high-consequence incidents Keeping safety as our priority

TransGrid’s priority is to ensure a safe place of work for its employees, contractors and the community. TransGrid is committed to ensuring the health, safety and welfare of all employees, contractors, agency employees, visitors and members of the public who may be affected by TransGrid activities. Safety is our first priority, and as such, everyone has a responsibility to undertake work activities and act in a safe manner at all times.

TransGrid is saddened to report a fatality involving a contractor working at one of our Sydney locations. TransGrid has

resharpened its focus to ensure risks are minimised and new measures have been put in place to ensure this never happens again.

Over the last year, a number of near misses or minor injuries have been reported. This type of incident, identified as a “high-consequence incident”, has the potential to cause serious injury. We are refocusing our attention on these incidents to eliminate the risks of major safety incidents from the workplace.

Safety is our first priority, and as such, everyone has a responsibility to undertake work activities and act in a safe manner at all times.

We are not satisfied with the safety performance of our contractors. This will be an area of focus in the future.

above

Brendan Heat, 4th Year Apprentice Electrical Fitter.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with saFety 53

safety

Our wins 2010/11 > reduced our lTi from two to one. > Further embedded our wellbeing program across the business.

> developed a new set of safety rules.

Looking ahead 2011/12 > launch the new safety rules program. > improve contractor safety performance. > A weight-loss program is in the planning stages and will be put in place late 2011.

> planning for 2011/12 will depend largely on the data from the 2011 voluntary health assessments which will be completed by december 2011.

> Help our employees and the public better appreciate the dangers of electricity.

new power system safety rules Creating more usable safety rules

Several multi-disciplinary teams began work on the new safety rules to make them more usable.The Safety rules Committee was keen to substantially improve the layout of the rules, without compromising our well-established safety standards. As the rules had evolved over many years, this proved to be a big task and a new way of looking at the rules was needed.

With valuable input from focus groups, the rules were restructured into job functions. For example, there is a chapter

on all you need to know about safety rules for overhead lines. For a line worker, this will be the only chapter that he or she needs to read and understand.

Because of these significant changes, we will need to change a number of other documents. TransGrid will need to develop new training material and roll out staff packages later this year. We anticipate all training of TransGrid staff will be completed before the end of the year – we can then proceed with applying the new rules.

Several multi-disciplinary teams began work on the new safety rules to make them more usable.

above

Left to right – Michael Lillis, Protection Technician and Melissa Lyons, Community Liaison Officer.

54 ConneCting with saFety > TrANSGrid ANNuAl repOrT 2011

case study

Safety Daydemonstrating our safety skillsTransGrid’s Safety day reflects our “Stop and Consider” safety principle. The event helps to hone our safety skills, promoting a sustained safety culture in all our workplaces. it also gives TransGrid’s board, executive and senior leaders the opportunity to reinforce their personal commitment to our safety.

This year Safety day was larger than ever with over 300 people attending the event. 18 teams from across the organisation competed. We congratulate

the Wagga Wagga team, which took home the Safety day shield, proving themselves the best all-rounders.

events included vital emergency response, fire fighting and risk assessment, and the well-received displays included wellbeing stands with a health-check station. Several third-year apprentices took up a wiring challenge, and a working-at-heights rescue demonstrated some of the fantastic skills our people have.

Safety day helps to hone our safety skills, promoting a sustained safety culture in all our workplaces.

above

TransGrid 2011 Safety Day Competition.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with saFety 55

safety

above

Colin Mayer, Senior Project Manager.

environmentconnecting with our

environment

We value the future of our assets and will continue to protect them by taking a whole of business approach to the environment.

environment

in 2010/11 there were 19 environmental incidents reported in TransGrid’s incident notification system. Two of these incidents were significant enough to require notification to a regulator. All were addressed promptly and resolved.

during 2010/11 there were no prosecutions brought against TransGrid under any environmental statutes.

environment snapshot

environmental incident notification statistics

2010/11 2009/10 2008/09

low 14 17 16

Medium 3 5 7

High 2 2 3

Total 19 24 26

Reportable 2 2 3

type of issue number of issues

erosion and sediment 5

Fire 2

Contractor 3

NpWS 2

Oil spill 2

illegal dumping 1

Contamination 1

Waste management 1

SF6 leak 1

Other 2

Date 2011 number of incidents

Date 2010 number of incidents

January 4 July 2

February 3 August 0

March 1 September 0

April 0 October 0

May 4 November 1

May 1 december 3

58 ConneCting with our environMent > TrANSGrid ANNuAl repOrT 2011

our environment

greengrid Giving back to communities and the environment

GreenGrid, a joint venture with Greening Australia, began in 1997.

TransGrid recognises that it must unavoidably engage in lopping or clearing vegetation that poses a risk to its assets (with subsequent public safety and bushfire risks). As such, it is conscious of its need to give back to the broader community in an environmental capacity. At the core of this partnership is tree planting and the regeneration of native vegetation.

extending its reach, GreenGrid held the first event for TransGrid’s Northern region. “Tree-ting Tomago with TransGrid” was held on 6 May 2011 to create habitat corridors across one of our Tomago easements. This was an important part of the overall Tomago Substation project, which boosted the reliability of electricity supply to Newcastle communities.

One of the largest GreenGrid community events was held at Mount Annan on 22 May 2011. The planting day at the Australian Botanic Gardens was a great opportunity for TransGrid staff to get their hands dirty alongside the community and help conserve native vegetation in the Gardens.

GreenGrid oversaw the planting of more than 32,000 tube stock, direct-seeded about 162 kilometres of tree line and erected 41.2 kilometres of fencing. This protects, enhances and restores 117 hectares of native vegetation for native birds.

GreenGrid was a Finalist in the united Nations Awards, presented in Melbourne in June 2011.

sustainability Committed to incorporating sustainability into our businesses activities

Being sustainable means ensuring our activities and those of our suppliers incorporate good practice, meet stakeholder needs, are safe and consider environmental impacts, both now and in the future.

TransGrid developed a sustainability roadmap based on the NSW Office of environment and Heritage (OeH) Sustainability Advantage program.

The objectives of the roadmap are to:

> provide a holistic approach to communicating TransGrid’s sustainability, which incorporates climate change aspects and aligns with TransGrid’s emissions Management plan 2011/12.

> identify and define sustainability strategies specific to TransGrid and show how these align with the Sustainability Advantage program. This process will identify recommendations for achievable strategies and definable targets.

> Set out the strategies to achieve the sustainability initiatives and assign responsibilities for achieving it.

Climate change Meeting our responsibilities

We have a responsibility under Section 6B of the Energy Services Corporation Act 1995 to comply with the principles of ecologically sustainable development.

TransGrid acknowledges that it has a social and environmental responsibility to:

> Minimise greenhouse emissions where possible.

> Manage the impact of climate change on its assets.

The effects of climate change have significant implications for TransGrid’s core business, from connecting increasing amounts of renewable generation, to managing the risks of increased climatic events that can impact on our assets and works.

TransGrid has developed a procedure to mitigate and adapt to climate change. This document covers the impact of climate change on TransGrid and the strategies for innovation, management and adaptation in terms of climate change.

The strategies focus on:

> Managing our environmental footprint and responding to climate change impacts on our network.

> Staying informed on policy developments by regulators and stakeholders.

> Building capability in our employees to ensure that we adapt to the unpredictable economic, environmental and social changes caused by climate change.

> developing an emissions management plan for 2011/12 to reduce emissions.

Boorowa river (Brr) won the ACT project Management Achievement Awards (Australian institute of project Management) for Sustainable projects.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our environMent 59

environment

national greenhouse and energy reporting

As required by the Commonwealth Government under the National Greenhouse Energy Reporting Act 2007, TransGrid met its obligations and submitted its National Greenhouse and energy reporting (NGer) report in October 2010.

environmental certification and audits

in October 2010, SAi Global did a surveillance audit of TransGrid’s environmental management system against the iSO 14001 Standard. No major issues were identified and TransGrid retained its certification.

wrapp policy Maximising resource efficiency and reducing waste

TransGrid has an ongoing commitment to incorporate the principles of the NSW Government’s Waste reduction and purchasing policy (WrApp). Since 1999,

TransGrid has aimed to support the WrApp framework by maximising resource efficiency and reducing waste through avoidance, reduction, reuse and recycling. TransGrid’s WrApp plan includes the following measures for the office environment:

> reduced paper use. > increased recycling. > education initiatives through our live Green program to inform staff about environmental issues, including resource consumption.

> Waste reduction and recycling for maintenance, vegetation management and construction activities.

in October 2009 TransGrid completed its biennial WrApp report and sent it to the department of environment, Climate Change and Water as required. TransGrid is currently preparing its 2011 report for submission in late 2011.

plantbank Preserving the biodiversity of Australian plant species

At the Australian Botanic Garden at Mount Annan, plantBank is a flagship project of the Botanic Gardens trust Bicentenary 2016, an innovative facility for plant research, education and conservation that will operate on a global level to preserve the biodiversity of Australian species.

in July 2010 The Trust and TransGrid began sponsoring the fundraising stage for plantBank. Working closely with TransGrid, The Trust developed a schedule of benefits that reflects TransGrid’s commitment to reducing the environmental footprint of its operations and to preserving biodiversity. This financial support also publicly demonstrates TransGrid’s commitment to educating and engaging the local community close to the Australian Botanic Garden at Mount Annan, particularly with regard to electrical safety around powerlines.

Our wins 2010/11 > Selected as a finalist with Greening Australia, in the united Nations Association of Australia World environment day Awards and in the Virgin Blue Business Awards – Best Specific environmental initiative category.

> Winner of the ACT project Management Achievement Awards (Sustainable projects category) for the Boorowa river recovery project.

> Selected as finalists in the united Nation Awards.

Looking ahead 2011/12 > implement strategies in the Sustainability roadmap to reduce our environmental footprint and move towards carbon neutrality by 2015.

> Facilitate, integrate and build on initiatives (including GreenGrid, plantBank, earthwatch, BeSafeKidz and live Green) to drive benefits for business, employees, stakeholders and the community.

> Broaden our Greening Australia program state-wide. > embed our climate change program across the business. > review and improve contractor environmental management, including contract specifications, compliance and auditing, reporting and performance recording.

beLow

Left to right – Peter McIntyre, Managing Director, Paul Skyllas, Graduate Civil Engineer.

60 ConneCting with our environMent > TrANSGrid ANNuAl repOrT 2011

2010 Systems

Excellence Awards The Systems excellence Awards are presented in recognition of organisations with “best of breed” certified management systems. Award-winning systems are those that provide a genuine framework for continuous improvement and measurably boost an organisation’s performance.

TransGrid won awards in two categories of the 2010 SAi Global Systems excellence Awards in the environmental Management and integrated Management Systems categories.

TransGrid benchmarks its practices against other leading organisations through participation in such awards, which is important for the continual improvement of our business systems. TransGrid’s Managing director, Mr peter Mcintyre, said the win reflected TransGrid’s expertise in developing practical business systems.

TransGrid’s win in two categories demonstrates the excellent work by staff over the last 12 months in systems management which is essential to TransGrid’s ongoing success. Having effective business systems in place is vital to ensure TransGrid improves its performance and meets its environmental and occupational health and safety goals. Managing Director, Peter McIntyre

case study

above

Revegetation at Macarthur substation.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our environMent 61

environment

above

Left to right – Isabelle Shanahan, Engineering Officer and Peter Rodgers, Team Leader/Engineering Officer Substations.

communityconnecting with our

community

We understand our major capital works program may affect some local communities which is why we engage directly with landowners and the broader community.

comm

unity

our community

sponsorships

sponsorships

2010/11 2009/10

Number of sponsorships supported 21 16

Total expenditure on sponsorships $325,313 $336,571

The distribution of 10 Community Updates to a total of more than

3,500 stakeholders

Answering more than

300 enquiries via our toll-free Project Hotline

More than

250 meetings with stakeholders affected by our major projects

5 visits to primary schools across New South Wales as part of the BeSafeKidz program

Community engagement

in 2010/11, we used a number of methods to engage the community, including:

We will continue to look at new ways to strengthen our interactions with stakeholders. Some of the innovative ways include utilising social media channels to interact with both internal and external stakeholders. Executive General Manager/People, Strategy and Corporate Services, Michael Gatt

64 ConneCting with our CoMMunity > TrANSGrid ANNuAl repOrT 2011

building relationships with communities

TransGrid is committed to connecting with communities across NSW. We engage with the public and build valuable relationships to ensure stakeholder interests are considered at all stages of our projects.

The goal of TransGrid’s community consultation is to strengthen our decision-making by ensuring we consider all relevant matters. each project requires a unique approach to community consultation. This is outlined in a detailed communications strategy, and varies with each community.

We will continue to invest in communities in 2011/12, focusing on regions affected by our major capital works program. The aim is to drive positive awareness by:

> educating the community about energy conservation.

> Helping the community stay safe around high-voltage electricity infrastructure or assets.

> informing the community about TransGrid’s current and future connections to renewable energies.

> Fostering young engineering graduates to protect the future of the power industry.

Consultation – a new approach

TransGrid has explored new ways of informing the public about our projects. We still use the traditional letter, but have adopted postcards and magnets, and updated our website to ensure diverse modes of communication during the consultation process.

Members of the public can log on to the website and sign up for an electronic update on major project milestones.

We engage with the public and build valuable relationships to ensure stakeholder interests are considered at all stages of projects.

above

Stuart Johnston, Corporate Environment Manager.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our CoMMunity 65

comm

unity

List of sponsorships, donations and partnerships in 2010/11

name of organisation amount ($) nature and purpose of sponsorship

engineers Australia – Sydney division

4,785.00 Three-year sponsorship (2010–2012) of the annual excellence Awards.

These awards are their flagship program. They recognise the commitment engineers make to the wellbeing of the community, the excellent standards of engineering, and the innovative work done every day by people in the profession.

electric energy Society of Australia (eeSA)

16,500.00 Gold sponsor of National Conference and Trade exhibition (September 2010). Free registrations were given to The Young professionals Network to allow graduate employees to attend.

TransGrid’s Managing director was a keynote speaker.

royal Botanic Gardens and domain Trust

50,000.00 plantBank is a 2,800m2 research facility to be built over three years in southwestern Sydney, at the Australian Botanic Gardens, Mount Annan.

TransGrid is a close neighbour of the Australian Botanic Gardens, having recently completed Macarthur Substation (330/132/66kV).

Stroud road Community Hall and progress Association inc,

500.00 Stroud road Bash ’n’ Bang – bonfire and fireworks fundraiser (August 2010)

TransGrid is active in this area with the current Tomago to Stroud project.

School of electrical and information engineering, Faculty of engineering and information Technologies, university of Sydney

5,500.00 research Conversazione 2010. postgraduate and undergraduate students showcase posters of their research for industry representatives.

