ConneCting PeoPle With energy

C o n n e C t i n g P e o P l e W i t h e n e r g y

AnnuAl RepoRt 2010

C o n t e n t S

A B o U t t h i S r e P o r t

This report covers Western Power’s financial performance, statutory obligations and sustainability performance for the period 1 July 2009 to 30 June 2010.

It reports on a broad range of business issues complementary to those defined in the Statement of Corporate Intent agreed annually with the Minister for Energy, consistent with Electricity Corporations Act 2005 (WA) and Electricity Industry Act 2004 (WA).

The content of this report is influenced by the Global Reporting Initiative (GRI) guidelines version 3.0, including the Electricity Utility Sector Supplement. As a signatory to the Sustainability Practice Framework (SPF) of the Energy Supply Association of Australia (ESAA) we are encouraged to report against the GRI indicators identified as most relevant to our industry. A summary GRI content index is provided.

An external sustainability assurance opinion has not been sought. This will be considered for a later period when we have fully integrated reporting on material sustainability issues within this report.

Our aim is to provide insight into our broader business performance, transformation and vision, highlighting Western Power’s commitment to connecting people with energy and the sustainability of Western Australia’s electricity network.

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

WESTERN POWER ANNUAL REPORT 2010

1 Connecting people with energy 3

2 Review 4

3 Achievements and challenges 2009/10 7

4 Performance 2009/10 10

5 Our core business 15

5.1 Operating and improving the network 15 5.2 Connecting with customers 20 5.3 Community investment 24 5.4 Safety and health 28 5.5 People and culture 32 5.6 Environment 34 5.7 Climate change 36 5.8 Transforming the core 38 5.9 Positioning for the future 41

6 Executive team and Board 42

FINANCIAL REPORT

Directors’ report 47Corporate governance statement 60Financial Statements 72Global Reporting Index 111

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1 C o n n e C t i n g P e o P l e W i t h e n e r g y

O u r p u r p O s e

Western Power connects people with energy. We operate the electricity network in the south west of Western Australia, delivering power to more than 1.5 million people every day. Our head office is located in Perth.

We are a Government Trading Enterprise that maintains and develops the network, known as the SWIS (South West Interconnected System), ensuring it delivers a safe and reliable electricity supply to homes, businesses, industry, schools, hospitals, transport systems and much more.

Our commitment is to connect people with the energy they need, ensuring we are meeting their requirements today and securing a sustainable energy supply for the future.

We do this by working closely with electricity generators to ensure a variety of traditional and renewable energy sources can be connected to our network.

O u r v i s i O n

By 2020, Western Power is recognised as a world class commercial enterprise, providing sustainable energy connections/transfers and related services.

O u r va l u e s

We work to create a constructive culture that drives the delivery of our services to the Western Australia community. Our values underpin everything we do and are the principles that guide the way we work, enabling us to achieve our goals.

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

Respect our customersWe stay committed to our customers to achieve the best energy solutions

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

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

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

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

FACtS And FigUreS

> 1.5 million people connected

> 225,000 streetlights

> 2943 employees

> 1,000,000 customer calls taken each year

> 63,000 school children ‘shockproofed!’

> 4028 MW summer peak load

> 22,000 new connections each year

> 96,000 km of powerlines

> 630,000 wood poles

> 13, 500 distribution substations

> 330 voltage regulator sites

> 120 zone substations

> 21 terminal substations

> One of the largest isolated networks in the world

Esperance

Albany

Perth

Kalbarri

Kalgoorlie/Boulder

Western Power’s South West

Interconnected SystemHorizon Power network

HOriZOn pOWer neTWOrK

WesTern pOWer’s sOuTH WesT inTerCOnneCTeD sYsTeM

| 3 |W e s T e r n p O W e r a n n u a l r e p O r T 2010

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2 r e V i e W

This has been done well and now it is incumbent upon us to look to meet the rapidly increasing demand for electricity in ways which deliver better financial, social, and environmental outcomes for our customers, our shareholder and the organisation.

Our challenges for the future are different from our historical ones as we shift our focus to delivering efficiently on our customers’ expectations, improving our commerciality and learning to achieve excellence as a regulated business. We must embed commerciality as a core capability and we must continue to listen to our stakeholders and the community and deliver a seamless and better customer experience with every single interaction.

In closing, I wish to acknowledge with gratitude the contributions of my fellow directors and in particular that of Peter Mansell, our outgoing Chairman and thank him for his leadership on behalf of the business. Peter’s guidance since disaggregation has ensured strong foundations that will assist the organisation to deliver its current strategy and position us well for future growth.

Mark Barnaba Chairman Western Power Board of Directors

C H a i r M a n ’ s r e v i e W

Since the disaggregation of Western Power in 2006, I have watched with interest as the new transmission and distribution business has evolved and I was delighted when in 2009 I was asked to join the Board and then in April this year to take on the role of Chairman.

Having been connected with the business now for a little over a year I have come to appreciate the sheer size of our assets and the span of responsibilities involved in managing a network that is not only vast but pivotal in supporting our state’s development. I am impressed with the commitment and enthusiasm I see within the business for meeting these responsibilities and the impressive improvements already made.

Disaggregation brought with it a number of challenges and rightly the initial focus for the organisation has been on establishing a sustainable long term vision, maintaining a quality service and gaining a greater understanding of the regulated environment in which we operate.

On behalf of the Board of Directors, I am pleased to present the Western Power Annual Report 2010.

| 4 | W e s T e r n p O W e r a n n u a l r e p O r T 2010

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Our refreshed strategy sharpens our focus on areas in which we need to improve to deliver on customer expectations, while allowing us to keep an eye on future developments, ensuring we are well placed to capitalise on them. It also recognises the need for us to provide clear focus on how to improve performance for everyone within the business.

Our strategy has four key elements:

1. ExTERNAL CONNECTIONS We are undertaking a significant shift in our decision making, and are determined to ‘listen, learn and deliver’ as we improve connections with our customers, the community and our shareholder.

2. OPERATIONAL ExCELLENCE We are focusing on efficiency improvements to simplify core operations, improve performance for our customers and drive cost efficiencies in a sustainable manner, thus improving our commerciality.

3. REgULATORy ExCELLENCE We are optimising our performance as a regulated business by ensuring the regulatory framework facilitates certainty and optimum outcomes for Western Australia and Western Power, and ensuring our internal processes are based on a deep regulatory and commercial understanding.

M a n a g i n g D i r e C T O r ’ s r e v i e W

The past year has been challenging for Western Power. We have responded to natural disasters such as the devastating March storm, as well as delivered a demanding works program. We have seen the launch of our refreshed strategic direction and achieved solid results against our corporate targets. Importantly, we have continued to ensure we deliver value to our state and remain focused on our core purpose of connecting people with energy.

In February, our strategic direction for 2010 - 2013, ‘Transform the Core’ was launched. After four years of operation, we took the opportunity to reflect on our journey to date to ensure our strategy remains aligned with changes to the market and external environment as well as internal shifts. Customers are demanding better service, more information, improved reliability and greater control over their energy use in response to economic and environmental drivers.

4. FUTURE POSITIONINg We are continuing to make targeted developments towards a smart grid, and identify seed investment opportunities to protect and leverage our natural advantages.

The strategy has provided renewed clarity and motivation around our purpose – ‘connecting people with energy’. It not only defines our core business, connecting the customers and communities of Western Australia with electricity, but characterises how we execute our work with personal energy as we strive to get the job done to our customers’ satisfaction.

Underpinning the key strategic areas of focus are three enabling strategies that will ‘Transform the Core’ of our business:

The introduction of a new safety and health management system, combined with a fundamental shift in the way we think and feel about safety will ensure we deliver our core activities safely and effectively.