Funded via the innovation demand Management Fund.

university of Wollongong 5,500.00 The Women in engineering Summit 2011 ‘So you think you can engineer?’ is a residential summit for young women (about to enter Year 11) interested in a career in engineering.

This sponsorship was an initiative of the Women@TransGrid Committee. A number of employees attended and presented an exercise for the attendees.

dungog Shire Council for Gp Stakes

1,000.00 TransGrid is active in dungog with the Tomago to Stroud project, and in early 2011 supported the dungog Shire Gp Stakes. This social sporting competition aimed to raise $20,000. The proceeds will fund a medical recruitment firm to find a new doctor for the shire.

TransGrid entered a team and was an active presence.

CiGre B5 Committee 1,815.00 South east Asia protection and Automation Conference.

The Australian National Committee of CiGre and the B5 protection and Automation panel held this conference in Sydney in March 2011.

it brought together the leading engineers in the protection and automation fields across Australia, New Zealand and South east Asia.

above

Kristy Head, Community Liaison Officer.


name of organisation amount ($) nature and purpose of sponsorship

Greening Australia 220,000.00 TransGrid recognises that it must unavoidably engage in lopping or clearing vegetation that poses a risk to its assets (with subsequent public safety and bushfire risks). As such, it is conscious of its need to give back to the broader community in an environmental capacity. At the core of this partnership is tree planting and the regeneration of native vegetation.

GreenGrid 2010/2011 – in late 2009 TransGrid renewed the partnership with Greening Australia until 2012. The total cost over three years is $660,000.

Children’s Medical research institute

1,922.00 dollar for dollar matching of employees’ donations to Jeans for Genes day (August 2010).

Yass public School, Berinba public School, Mt Carmel School, Yass High School

900.00 donations to schools in the Southern region in support of their prize Nights.

Oncology Children’s Foundation

490.91 TransGrid subsidised the entry fee of employees joining the Bicycle NSW Spring Cycle.

Cancer Council of Australia 2,670.00 dollar for dollar matching of employees’ donations to pink ribbon day (November 2010).

Cancer Council of Australia – Australia’s Biggest Morning Tea

847.50 $5 donation for each completed employee survey, divided equally among selected charities (November 2010).

Children’s Medical research institute – Jeans for Genes day

848.00 $5 donation for each completed employee survey, divided equally among selected charities.

Cancer Council of Australia – pink ribbon day

847.50 $5 donation for each completed employee survey, divided equally among selected charities.

Movember Foundation – Movember

$5 donation for each completed employee survey divided equally among selected charities.

Movember Foundation – Movember

2,403.00 donation to TransGrid Movember Team. An average of other dollar for dollar amounts to Biggest Morning Tea, Jeans for Genes day and pink ribbon day.

premier’s Flood relief Appeal 5,000.00 donation to the Queensland Flood Appeal.

TAFe NSW – riverina institute – Wagga Wagga Campus

500.00 donation to Annual Graduation and Awards presentation at Wagga Wagga Campus, riverina institute, TAFe NSW. TransGrid has four apprentices at this campus.

Starlight Children’s Foundation

1,170.00 dollar for dollar matching of employees’ donations to Starlight day (May–June 2011).

Note: This amount was accrued in June 2011 but not paid until July 2011.

Cancer Council of Australia 2,114.00 dollar for dollar matching of employees’ donations to Australia’s Biggest Morning Tea (May–June 2011).

Note: This amount was accrued in June 2011 but not paid until July 2011.

* All Amounts are GST inclusive.

above

Students attending the Parkes Landcare Forum.


comm

unity

community

promotion

We publish a wide variety of information to our customers, stakeholders, employees and suppliers. during the reporting period we produced the following publications and communications:

> Annual report. > NSW Annual planning report. > Corporate plan. > Statement of Corporate intent. > Brochures, advertisements, fact sheets, community updates and project newsletters.

> review of environmental Factors for our various capital projects.

> Website and project email addresses.

We are developing social media including Facebook and Twitter accounts to ensure we adapt to changing communications and effectively engage with all our stakeholders.

Electronic communicationsTo engage the public, customers, stakeholders, employees and suppliers we communicate through many different channels.

We provide our employees with secure access to electronic corporate applications, such as the intranet and their email account through the internet. A new intranet, the Wire, has strengthened this two-way communication.

We have launched a new website that caters better to the public’s growing need for information. The public can now subscribe to regular updates on our capital projects, media releases and regulatory documents. The new website also gives simple access to our e-tendering and e-recruitment sites.

Our wins 2010/11 > increased the profile of our specialised workforce. > invested $325,313 in community sponsorships, donations and partnerships.

> Continued to execute the BeSafeKidz schools sponsorship program.

> delivered sponsorship to communities near our major projects.

> planted more than 1,000 trees as part of the GreenGrid program.

Looking ahead 2011/12 > Communicating positive messages in a climate dominated by negative publicity about the rise in electricity prices.

> Satisfying the majority of stakeholders during the route or site selection process for major projects.

> delivering major projects on behalf of communities and on schedule after a recent change in government and planning legislation.

> Continuing to invest in areas affected by our capital work projects through a tailored community investment program.

above

Left to right – Mark Sumner, Trainee Engineering Officer and Paul Skyllas, Graduate Civil Engineer.


BeSafeKidz Teaching school kids electrical safetyOur BeSafeKidz program was created in September 2010 to educate primary school students about what we do, and how to stay safe around high-voltage transmission lines and equipment. it was aimed at schools where TransGrid is currently planning, building or upgrading our assets.

We held the first official presentation at Gloucester public School on 20 October 2010, with 90 Year 5 and 6 students. less than a year later, TransGrid staff visited Wallerawang public School, speaking to 250 students – the largest group from a single school involved to date.

BeSafeKidz covers topics including:

> The history of electricity. > A brief overview of TransGrid. > Safety around our assets and electrical safety in general.

> Activities and worksheets. > Our environmental commitment.

The BeSafeKidz program includes an interactive webpage which is linked to the TransGrid website.

We delivered our electrical safety message to more than 450 students across five schools in NSW.

case study

above

BeSafeKidz visit to Gloucester Public School.


comm

unity

above

Left to right – Ian Goff, Manager/Fixed Assets and Revenue, Gavin Thomas, Capital Expenditure Analyst, Louise Birkmann, Senior Accounting Analyst.

responsibilitiesconnecting with our

responsibilities

Our board and management support an environment that encourages accountability amongst all employees.

responsib

ilities

corporate governance

The Board of directors provides an effective system of corporate governance through guidance and independence in decision making.

shareholders

TransGrid’s board is responsible and accountable to the voting shareholders, being the NSW Treasurer and the Minister for Finance, who each hold one share for and on behalf of the NSW Government in accordance with the State Owned Corporations Act 1989.

the board of Directors

The principal objectives and functions of TransGrid and the structure and composition of the TransGrid board are laid out in the Energy Services Corporations Act 1995 No. 95, the State Owned Corporations Act 1989 No. 134 and TransGrid’s constitution.

TransGrid’s board complies with the broad principles set out in its board charter. This details the board’s structure and responsibilities and is reviewed annually. The board also has a code of conduct to which all directors must adhere, and which is also reviewed annually.

structure of the board

The Energy Services Corporations Act 1995 provides for the board to consist of:

> The Managing director. > One director appointed by the voting shareholders on the recommendation of a selection committee comprising:– two persons nominated by the

portfolio minister

– two persons nominated by the labor Council of New South Wales, each being a person selected by the committee from a panel of three persons nominated by the labor Council.

> At least two and not more than five other directors to be appointed by the voting shareholders at their discretion.

> The appointment term of non-executive directors is at the discretion of the voting shareholders.

responsibilities of the board

The responsibilities of the board are outlined in the board charter. They include:

> providing strategic guidance and direction to the corporation, including contributing to the development of and approving the corporate strategy.

> reviewing and approving business plans, the annual budget and financial plans including capital expenditure initiatives.

> Overseeing and monitoring:– organisational performance and

achievement of strategic goals and objectives

– compliance with the corporation’s code of ethics and conduct

– progress on major capital expenditure and other significant corporate projects.

> Monitoring financial performance. > ensuring there is an effective system of corporate governance.

> ensuring effective management including executive development and succession planning.

board members

details of the directors, their experience, expertise, qualifications, term of office and independent status are set out in the following section.

All non-executive directors on the TransGrid board are considered independent, in accordance with the NSW Treasury Guidelines for Boards of Government Businesses.

terms of office and remuneration

in accordance with Schedule 8, Clause 5 of the State Owned Corporations Act 1989, a director may be appointed to hold office for a period not exceeding five years.

The remuneration of each non-executive director is paid out of TransGrid funds, and is determined by the shareholders. The total income received by all directors of TransGrid is listed in the Notes to the Financial Statements. The managing director is not entitled to any additional remuneration for being an executive director.

Chairman and Managing Director

The board charter outlines the roles of the chairman and managing director.

The chairman is to provide leadership and promote the cohesiveness and effectiveness of the board. Key roles include:

> Assisting the board to develop good relationships with the Shareholding Ministers and portfolio Minister, with the Managing director and with other key stakeholders and interested parties.

> Assisting individual directors, and the board as a whole, to understand their role, responsibilities and accountabilities.

> Helping directors understand their roles and responsibilities as individual members and as a board.

> ensuring a comprehensive agenda is presented to each meeting of the board.

Section 20l (2) of the State Owned Corporations Act 1989 and Article 16.7 (a) of TransGrid’s constitution provide that the managing director is responsible for the day-to-day management of operations in accordance with the general policies and specific directions of the board.

72 ConneCting with our responsibiLities > TrANSGrid ANNuAl repOrT 2011

Commitment

11 board meetings and one additional board and executive corporate planning session were held in the year ended 30 June 2011. Of the 11 board meetings, one was held in September in TransGrid’s Sydney West office and regional centre, to coincide with Safety day. A second was held in december at the Yass regional Centre, to meet staff and visit sites. All other board meetings were held at head office.

Induction and training

On their appointment to the TransGrid board, directors attend an induction program to enable them to clearly understand the expectations and requirements of the board. They also attend briefings with the Chairman, the Managing director and the board’s Secretary.

essential documents include:

> Their letter of appointment. > A deed of indemnity. > A list of fellow directors and the chair and contact details.

> The business’s constitution. > The board’s code of conduct. > The charters for the board and board committees.

> The most recent Statement of Corporate intent and Annual report.

> The board and committee meeting schedule.

> Organisation charts. > The previous month’s meeting papers and minutes.

directors also receive ongoing education via quarterly information sessions. in 2010/11 these included:

> presentation on electricity network performance.

> presentation on electricity pricing. > presentation from the Chair and Managing director of the Australian energy Market Operator.

> presentation from executive General Manager/people, Strategy and Corporate Services.

> presentation from executive General Manager/Capital program delivery.

Meetings of the board

The table below outlines the number of meetings of the board of directors held during the year ended 30 June 2011, and the number of meetings attended by each director.

name

transgrid board audit and risk Committee

remuneration and structure Committee

health and safety Committee

Meetings attended

Meetings entitled to

attend

Meetings attended


attend

Meetings attended


attend

Meetings attended


attend

B Foy 10 11 6 6 4 4 x x

p Mcintyre 11 11 6 6 4 4 2 2

M papathanasiou* 9 10 4 5 x x x x

N Betts 7 11 x x x x 0 2

J price 10 11 x x 4 4 2 2

M Nugent 11 11 6 6 4 4 x x

T danos 9 9 2 2 x x 2 2

* Resigned 24 May 2011.X Not a member of this committee.

above

Jaleel Shaheen, Project Engineer.

TrANSGrid ANNuAl repOrT 2011 > ConneCting with our responsibiLities 73

responsib

ilities

Our leadership team executes our vision with efficiency, sound commercial mindset and an eye for the future. They look ahead to see how we can continue to do better and better. i thank them for their strong leadership. Chairman, Bruce Foy

Independent professional advice

directors and board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at TransGrid’s expense.

Board committees

To assist the board in fulfilling its corporate governance responsibilities, the board utilises the executive Board Committee, the Board Audit and risk Committee, the Board remuneration and Structure Committee and the Board Health and Safety Committee.

A charter governs these committees and the board delegates specific powers and procedures to them. each charter details the committee’s primary function, structure and responsibilities. each charter is reviewed annually.

The committees on Audit and risk, remuneration and Structure, and Health and Safety meet on at least a quarterly basis or at such times as considered appropriate.

The executive Board Committee meets as and when required.

Non-executive directors chair the board committees. Senior executives and management may be invited to attend committee meetings.

A report detailing the items considered by the committee is tabled at the next board meeting.

Executive Board Committee

The primary function of the executive Board Committee is to consider matters between board meetings that would otherwise require board approval. The matter is delegated to the executive Board Committee at the prior board meeting and a report is given to the board at the meeting following the exercise of the delegation. Generally the executive

Committee is made up of the chairman and the managing director. However, other directors may be invited to sit on this committee as and when required or considered appropriate.

Audit and Risk Committee

This committee consists of the following directors:

> M Nugent (Chair) > B Foy > T danos

its primary function is to assist the Board in fulfilling its oversight responsibilities by reviewing the overall audit process of the corporation, the system of internal control that management and the board of directors have established and the financial information that will be provided to the Shareholding Ministers and others.

Board Remuneration and Structure Committee


> B Foy (Chair) > J price > N Nugent

its primary function is to assist the board in determining the remuneration and employment conditions of TransGrid’s executive management, and reviewing the structure of the organisation.

Board Health and Safety Committee


> J price (Chair) > T danos > N Betts

its primary function is to assist the board in carrying out its obligations in relation to health and safety.

Performance statements

Peter McIntyre, Managing Director was assessed by the Board as having achieved the performance criteria set in the Corporate plan and the Statement of Corporate intent including revenue, profitability, efficiency and reliability targets.

The Board also recognised the following significant achievements:

> establishing new strategic themes for the business.

> improving the commercial focus of the organisation.

> Achieving a sharper focus on performance.

> enhancing engagement from staff to drive further business improvements.

Gerard Reiter, Executive General Manager/ Capital Program Delivery was assessed by the Managing director as having achieved all performance criteria, including:

> delivering more than $300 million worth of capital works during 2010/11.

> Commencing the major construction components of the $700 million Western Sydney Supply project.

> Completion of the Tomago 330/132kV Substation.

> Completion of $35 million of communications upgrade projects to improve the control of the power network.

> Finalisation of outstanding contractual matters for the Wollar–Wellington 330kV transmission line project.


Our board and management support an environment that encourages accountability amongst all employees to deliver a service in the best interests of shareholders, the community and our stakeholders.