The development of our people and leaders will be critical to the success of our long term objectives. This development supports the move to an achievement culture, making future opportunities easier to realise.


Improved use and integration of information and communication technology will significantly improve our responsiveness and the commerciality of our business.

As we approach the end of the financial year we have already seen cost savings and efficiencies generated through our Operational Excellence program. Improvements to our operational value chain combined with cost savings in areas such as vegetation management and a reduction in consultant expenditure have realised savings of $43 million this year. Process improvements and cost efficiencies have already been identified which will deliver additional cost savings over the next two years as we deliver on our ‘Transform the Core’ strategy.

Our focus for 2010/11 is to continue business improvement and ensure we deliver enhanced service for our customers. A key customer service focus is the communication of planned outages. We are implementing a program of changes to our notification process and I am confident this is an area where we will see dramatic improvements.

I am pleased to report that we have met ten of eleven key performance targets for 2009/10.

Safety and health is a core value and fundamental to everything we do. This year safety performance has been steady, which is normal for a business in the process of driving change. Our workforce Lost Time Injury Frequency Rate (LTIFR) of 2.6 has improved from 2.7 last year and is ahead of our 2009/10 target of 3.0. While not quite reaching our internal stretch target of 2.5, this small increase indicates a good underlying level of performance.

Our focus remains on zero harm and implementing initiatives that move us closer to this being achieved.

Delivery of major projects on schedule exceeded target, with 99.2 per cent of major projects tracking within agreed timeframes. Delivery of major projects on budget also finished ahead of target at 100 per cent. This outstanding result has only been achievable due to increased focus on operational areas and customer service. Highlights include the delivery of our challenging Summer Ready program and record numbers of wood pole inspections and replacements in our Pole Replacement program.

The year has not been without its challenges. The bushfire that devastated Toodyay over the new-year period saw our crews working long hours, battling daytime temperatures of 40 degrees to restore power and replace more than 120 poles and 55 transformers. It was an amazing response by our people, and teams throughout the business delivered extraordinary results under extremely difficult conditions.

The storm that swept through Perth in March, leaving 158,000 customers without power at its peak, again saw a swift and efficient response by our crews to an unprecedented level of damage. Our customer service teams managed close to 40,000 calls in just three hours during the height of the storm and in excess of 200,000 calls over the next four working days. Running simultaneously to the inbound calls were more than two thousand outbound calls generated by our customer service teams to follow up with residents that their power had been restored. Another remarkable effort by all involved.

On behalf of the business I want to extend my thanks to Peter Mansell, who completed his tenure as Chairman of the Western Power Board in April 2010. Peter was appointed Western Power’s inaugural Chairman in 2006, and served in the role for the past four years. Peter’s leadership of the Board has resulted in a strong foundation for the business and one which has positioned us well for the future. Together with the Executive Team, I wish him all the very best for the future.

I would like to welcome Mark Barnaba as our new Chairman. Mark has been Deputy Chairman of Western Power since 2009 and brings an immense wealth of knowledge and experience to the Board. Mark is joined by John Cahill, our recently appointed Deputy Chairman, who also brings many years of experience in the utility industry to his role.

The challenge for Western Power in the next few years will be to build on foundations already established and accelerate change in the areas of safety, performance, cost effectiveness and cultural transformation. We will know we have been successful when we can state we have met the challenging targets we have set ourselves.

I would like to thank our people for their contributions throughout the year, and I look forward to working together as we continue our exciting journey.

Doug Aberle Managing Director


3 A C h i e V e m e n t S A n d C h A l l e n g e S 2 0 0 9 / 1 0

a C H i e v e M e n T s

1 Creation and launch of refreshed strategic direction 2010-13 Transform the Core

2 Implementation of new Safety and Health Strategy Set out for Safety

3 Reduction of contractor LTIFR from 2.5 to 1.9

4 $1.8 billion spend with 100% major projects completed on budget and 99.2% major projects completed on time

5 Operational Excellence program and other corporate initiatives deliver $43 million in savings and efficiencies

6 Restoring power to 158,000 customers after worst storm on record causes unprecedented network damage

7 Bronze award Corporate Responsibility Index rating of 72.5% achieved, an increase on our 53.5% 2009 performance

8 Western Power leads the consortium responsible for implementing Perth Solar City project

9 A record 10,600 poles replaced throughout the network

10Western Power’s world-leading application of Telecommunication Network Management System wins prestigious Engineering Excellence Award

11 Shockproof! energy safety education program reaches 63,000 primary school children

C H a l l e n g e s

1 Securing Access Arrangement 2 with the Economic Regulation Authority (ERA) and State Government

2 Improving regulatory engagement model in preparation for Access Arrangement 3

3 Reprioritising works program in line with constrained budgets

4 Embedding and allocating resources to deliver Transform the Core strategy

5 Move to streamlined, single-alliance service delivery model

6 Increase in customer demand and load requirements

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

8 Finalising Enterprise Agreement negotiations with the Australian Services Union

9 Restructuring the organisation to become more responsive and simplified


.11...1Alf

4 P e r F o r m A n C e 2 0 0 9 / 1 0

Western Power’s performance is tracked against Key Performance Indicators (KPIs) detailed in the Western Power Statement of Corporate Intent 2009/10.

1 Performance is measured by average number of incidents over a rolling 12 month period (Jul 09 - Jun 10)

INDICATOR DESCRIPTION2009/10 ACTUAL

2009/10 TARgET

Lost Time Injury Frequency Rate (LTIFR)

(LTIs / million hours worked – workforce) 2.6 <3.0

All Medical Frequency Rate (AMFR)

(AMs / million hours worked - workforce) 10.9 <11

Public safety incidents1 12 <12

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

217 230

Customer Charter compliance (%) 90 88

Net Profit After Tax (NPAT) ($M) year-to-date 97.3 11.5

Major Projects on Budget: Delivery of major projects +/- 10% of cost estimate (%) year-to-date

100 95

Major Projects on Schedule: Delivery of major projects within +/- 3 months of schedule (%) year-to-date

99.2 95

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

72 71

Corporate Reputation (%) 82 67

Organisational Health (%) 70 70

A summary of Western Power’s 2009/10 performance, tracked against Key Performance Indicators (KPIs) detailed in the Western Power Statement of Corporate Intent 2009/10.


s a F e T Y

Safety remains our core value and is seen as a key enabler in supporting Western Power’s transformation program. Performance has continued to improve in 2009/10; however the rate of improvement is slowing. This is to be expected as we get closer to our goal of zero harm, and our safety and health strategy has been built to increase focus on three core priorities; improving safety leadership, lifting employee engagement and empowering our people.

This year, the workforce Lost Time Injury Frequency Rate improved from 2.7 (injuries per million hours worked) in 2008/9 to 2.6. Against a target of 3.0 and a stretch target of 2.5, this performance is encouraging. We have experienced periods of sustained strong performance in some of our higher risk environments and populations, and we have lifted safety leadership and engagement.

At 10.9 (injuries per million hours worked), the All Medical Frequency Rate also exceeds our target of 11, but falls slightly short of our stretch target of 10. This reflects an overall improvement in the management of harm through early intervention strategies and injury management.

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

SAFETy PERFORMANCE 2007/8 – 2009/10

Details of safety and health achievements and challenges during 2009/10 are available on page 28.

2007/08 2009/102008/09

20

18

16

14

12

10

8

6

4

2

02007/08 2009/102008/09

lTiFr aMFr


p u b l i C s a F e T Y

The average rate of public safety incident occurrence increased from 8.3 at the beginning of 2008/9 to 12 per month during 2009/10. This was due to a large number of pole top fire related incidents between November and March. Hot weather was the major contributor to this increase, with 2009/10 one of the hottest summers on record in Western Australia, coupled with a record dry spell in the wider Perth area. There was also a higher than average number of easterly winds recorded. These weather conditions are particularly conducive to pole top fires.

The 2009/10 Bushfire Management Implementation Plan achieved several milestones to improve the safety of the general community, including:

completion of 2000 HV LongBay solutions in 2009/10, which exceeded the target of 1200 solutions

completion of 8000 LV spreader installations in extreme and high bushfire areas

implementation of 15,000 silicone solutions to prevent pole top fires in extreme and high bushfire areas

partnership with F.E.S.A. to implement a fuel reduction program in the Perth Hills

communication of Western Power’s annual winter safety campaign

PUBLIC SAFETy INCIDENTS 2008/9 - 2009/10

nO. OF publiC saFeTY inCiDenTs

12-MOnTH rOlling average OF publiC saFeTY inCiDenTs

TargeT 12-MOnTH rOlling average

30

25

20

15

10

5

0Jul 08 aug 08 sep 08 OCT 08 nOv 08 DeC 08 Jan 09 Feb 09 Mar 09 apr 09 MaY 09 Jun 09

30

25

20

15

10

5

0Jul 09 aug 09 sep 09 OCT 09 nOv 09 DeC 09 Jan 10 Feb 10 Mar 10 apr 10 MaY 10 Jun 10

| 1 0 | W e s T e r n p O W e r a n n u a l r e p O r T 2010

n e T W O r K p e r F O r M a n C e

Our SAIDI (System Average Interruption Duration Index) performance for 2009/10 is 217 minutes and is well below our target of 230 minutes. SAIDI is a measure of the total duration of power interruption in minutes per customer per year, and last year’s performance represents a four minute improvement on 2008/9.

The improvement in SAIDI performance can be attributed to the delivery of reliability and power quality programs of work during the year including the Summer Ready program and the completion of the Worst Performing Feeders program. There was also a reduction in asset damage due to fires, vandalism and vehicles during the year. Despite the 22 March storm, there has also been less inclement weather than previous years.

SAIDI did increase during January 2010 due to general equipment failure during the second hottest January on record. There was also an increase in emergency outages to customers to remove identified hazards. Lightning in country areas also impacted SAIDI between February and April 2010.

NETWORk PERFORMANCE 2007/8 – 2009/10

Details of network performance achievements and challenges during 2009/10 are available on page 15.

C u s T O M e r C H a r T e r

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

The Customer Charter compliance target (85 per cent) was achieved every month, reflecting the increased and sustained effort on customer service. The year ended with compliance of 90 per cent. Achieving compliance in the last 3 months of the year was particularly rewarding in the wake of the massive volumes of customer enquiries created by the 22 March storm.

CUSTOMER ChARTER 2007/8 – 2009/10

235

230

225

220

215

2102007/08 2009/102008/09

saiDi - MinuTes inTerrupTeD

Details of customer service achievements and challenges during 2009/10 are available on page 20.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2007/08 2009/102008/09

CusTOMer CHarTer COMplianCe

| 1 1 |W e s T e r n p O W e r a n n u a l r e p O r T 2010

2 Normalisation in 2009/10 included adjusting for significantly above budget Gifted Assets revenue, an unbudgeted tariff revenue increase from March 2010, and cost impacts relating to the 22 March storms.

FinanCial perFOrManCe

Our Net Profit After Tax position for the 2009/10 financial year was $97.3 million, significantly above our $11.5 million target.

This above target performance is due to higher than budgeted regulated revenue offset by depreciation, interest and tax.

Total revenue was $111.6 million above budget comprising regulated revenue of $96.7 million and unregulated revenue of $14.9 million. Regulated revenue is above target due to higher energy volumes and the impact of tariff price increases in March 2010. Additional Distribution Gifted Assets were received during the year, which resulted in higher regulated capital contributions.

Operating expenses achieved the budgeted target this year. Western Power’s maintenance program was overspent for the year due to corrective activities including incremental spend driven by the severe storm on 22 March 2010. This was more than offset by cost savings in corporate areas and savings through Operational Excellence program initiatives.

MaJOr prOJeCTs DeliverY

The third year of our four-year $3.5 billion capital investment program, our largest ever work program, was completed in June 2010. A total of $1006.3 million was invested in upgrading and expanding the network.

Of our major projects, 99.2 per cent were delivered on or ahead of schedule and 100 per cent delivered within agreed budgets. A major highlight was reaching the 2009/10 pole replacement target, replacing 10,600 poles. The distribution wood pole inspection backlog has been reduced over the year from 14,354 poles to 1,572 poles at 30 June 2010.

The Worst Performing Feeder program is also complete. During this program 11,844 conditions were completed over a total of 176 feeders.

All Summer Ready projects delivered their summer critical components on time and the Vegetation Bushfire Cut was completed by 30 November 2009.

Depreciation is $8.8 million above budget due to a conscious effort to finalise work in progress to the asset register resulting in higher depreciation for the year.

NPAT 2007/8 – 2009/10

Western Power measures itself on an underlying EBT (Earnings Before Tax) basis, which normalises the business’ performance for abnormal positive and negative financial impacts during the year. Western Power achieved an underlying EBT of $38.3M, compared to a target of $30.0M.

140

120

100

80

60

40

20

02007/08 2009/102008/09

neT prOFiT aFTer TaX $M


COrpOraTe repuTaTiOn

Comparison between the previous 2008/09 Synovate study and the latest 2009/10 TNS* study indicates that the degree of ‘positivity’ in the Corporate Reputation KPI results has increased significantly.

Research indicated that the majority of stakeholders and key customers felt there had been a noticeable improvement in the performance, responsiveness and customer focus of Western Power over the previous 12-18 months.

Shortly before undertaking the corporate reputation study, Western Australia experienced the March storm, which significantly disrupted the lives of Perth residents. Media attention surrounding that storm and Western Power’s emergency response would have been at the forefront of people’s minds when completing the survey and may have contributed to the increase in positive perception.

The result in our customers’ perception of Western Power’s value in energy efficiency and sustainable solutions remained largely unchanged from previous years.

*During 2009/10 Western Power

changed the agency used to provide

corporate reputation KPI research.

As a result of the improved methodology

used by TNS, 2009/10 corporate

reputation results are not directly

comparable with previous years.

CORPORATE REPUTATION 2007/8 – 2009/10

2009/102008/092007/08

APPROvED WORkS PROgRAM INvESTMENT 2007/8 – 2009/10

1,200

1,000

800

600

400

200

0

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2007/08 2009/102008/09

More information regarding Western Power’s works program delivery is available on page 15.

aWp CapiTal

aWp MainTenanCe100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2009/102008/09

aWp invesTMenT M$ COrpOraTe repuTaTiOn % pOsiTive respOnse

value rOle in energY eFFiCienCY anD susTainable sOluTiOn - %


O r g a n i s aT i O n a l H e a lT H

The Organisational Health Indicator (OHI) is a key performance indicator of organisation health and employee engagement, reflecting favourable responses from ten questions within the Pulse employee survey. The Pulse survey is circulated to all Western Power employees and captures perceptions and experiences of key cultural areas such as leadership, accountability, training, job satisfaction, customer service, communication and safety.

Progressional results:

Apr 2010 70% Apr 2009 73% Oct 2008 71% Apr 2008 66% Apr 2007 64%

OHI has improved significantly since April 2007, peaking at 73 per cent in April 2009. The slight decline in the April 2010 results are reflective of an organisation experiencing a high degree of change activity, raised benchmarks and increased employee expectations.