Lionel Smyth, Executive General Manager/ Network Services and Operationswas assessed by the Managing director as having achieved all performance criteria including:

> All key network reliability, availability, maintenance and construction targets within approved budgets and timeframes while maintaining high level safety, environmental and operating performance.

> delivering and commissioning all planned major projects and asset replacement programs.

> Maintaining a sustainable human resource plan that includes succession and development plans to meet future requirements.

Paul Phillips, General Manager/Strategic Projectswas assessed by the Managing director as having achieved all performance criteria including:

> developing Sustainability roadmap, Climate Strategy and Carbon emissions Management plans.

> delivering on another year of strong results with Greening Australia in 2010/11.

> introducing the concept of High Consequence incidents to identify and place corrective actions on high risk areas.

> extending Wellbeing programs to address risk areas of obesity and fatigue.

> Successfully delivering the Wire project – TransGrid’s new intranet.

Tony Meehan, Executive General Manager/Finance and Information Systems Services was assessed by the Managing director as having achieved all performance criteria including:

> effective control of the organisation’s financial management and statutory reporting requirements.

> Managing the iCT functions and executive sponsor of the project Symphony erp and business improvement program.

> proactive management of the composition and duration of the instruments in the debt portfolio taking into account market conditions and the funding requirements of the capital work program.

> developing a commercial approach to the pricing of Negotiated Services projects.

> enhancing the commercial focus of the organisation with restructure of the chart of accounts and changes to executive reporting.

Michael Gatt, Executive General Manager/ People, Strategy and Corporate Services was assessed by the Managing director as having achieved all performance criteria, including:

> Acquiring easements critical to the delivery of the capital program 2010/11.

> leadership in the development of contemporary human resource practices.

> Management of media and government relations activities.

> delivering of internal and external communication functions.

> provision of internal corporate services. > procuring goods and services to enable both the capital program and operations.

> driving the business change necessary to enable a more flexible and adaptive workforce.

Stephen Clark, Executive General Manager/ Network Planning and Performance was assessed by the Managing director as having achieved all performance criteria, including:

> establishing a portfolio Management Office to provide better coordination of capital projects.

> identifying prudent project deferrals of $200 million.

> Managing the transition to a provision of service model of providing negotiated connection services.

> increasing the commercial focus of negotiations.


responsib

ilities

remuneration paid

name title remuneration paid (2010/11)

peter Mcintyre executive director and Managing director $534,250

lionel Smyth executive General Manager/Network Services and Operations $322,750

paul phillips General Manager/Strategic projects $314,500

Tony Meehan executive General Manager/Finance and information Systems $313,500

Michael Gatt executive General Manager/people Strategy and Corporate Services $304,788

Gerard reiter* executive General Manager/Capital program delivery $161,250

Stephen Clark* executive General Manager/Network planning and performance $155,296

Chris FitzGerald** General Manager/Capital program delivery $23,896

Vic Galea*** General Manager/Network Services $97,511

* Employment commenced 4 January 2011.** Retired 29 July 2010.*** Retired 25 October 2010.

Qualifications

name title Qualifications

peter Mcintyre Managing director BSc, Beng (Hons), MBA (Technology Management), FieAust, FAiCd, FAie

Gerard reiter executive General Manager/ Capital program delivery

Beng (Hons), Cppd, rpeQ

lionel Smyth executive General Manager/ Network Services and Operations

Beng (elec), Grad Mgt Qual, GAiCd

paul phillips General Manager/Strategic projects Beng (Hons), BSc, MMgt

Tony Meehan executive General Manager/ Finance and information Systems

BComm (Accounting, Finance and Systems), FCpA

Michael Gatt executive General Manager/people, Strategy and Corporate Services

Adv Cert electrotechnology, dip elec engineering, BComm (Business)

Stephen Clark executive General Manager/Network planning and performance

Beng (Hons), peng

above

Left to right – Gemma Holdsworth, Payroll Officer, Stacey Faux, Ellipse System Administrator and Kayle Mabagos, Human Resource Advisor.


Legislative changes

Legal changes affecting operations up to 30 June 2011

The following legislative and curial developments occurred during the year:

> The infrastructure NSW Bill 2011 was introduced into parliament. it establishes a new framework for co-ordination and oversight of major infrastructure projects.

> The Environmental Planning and Assessment Amendment (Part 3A Repeal) Act 2011 established a new system for approval of state significant development and infrastructure.

> The Work Health and Safety Act 2011 legislated nationally harmonised work safety laws.

> The public interest disclosures Amendment Bill 2011 will, when passed, require public authorities to submit quarterly reports to the Ombudsman’s office.

> Amendments to the Building and Construction Industry Security of Payment Act 1999 require a principal contractor, when prompted by a subcontractor, to withhold money from a contractor long enough that the subcontractor can sue the contractor.

> Serial amendments to the National electricity rules took effect on 2 August 2010, 16 September 2010, 6 January 2011, 15 March 2011, 24 March 2011 and 21 April 2011.

Judicial decisions

during the reporting period, there were no decisions which interpreted legislation in a way which affected our operations, financial position or financial performance to a material extent.

Consumer response

TransGrid received a small number of complaints in the areas of site maintenance, substation noise levels and easement maintenance. All matters were resolved in a timely and satisfactory manner with no outstanding issues. TransGrid has continued to implement ongoing improvements to stakeholder engagement including:

> embedding its Community liaison Officers in project and maintenance work.

> improving website information and transparency to satisfy a range of enquiries.

> phone, email and website enquiries on major capital work programs.

> Noise studies are conducted and depending on results, sound walls are installed to minimise impact of affected areas.

> project and maintenance letters and facts sheets distributed to directly affected stakeholders prior to work commencing.

Credit card usage

Our credit card usage is in accordance with our documented procedures. We continue to promote the correct usage of our corporate credit cards and we continually review usage characteristics and authorisations.

Consultant fees

during the year, $14,903 was spent on consulting services relating to the preparation of a range of reports including environmental impact assessments, ecological constraints and opportunities and bushfire assessments.

overseas travel

page 78 includes a list of overseas visits undertaken by our employees during the reporting period.

Overseas visits provide our employees with an opportunity to engage in critical design reviews and factory testing of plant for our capital expenditure program. These visits also play a key role in helping us determine the best way to build a safe, reliable and secure network.

above

Left to right – Raymond Selmes, Engineering Officer/Asset Performance and Julie Death, Administrative Officer.


responsib

ilities

overseas visits

name Classification Countries visited purpose of visit

W Goldsmith engineering Officer Sweden Three overseas visits associated with system testing and training for the SCAdA/eMS upgrade project

A Hammond engineering Officer Sweden Two overseas visits associated with system testing for the SCAdA/eMS upgrade project

J Abbatantuono professional Officer Germany Witness factory acceptance testing of gas insulated switchgear

p Mcintyre Managing director uSA Attend development course at Stanford university

J Mouatt professional Officer Japan design review for uprating of spare Fuji 500kV transformers

G ebb Manager Japan design review of 132/33kV GiS for Munyang substation

d Yoga iswara engineering Officer Japan design review of 132/33kV GiS for Munyang substation

A Kingsmill Manager Netherlands and Finland Attend international Transmission Asset Management study conference and meeting with FiNGrid

J Howland Manager Netherlands and Finland Attend international Transmission Asset Management Study conference and meeting with FiNGrid

p Mcintyre Managing director Switzerland Attend international institute for Management development (iMd) strategic finance course

G Spence professional Officer Sweden System testing for the SCAdA/eMS upgrade project

T Meehan executive General Manager uK and Malaysia Meetings with insurance underwriters and the development of information systems

r ebeling Manager New Zealand Attend CiGre Conference

B Sichter Manager Sweden System testing for the SCAdA/eMS upgrade project

d Yoga iswara engineering Officer Austria and italy design review of 132/66kV transformers for Wallerawang substation

M Grierson engineering Officer Austria and italy design review of 132/66kV transformers for Wallerawang substation

A further two trips, where the majority of costs were funded by other organisations, were undertaken by TransGrid officers, as follows:

name Classification Countries visited purpose of visit

S Jones Manager France Attend CiGre 2010 general session

e lamplough professional Officer France Attend CiGre 2010 general session

above

Left to right – David Fayyad, Senior Solicitor, Philip Gall, General Manager/Corporate and Regulatory Strategy, Nicola Tully, Manager/Revenue Reset.


risk management

The executive Audit and risk Committee supports the Board and risk Committee and is responsible for ensuring our risks are identified and effectively managed.

implementation of risk management strategies are the responsibility of all levels of management and a framework exists to ensure that all risks are proactively and explicitly managed on an ongoing basis.

The Corporate Audit and risk group provides assistance in the development and maintenance of enterprise-wide risk management plans, training staff in risk management and the ongoing verification and review of risk mitigation actions across the organisation.

Our Board members are of the opinion that the Board Audit and risk Committee is constituted and operates in accordance with the independence and governance requirements of Treasury Circular NSW TC 09/08.

insurance

Our insurance strategy is to obtain the most comprehensive insurance coverage available at the most economical cost. each year, we look at the risks for which we are prepared to seek cover, the available insurance coverage or other means to meet the remaining risks and the costs of covering these risks.

Disability plan

We are removing barriers to services and increasing employment participation of people with a disability by improving accessibility to the job application process as well as reviewing our job design process. This will include consideration of where jobs can be filled by a person with a disability. This will be an ongoing review focussing on ways to improve accessibility.

privacy

We are committed to the principles of sound privacy management in line with the Privacy and Personal Protection Act 1998.

We have a privacy Management plan, which facilitates compliance with the Act and tells our employees how we manage privacy. The plan is accessible via our intranet.

Charter

TransGrid was established as a State-owned corporation on 14 december 1998, by and under the Energy Services Corporations Act 1998.

Section 6C of the Act gives TransGrid, as an energy transmission operator, two principal functions:

1. To establish, maintain and operate facilities for the transmission of electricity and other forms of energy.

2. To provide services for the transmission of electricity and other forms of energy in accordance with the relevant regulatory regime.

The section also empowers TransGrid to use and develop its electricity transmission facilities to carry out telecommunications services.

The principal legislation TransGrid operates under is the Energy Services Corporations Act 1995, the Electricity Supply Act 1995 and the State Owned Corporations Act 1998.


responsib

ilities

reporting exemptions

The following reporting exemptions have been granted by NSW Treasury to enable financial reporting requirements that apply, to be broadly consistent with Corporations Act reporting requirements.

statutory requirements act/regulation references Comments

Budgets:

> detailed budget for the year reported on. s.7(1)(a)(iii)ArSBA

> Outline budget for next year. s.7(1)(a)(iii)ArSBA

> particulars of material adjustments to detailed budget for the year reported on.

cl 6 ArSBr

report of Operations s.7(1)(a)(iv)ArSBA exemption subject to the condition that information relating to the “Summary review of operations” is to be disclosed in a summarised form.

Management and Activities Schedule 1 ArSBr exemption subject to the condition that relevant information is to be disclosed in a summarised form.

research and development Schedule 1 ArSBr

Human resources Schedule 1 ArSBr

Consultants Schedule 1 ArSBr exemption subject to the condition that the total amount spent on consultants is to be disclosed along with a summary of the main purposes of the engagements.

land disposal Schedule 1 ArSBr

payment of Accounts Schedule 1 ArSBr

Time for payment of Accounts Schedule 1 ArSBr

report on risk Management and insurance Activities

Schedule 1 ArSBr exemption subject to the condition that relevant information is to be disclosed in a summarised form.

investment performance cl 12 ArSBr

liability Management performance cl 13 ArSBr

Abbreviations:

ARSBA Annual Reports (Statutory Bodies) Act 1984

ARSBR Annual Reports (Statutory Bodies) Regulation 2005

above

Left to right – Andrew Quilty, Protection Technician, Greg Lodge, Protection Metering Technician, Bob Cram, Substations/Engineering Officer Team Leader and Peter McIntyre, Managing Director.


Land disposals 2010/11

Legal description new owner Details

lot 19 dp 1157491 rTA This is land acquired by compulsory means for road widening to create the new erskine park link road. The land was acquired by gazettal on 24 december 2010. The money is yet to be paid and is held in trust by solicitors acting for the acquiring authority. Total sale price was $1,284,638.

lot 20 dp 1157491 rTA As above

lot 17 dp 755445 National parks and Wildlife Service, (NpWS) land disposed of at a nominal amount to NpWS as offset land for the Wollar–Wellington 330kV transmission line project. disposed of on 19 January 2011.

lot 2 dp 844583 National parks and Wildlife Service As above.




Government Information Public Access (GIPA) Act 2009

TransGrid received two applications under the Government Information Public Access Act in 2010/11.

The table shows the responses to requests made under the Freedom of Information Act 1989 and the GipA Act.

year and source of request

applications 2010/11 (gipa) 2009/10 (Freedom of information)

requests received 3 5

Brought forward 0 0

Completed 2 5

Transferred out 0 0

unfinished (carried forward) 0 0

Granted in full 1 4

partially granted 1 2

refused 1 0

Fees received $690 $590

During the 2010/2011 year:

> The impact of the requirements of the Act on TransGrid’s activities was minimal.

> No issues arose in connection with TransGrid’s compliance with the requirements of the Act.

> No determination by TransGrid was the subject of review by the Ombudsman, the Administrative decisions Tribunal or the Supreme Court.

above

Left to right – Rebecca McPhee, Logistics Support Officer and Colleen White, Logistics Officer.


responsib

ilities

above

Left to right – Michelle Trinh, Funds Manager, Gavin Thomas, Capital Expenditure Analyst and Ian Goff, Manager/Fixed Assets and Revenue.


2010/11 financials

Contents

84 Statement of Financial Position

85 Statement of Comprehensive Income

86 Statement of Changes in Equity

87 Statement of Cash Flows

88 Notes to the Financial Statements

115 Statement by Members of the Board

116 Independent Auditor’s Report

TransGrid annual reporT 2011 > commercial report 83

commercial reportby the Executive General Manager / Finance and Information Systems

during 2010/11 we achieved a profit before tax of $243 million resulting from the recognition of $758 million in total revenue and expenses including financing costs of $515 million. Based on a profit after tax of $167 million we declared dividend payments to our shareholders of $134 million.

This year our prescribed revenue increased by $64 million which is primarily attributable to the increase allowed in the australian energy regulator (aer) revenue determination for the 2009/10 to 2013/14 regulatory period and the australian Competition Tribunal review of this determination.

This year marks the second year of the current 2009/10 to 2013/14 regulatory period. Capital expenditure for the year was $379 million representing a $50 million decrease from last year. The decrease in capital expenditure was a result of a number of major capital works projects being in their feasibility and planning stages for the first two years of this regulatory period. as these projects are now moving into their respective construction phases, we expect to see capital expenditure increase significantly in the final three years of this regulatory period.