ORgANISATIONAL hEALTh 2007/8 – 2009/10

s u s Ta i n a b i l i T Y p e r F O r M a n C e

We actively consider ways to improve our economic, social and environmental performance. To assist in managing and measuring this, we participate in the Corporate Responsibility Index (CRI), a leading benchmarking tool developed by Business in the Community (UK).

In 2009 we obtained a CRI score of 72.5 per cent, a 19 per cent increase on our 2008 performance, and were awarded the most improved company in the CRI bronze category (70 – 79.99 per cent).

This was as a result of improvements in the integration of sustainability principles and management practices related to stakeholders, environment, climate change and developing our people.

Examples of improvements are:

climate change (reporting of emissions)

strategic relationships withFederal and State Government (in support of policy initiatives)

waste and resource management (target of 50 per cent of waste recycle and program implemented)

employee programs (including health & well-being)

management of community investment (centralisation of the portfolio)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%2007/08 2009/102008/09

OrganisaTiOnal HealTH - %


5o U r C o r e B U S i n e S S

The South West Interconnected System (SWIS) is one of the largest, isolated electricity networks in the world. As the owner and operator of the SWIS, Western Power has a key role in securing Western Australia’s energy future.

By maintaining, developing and improving the network, we ensure it delivers a safe and reliable power supply to new and existing customers, and incorporates advanced systems and technology that will facilitate the connection of new and renewable energy sources.

Our network investment is shaped by our Access Arrangement (AA), which is the three-year performance contract Western Power agrees with the Economic Regulation Authority. Within the framework of the AA we deliver short and long term planning based on projected load forecasts and our assessment of our network’s ability to meet the state’s energy needs.

The AA defines the enhancement and network development we can deliver during that period and provides additional rigour around our decision making. This ensures we remain commercially focused and invest in the right infrastructure solutions to deliver the greatest benefit for Western Australia.

Key to the successful maintenance and development of the SWIS is the delivery of the Approved Works Program, which maps out all of the maintenance and new infrastructure development to be delivered each financial year, as part of our long-term strategic network development.

a p p r O v e D W O r K s p r O g r a M ( a W p )

In 2009/10 we delivered the third year of our largest-ever works program, constructing two new substations, 70 km of underground powerlines and replacing more than 10,000 poles.

The AWP details the complete schedule of works for the year, including all capital expenditure (network enhancement to increase capacity) and operational expenditure (maintenance and reliability improvement) for transmission and distribution projects. In 2009/10 the AWP consisted of more than 1,000 projects, with priority given to those on the major projects list. Major projects include substation construction, new customer connections, our ‘Summer Ready’ maintenance schedule and a comprehensive Pole Replacement Program.

5 .1 O p e r aT i n g a n D i M p r O v i n g T H e n e T W O r K

APProVed WorkS ProgrAm

> 184,924 poles inspected

> 10,608 poles replaced

> 2 new substations

> 70 km powerlines undergrounded

> 128 major projects delivered

> 99.2 % major projects delivered on time

> 100% major projects delivered on budget

> $1006.3 m invested in the network


During 2009/10, 99.2 per cent of major projects were delivered on schedule and 100 per cent delivered within budget. The following section highlights some of our key projects and achievements in the works program during the last twelve months.

s u M M e r r e a D Y p r O g r a M O v e r v i e W

ThE ChALLENgE The Summer Ready program is one of the most critical programs of work for Western Power. During the summer months electricity consumption reaches a number of annual peaks, driven largely by increased air conditioning usage during extremely hot weather. These peaks have increased on average by 5 per cent per year over the last decade, resulting in the need for extensive infrastructure enhancement to ensure the SWIS has the capacity to meet the demand.

ThE SOLUTION In 2009/10, the Summer Ready program comprised 39 projects across the transmission and distribution network, at a total value of $118.4 million.

The Transmission Summer Ready program consisted of 13 projects requiring delivery before summer. Highlights included the installation of seven additional transformers in existing substations to support load growth, and construction of the 330/132 kV 550 MVA power transformer at Kwinana.

The Transmission projects totalled $84.5 million in total business case value. All 13 projects were delivered within budget allowance and the essential elements within agreed timeframes.

Distribution Summer Ready included 25 projects with a value of $33.9 million, of which 24 were delivered on time and before the system peak. Highlights included feeder

enhancements in Nedlands, Shenton Park, Waikiki, Yokine and Gosnells, which helped reduce highly loaded feeders that in some cases were over capacity at up to 128 per cent loading.

ThE RESULT On 25 February 2010 the system peak reached 4028 MW, a 272 MW increase on 2009 and the first time peak load has surpassed 4000 MW. Successful completion of 98 per cent of Summer Ready projects on schedule enabled the network to meet capacity for the new record peak.

Work dramatically reduced average loading on feeders from 94 per cent in 2008/9 to 63 per cent in 2009/10, ensuring greater reliability and capacity for managing peak loads. The Summer Ready program has also reduced the impact of equipment failures on network reliability, with our SAIDI (System Average Interruption Duration Index) due to equipment failure improving from 82.61 minutes in February 2009 to 50.75 minutes in February 2010.

ELECTRICITy CONSUMPTION gROWTh IN WA

yeAr

4500

4000

3500

3000

2500

2000

1500

1000

500

0

mW

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

18 Year annual grOWTH 4.5%



annual peaK (MW)

TrenD (MW)


s O u T H e r n s e a W aT e r D e s a l i n aT i O n p l a n T

ThE ChALLENgE The Western Australian Water Corporation proposes to install a desalination plant at Binningup, 127 km south of Perth. Costing $955 million, the project will secure Western Australia’s water supply for the immediate future.

Western Power was requested to provide a high voltage power supply to the project, with an initial peak demand of 30 MW, and an ultimate demand of 55 MW. The initial works are to be completed by October 2010, aligning with the Water Corporation commissioning start date.

ThE SOLUTION The solution is to provide a 132 kV electricity supply to the desalination plant and to ensure sufficient capacity can be provided from Western Power’s Kemerton Terminal. To provide a reliable 132 kV supply, a new 490 MVA transformer and a new 132kV switch yard is being installed at Kemerton Terminal. 10 km of 132 kV transmission line is also being installed between the new switch yard and the Binningup Desalination Plant substation.

Following environmental consultation, approximately 2 km of transmission line running through forest area was constructed on poles placed a shorter distance apart than normal to reduce disruption to wildlife habitat. Hundreds of bird diverters were installed on poles to protect swans and pelicans flying in the area.

ThE RESULT Western Power is tracking to deliver the project on schedule, investing a total $55 million on completion. The installation of a second transformer at Kemerton Terminal will allow for higher power supply security than would otherwise be available with only a single transformer in service. It also reduces the risk of load shedding during contingency conditions.

Works are designed to provide an ultimate demand of 55 MW, however additional capacity has been built-in to sustain electricity growth and meet customers’ needs throughout Bunbury and Muja well into the future.

p O l e r e p l a C e M e n T p r O g r a M

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

ThE SOLUTION Western Power has continued with the successful new bundling works program, whereby several jobs in a region are bundled and allocated to one contractor. Previously, pole upgrades were charged separately to replacement costs. These charges are now included in the total cost, meaning more work at a similar price. This approach has enabled high volumes of work to be completed with significant time and cost savings realised.

ThE RESULT A record 10,608 poles were replaced throughout the network at a cost of $59.5 million. The number of pole top fires was 30 per cent below the predicted target, despite an exceptionally long summer dry spell. Against a target of 170,000, the wood pole inspection program achieved 184,924 inspections. The pole inspection backlog has also been reduced from 14,354 to 1,572 poles.

C O l l g a r W i n D F a r M

ThE ChALLENgE The State Government has approved construction of the $750 million Collgar Wind Farm, one of Australia’s largest renewable energy projects. The 267 MW facility will generate more than 790,000 MWh of renewable energy per annum, enough to power 125,000 homes. With more than 100 turbines across 13,000 hectares of land, the wind farm will be located in Merredin, Western Australia.

Western Power’s challenge is to connect the Collgar Wind Farm to the South West Interconnected System (SWIS), enabling the safe and reliable transfer of renewable energy to customers.


ThE SOLUTION Construction of the Collgar Wind Farm will commence in January 2011 and is expected to be operational by August that year.

Western Power is working with the Government, Synergy and the Independent Market Operator to ensure project approvals and planning remain on schedule. Western Power has carried out a series of pre-approval studies and network planning analyses to ensure the successful delivery of the project in line with the August 2011 deadline.

At a cost of $20 million Western Power will install a 220 kV transmission point 30 km east of Merredin, connecting into the existing Muja to Goldfields power line. Collgar Wind Farm will connect to the SWIS via this transmission line, adding a large scale renewable energy source to the network.

ThE RESULT Connection to the network is on schedule for delivery early 2011. The project creates a new source of renewable energy for Western Australians and a significant economic boost for Merredin, with 200 jobs created during the construction phase and up to 20 ongoing jobs once complete.

Collgar Wind Farm is Western Australia’s largest renewable energy project and will help towards achieving the Federal renewable energy target of 20 per cent by 2020. Western Power is proud to be a part of this important project to supply safe and renewable power to customers.

D i s T r i b u T i O n D e l i v e r Y p a r T n e r s

ThE ChALLENgE Ensuring we have resources to deliver the works program is a huge task. In 2010/11 the works program consists of 1,387 distribution projects, requiring more than three million man hours of work. Not all projects can be delivered by our internal workforce; therefore we depend on various commercial arrangements to assist with the delivery of the works program.

As the distribution works program has grown every year, so has Western Power’s reliance on contractors. At the end of the 2008/9 financial year, Western Power worked directly with more than 40 individual contractors to deliver the distribution works program. In some cases, these contracts had varying service levels and had not been reviewed for some time.

ThE SOLUTION Western Power implemented the Distribution Delivery Project to consolidate the number of contractors working on distribution works projects and to improve the commerciality of these relationships.

In January 2010 distribution work was put to tender to ensure a fair and robust selection process, deliver best value and quality for Western Power and increase visibility of works for the successful partners.

In April 2010 the project was completed and three distribution delivery partners appointed. A key selection criterion was the vendor’s scale and ability to deliver the works program in full.

Each distribution partner is expected to manage their work allocation effectively and be responsible for resourcing the work appropriately to ensure delivery.

ThE RESULT Simplifying our engagement model has resulted in the implementation of performance based contracts with each partner to ensure quality of delivery. The distribution partners benefit from having increased visibility of works which provides greater security and allows for more effective planning. The new model also enables Western Power to bundle together large volumes of work, resulting in a better commercial arrangement with the distribution partners.

The overarching agreement for the new distribution delivery partners will run for two years with the option of three one-year extensions. At June 2010 Western Power had issued four work packages to the distribution delivery partners comprising pole replacements and maintenance works within the metropolitan area. It is estimated the project will deliver significant savings over the lifetime of the contracts.


2 2 M a r C H s T O r M r e s T O r aT i O n

ThE ChALLENgE The storm that raged through Perth and its surrounding suburbs on 22 March 2010 was the worst on record, leaving 158,000 homes and businesses without electricity and Western Power’s network with unprecedented levels of damage. More than 7000 individual network faults were recorded in just two hours, with four major substations blacked out due to the severe weather.

Severe weather also hit the north and south country regions, with Western Power crews working around the clock to restore power. Geraldton homes and businesses were hit on three consecutive nights with thunderstorms leaving many without power. The south west also experienced thunderstorm activity causing power interruptions on two consecutive nights.

ThE SOLUTION Western Power’s response was immediate, with crews focusing on public safety and securing hazards before clearing the major faults.

General Manager System Management, Ken Brown explained the approach to the restoration effort.

“It was very difficult, from a safety perspective, to get power restored soon after the storm passed. The hail and rain had stopped but there was still a significant amount of lightning occurring around the metropolitan area.

“Western Power was unable to start switching power back on immediately due to the extensive network damage. There was a real potential that had we tried to turn power back on it could have caused further safety hazards for the public.

“Normally, Western Power is able to isolate sections of faulted equipment and restore power to undamaged sections of powerline very quickly. However, as there was so much damage extreme caution was exercised in order to reduce the risk of energising a faulted section.

“It was important that we focused on the hazards first, deploying teams to ensure any damage to the network did not threaten public safety. Once these were made safe we worked on the major faults to bring as many customers back on line in the shortest time possible.

“From there our crews concentrated on faults affecting more than one customer, before finishing the single-customer faults by the Friday. Sensitive customers such as medical facilities and traffic management were also prioritised to minimise disruption,” Ken said.

ThE RESULT

More than 100,000 properties were restored within 24 hours. The majority of customers were restored within 48 hours, with crews responding to single fault calls once all hazards and major faults were cleared. All customers in the metropolitan area were restored by Friday 26.

22 mArCh Storm, VitAl StAtS

> 100,000 customers restored within 24 hrs

> 158,000 homes & businesses affected

> 40,000 customer calls in 3 hrs

> 7795 network faults

> 361 drop out fuses tripped

> 830 wires down

> 325 poles damages

> 4 major substations blacked out


Our purpose is to connect people with energy. This means ensuring more than 1.5 million people have safe, sustainable access to the power they need to support their lives.

Customer requirements are critical to our forward planning. As electricity demand increases through industrial development, consumerism, environmental pressures and population growth, our challenge is to gauge the ability of our network to meet increased demand and, importantly, understand our customers’ needs, ensuring we deliver the right solutions effectively, commercially and with innovation.

In 2009/10 Western Power continued its commitment to customer service by delivering a suite of initiatives that improve customer focus and engagement and drive commerciality. These initiatives include the creation of a Market Segment Management Team, improved public consultation strategies, delivery of community-based energy efficiency and education programs, and ongoing improvement of our accessibility and customer service processes.

The following section outlines how we are working to improve our ability to connect with our customers.

C u s T O M e r s e g M e n TaT i O n

ThE ChALLENgE Lengthy processes, lack of transparency and poor communication led to lower than expected customer satisfaction scores in 2009 for our key market segments of Local Government Authorities and the land development industry. We listened to customer feedback and recognised the need to provide greater focus and support to these two areas.

ThE SOLUTION In January 2010, the Market Segment Management Team was established to work across the business to improve Western Power’s relationship with Local Government Authorities and the land development industry.

The team looks at our policies, processes and issues that are negatively impacting these customer groups. The team works directly with customers and also peak bodies such as the Western Australian Local Government Association (WALGA) and the Urban Development Institute of Australia (UDIA).

Within the Market Segment Management Team, relationship managers have been appointed to improve ongoing communications with the key customer groups.

ThE RESULTS The Market Segment Management Team has developed an engagement framework and set up two strategic reference groups – the Local Government Strategic Reference Group and the Urban Development Strategic Reference Group.

5 . 2 C O n n e C T i n g W i T H C u s T O M e r s

oUr CUStomerS

> 15,043 new customer connections

> 800,000 residential customers

> 100,000 small to medium enterprises

> 85 major customers

> 144 local government authorities

> 37 public consultations held

> 1,083,908 customer calls received

> 63,000 primary school children ‘shockproofed!’


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Through these groups, the Market Segment Management Team works to identify priority issues and strategies to address them. From this, they develop operational work plans and projects to improve Western Power services. An issue facing both groups is the cost and timeliness of customer funded work, which comprises 30 per cent of all work undertaken by Western Power.