The total approved capital expenditure for this regulatory period is $2.6 billion. This approved capital expenditure for the current regulatory control period will be used to upgrade our network to meet the increasing demand for electricity, replacement of ageing assets and improving overall network security and reliability.

in order to fund our increased capital works program we increased our debt by $76 million this year, resulting in an increase in our financing charges. TransGrid’s debt and investment risk Management policy was modified to include a risk dashboard which was

designed for the purpose of selecting the optimum debt facility at the time of each debt drawdown and incorporates a target portfolio mix of normal, inflation linked and short term debt. The objectives of the policy are to minimise interest expense and profit volatility while mitigating potential refinancing risks.

during the year, our defined benefit superannuation net liability decreased by $27 million. This decrease was primarily attributable to recoveries in the value of the scheme’s assets arising from an improvement in financial markets during this period. looking forward we expect to see continued volatility in the value of this liability due to recent instability in global financial markets.

We are committed to financial governance policies and practices that provide appropriate accountability and control systems to encourage and enhance sustainable business performance. our financial governance policies and practices are documented in a suite of policies and procedures that are the foundation for our financial management framework. We regularly review these policies and procedures in light of new standards and improved business practices.

during the year we reviewed our chart of accounts to ensure that financial transactions continue to be correctly recorded in TransGrid’s financial systems and to promote transparency, consistency and comparability in how we provide and report financial information.

in preparation for the submission to the aer of the 2014-2019 revenue proposal, processes have commenced to ensure the timely completion of TransGrid’s application in accordance with the stipulated timeframes. The success of this project is crucial to the ability of TransGrid to provide its services on a commercial basis in the

longer term and will be a focus area for 2011/12 and 2012/13.

a key initiative for 2010/11 focussed on the improvement of the scope and quality of key performance indicators for the organisation. This was achieved through a two-stage project involving the determination of current and leading key indicators that are most relevant to managing and monitoring organisational performance on an ongoing basis and the implementation of an executive dashboard which facilitates the online monthly reporting of the key performance indicators. The executive dashboard presents a consolidated snapshot of the key performance indicators in accordance with the TransGrid balanced scorecard perspectives.

over the coming months TransGrid is embarking on a business transformation project that provides a significant opportunity to improve the way the organisation conducts business together. Project Symphony looks to the future by addressing business improvements in key areas such as people management, asset management and maintenance, capital planning, project delivery, procurement, material management and finance. The project includes an upgrade of TransGrid’s enterprise resource planning (erp) system and will provide better integration of our business systems and create an authoritative source of corporate information. This in turn will set the tempo for the future by supporting a smarter way to work through innovation and ongoing improvement.

84 statement of financial position > TransGrid annual reporT 2011

note2011

$’0002010 $’000

current assets

Cash and cash equivalents 7 1,297 1,144

Trade and other receivables 8 115,082 131,177

inventories 9 28,083 28,818

Current tax assets – 2,120

derivatives 10 – 1,472

other 11 2,321 2,389

Total Current Assets 146,783 167,120

non-current assets

deferred tax assets 6(b) 79,638 84,653

derivatives 10 – 57

property, plant and equipment 12 5,389,591 5,135,747

intangibles 13 560,329 545,761

other 14 5,689 5,793

Total Non-Current Assets 6,035,247 5,772,011

Total Assets 6,182,030 5,939,131

current liabilities

Borrowings 216,707 302,401

Trade and other payables 16 126,898 134,066

Current tax liabilities 15,915 –

provisions 17 199,492 202,093

derivatives 18 1,612 1,103

other 19 3,203 3,064

Total Current Liabilities 563,827 642,727

non-current liabilities

Borrowings 2,053,943 1,891,929

deferred tax liabilities 6(b) 913,908 847,956

provisions 17 188,567 215,057

derivatives 18 2,513 892

Total Non-Current Liabilities 3,158,931 2,955,834

Total Liabilities 3,722,758 3,598,561

Net Assets 2,459,272 2,340,570

equity

Capital 20 651,967 651,967

reserves 21 1,717,560 1,642,671

retained earnings 22 89,745 45,932

Total Equity 2,459,272 2,340,570

The accompanying notes form an integral part of these financial statements.

statement of financial positionas at 30 June 2011

TransGrid annual reporT 2011 > statement of comprehensive income 85

statement of comprehensive incomeFor the Year ended 30 June 2011

note2011

$’0002010 $’000

income 3 758,311 695,033

expenses excluding finance costs 4 (362,685) (330,983)

Finance costs 4 (152,173) (138,753)

Profit/(Loss) Before Income Tax Expense 243,453 225,297

income tax benefit/(expense) 6(a)(i) (76,019) (63,224)

Profit/(Loss) For The Year 167,434 162,073

Other Comprehensive Income

asset revaluation surplus: net increase/(decrease) in revaluations, including impairments 21 112,972 513,250

Cash flow hedge reserve: net increase/(decrease) 21 (3,598) (3,706)

superannuation actuarial gains/(losses) 5(b) 11,299 (44,034)

income tax benefit/(expense) relating to components of other comprehensive income 6(a)(ii) (36,183) (139,654)

Other Comprehensive Income For The Year, Net of Tax 84,490 325,856

Total Comprehensive Income For The Year 251,924 487,929


86 statement of changes in equity > TransGrid annual reporT 2011

statement of changes in equityFor the Year ended 30 June 2011

capital $’000

retained earnings

$’000

cash flow hedge

reserve $’000

asset revaluation

surplus $’000

total $’000

Balance at 1 July 2009 651,967 49,203 2,268 1,284,099 1,987,537

comprehensive income for the year:

profit/(loss) for the year – 162,073 – – 162,073

other comprehensive income for the year before related tax effects

– (44,034) (3,706) 513,250 465,510

income tax benefit/(expense) relating to components of other comprehensive income

– 13,209 1,112 (153,975) (139,654)

Total Comprehensive Income For The Year – 131,248 (2,594) 359,275 487,929

owner related equity transactions:

dividend – (135,058) – – (135,058)

Transfers from asset revaluation surplus – 539 – (539) –

income tax benefit/(expense) relating to transfers from asset revaluation surplus

– – – 162 162

Total Owner Related Equity Transactions – (134,519) – (377) (134,896)

Balance at 30 June 2010 651,967 45,932 (326) 1,642,997 2,340,570

Balance at 1 July 2010 651,967 45,932 (326) 1,642,997 2,340,570

comprehensive income for the year:

profit/(loss) for the year – 167,434 – – 167,434

other comprehensive income for the year before related tax effects

– 11,299 (3,598) 112,972 120,673

income tax benefit/(expense) relating to components of other comprehensive income

– (3,389) 1,098 (33,892) (36,183)

Total Comprehensive Income For The Year – 175,344 (2,500) 79,080 251,924

owner related equity transactions:

dividend – (133,947) – – (133,947)

Transfers from asset revaluation surplus – 2,416 – (2,416) –

income tax benefit/(expense) relating to transfers from asset revaluation surplus

– – – 725 725

Total Owner Related Equity Transactions – (131,531) – (1,691) (133,222)

Balance at 30 June 2011 651,967 89,745 (2,826) 1,720,386 2,459,272


TransGrid annual reporT 2011 > statement of cash flows 87

note2011

$’0002010 $’000

cash flows from operating activities

Cash receipts from customers 865,285 745,630

Cash paid to suppliers and employees (248,596) (255,000)

Finance costs paid (173,440) (148,042)

interest received 225 275

income tax paid (22,477) (50,520)

Net Cash Inflows / (Outflows) From Operating Activities 30(d) 420,997 292,343

cash flows from investing activities

purchase of property, plant and equipment, and intangibles (365,721) (403,204)

proceeds from the sale of property, plant and equipment 3,692 6,479

Net Cash Inflows / (Outflows) From Investing Activities (362,029) (396,725)

cash flows from financing activities

proceeds from borrowings 656,806 1,379,093

repayments of borrowings (580,563) (1,174,195)

dividends paid 17(a) (135,058) (120,233)

Net Cash Inflows / (Outflows) From Financing Activities (58,815) 84,665

net increase / (decrease) in cash and cash equivalents 153 (19,717)

Cash and cash equivalents at beginning of the financial year 1,144 20,861

Cash and Cash Equivalents at the End of the Financial Year 7, 30(a) 1,297 1,144


statement of cash flowsFor the Year ended 30 June 2011

88 notes to the financial statements > TransGrid annual reporT 2011

notes to the financial statementsFor the Year ended 30 June 2011

1. reporting entityThe financial statements of TransGrid for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of the directors on 22 september 2011.

TransGrid is a statutory state owned Corporation under the state owned Corporations act 1989 and was corporatised under the energy services Corporations amendment (TransGrid Corporatisation) act 1998.

2. summary of significant accounting policies

(a) Basis of Preparation The financial statements are general-purpose financial statements and have been prepared in accordance with australian accounting standards including accounting interpretations, the requirements of the public Finance and audit act 1983, the public Finance and audit regulation 2010, the state owned Corporations act 1989, and relevant Treasury Circulars.

property, plant and equipment and derivative financial instruments are measured at fair value. other financial statement items are prepared in accordance with the historical cost convention, except as otherwise stated in the financial statements.

Where necessary, comparative information has been reclassified to conform to the current year’s presentation.

all amounts are rounded to the nearest thousand dollars ($’000) and are expressed in australian dollars (aud).

(b) Statement of ComplianceThe financial statements comply with the international Financial reporting standards (iFrs) as issued by the international accounting standards Board (iasB).

(c) New Australian Accounting Standards and Interpretations not yet adopted

australian accounting standards and interpretations that have recently been issued or amended, but are not yet effective, have not been adopted by TransGrid in preparing the financial statements in accordance with Treasury Circular nsW TC 10-08 Mandates of Options and Major Policy Decisions under Australian Accounting Standards.

The following standards, amendments to standards and interpretations have been identified as those which may impact TransGrid in the period of initial application:

> aasB 7 and aasB 2010-6 relate to financial instrument disclosures.

> aasB 9 and aasB 2009-11 relate to financial instruments.

> aasB 112 and aasB 2010-8 relate to income taxes.

> aasB 124 and aasB 2009-12 relate to related party transactions.

> aasB 1053 and aasB 2010-2 relate to the application of tiers of australian accounting standards.

all of these standards are applicable to future reporting periods as identified in the table below. The new standards are concerned with disclosures and will have no direct impact on TransGrid’s financial results.

Standard/Interpretation applies to annual reporting periods beginning on or after:

aasB 9 Financial Instruments and aasB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

1 January 2013

aasB 124 Related Party Disclosures (Revised December 2009) and aasB 2009-12 Amendments to Australian Accounting Standards

1 January 2011

aasB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets

1 July 2011

aasB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets

1 January 2012

aasB 1053 Application of Tiers of Australian Accounting Standards and aasB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements

1 July 2013

(d) Significant Accounting Judgements, Estimates and Assumptions Made by Management

in applying TransGrid’s accounting policies, management evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on TransGrid. all judgements, estimates and assumptions made are believed to be reasonable, based on the most current set of circumstances known to management. actual results may differ from the judgements, estimates and assumptions. significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(i) Significant Accounting Judgements

ImpairmentTransGrid assesses impairment of all assets at the end of the reporting period by evaluating conditions specific to TransGrid’s business as a whole, which may lead to impairment. if an impairment trigger exists, the recoverable amount of the value in use for the business is determined. Further details on the value in use calculations and adjustment for impairment are disclosed in note 2(f)(ii).

Recovery of Deferred Tax Assets deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences.

Long Service Leave ProvisionThe liability for long service leave is based on an annual independent actuarial assessment, supplemented by management considerations, to arrive at a best estimate of the expenditure required to settle present obligations at the end of the reporting period.

Workers’ Compensation ProvisionThe liability for workers’ compensation is based on an annual independent actuarial assessment, supplemented by management considerations, to arrive at a best estimate of the expenditure required to settle present obligations at the end of the reporting period.

TransGrid annual reporT 2011 > notes to the financial statements 89

(ii) Significant Accounting Estimates and Assumptions

Allowance for Impairment Loss on Trade and Other ReceivablesWhere receivables are outstanding beyond the normal trading terms, the likelihood of recovery of these receivables is assessed by management. This assessment is based on supportable past collection history and historical write-offs of bad debts.

Estimation of Useful Lives of AssetsThe estimation of the useful lives of assets is based on historical experience, industry comparisons, as well as expected usage, physical wear and tear, and the rate of technical and commercial obsolescence. Further information on the estimation of useful lives is disclosed in note 2(f)(v).

(e) Changes in Accounting Policiesaccounting policies are consistent with those applied in the previous year.

(f) Property, Plant and Equipment

(i) Acquisition of AssetsThe cost method of accounting is used for the initial recording of all acquisitions of assets controlled by TransGrid. Cost is the amount of cash or cash equivalents paid at the time of acquisition or construction. Cost includes interest on borrowings related to Qualifying assets as detailed in note 2(f)(iv).

assets acquired at no cost, or for nominal consideration, are initially recognised at their fair value at the date of acquisition.

(ii) Revaluationsproperty, plant and equipment are valued in accordance with nsW Treasury policy Tpp 07-1 Valuation of Physical Non-Current Assets at Fair Value. The valuation of property, plant and equipment is determined in a two-step process. First, fair value is determined in accordance with aasB 116 Property, Plant and Equipment. second, the fair value is subject to a separate impairment test in accordance with aasB 136 Impairment of Assets.

Fair ValueFair value of property, plant and equipment is determined based on the best available market evidence, including current market selling prices for the same or similar assets. Where there is no available market evidence, the asset’s fair value is measured at its market buying price, the best indicator of which is depreciated replacement cost.

TransGrid revalues depreciable property, plant and equipment by reference to its current depreciated replacement cost. The accumulated depreciation for the revalued asset is restated proportionately with the change in the gross carrying amount of the asset, so that the carrying amount of the asset after revaluation equals its revalued amount, in line with nsW Treasury policy.

TransGrid assesses at the end of the reporting period whether there is any indication that an asset’s carrying amount differs materially from fair value. if any indication exists, the asset is revalued.

TransGrid’s valuation policy provides for a full and detailed valuation of these assets to be undertaken at five-year intervals, in accordance with nsW Treasury policy. in the intervening years, a revaluation based on price index movements is undertaken.

Where an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in other Comprehensive income and accumulated in equity under the heading of asset revaluation surplus.

Where an asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in other Comprehensive

income to the extent of any credit balance existing in the asset revaluation surplus in respect of that asset. The decrease recognised in other Comprehensive income reduces the amount accumulated in equity under the heading of asset revaluation surplus.

Impairment Assessmenteach year, TransGrid’s specialised plant and infrastructure assets, land and buildings, and easements are tested for impairment. should there be any indication that the cash-generating unit may be impaired, TransGrid makes an estimate of the recoverable amount. TransGrid as a whole represents a cash generating unit.