The Market Segment Management Team is working closely with Western Power’s Customer Network Connections section to review the end-to-end customer funded work process and establish standards that ‘start and end with the customer’ in mind.

C O M M u n i T Y e n g a g e M e n T

ThE ChALLENgE Community engagement is a fundamental part of Western Power’s business. Previously, community engagement has been limited to major projects, providing little scope for establishing ongoing dialogue with the community.

We are now seeking to develop greater community engagement by actively engaging with the community using a two-way process of consultation and information sessions.

ThE SOLUTION Our new approach uses a number of different community engagement tools. One of these tools is the internationally recognised public participation spectrum from the International Association for Public Participation, which frames

community engagement into five levels of communication:

informing the community

consulting with the community and taking on feedback

involving the community and establishing two-way dialogue

collaborating with the community and seeking advice from them

empowering the community to determine a solution

Initiatives being used in this new approach include one-on-one interviews with community members, community comment sessions, surveys and online communication such as blogs and wikis.

Using this new approach, the engagement team identifies the level of communication suitable for the audience and project, allowing the team to work with relevant areas across the business for more comprehensive communication at an earlier stage of the project lifecycle.

ThE RESULT This new approach has seen the number of community engagement sessions more than double to 37 during 2009/10, with 1400 community members attending.

Increasing the frequency and type of engagement in the early stages of the project lifecycle has allowed Western Power to develop a continuous, constructive dialogue with the community and make the business more accessible. This inclusive and coordinated approach has enhanced Western Power’s ability to make decisions that better meet the needs and expectations of the community.

CommUnity engAgement StAtS

> 37 community contact sessions in less than twelve months

> 1,400 attendees

> 38,000 mail outs

> 80 newspaper ads

> over 2000 km travelled

> 550 community members participating in reference groups


p e r T H s O l a r C i T Y

ThE ChALLENgE Perth Solar City is part of the Federal Government’s Solar Cities initiative, which challenges industry, business, governments and communities to come together and change the way they produce, use and save energy. It is a high profile community engagement project which is helping shape Australia’s energy future focusing on renewable options that align with the federal target of 20 per cent renewable energy generation by 2020.

Western Power is responsible for the delivery of the Perth Solar City program including program management, marketing and communications and data management. Supporting Western Power to bring Perth Solar City to the community is a consortium of industry leaders including Botanic Gardens and Parks Authority, the Eastern Metropolitan Regional Council (EMRC), Mojarra, Prospero Productions, Solahart, Sunpower and Synergy.

ThE SOLUTION Residents in Perth’s eastern region are engaged in the project and have access to free home eco-consultations, discounts on solar hot water and energy systems, and can take part in other energy saving projects. In addition, as part of its Perth Solar City contribution, Western Power is conducting trials to test new technologies, engaging with the community and promoting energy efficiency.

Western Power’s smart grid pilot includes the rollout of 11,500 Smart Meters and the installation of communications and SCADA (Supervisory Control and Data Acquisition) infrastructure to implement, test and validate new services, including:

remote meter reading

remote disconnection and reconnection

power quality events

two way customer interface via an In Home Display (IHD)

Further trials include:

a Photovoltaic (PV) Saturation trial to investigate the impact of a high saturation of residential solar PV systems on the distribution network

a Direct Load Control (DLC) trial to research the effectiveness and technical feasibility of DLC as a demand management tool by allowing remote control of participant’s air conditioners during peak energy periods

Western Power will also support Synergy in the delivery of In-home Displays (IHDs) to assist customers in tracking their energy consumption.

ThE RESULT Perth Solar City is trialling practical and creative ways to be smarter about energy use. During 2009/10 two of five iconic solar projects have been delivered at Midland Foundry and the Central Institute of Technology in East Perth. The results and information collected will help Australia develop sustainable energy solutions now and in the future.

T H e W e s T e r n a u s T r a l i a n D i s T r i b u T i O n C O n n e C T i O n s M a n u a l

ThE ChALLENgE Connecting to the network at a distribution level has historically been a lengthy and frustrating process. Numerous policies, procedures and standards across the business made accessing the right information at various stages of the application process unduly difficult, particularly for those new to the industry or without detailed knowledge of Western Power’s operations.

The complexity and inconsistency of the process also posed significant efficiency and safety challenges that could have led to serious injury or even death.

ThE SOLUTION Western Power has responded to this issue by working with internal and external stakeholders to establish the Western Australian Distribution Connections Manual, a customer friendly guide book that brings together crucial and practical information in one accessible resource.


The manual has three sections:

Basic information required for builders – including detailed explanations and photos of equipment, requirements on site, the application process, and charges

Technical information for electricians and engineers – including the technical requirements needed to be factored into designs

General information – including key contacts within the business, and how to access appropriate forms

As well as consolidating more than 30 years of industry knowledge, compiling the manual has ensured information provided is consistent and relevant to today’s industry.

ThE RESULT Launched in June 2010 the Western Australian Distribution Connections Manual has been embraced by industry, which recognises that it will improve safety and efficiency. Collaboration with Horizon Power ensures applicability to networks across the state, opening the market up and providing more opportunity for industry.

The manual is also being presented to final year apprentices and provides clear direction and expectations when working with the network.

n e T C i s T W O – p l a n n i n g F O r T H e C u s T O M e r

ThE ChALLENgE As part of our focus on improving customer services we sought to consolidate customer information to ensure consistency and efficiency of customer communications.

ThE SOLUTION As part of SPoW (the IT Strategic Program of Work) Western Power has established the NetCIS IT system, which allows the business to build and share customer information to improve customer relationships and allow for more efficient decision making.

NetCIS has brought together information about customers and stakeholders, their properties and a history of their interaction with Western Power into one central location accessible to the whole business. This will ensure that all customer data is accurate and being managed efficiently.

The modular format of NetCIS means new functions can be added to meet the changing needs of the business, without having to rework existing content. Change management and training professionals are working in conjunction with the project rollout to ensure people are proficient with the system and the customer strategies it supports.

ThE RESULT The NetCIS journey has begun and over time will improve Western Power’s use of customer information providing a richer picture of individual customer situations. The way in which Western Power interacts with customers has entered a new era, with the introduction of this centralised information system placing the customer at the heart of all business activities.


Western Power is passionate about connecting with the Western Australian community. Our corporate community investment programs are designed to improve our relationships with people in Western Australia and support our promise to ‘connect people with energy’.

Our community investment and education goals are designed to have a positive impact on our society by:

helping the community stay safe when using electricity

educating the community about how to conserve energy and save money

keeping the community informed about how the energy industry contributes to CO2 and how the community’s energy usage impacts our environment

future proofing the power industry by supporting development of science, engineering and green energy skills through key learning institutions

supporting the community to address key society issues through charitable giving

Measuring anD evaluaTing Our COMMuniT Y invesTMenT

A key aspect of our community investment strategy is regular, systematic evaluation to ensure our investment in community programs is having the desired impact. We measure this impact using the London Benchmarking Group (LBG) methodology and commissioning regular independent evaluations of individual programs.

LBG reporting demonstrates that Western Power invests more than $1.68 million annually towards community programs, supporting a wide range of causes and community partnerships.

vERIFICATION STATEMENT FROM LBg AUSTRALIA/NEW ZEALAND The LBG model helps businesses improve the measurement, management and reporting of their corporate community investment programs. It covers the full range of contributions (cash, time and in-kind donations) made to community causes, and assesses the actual results achieved for the community and for the business. As managers of LBG Australia/New Zealand, we have worked with Western Power to review its understanding and application of the LBG model in respect of the wide range of community programs supported. Our aim has been to ensure that the evaluation principles have been correctly and consistently applied. Having conducted an assessment, we are satisfied that this has been achieved. Our work has not extended to an independent audit of the data.

Jessica Pattison LBG Manager July 2010www.lbg-australia.com

5 . 3 C O M M u n i T Y i n v e s T M e n T

oUr CUStomerS

> 63,000 primary school children ‘shockproofed!’

> $1.68 m community sponsorships

> 72.5% Cri rating

business basiCs

ManDaTOrY COnTribuTiOns

COMMerCial iniTiaTives in THe COMMuniTY

COMMuniTY invesTMenTs

CHariTable giFTs


a b O u T T H e l O n D O n b e n C H M a r K i n g g r O u p ( l b g )

The LBG uses an emerging global standard for reporting community investment activities.

The LBG model is based on a pyramid of reporting that captures all charitable donations, community investments and commercial initiatives. Mandatory contributions and business basics are not reported under the LBG model.

Western Power chose the LBG framework as it presents a systematic and robust system for measuring and benchmarking community contributions over time. The tool is also used to benchmark the impact in the community and how the programs compare with peer companies.

The LBG standard measures the total financial value of contributions, including donations, volunteering hours and the community investment component of commercial activities. By using LBG to assess the impact of our programs and initiatives we ensure our investments are making a real difference to the community.

v O l u n T e e r b u s H F i r e b r i g a D e g r a n T s

ThE ChALLENgE Bushfires are a constant threat during summer in Western Australia. When a bushfire occurs, the immediate danger to communities can be increased if the electricity network is damaged. This can result in electrical fires and loss of power, communications, and in many rural areas, water supply.

ThE SOLUTION To help keep communities safe, Western Power has introduced an annual grants program in partnership with the Fire and Emergency Services Authority (FESA) to assist Volunteer Bush Fire Brigades to purchase valuable equipment or update facilities.

This is a charitable donation to the Volunteer Bush Fire Brigades Association and recognises the incredible work of Western Australia’s unsung heroes, who work tirelessly in our community throughout the bushfire season.

Western Power provides an annual grant of $80,000 to assist Volunteer Bush Fire Brigades working within the SWIS. Brigades can apply for funding of up to $5,000 to purchase equipment and materials that will improve their ability to help the community.

ThE RESULT Community benefit - the Volunteer Bush Fire Brigades provide a vital service to the Western Australian community, however as the brigades are staffed by volunteers, funding is often difficult to raise. With the help of the grants, volunteer brigades from Kalbarri to Albany have been able to purchase equipment including handheld radios, GPS units, water pumps, satellite phones, water tanks, and upgrade facilities and office equipment.

Business benefit - the management of the risk of bushfires is crucial, and ensuring the Volunteer Bush Fire Brigades are well resourced places them in a better position to respond in the event of a fire and reduce impact on the community and to our assets.

VolUnteer BUShFire BrigAde grAntS Size oF ContriBUtion (P.A.)

> Cash: $80,000

> 2009 – 21 grants were provided to volunteer bushfire brigades

> Time: 30 hours

> in-kind: $3,000

> Total value (includes management costs): $84,500


T O Ta l va l u e O F C O M M u n i T Y i n v e s T M e n T

The total value of our contributions has increased since LBG benchmarking was introduced this financial year. In 2009/10, the total value of contributions across the SWIS was over $1.68 million. This includes over 1000 volunteering hours.

b r e a K D O W n O F C O M M u n i T Y i n v e s T M e n T

Western Power is committed to developing programs that will help build a sustainable future for WA.

Fifty-eight per cent of our community investment was directed towards education and young people through our scholarship and energy efficiency programs. This figure demonstrates the significant investment we have made in offering electrical engineering scholarships with Curtin University and UWA. A further eight per cent was provided for environmental programs.

When analysed by strategic program area, 15 per cent of our community investment was directed towards improving community safety and 23 per cent was committed to improving energy efficiency behaviours in the community.

LBg REPORTINg BREAkDOWN By CATEgORy AND WESTERN POWER STRATEgIC PROgRAM

COMMuniTY invesTMenT bY lbg CaTegOrY

arTs & CulTure (7%)

eCOnOMiC DevelOpMenT (0%)

eDuCaTiOn & YOung peOple (50%)

eMergenCY relieF (11%)

envirOnMenT (8%)

HealTH (5%)

OTHer (0%)

sOCial WelFare (11%)

TOMOrrOW’s green engineers (32%)

a saFer WesTern ausTralia (15%)

envirOnMenT anD reneWables (8%)

COnneCTing WiTH COMMuniTY (22%)

energY eFFiCienCY (23%)

COnTribuTiOn bY WesTern pOWer prOgraM area


e n e r g Y e D u C aT i O n

ShOCkPROOF! Every year in Western Australia, hundreds of families are affected by the trauma associated with electrical shock. Many of these injuries are due to a lack of understanding of electrical safety.

Western Power education presenters visited more than 200 schools over the past 12 months, talking to more than 63,000 students from kindergarten to year seven about electrical safety.

POWER DOWN BETWEEN 4PM AND 9PM Australians are one of the biggest users of electricity per capita globally. Western Australians continue to increase their demand for electricity at an average annual rate of five per cent. On 25 February 2010, Perth experienced its highest ever peak (energy consumption level) at 4028 MW.

One of the largest contributing factors has been the increase in the use of air conditioners, with more than 92 per cent of Perth homes using air conditioners.

The community has given feedback that they want to find ways to reduce energy consumption and their impact on the environment.

By encouraging energy efficient behaviour, particularly between home time periods of 4pm and 9pm, we should be able to minimise the need for significant increased investment in new infrastructure.

The Power Down campaign aims to educate the community about the simple changes they can make at home to reduce their energy consumption and their impact on the environment. As a result of viewing the campaign 66 per cent of people are using low wattage globes, 59 per cent will consider high star rated appliances, 56 per cent consider using major appliances after bed-time and 53 per cent set their air-conditioner to 24 degrees.

POWER DOWN FOR kIDS In 2010 we commenced the roll out of the new Power Down primary school energy education incursion program and school holiday workshops. Using pester power to its max, we are teaching children in years four to seven to stop being power raiders and become ‘power rangers’ in their homes, using energy wisely and helping mum and dad save money on the power bill. The program is linked to the education curriculum for science, environment, energy and change. It was piloted in the Perth metropolitan area during term one and two and is now available for booking through the education team.

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

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

Western Power also provides significant support to students in electrical engineering at Curtin University and the University of Western Australia. The scholarship program currently has a pool of 104 students in WA.


The 2009/10 financial year has seen significant change and improvement to the management of safety and health at Western Power.

To help make the concept of zero harm a reality for Western Power, a new safety and health strategy, based on a best practice change management model, was launched in November 2009. The strategy focuses on three key areas of activity:

I want to be safe and healthy

I know how to work safely and healthily

I’m in control of my own safety and health

I want to be safe and healthy develops the safety culture at Western Power by making zero harm relevant to employees and keeping safety and health at the forefront of their minds. A series of engagement activities designed to reinforce and build safety awareness have run over the last twelve months:

In October 2009 Western Power held a Safety and Health Awareness week to coincide with Safe Work Australia Week. During the week formal leaders in both operational and office based areas were provided with interactive activity sheets to run through with their teams each day.

Activities were designed to focus attention on:

- Working hours- Occupational stress- Manual handling- New and young workers- Slips, trips and falls

In December a safety-themed Christmas event attended by more than 500 employees and their families was held at Scitech, focusing on the importance of returning home safely each day.

A personal safety engagement campaign ran between December 2009 and January 2010, complemented in February by a ‘healthy minds’ campaign to help our people understand the symptoms, causes and effects of mental illness.