The recoverable amount is based on the value in use for the business as a whole. in assessing value in use, the estimated future cash flows for the business are discounted to their present value using a discount rate that reflects the risks specific to the business and relevant market assessments.

if the carrying amounts of the assets, as represented by the current depreciated replacement cost, exceed the recoverable amount of the business, the assets comprising the business as a whole are considered to be impaired. The assets are written down proportionately to ensure their carrying amounts reflect the recoverable amount and a corresponding impairment loss is recognised as a revaluation decrease.

at the end of each year, an assessment is made as to whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased. if any such indication exists, TransGrid estimates the recoverable amount of that asset. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. a reversal of an impairment loss is allocated proportionately to the assets to ensure their carrying amounts reflect the recoverable amount. a corresponding amount is recognised as a revaluation increase.

Retirements or Disposalsupon retirement or disposal, any revaluation surplus relating to the particular asset is transferred to retained earnings.

(iii) Categoriesproperty, plant and equipment comprise the following types of assets:

Prescribed Assets prescribed assets comprise property, plant and equipment used by TransGrid to provide electricity transmission services that are regulated by the australian energy regulator (aer). prescribed assets as disclosed in notes 12(a) and (b) are:

> network asset. > other assets.

The network asset is a complex infrastructure asset that works together as an integrated whole to provide regulated electricity transmission services. it includes the following major parts:

> land. > Buildings. > system plant and equipment. > Communication equipment.

The five year detailed valuations of the network asset were undertaken as at 30 June 2009 using a combination of independent valuers and internal expertise.



Negotiated Transmission Assetsnegotiated transmission assets include those assets relating to connection services between:

> TransGrid and new generators. > TransGrid to new or expanded loads.

Non-regulated Assetsnon-regulated assets comprise property, plant and equipment used by TransGrid to provide services other than prescribed and negotiated electricity transmission services. non-regulated assets as disclosed in notes 12(a) and (b) are:

> system plant and equipment. > Communication equipment. > other assets.

(iv) Capitalisation Capital expenditure is defined as expenditure in relation to:

> acquisition of a new unit of plant. > installation of a new unit of plant. > Work performed on a unit of plant, where the need for the work existed at the time the unit was acquired and the work was carried out prior to it being put into operation.

> replacement of a unit of plant, or of a substantial part of a unit of plant.

> an addition or alteration to a unit of plant, which results in an increase in economic benefits.

interest on borrowings is capitalised against Qualifying assets in accordance with aasB 123 Borrowing Costs. Qualifying assets are assets which take more than 12 months to be ready for their intended use.

expenditure is not capitalised below a minimum threshold of $1,000.

(v) Depreciationproperty, plant and equipment, excluding land, are depreciated over their estimated useful lives. The straight-line depreciation method is used. assets are depreciated from the month of acquisition or in respect of constructed assets, from the time the asset reaches practical completion and is ready for use.

asset lives are reviewed annually in accordance with aasB 116 Property, Plant and Equipment, and where required, adjustments have been made to the remaining useful lives of separately identifiable parts of assets having regard to factors such as asset usage and the rate of technical and commercial obsolescence.

Within the prescribed, non-regulated and negotiated Transmission asset base the following sub-categories have been established. The useful lives presently assigned to these assets are:

Prescribed & Non-regulated Assets

network asset Buildings 40 years

system plant and equipment

20 – 50 years

Communication equipment

7 – 35 years

other assets 2 – 10 years

Negotiated Transmission Assets

system plant and equipment

20 – 30 years

(g) Intangible Assets intangible assets are measured at cost and comprise easements and Computer software as disclosed in notes 13(a) and (b). TransGrid has no internally generated intangible assets.

Capital expenditure on intangible assets is defined as expenditure in relation to:

> acquisition of computer software or easements. > installation of computer software. > an addition or alteration to computer software, which results in an increase in economic benefits.

easements are a component of TransGrid’s infrastructure assets that provide electricity transmission services that are regulated by the aer. easements are assessed for impairment on an annual basis and are not amortised as they are granted for an unlimited time, and thus have an indefinite useful life.

Computer software is amortised over a period of five years using the straight-line amortisation method. amortisation expense is included in the “expenses excluding Finance Costs” line item of the statement of Comprehensive income. The useful life for software is reviewed annually, and adjustments where applicable, are made on a prospective basis.

expenditure is not capitalised below a minimum threshold of $1,000.

(h) Inventories inventories of stores and materials are valued at the lower of cost and net realisable value. Cost is determined by TransGrid to be the weighted average cost of items in store, separately determined for each location. TransGrid’s inventories relate mostly to specialist equipment. as there is no active market in respect of the majority of TransGrid’s inventories, TransGrid recognises the weighted average cost of items as a proxy for lower of cost and net realisable value.

(i) Cash and Cash EquivalentsCash and cash equivalents in the statement of Financial position and for purposes of the statement of Cash Flows comprise cash on hand, cash at bank and deposits with financial institutions.

(j) Borrowings all borrowings are measured at amortised cost using the effective interest method.

interest on borrowings is recognised as expense in the period in which it is incurred unless it relates to qualifying assets. Qualifying assets are assets, which take more than 12 months to get ready for their intended use. Where funds are borrowed generally, interest on the borrowings is capitalised to qualifying assets in accordance with aasB 123 Borrowing Costs.

The amount of interest attributed to qualifying assets during the year was $13.8M (2010 – $21.7M) at a weighted average rate of 7.2 per cent (2010 – 7.6 per cent).

loans are classified as current when they have a maturity of less than one year from the end of the reporting period.

(k) Dividendsprovision is made for the amount of dividend payable in relation to the current financial year, in accordance with the dividend recognition policy set out in Treasury Circular nsW TC 10-16 Accounting for Dividends. accordingly, a dividend in relation to the financial year is taken to be determined before the end of the reporting period, consistent with the requirements of aasB 137 Provisions, Contingent Liabilities and Contingent Assets.


The dividend is calculated in accordance with Tpp 09-6 Financial Distribution Policy for Government Businesses. The dividend payable of $133.9M (2010: $135.1M) is calculated based on profit for the year. The dividends are determined by TransGrid’s Board after discussion with nsW Treasury.

(l) Employee Benefitsa calculation in accordance with aasB 119 Employee Benefits is made each year in respect of TransGrid’s liability at the end of the reporting period for employee benefits relating to long service leave and annual leave, and an annual contribution is made to adjust the provision to an amount which is considered adequate to meet that liability.

(i) Annual LeaveThe provision for employee benefits relating to annual leave represents the amount which TransGrid has a present obligation to pay resulting from employees’ services provided up to the end of the reporting period.

The provision has been calculated at nominal amounts based on the remuneration rates that are expected to be paid when the leave is taken.

(ii) Long Service LeaveThe liability for employee benefits relating to long service leave has been calculated on the basis of current salary rates to be paid by TransGrid resulting from employees’ services provided up to the end of the reporting period and includes related on-costs, in accordance with the guidelines of Treasury Circular nsW TC 11/06 Accounting for Long Service Leave and Annual Leave. The liability for long service leave is recognised 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. expected future payments are discounted using market yields at the reporting date on Commonwealth Government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.

(m) SuperannuationTransGrid contributes to the energy industries superannuation scheme (eiss) pool B which is a defined benefit superannuation scheme for which liabilities accrue.

TransGrid also contributes to a number of accumulation superannuation schemes for which no long-term liability accrues.

With the defined benefit schemes, a component of the final benefit is derived from a multiple of member salary and years of membership. all the defined benefit schemes are closed to new members.

The eiss advises the level of liability in respect of TransGrid’s superannuation commitments to its employees who are members of the various divisions of the schemes. The calculation of the superannuation position is based upon actuarial reviews independent of TransGrid’s ongoing activities and involvement. Various actuarial assumptions underpin the determination of TransGrid’s defined benefit obligations. These assumptions and the related carrying amounts are disclosed in note 5.

TransGrid recognises the net total of the following as an asset or a liability in its statement of Financial position:

> present value of the defined benefit obligation at the end of the reporting period.

> Fair value of plan assets in the defined benefit schemes at the end of the reporting period.

The total of the net superannuation expense (or revenue) for the year, including amounts recognised in the accounts, is the difference between the opening and closing balances of the net defined superannuation liability (or prepaid superannuation contributions) plus the contributions paid by TransGrid to the eiss.

in accordance with nsW Treasury Circular nsW TC 11/04 Accounting for Superannuation, actuarial gains and losses are recognised in other Comprehensive income while non-actuarial gains and losses are recognised in profit or loss.

(n) InsuranceTransGrid maintains a mix of external insurance policies and internal provisioning in accordance with aasB 137 Provisions, Contingent Liabilities and Contingent Assets. The treatment of risks and associated liabilities are determined in conjunction with independent insurance advisers and loss adjusters.

TransGrid is a self-insurer for Workers’ Compensation. The liability for claims made, or to be made, against the insurance provision is determined by reference to the Workers’ Compensation act 1987 and the WorkCover authority’s guidelines to self-insurers.

(o) Trade and Other Receivables receivables from trade and other debtors are recognised at amounts due less an allowance for any uncollectible amounts. Collectability of these receivables is reviewed on an ongoing basis. debts that are known to be uncollectible are written off when identified. an allowance for impairment loss on trade and other receivables is raised when there is objective evidence that TransGrid will not be able to collect the debt.

Prescribed Customer Receivablesas at 30 June 2011, TransGrid’s total revenue received for prescribed transmission services, including intra-regional settlement residues and inter-regional settlement residue auction proceeds, was less than the revenue entitlement for the financial year. in accordance with the national electricity rules (ner), the under-recovered amount and associated interest is entitled to be recovered when setting future transmission service prices. The revenue under-recovery has been recognised in prescribed Customer receivables.

(p) Payablesaccounts payable, including accruals not yet billed, are recognised when TransGrid has an obligation to pay as a result of the completion of a work or service.

(q) Revenuerevenue is recognised to the extent that it is probable that the economic benefits will flow to TransGrid and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of Goodsrevenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.

(ii) Rendering of Servicesrevenue from electricity transmission services is subject to the application of an aer determined Maximum allowable revenue (Mar) for the financial year. TransGrid is in the second year of the current five year regulatory determination which operates from July 2009 to June 2014. The transmission service prices are set at the beginning of the financial year in accordance with the Mar.



revenue from the rendering of other services is recognised when the service is provided or by reference to the stage of completion. Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

(iii) Interestinterest revenue is recognised as it is earned, using the effective interest method.

(iv) Contributions for Capital WorksCash and non-cash capital contributions are recognised in accordance with accounting interpretation 18 Transfers of Assets from Customers.

Contributions of non-current assets are recognised as revenue and an asset when TransGrid gains control of the asset. The amount recognised is the fair value of the contributed asset at the date on which control is gained.

Cash capital contributions are recognised as revenue when the network is extended or modified, consistent with the terms of the contribution.

(r) Income TaxTransGrid is subject to the national Tax equivalent regime (nTer) administered by the australian Taxation office (aTo). The nTer is based on application of federal income tax laws under which TransGrid pays income tax equivalents to nsW Treasury.

deferred income tax is provided on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability, and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred income tax asset arises from the initial recognition of an asset or liability, and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

deferred income tax assets and liabilities are measured at the tax rate that is expected to apply to the year when the asset is realised or the liability is settled, based on tax rate (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.

income taxes relating to items recognised directly in equity (such as asset revaluation surplus, cash flow hedges and superannuation actuarial gains and losses) are recognised in equity and not in profit or loss.

(s) Financial Risk Management

OverviewTransGrid has exposure to the following risks from its use of financial instruments:

> Credit risk. > liquidity and funding risk. > interest rate risk. > Foreign exchange risk. > Commodity risk. > operational risk.

Credit RiskCredit risk is the risk that arises if a financial loss is suffered due to the inability of the counterparty being able to meet its financial obligations to TransGrid.

The risk is managed by only undertaking transactions with government owned financial institutions and commercial banks with a minimum credit rating threshold. Monetary limits apply to contain the exposure within reasonable levels.

Trade and Oher Receivables

TransGrid’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of TransGrid’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

TransGrid considers a concentration of credit risk to exist when an individual customer’s outstanding trade receivable balance exceeds 10 per cent of the total trade receivables balance. approximately 89 per cent (2010 – 88 per cent ) of TransGrid’s trade receivables balance is attributable to three distribution customers who have individual trade receivable balances in excess of 10 per cent of the total balance. all of TransGrid’s distribution customers have been transacting with the organisation since its inception, with no credit losses occurring during that time.

Liquidity and Funding RiskThe main objective of liquidity risk management is to ensure that TransGrid has sufficient funds available to meet its financial obligations and in a timely manner.

TransGrid maintains detailed cash flow forecasts and use approved instruments with liquidity limits to maintain adequate cash flow. Borrowing limits are monitored to ensure funding commitment for major capital works are in place. The debt portfolio is managed in such a way that no more than 20 per cent of the portfolio will mature in any 12 month period.

TransGrid has entered into forward start borrowing agreements with the nsW Treasury Corporation to manage liquidity and funding risk.

as at 30 June 2011, TransGrid had three forward start borrowings with an aggregate book value of $152.5M which will be drawn during 2011/12.

Interest Rate Riskinterest rate risk is the risk of a material change in earnings as a consequence of adverse movements in interest rates.

The objective in managing interest rate risk is to minimise interest expense volatility whilst ensuring that an appropriate level of flexibility exists to accommodate potential changes in funding requirements and movement in market interest rates.


To achieve this, TransGrid’s overall debt portfolio comprises a mix of nominal fixed rate and long dated Cpi linked debt with some short term nominal debt.

Foreign Exchange RiskForeign exchange risk is the risk that TransGrid suffers financial loss due to a change in foreign exchange rates.

TransGrid’s policy is to hedge all foreign currency exposures in excess of aud 0.5 million equivalent.

Commodity RiskTransGrid may be exposed to commodity price risk typically in relation to adverse and unexpected increases in costs for infrastructure related capital expenditure. TransGrid’s preferred position in relation to commodity risk is to negotiate fixed price contracts with its suppliers. in addition, appropriate policies are in place to monitor movements in commodity prices with hedging strategies to mitigate risk.

Operational Riskoperational risk is the risk that TransGrid suffers financial loss due to mismanagement, error, fraud or unauthorised use of techniques and/or financial products.

The policy objective is to minimise the risk that TransGrid suffers any financial loss arising from operational risk.

appropriate segregation of duties and maintenance of control systems are in place to mitigate operational risk.

(t) Capital ManagementTransGrid has been subject to the nsW Government’s Financial distribution policy since its inception and is fully committed to providing an adequate return to its shareholder. This objective must be managed within the regulatory framework provided by the ner, given that the majority of TransGrid’s revenue is subject to regulation.

TransGrid’s return on capital is based on a Weighted average Cost of Capital (WaCC) set by the aer, as part of the revenue cap determination process at five-year intervals. The regulatory rate of return is set at a level deemed sufficient to ensure the continuing viability of TransGrid’s business and to encourage necessary investment in new and replacement assets. The WaCC applicable to TransGrid for the current five-year regulatory period ending 30 June 2014 is 10.05%.

There were no changes in TransGrid’s approach to capital management during the year.

TransGrid is not subject to externally imposed capital requirements.

(u) Goods and Services Taxrevenues, expenses and assets are recognised net of the amount of Goods and services Tax (GsT), with the following exceptions:

> Where the amount of GsT incurred is not recoverable from the aTo. in these circumstances, the GsT is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

> receivables and payables are stated with the amount of GsT included.

The net amount of GsT recoverable from, or payable to, the aTo is included as a current asset or current liability in the statement of Financial position.

Cash flows are included in the statement of Cash Flows on a gross basis. The GsT component of cash flows arising from investing and financing activities which are recoverable from, or payable to, the aTo are classified as operating cash flows.

(v) Derivative Financial InstrumentsTransGrid uses derivative financial instruments such as forward foreign currency contracts to hedge its risks associated with foreign currency fluctuations.

For the purposes of hedge accounting, TransGrid classifies its hedges as cash flow hedges. The hedges are undertaken to address exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.

in relation to cash flow hedges to hedge firm commitments which meet the specific conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in other Comprehensive income and the ineffective portion, subject to a materiality threshold, is recognised in profit or loss.

When the hedged firm commitment results in the recognition of an asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in other Comprehensive income are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability.

aasB 7 Financial Instruments: Disclosures requires classification of fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy is made up of the following levels:

> level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

> level 2 – inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

> level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy in which the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

For TransGrid, the above disclosures only apply to derivative transactions.

(w) Joint VenturesTransGrid has entered into an unincorporated Joint Venture agreement in order to accommodate the future provision of telecommunications services.

in accordance with aasB 131 Interests in Joint Ventures, the joint venture is deemed to be a jointly controlled operation as each venturer uses its own assets in pursuit of the joint operations. upon commencement of activities, TransGrid’s interest in the joint venture will be brought to account by recognising in its financial statements the assets it controls, the liabilities and expenses it incurs, and its share of income that it earns from the sale of goods or services by the joint venture.



3. income

2011 $’000

2010 $’000

Revenue

Transmission of electricity 739,290 675,044

non-prescribed work 16,173 14,543

Capital contributions – 53

interest 1,013 1,615

sundry 1,835 3,778

Total Revenue 758,311 695,033

4. expenses

2011 $’000

2010 $’000

Expenses Excluding Losses & Finance Costs

Transmission of electricity 351,843 320,596

other services 8,816 9,368

Total Expenses Excluding Losses & Finance Costs 360,659 329,964

net loss on disposal of property, plant and equipment 1,858 477

net loss on cash flow hedges 168 542

Total Expenses Excluding Finance Costs 362,685 330,983

Finance costs 152,173 138,753

Total Expenses 514,858 469,736

Total Expenses Above Include:

2011 $’000

2010 $’000

depreciation of property, plant and equipment (refer to note 12(b)) 212,303 174,925

amortisation of intangibles (refer to note 13(b)) 5,353 6,374

impairment loss on trade and other receivables 148 (35)

inventory expense 2,762 3,063

inventory write-downs 732 418

Employee Benefits Expense:

net superannuation expense, excluding actuarial losses (refer note 5(a)) 8,161 11,004

other employee benefits expense 88,701 79,926

Total Employee Benefits Expense 96,862 90,930

Maintenance expenses are a subset of the above total expenses:

Maintenance Expense:

Transmission of electricity

employee-related maintenance expense 38,352 35,820

other maintenance expense 27,311 24,508

Transmission of electricity – maintenance expense 65,663 60,328

other services

employee-related maintenance expense 29 –

other maintenance expense 272 251

other services – maintenance expense 301 251

Total Maintenance Expense 65,964 60,579


5. superannuation defined benefit plansThe following tables summarise the components of movement in employer’s superannuation reserve recognised in profit or loss and other comprehensive income, and the funded status and amounts recognised in the statement of Financial position for the defined benefit superannuation plans.

The assets and liabilities of TransGrid’s eiss defined Benefit plans are provided by the scheme’s actuary, Mercer (australia) pty ltd.

(a) Movements in Superannuation Reserves Recognised in Profit or Loss

2011 $’000

2010 $’000

EISS

Current service cost (7,706) (10,060)

interest cost on benefit obligation (28,609) (25,424)

expected return on plan assets 28,154 24,475

EISS Net Income/(Expense) (8,161) (11,009)

SSS, SASS and SANCS Net Income/(Expense) – 5

Total Net Income/(Expense) (8,161) (11,004)

(b) Movements in Superannuation Reserves Recognised in Other Comprehensive Income

2011 $’000

2010 $’000

eiss actuarial gains/(losses) 11,299 (44,029)

sss, sass and sanCs actuarial gains/(losses) – (5)

Total Actuarial Gains/(Losses) 11,299 (44,034)

(c) EISS Superannuation Surplus/(Liability)

2011 $’000

2010 $’000

Fair value of plan assets at end of year 380,315 346,559

present value of defined benefit obligation at end of year (555,058) (547,814)

Net Asset/(Liability) Recognised in Statement of Financial Position at End of Year (174,743) (201,255)

(d) Reconciliation of the Present Value of the EISS Defined Benefit Obligations

2011 $’000

2010 $’000

Present Value of Defined Benefit Obligations at Beginning of the Year (547,814) (468,958)

Current service cost (7,706) (10,060)

interest cost (28,609) (25,424)

Contributions by scheme participants (3,774) (3,893)

actuarial gains/(losses) 2,025 (49,876)

Benefits paid 30,820 10,397

Present Value of Defined Benefit Obligations at the End of the Year (555,058) (547,814)



(e) Reconciliation of the EISS Fair Value of Plan Assets

2011 $’000

2010 $’000

Fair Value of Plan Assets at Beginning of the Year 346,559 307,166

expected return on plan assets 28,154 24,475

actuarial gains/(losses) 9,274 5,847

employer contributions 23,374 15,575

Contributions by plan participants 3,774 3,893

Benefits paid (30,820) (10,397)

Fair Value of Plan Assets at the End of the Year 380,315 346,559

(f) Percentage Invested in Each Asset Class at the End of the Reporting Period:

2011

listed equities 63.5%

semi-liquids & absolute return (growth) 15.9%

Fixed income 13.4%

Cash 3.1%

unlisted property 2.4%

private equity 1.7%

(g) Fair Value of EISS Scheme Assetsall scheme assets are invested by the Trustees at arm’s length through independent managers.

(h) Expected Rate of Return on AssetsThe expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees.

(i) Actual Return on EISS Plan Assets

2011 $’000

2010 $’000

actual return on plan assets 37,519 34,442

(j) Valuation MethodThe projected unit Credit (puC) valuation method was used to determine the present value of the defined benefit obligations and the related current service costs. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.

(k) Economic Assumptions

30 June 2011

salary increase rate (excluding promotional increase) 4% p.a.

rate of Cpi increase 2.5% p.a.

expected rate of return on assets 8.10% p.a.

discount rate 5.28% p.a.


(l) Demographic AssumptionsThe demographic assumptions at 30 June 2011 are those used in the 2009 triennial actuarial valuation.

(m) Historical Information

2011 $’000

2010 $’000

2009 $’000

2008 $’000

2007 $’000

present value of defined benefit obligation (555,058) (547,814) (468,958) (412,716) (409,747)

Fair value of scheme assets 380,315 346,559 307,166 385,164 430,848

surplus/(deficit) in scheme (174,743) (201,255) (161,792) (27,552) 21,101

experience adjustments – scheme liabilities 2,025 (49,876) (34,330) 32,850 5,103

experience adjustments – scheme assets 9,274 5,847 (98,840) (72,279) 24,780

(n) Expected Contributions

$’000

expected employer contributions to be paid in the 2011/12 financial year 21,809

(o) Funding Arrangements for Employer Contributions

(i) Net Surplus/(Liability)The following is a summary of the financial position of the scheme at the end of the reporting period calculated in accordance with aas 25 Financial Reporting by Superannuation Plans.

2011 $’000

2010 $’000

net Market Value of scheme assets 380,315 346,559

accrued Benefits (435,778) (417,574)

Net Surplus/(Liability) (55,463) (71,015)

(ii) Funding Method

The method used to determine the employer contribution recommendations in the 2009 triennial actuarial review was the Aggregate Funding method. The method adopted affects the timing of the cost to the employer.

under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions.

(iii) Economic AssumptionsThe economic assumptions adopted for the 2009 triennial actuarial review of the scheme were:

Weighted Average Assumptions

expected rate of return on scheme assets 7.0% p.a.

expected salary increase rate 4.0% p.a.

expected rate of Cpi increase 2.5% p.a.

(iv) Nature of Asset/Liability

as a liability is recognised in the statement of Financial position as at 30 June 2011, TransGrid is responsible for the difference between the organisation’s share of scheme assets and the defined benefit obligation.

(p) OtherThe superannuation expense recognised in profit or loss is included in the line item “expenses excluding Finance Costs”. superannuation actuarial gains/(losses) in respect of eiss, sss, sass and sanCs of $11.3M (2010: $44.0M loss) are separately identified in “other Comprehensive income”.



6. income tax

(a) Income Tax Expense Major components of income tax expense for the years ended 30 June 2011 and 2010 are:

(i) Profit or Loss

2011 $’000

2010 $’000

Current Income Tax

Current income tax charge 42,939 30,512

adjustments in respect of current income tax of previous years (2,428) 10

Deferred Income Tax

relating to origination and reversal of temporary differences 35,508 32,702

Income Tax Expense 76,019 63,224

(ii) Other Comprehensive Income

2011 $’000

2010 $’000

Deferred Income Tax

net tax (gain)/loss on revaluation of property, plant and equipment 33,892 153,975

net tax (gain)/loss on superannuation reserve – actuarial losses 3,389 (13,209)

net tax (gain)/loss on cash flow hedges (1,098) (1,112)

Income Tax on Items Taken Directly to Equity During the Year 36,183 139,654

(iii) Statement of Changes in Equity

2011 $’000

2010 $’000

Deferred Income Tax

net tax (gain)/loss on transfers from asset revaluation surplus (725) (162)

Income Tax on Items Taken Directly to Equity During the Year (725) (162)

(iv) Reconciliation of Income Tax Expense on Pre-tax Accounting Profit to Income Tax Expense Reported in Profit or Loss The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in profit or loss as follows:

2011 $’000

2011 $’000

2010 $’000

2010 $’000

profit/(loss) before income tax expense 243,453 225,297

income tax expense/(benefit) calculated at statutory income tax rate of 30% 73,036 67,589

Capital allowances (186) (2,219)

expenditure not allowed for income tax purposes 20 55

reversal of temporary differences recognised in previous years 5,577 (2,211)

adjustments in respect of current income tax of previous years (2,428) 10

Income Tax Expense Reported in Profit or Loss 76,019 63,224


(b) Deferred Income Taxdeferred income tax at 30 June 2011 relates to the following:

Recognised in Statement of Financial Position

Recognised in Profit or Loss

2011 $’000

2010 $’000

2011 $’000

2010 $’000

Deferred Tax Assets

provisions 20,827 21,274 447 565

superannuation liability 52,423 60,377 4,564 1,370

property, plant and equipment and intangibles 2,327 1,578 (750) 440

other 4,061 1,424 (1,997) 48

Gross Deferred Tax Assets 79,638 84,653

Deferred Tax Liabilities

property, plant and equipment and intangibles (911,175) (845,148) 32,859 29,719

other (2,733) (2,808) 385 560

Gross Deferred Tax Liabilities (913,908) (847,956)

Deferred Tax Charge 35,508 32,702

7. cash and cash equivalents

2011 $’000

2010 $’000

Cash on hand 13 13

Cash at bank 1,284 1,131

Total 1,297 1,144

8. trade and other receivables

2011 $’000

2010 $’000

Current

Debtors

Trade debtors 108,619 86,171

debtors other than trade 3,024 5,365

111,643 91,536

allowance for impairment loss on Trade and other receivables – –

Total Debtors 111,643 91,536

Other

prescribed customer receivables 3,119 39,541

other 320 100

Total Other 3,439 39,641

Total 115,082 131,177



9. inventories

2011 $’000

2010 $’000

Transmission plant spares 27,945 28,647

other 138 171

Total 28,083 28,818

10. derivatives (assets)

2011 $’000

2010 $’000

Current

Forward foreign currency contracts – 1,472

Non-Current

Forward foreign currency contracts – 57

Total – 1,529

11. other current assets

2011 $’000

2010 $’000

prepayments 1,826 1,912

insurance recovery asset 495 477

Total 2,321 2,389


12. property, plant and equipment

(a) Valuation and Accumulated Depreciation for Each Class of Property, Plant and Equipment

2011 $’000

2010 $’000

Prescribed Assets

network asset 10,247,340 9,746,991

accumulated depreciation (5,404,911) (5,090,029)

Work in progress 423,538 348,045

5,265,967 5,005,007

other assets 101,706 104,267

accumulated depreciation (51,783) (59,052)


57,875 62,058

Total Prescribed Assets 5,323,842 5,067,065

Negotiated Transmission Assets

system plant and equipment 61,537 61,479


Work in progress 56 –

Total Negotiated Transmission Assets 55,678 58,106

Non-regulated Assets

system plant and equipment 14,236 14,111



8,670 9,132

Communication equipment 522 489

accumulated depreciation (170) (124)


392 365

other assets 1,037 1,269

accumulated depreciation (197) (220)

Work in progress 169 30

1,009 1,079

Total Non-regulated Assets 10,071 10,576

Total Property, Plant and Equipment 5,389,591 5,135,747



(b) Reconciliations of the Carrying Amounts of Each Class of Property, Plant and Equipment at the Beginning and End of the Financial Year

property, plant and equipment is treated in accordance with the various explanations set out in note two. property, plant and equipment are valued in accordance with nsW Treasury policy Tpp 07-1 Valuation of Physical Non-Current Assets at Fair Value.

at the end of the reporting period, no non-current assets held for sale were recognised in TransGrid’s accounts (2010 – nil).

2011

Carrying Amount at Beginning

of year $’000

Movements $’000

Disposals $’000

Depreciation $’000

Revaluation Increments/

(Decrements) excluding

Impairments $’000

(Impairments)/Impairment

Reversals $’000

Carrying Amount

at End of year

$’000

Prescribed Assets:

network asset 5,005,007 343,458 (1,055) (194,415) 112,972 – 5,265,967

other assets 62,058 14,304 (4,018) (14,469) – – 57,875

Total Prescribed Assets 5,067,065 357,762 (5,073) (208,884) 112,972 – 5,323,842

Negotiated

Transmission Assets:

system plant and equipment 58,106 113 – (2,541) – – 55,678

Total Negotiated Transmission Assets

58,106 113 – (2,541) – – 55,678

Non-regulated Assets:

system plant and equipment 9,132 201 – (663) – – 8,670

Communication equipment 365 72 – (45) – – 392

other assets 1,079 577 (477) (170) – – 1,009

Total Non-regulated Assets 10,576 850 (477) (878) – – 10,071

Total 5,135,747 358,725 (5,550) (212,303) 112,972 – 5,389,591

2010


of year $’000

Movements $’000

Disposals $’000

Depreciation $’000

Revaluation Increments/

(Decrements) excluding

Impairments $’000

(Impairments)/Impairment

Reversals $’000

Carrying Amount

at End of year

$’000

Prescribed Assets:

network asset 4,262,304 394,061 (3,921) (160,687) 148,229 365,021 5,005,007

other assets 58,860 16,697 (2,583) (10,916) – – 62,058

Total Prescribed Assets 4,321,164 410,758 (6,504) (171,603) 148,229 365,021 5,067,065

Negotiated

Transmission Assets:

system plant and equipment 59,615 953 – (2,462) – – 58,106

Total Negotiated Transmission Assets

59,615 953 – (2,462) – – 58,106

Non-regulated Assets:

system plant and equipment 11,231 (1,486) – (613) – – 9,132

Communication equipment 150 273 – (58) – – 365

other assets 1,015 702 (449) (189) – – 1,079

Total Non-regulated Assets 12,396 (511) (449) (860) – – 10,576

Total 4,393,175 411,200 (6,953) (174,925) 148,229 365,021 5,135,747


(c) Cost Model

As at 30 June 2011Cost

$’000

Accumulated Depreciation

$’000Net Book Value

$’000

Prescribed Assets:

network asset 4,106,518 1,074,519 3,031,999

As at 30 June 2010Cost

$’000

Accumulated Depreciation

$’000Net Book Value

$’000

Prescribed Assets:

network asset 3,843,789 (955,226) 2,888,563

13. intangibles

(a) Valuation and Accumulated Amortisation of Intangibles

2011 $’000

2010 $’000

easements 511,682 510,534


521,032 514,014

Computer software 31,012 51,911

accumulated amortisation (18,762) (39,960)


39,297 31,747

Total Intangibles 560,329 545,761

(b) Reconciliations of the Carrying Amounts of Intangibles at the Beginning and End of the Financial Year

2011


of Year $’000

Additions $’000

Disposals $’000

Amortisation $’000

Impairments $’000

Carrying Amount at End

of Year $’000

Intangible Assets

easements 514,014 7,018 – – – 521,032

Computer software 31,747 12,903 – (5,353) – 39,297

Total 545,761 19,921 – (5,353) – 560,329

2010


of Year $’000

Additions $’000

Disposals $’000

Amortisation $’000

Impairments $’000

Carrying Amount at End

of Year $’000

Intangible Assets

easements 504,320 9,694 – – – 514,014

Computer software 30,315 7,810 (4) (6,374) – 31,747

Total 534,635 17,504 (4) (6,374) – 545,761



14. other non-current assets

2011 $’000

2010 $’000

insurance recovery asset 5,689 5,793

Total 5,689 5,793

15. expenditure commitments

(a) Capital Expenditure Commitments Commitments arising from contracts for expenditure in respect of property, plant and equipment and intangibles, to the extent not provided for in the accounts:

2011 $’000

2010 $’000

payable within one year 206,717 233,306

payable one to five years 150,045 74,657

payable later than five years – –

Total (Including GST) 356,762 307,963

Total expenditure commitments above include input tax credits of $32.4M (2010 – $28.0M) that are expected to be recoverable from the aTo.

(b) Operating Expenditure Commitments Major commitments arising from contracts for expenditure associated with network support, to the extent not provided for in the accounts:

2011 $’000

2010 $’000

payable within one year 161 220

payable one to five years 3,900 –

payable later than five years – –

Total (Including GST) 4,061 220

Total expenditure commitments above include input tax credits of $0.4M (2010 – $20K) that are expected to be recoverable from the aTo.

16. trade and other payables

2011 $’000

2010 $’000

Current

Creditors 62,779 62,693

accrued finance costs 58,555 66,148

other 5,564 5,225

Total 126,898 134,066


17. provisions

2011 $’000

2010 $’000

Current

dividend 133,947 135,058

employees’ accrued benefits 64,205 65,922

insurance 1,340 1,113

199,492 202,093

Non-Current

employees’ accrued benefits 4,441 4,319

insurance 9,383 9,483

superannuation liability 174,743 201,255

188,567 215,057

Total 388,059 417,150

(a) Dividends

2011 $’000

2010 $’000

opening balance 135,058 120,233

dividend payments (135,058) (120,233)

dividend for the year 133,947 135,058

Closing Balance 133,947 135,058

(b) Employees’ Accrued Benefits The following table details the movements in the employees’ accrued Benefits provision during the year:

2011 $’000

2010 $’000


Contributions 9,943 9,319

payments (11,538) (11,141)


The following table shows a breakdown of the employees’ accrued Benefits provision at the end of the reporting period:

2011 $’000

2010 $’000

annual leave 17,042 16,596

long service leave 51,604 53,645

Total 68,646 70,241

The following table shows a breakdown of the Current portion of the employees’ accrued Benefits provision at the end of the reporting period, split into the period of time the benefits are expected to be settled:

2011 $’000

2010 $’000

Within one year 14,169 13,390

later than one year 50,036 52,532

Total 64,205 65,922



(c) Insurancein accordance with Condition 6(a)(iii) of the license granted under section 211 of the Worker’s Compensation act, 1987, the provision for total outstanding workers’ compensation claims liability including incurred but not reported claims and administration is $10.7M (2010 – $10.6M). during the financial year, $1.2M (2010 – $2.4M) was contributed to the provision for Workers’ Compensation.

The provision includes $6.2M for a workers’ compensation claim that has been activated under TransGrid’s reinsurance policy. reinsurance recoveries have commenced and future recoveries for this claim are considered to be virtually certain. TransGrid has recognised an insurance recovery asset of $6.2M based on independent actuarial advice (refer to notes 11 and 14).

The following table details the movements in the insurance provision during the year:

Class Opening Balance $’000

Contributions $’000

Payments $’000

Closing Balance $’000

Workers’ compensation 10,595 1,176 (1,047) 10,724

Total 10,595 1,176 (1,047) 10,724

18. derivatives (liabilities)

2011 $’000

2010 $’000

Current

Forward foreign currency contracts 1,612 1,103

Non-Current

Forward foreign currency contracts 2,513 892

Total 4,125 1,995

19. other current liabilities

2011 $’000

2010 $’000

unearned revenue 3,203 3,064

Total 3,203 3,064

20. capital TransGrid commenced operations on 1 February 1995 on separation from pacific power under the electricity Transmission authority act, 1994 at which time a series of assets and liabilities were transferred.

TransGrid was corporatised as a statutory state owned Corporation on 14 december 1998, with share capital of two $1.00 shares. These shares were issued to the Treasurer and the Minister for Finance, as Voting shareholders on behalf of the nsW Government, as at 30 June 2011. The $2.00 is reported as part of Capital.

2011 $’000

2010 $’000

Capital


Movements – –



21. reserves

Reserves

Asset Revaluation

Surplus $’000

Cash Flow Hedge

Reserve $’000

Total $’000

At 1 July 2009 1,284,099 2,268 1,286,367

revaluation of property, plant & equipment, excluding impairments (note 12(b)) 148,229 – 148,229

impairments (note 12(b)) 365,021 – 365,021

Transfers to retained earnings – revaluation surplus for assets disposed (note 22) (539) – (539)

Tax effect of property, plant & equipment revaluation, and impairments (note 6(a)(ii)) (153,975) – (153,975)

Tax effect of transfers to retained earnings (note 6(a)(iii)) 162 – 162

revaluation of cash flow hedges – (3,405) (3,405)

realised (gains)/losses on cash flow hedges removed from equity and included in assets – (301) (301)

Tax effect of cash flow hedge equity movements (note 6(a)(ii)) – 1,112 1,112

At 30 June 2010 1,642,997 (326) 1,642,671

revaluation of property, plant & equipment, excluding impairments (note 12(b)) 112,972 – 112,972

Transfers to retained earnings – revaluation surplus for assets disposed (note 22) (2,416) – (2,416)

Tax effect of property, plant & equipment revaluation, and impairments (note 6(a)(ii)) (33,892) – (33,892)

Tax effect of transfers to retained earnings (note 6(a)(iii)) 725 – 725

revaluation of cash flow hedges – (6,766) (6,766)

realised (gains)/losses on cash flow hedges removed from equity and included in assets – 3,168 3,168

Tax effect of cash flow hedge equity movements (note 6(a)(ii)) – 1,098 1,098

At 30 June 2011 1,720,386 (2,826) 1,717,560

The net movement in equity, excluding tax effects, in respect of the Cash Flow Hedge reserve during the year was ($3,598K) (2010 – ($3,706K)).

Asset Revaluation SurplusThis reserve is used to record increases in the fair value of property, plant and equipment, and decreases to the extent that such decreases relate to an increase on the same asset previously recognised in equity. assets are revalued in accordance with nsW Treasury policy Tpp 07-1 Valuation of Physical Non-Current Assets at Fair Value.

Cash Flow Hedge ReserveThis reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be effective.

22. retained earnings

2011 $’000

2010 $’000


net profit/(loss) before dividend 167,434 162,073

superannuation actuarial gains/(losses) 11,299 (44,034)

income tax benefit/(expense) on superannuation actuarial gains/(losses) (3,389) 13,209

dividend (133,947) (135,058)

Transfers from asset revaluation surplus 2,416 539




23. dividend and contributions to shareholdera dividend of $133.9M (2010 – $135.1M) has been recognised for distribution to the shareholder. The dividend will be paid during the course of the 2011/12 financial year and is represented by the dividend provision.

24. secured liabilitiesat the end of the reporting period, there was no loan liability of TransGrid secured by a charge over TransGrid’s assets.

25. audit feesamounts received, or due and receivable, by the auditors for:

2011 $’000

2010 $’000

auditing the financial statements 176 172

26. compensation of Key management personnel

2011 $’000

2010 $’000

short-term employee benefits 2,427 2,356

post-employment benefits 492 791

other long-term benefits 139 338

Total 3,058 3,485

Fees Paid to DirectorsFees, including superannuation benefits paid to directors, other than salaries paid to full-time directors, were $0.5M (2010 – $0.4M).

no related party transactions were entered into during the 2010/11 financial year.

27. contingent liabilities and contingent assets

(a) Contingent Liabilities

2011 $’000

2010 $’000

Contract liability 1,000 1,548

a claim for compensation is being pursued against TransGrid associated with roles and responsibilities under the national electricity rules. The amount disclosed represents TransGrid management’s best estimate at the end of the reporting period. at this stage, it is not possible for management to form an opinion on the likely outcome of the claim.

Claims for compensation associated with delayed contractual milestones and discrepancies in the value of works are being pursued against TransGrid by a contractor. at this stage, it is not possible for management to form an opinion about the likely outcome or reliably estimate the value of claims.

There are a small number of non-contractual claims that have been made against TransGrid which have been either denied, are considered to be of low risk or at a stage where a reliable financial estimate cannot be made.

(b) Contingent AssetsTransGrid has initiated legal proceedings to recover damages of $17.0 million associated with its contractor. at this stage, it is not possible for management to form an opinion on the likely outcome of the proceedings.


28. fair compensation trust accountin accordance with the land acquisition (Just Terms Compensation) act, TransGrid maintains a Trust account. The account balance at the end of the reporting period was $0.9M (2010 – $38K).

29. leases TransGrid has no finance lease commitments. The following lease commitments disclosed are in the nature of non-cancellable operating leases.

Lessee

TransGrid has one operating lease commitment under a commercial lease which commenced on 9 May 2007. The lease term is 6 years with an option to extend for another 4 years. lease payments are increased annually by 4 per cent. The lease expenditure recognised in the statement of Comprehensive income for the financial year, GsT-exclusive, was $1.9M (2010 – $1.9M).

Minimum rentals payable GsT-inclusive, as at 30 June 2011 are as follows:

2011 $’000

2010 $’000

Within one year 2,783 2,143

later than one year but not later than five years 2,457 4,217

later than five years – –

Total (Including GST) 5,240 6,360

30. notes to statement of cash flows

(a) Reconciliation of Cash Cash as at the end of the financial year as shown in the statement of Cash Flows is reconciled to the related items in the statement of Financial position as follows:

2011 $’000

2010 $’000

Cash and cash equivalents 1,297 1,144

(b) Dividends and Taxesno dividends were received. dividends and tax equivalents paid during the year amounted to $157.5M (2010 – $170.8M).

(c) Acquisitions and Disposals of Entitiesno entities were acquired or disposed of during the year.



(d) Reconciliation of Profit After Income Tax Equivalent Expense to Net Cash Provided by Operating Activities

2011 $’000

2010 $’000

Profit/(Loss) After Income Tax Equivalent Expense 167,434 162,073

Add/(Less): Items Classified as Financing/Investing Activities

loss/(gain) on disposal of property, plant and equipment 1,858 478

Add/(Less) Non-Cash Items

depreciation and amortisation 217,656 181,299

amortisation of (premium)/discount on loans 78 504

Capitalised interest (13,752) (21,723)

Capital contributions – (53)

unrealised net loss on cash flow hedges 62 –

Net Cash Provided by Operating Activities Before Change in Assets and Liabilities 373,336 322,578

Net Changes in Assets and Liabilities During the Financial Year

(increase)/decrease in trade debtors & other receivables 16,095 (21,081)

(increase)/decrease in inventories 735 (1,184)

(increase)/decrease in other current assets 68 (94)

(increase)/decrease in other non-current assets 104 (1,785)

increase/(decrease) in trade creditors & other payables (6,341) (3,525)

increase/(decrease) in provisions (16,681) (475)

increase/(decrease) in income tax & deferred taxes 53,542 12,704

increase/(decrease) in other current liabilities 139 (14,795)

Net Cash Provided by Operating Activities 420,997 292,343

(e) Financing ArrangementsTransGrid has a number of financial arrangement facilities in place to meet liquidity and contractual requirements as identified in the table below:

Facility Type Financial InstitutionFacility Limit

$’000

Borrowings nsW Treasury Corporation 2,900,000

Come and go nsW Treasury Corporation 170,000

Bank overdraft Westpac Banking Corporation 30,000

Bank guarantee nsW Treasury Corporation 8,000

Bank guarantee Commercial Bank 8,000

Credit card Commercial Bank 4,000


31. financial instruments disclosure

(a) Credit Risk

Exposure to Credit RiskThe carrying amount of TransGrid’s financial assets represents the maximum credit exposure. TransGrid’s maximum exposure to credit risk at the end of the reporting period was:

Carrying Amount note2011

$’0002010 $’000

Cash and cash equivalents 7 1,297 1,144

Trade and other receivables 8 115,082 131,177

Forward exchange contracts used for hedging (assets) 10 – 1,529

116,379 133,850

Impairment LossesThe aging of TransGrid’s trade and other receivables at the end of the reporting period was:

Gross Receivables 2011

$’000

Impairment Losses 2011

$’000

Gross Receivables 2010

$’000

Impairment Losses 2010 $’000

not past due 113,714 – 129,096 –

past due 1-30 days 1,313 – 1,416 –

past due 31-60 days 6 – 44 –

More than 60 days 49 – 621 –

115,082 – 131,177 –

The above table defines the gross receivables expected to be received by TransGrid.

as at 30 June 2011, all receivable transactions were assessed to determine their fair value and that collectability was highly probable. There was no impairment for 2011 (2010 – nil).

The movement in the allowance for impairment loss on trade and other receivables account during the year was as follows:

2011 $’000

2010 $’000

Balance at 1 July 2011 – 50

reversal of previous allowance – (50)

impairment loss recognised – –

Balance at 30 June 2011 – –

Based on historic default rates, TransGrid believes that no impairment allowance is necessary in respect of trade receivables either not past due or past due. The trade receivables balance, which includes the amounts owed by TransGrid’s three most significant customers, relates to customers that have a good credit history with TransGrid.



(b) Liquidity and Funding Risk The following are the contractual maturities of financial liabilities, including estimated interest payments:

30 June 2011

Carrying Amount

$’000

Contractual Cash flows

$’000

Less than 1 year $’000

1 year to 5 years

$’000

More than 5 years

$’000

Non-derivative Financial Liabilities

Borrowings 2,270,650 3,327,357 327,736 1,102,495 1,897,126

Forward start borrowings – 52,820 (154,593) 36,602 170,811

Trade and other payables 126,898 126,898 126,898 – –

Derivative Financial Liabilities

Forward exchange contracts used for hedging: Gross outflow 4,125 34,147 14,703 19,444 –

Total 2,401,673 3,541,222 314,744 1,158,541 2,067,937

30 June 2010

Carrying Amount

$’000

Contractual Cash flows

$’000

Less than 1 year $’000

1 year to 5 years

$’000

More than 5 years

$’000

Non-derivative Financial Liabilities

Borrowings 2,194,330 3,208,646 412,261 1,043,211 1,753,174

Trade and other payables 134,066 134,066 134,066 – –

Derivative Financial Liabilities

Forward exchange contracts used for hedging: Gross outflow 1,995 32,621 9,151 23,470 –

Total 2,330,391 3,375,333 555,478 1,066,681 1,753,174

(c) Foreign Exchange Risk

Cash Flow HedgesThe cash flows arising from cash flow hedges are not expected to materially affect profit or loss.

Cash Flow Hedge Equity Movements

2011

Carrying amount at beginning of period (1/7/10)

$’000

Amount recognised in equity during

the period $’000

Amount removed from equity

and included in profit or loss

$’000

Amount removed from equity and

included in assets $’000

Carrying amount at end of period

(30/6/11) $’000

equity (466) (6,766) – 3,168 (4,064)

2010

Carrying amount at beginning of period (1/7/09)

$’000

Amount recognised

in equity during the period

$’000

Amount removed from equity

and included in profit or loss

$’000

Amount removed from equity and

included in assets $’000

Carrying amount at end of period

(30/6/10) $’000

equity 3,240 (3,405) – (301) (466)


Sensitivity AnalysisTransGrid employs cash flow hedges to remove currency risk associated with purchase of overseas equipment.

a 10 per cent strengthening and weakening of the australian dollar against the following currencies would have increased/(decreased) equity, or profit or loss, by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010.

Impact on Equity in AUD Impact on Profit or Loss in AUD

$’000 +10%

$’000 –10%

$’000 +10%

$’000 –10%

30 June 2011

usd (482) 589 – –

eur (1,175) 1,436 (79) 96

JpY (985) 1,204 – –

seK (8) 10 – –

30 June 2010

usd (313) 383 – –

CHF (163) 199 – –

eur (2,916) 3,563 – –

JpY (1,019) 1,245 – –

seK (50) 61 – –

(d) Interest Rate Risk interest rate risk is the risk of a material change in earnings and ultimately dividend payments as a consequence of adverse movements in interest rates. The policy objective is to ensure that TransGrid is not exposed to interest rate movements which could adversely impact on its ability to meet its financial obligations as they fall due.

Cash Flow Sensitivity Analysis for Variable Rate Instrumentsa change of 100 basis points in interest rates at the end of the reporting period would have increased/(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2010.

Impact on Profit or Loss

$’000 –100bp

$’000 +100bp

30 June 2011

prescribed customer receivables (31) 31

Westpac bank accounts (13) 13

nsW Treasury Corporation come and go facility 642 (642)

Cash Flow Sensitivity (Net) 598 (598)

30 June 2010

prescribed customer receivables (395) 395

Westpac bank accounts (11) 11

nsW Treasury Corporation come and go facility 303 (303)

Cash Flow Sensitivity (Net) (103) 103



(e) Net Fair Value of Financial Assets and Liabilities The net fair value of financial assets and liabilities, with the exception of borrowings, is reflected by their carrying amounts in the statement of Financial position, in accordance with aasB 132 and aasB 7.

The net fair value of borrowings is based on market value derived by Barrington Treasury services using market interest rates current at the end of the reporting period.

The carrying amounts and net fair values of financial assets and liabilities at the end of the reporting period are:

2011 2010

Carrying Amount

$’000Fair Value

$’000

Carrying Amount

$’000Fair Value

$’000

Financial Assets

Cash and cash equivalents 1,297 1,297 1,144 1,144

Trade and other receivables 115,082 115,082 131,177 131,177

derivatives – – 1,529 1,529

Total Financial Assets 116,379 116,379 133,850 133,850

Financial Liabilities

Trade and other payables 126,898 126,898 134,066 134,066

Borrowings 2,270,650 2,394,217 2,194,330 2,277,759

derivatives 4,125 4,125 1,995 1,995

Total Financial Liabilities 2,401,673 2,525,240 2,330,391 2,413,820

in accordance with the requirements of aasB 7 Financial Instruments: Disclosures, all of TransGrid’s derivative financial instruments fall within the level two category of the fair value hierarchy. There were no transfers between categories during the year.

end of audited financial statements

TransGrid annual reporT 2011 > statement by members of the board 115

statement by members of the board

116 independent auditor’s report > TransGrid annual reporT 2011

independent auditor’s report

TransGrid annual reporT 2011 > independent auditor’s report 117

independent auditor’s report continued

118 index > TransGrid annual reporT 2011

aabout TransGrid 6

asset base 30

asset management initiatives 35

bBoard of directors: Committees 74

Board of directors: Meetings 73

Board of directors: induction and training 73

Board of directors: profiles 12

Board of directors: remuneration 76

Building program 38

cCapital investment ($M) 38

Capital works completed (2010/11) 38

Carbon pricing 33

Chairman’s review 16

Charter 79

Climate change strategy 59

Community initiatives 64

Consultant fees 77

Consumer response 77

Contact details inside back cover

Contents 2

Corporate governance 72

Corporate social responsibility 59

Cost of annual report inside back cover

Credit card usage 77

ddemand management initiatives 33

diversity 45

dividend ($M) 22

eearnings before interest and tax ($M) 22

electricity demand 34

electronic service delivery 68

environmental incident notification statistics 58

environment initiatives 59

executive leadership Team: performance statements 74

executive leadership Team: Qualifications 76

executive leadership Team: remuneration 76

fFinancials 2010/11 82

gGearing ratio (%) 24

Glossary 120

Graduate programs 47

Government information and public access (Gipa) act 2009 81

hHighlights 2010/11 20

iincome ($M) 22

independent auditor’s report 116

index 118

insurance 79

interest cover (times) 24

internet contact details inside back cover

JJudicial decisions 77

index

TransGrid annual reporT 2011 > index 119

lland disposal 81

leadership development programs 45

legislative change 77

letter to shareholders 3

looking ahead 2011/12 26

lost-time injury frequency rate – contractors 52

lost-time injury frequency rate – employees 52

mManaging director’s review 17

Managing director’s scholarship 49

Maintenance expenditure ($M) 31

Multicultural policies and services program (Mpsp) 46

nnational electricity Market 32

national greenhouse and energy reporting 60

network availability (%) 30

network reliability (system minutes lost) 30

notes to the financial statements 88

ooverseas visits 78

ppricing (transmission) 32

privacy 79

profit before tax ($M) 22

promotion 68

rregulatory test statistical information 38

reporting exemptions 80

return on regulated asset Base (%) 24

risk management 79

ssafety initiatives 53

shareholders 72

sponsorship statistics 66

staff numbers: by category 44

staff numbers: by gender 44

staff numbers: senior contract staff by gender 44

staff profile 44

statement of cash flows 87

statement of changes in equity 86

statement of comprehensive income 85

vValues 26

wWomen programs 47

Waste reduction and purchasing policy (Wrapp) 60

index continued

120 glossary > TransGrid annual reporT 2011

glossary

Term Explanation/Comments

aeMC The australian energy Market Commission.

aeMo The australian energy Market operator.

aer The australian energy regulator.

assets TransGrid’s ‘poles and wires’, all the substations and electricity transmission lines that form our network.

Customers TransGrid’s customers are those directly connected to our network. They are either distribution network service providers, directly connected generators, large industrial customers, customers connected through inter-regional connections or potential new customers.

dM demand management. a set of initiatives that is put in place at the point of end-use to reduce the total and/or peak consumption of electricity.

dnsp distribution network service provider. a body that owns, controls or operates a distribution system in the neM.

easement an easement over a property gives TransGrid the right to construct and maintain our assets, while ownership of the property remains with the original landowner.

GWh a unit of energy consumption equal to 1,000 MWh.

interconnection The points on an electricity transmission network that cross jurisdictional/state boundaries.

kV operating voltage of electricity transmission equipment. one kilovolt is equal to one thousand volts.

led light-emitting diode (energy efficient lighting).

lidar light detection and ranging.

load The amount of electrical power that is drawn from the network.

lTiFr lost time injury Frequency rate.

MWh a unit of energy consumption. one Megawatt hour is the amount of energy consumed in one hour at a rate of one Megawatt.

national electricity law Common laws across the states which comprise the neM, which make the ner enforceable.

national electricity rules (ner or The rules) The rules that govern the operation of the neM.

TransGrid annual reporT 2011 > glossary 121

glossary continued

Term Explanation/Comments

neM The national electricity Market.

network augmentation an expansion of the existing electricity transmission network.

non-network solutions alternatives to network augmentation which address a potential shortage in electricity supply in a region.

outage an outage is when part of the network loses power. This can be either planned (i.e. when work needs to be done on the line) or unplanned.

pls Cadd power lines system – Computer aided design and drafting.

raB return on regulated asset Base.

regulatory Test a test promulgated by the aer that is required by the ner to be applied when determining the relative economic merits of options for the relief of transmission constraints.

rFp request for proposal.

riT-T regulatory investment Test – Transmission.

sVC static Var Compensator. a device that provides for control of reactive power.

switchbay a site containing high voltage switchgear, used to connect or disconnect a section of the network.

Tnsp Transmission network service provider. a body that owns, controls and operates an electricity transmission system in the neM.

Transmission line a high-voltage power line running at 500kV, 330kV or 132kV.

sVC static Var Compensator. a device that provides for control of reactive power.

switchbay a site containing high voltage switchgear, used to connect or disconnect a section of the network.

The Minister The new south Wales Minister for energy.

Tnsp Transmission network service provider. a body that owns, controls and operates an electricity transmission system in the neM.

Transmission line a high-voltage power line running at 500kV, 330kV or 132kV.

122 environmental production notes > TransGrid annual reporT 2011

environmental production notes

printingThe printer of the annual report holds an FsC Chain of Custody (CoC) Certification ensuring the highest standards of sustainable practice have been used throughout the printing process.

environmentally friendly soy-based inks and low-alcohol production methods have been used.

cover and editorial pagesThe cover and editorial section pages are printed on Monza recycled, which contains 55 per cent recycled fibre (25 per cent post consumer and 30 per cent pre consumer) and FsC certified pulp, ensuring all virgin pulp is derived from well-managed forests, and is manufactured by an iso 14001 certified mill.

The paper is FsC Mixed source Certified.

financial pagesThe financial pages are printed on Tudor rp, which is FsC recycled Certified and australian Made. it contains 100 per cent recycled fibre and no chlorine bleaching occurs in the recycling process. The milll is iso 14001 certified. sales of Tudior rp support landcare australia.

TransGrid’s commitment to the environment is reflected in the sustainable printing practices and paper used in the production of this annual report.

TransGrid Contact Details

Sydney

201 Elizabeth Street PO Box A1000 Sydney South NSW 1235

Telephone +61 2 9284 3000 Facsimile +61 2 9284 3522

Business Hours 8:00am – 5:00pm

Metropolitan

Telephone +61 2 9620 0777

Orange

Telephone +61 2 6360 8711

Newcastle

Telephone +61 2 4967 8678

Tamworth

Telephone +61 2 6765 1666

Wagga

Telephone +61 2 6922 0222

Yass

Telephone +61 2 6226 9666

TransGrid ABN: 19 622 755 774

This report is available on TransGrid’s website

www.transgrid.com.au

Acknowledgements

Produced by

TransGrid Corporate Affairs Group

Designed and produced by

Equation Corporate Design Pty Ltd

Photographs by

Gavin Jowitt

About this report

This Annual Report was prepared by TransGrid and designed by an external graphic design firm and writing consultancy. The total external costs in producing this report were $41,563.

Our Annual Reports are available on www.transgrid.com.au

A printed version of the Annual Report can be requested by phone on 02 9284 3000.

We welcome your feedback on this report:

> By email at [email protected] > By post PO Box A1000, Sydney South NSW 1235, or > By phone +61 2 9284 3000

Would you prefer a printed or online version of the TransGrid Annual Report?

As part of TransGrid's commitment to good environmental practice we would like to reduce the number of printed copies of the Annual Report. You can indicate your preference by simply emailing: [email protected] and writing Online Version or Printed Version in the subject space.

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