As part of the campaign employees were given the opportunity to attend information sessions conducted by a psychiatrist, with formal leaders offered a more in depth session focusing in on how to support employees with mental health problems. Information packs recognising and addressing common mental health problems were also distributed across the organisation.

I know how to work safely and healthily is establishing a framework for safety and health leadership at Western Power. Work in this area includes improvements to Guardian, (the business’ incident reporting information system) and implementing programs to enhance the communication skills of our leaders around safety messaging supported by the development of practical and accessible briefing notes.

5 . 4 s a F e T Y a n D H e a lT H

SAFety And heAlth

> 2972 employees

> 677 external contractors

> 23 lost time injuries

> 95 all medical injuries

> 50,000 children ‘shockproofed’


To further support the safety cultural change program a ‘Set Out for Safety’ brand has been developed. The brand illustrates the journey towards zero harm with each arrow representing one of the three key areas of the strategy: I want to be safe and healthy, I know how to work safely and healthily and I’m in control of my own safety and health.

I’m in control of my own safety and health focuses on the development of new systems, processes and tools to equip employees to work in a safe and

healthy manner. Activity in this area to date has included work to maximise the role of elected safety and health representatives and the launch of a new safety and health management system in March 2010.

The new safety and health management system framework delivers a unified and proactive approach to safety and health by clearly defining related management processes, roles and responsibilities.

Its introduction is fundamental to Western Power achieving its zero harm goal as it gives the business a clearly defined structure with which to manage safety and health.

The system was developed following analysis of potential hazards and risks at Western Power and operates within a document hierarchy that clearly defines the purpose and audience for safety and health documents within the business.

Safety and Health document hierarchy

The Safety & Health policy details the commitment to safety as a core organisational value and is mandatory for all Western Power sites

The Safety & Health management system contains 13 elements each one setting out performance expectations that must be followed.

A Safety & Health management standard is written as a rule that must be followed and applies to a particular management system element.

A process describes step-by-step the activities that need to be followed in order to comply with the relevant expectations of the particular management system element.

A work instruction describes “how” an activity within a Safety & Health process is to be performed.

Guidance notes, forms, templates and registers are supporting documents to those within the

document hierarchy.

Policy

Guidance notes, forms, templates and registers

Management

system element

Management standard

Work instruction

Process


,,,Igg westernpoweras

plug VACOMMUNMY

-.1,, SET OUT FOR,MSAFETY

Incident reporting, investigation and analysis was the first element of the system launched in April 2010 to improve the quality and effectiveness of the investigation process and corrective actions, helping to prevent further safety incidents. The new process clearly defines roles and accountabilities, integrates the incident reporting system Guardian, identifies nominated lead investigators and is supported by a certified comprehensive training program for lead investigators.

Its roll out has been supported with training and employee development to create consistency in the management of safety and health roles, and to ensure responsibilities are clearly understood throughout the organisation.

M e a s u r e M e n T a n D a n a lY s i s

Traditionally, the business has measured safety performance with lag indicators including Lost Time Injury Frequency Rate (LTIFR) and All Medical Frequency Rate (AMFR). As part of our set out for safety strategy we are continually looking at proactive measures to manage safety, using ‘lead’ measurements such as workplace inspections and identifying hazards. These lead measures combined with existing lag indicators (such as LTIFR and AMFR) allow us to move closer to achieving zero harm.

Western Power Safety and Health Vision and Policy

Elements (supported by Performance Standards and Enabling processes)

2. Risk assessment and control3. Incident reporting, investigation

and analysis4. Occupational health and hygiene5. Emergency preparedness6. Employee development and

training7. Documentation and records8. Management of change9. Asset design and construction10. Operation and maintenance11. Contractor and vendor

management12. Community

Business activities

1. Leadership, involvement and responsibility

Driver Assurance

13. Assurance and continual improvement

“What we want”

“What we do What we know”

Safety and Health Management System


p u b l i C s a F e T Y

We are committed to ensuring the electricity network is safe for everybody. It is important that members of the community can live and work around our infrastructure safely and remain free from harm. We constantly work to ensure our assets and work practices do not compromise safety and have a thorough investigation, reporting and analysis system to understand how we can improve safety should incidents occur.

More importantly we aim to prevent incidents by engaging with the community and raising awareness of the potential hazards caused by our assets. In 2009/10 Western Power launched two seasonal safety campaigns, highlighting key public safety issues.

W i n T e r s a F e T Y C a M p a i g n

During winter, vegetation coming into contact with our network is one of the biggest causes of power failure and public safety issues. Talking to the community about the risks associated with overhead powerlines is important to build awareness and understanding of the need for residents to keep their trees away from powerlines.

Through a series of TV advertisements, this year we encouraged the community to take responsibility by engaging a qualified arborist to prune trees on private properties. In 2009, 21 per cent of the community engaged a professional to trim their trees as a result of the campaign.

s u M M e r s a F e T Y C a M p a i g n

Bushfires in summer are one of the biggest threats to the Western Australia community. Sparking caused by trees coming into contact with powerlines is a significant danger in hot weather and has the potential to cause significant power interruptions and damage to our customers’ property.

The summer safety campaign was introduced in 2010 to educate residents and local councils in the more susceptible fire danger suburbs about tree pruning by a professional before the end of November. The campaign included web, newspaper and radio advertising. Campaign analysis indicated that 56 per cent of the community trimmed trees in preparation for summer as a result of the advertising.


Results also revealed a significant shift to a constructive culture by Senior Management, with the Extended Management Team (n= 53) Culture Index (CI) moving from 481 to 708 and the Section Heads/Team Leaders’ (n= 260) CI moving from 363 to 663.

The successful shift in the culture of the leadership team within Western Power can be attributed to the focused investment in leadership development and transformation over the past two and a half years. Research indicates that effective and long term change management programs (those taking between 5 – 7 years) need to focus on leadership in the early stages to create a sustainable shift in culture.

Line employees also reported a slight positive shift in culture (CI 293 to 318), indicating the constructive culture experienced by leaders is not yet transferring to the front line. This is now a key area of focus for the business moving forward.

The Unlocking our potential program has been focusing on Western Power’s corporate value; ‘act like it’s our own business’, with a series of workshops run in November 2009 for formal leaders reinforcing the importance of commerciality in all decision making.

p e O p l e a n D C u lT u r e p l a n

An overarching People and Culture Plan was refreshed in 2010 to manage ongoing cultural change and enable Western Power to utilise its resources in the most effective manner to meet its strategic goals and objectives. The plan focuses on:

aligning leadership and people capability

building a constructive, commercial and customer focused culture

raising workforce productivity and efficiency

developing simple, effective people systems and processes

D i v e r s i T Y a n D e q u a l i T Y

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

D i s a b i l i T Y a C C e s s a n D i n C l u s i O n p l a n

Disability currently affects one third of the Western Australian population and is forecast to affect many more as ‘baby boomers’ move into age groups in which disability is more prevalent. We believe that by helping to create an accessible and inclusive community, we can reduce the impact of disability. Through our Disability Access and Inclusion Plan (DAIP) we are systematically identifying and overcoming barriers that restrict access to our services, events, information, complaint mechanisms and consultations and buildings and facilities.

5 . 5 p e O p l e a n D C u lT u r e

Western Power has been working to transform its culture and operations to become a more commercially focused business. In 2008 we introduced a cultural change program, Unlocking our potential, to align our values and systems and create a more constructive working environment.

In 2010 we articulated our vision for 2020: to be recognised as a world class commercial enterprise, providing sustainable energy transfer/connections and related services.

This is a long term focus. Work to achieve this has already begun, with a range of initiatives focused on developing, supporting and investing in the people who will help us get there – our employees.

u n l O C K i n g O u r p O T e n T i a l

The Organisation Culture Inventory (OCI) is a means of measuring an organisation’s culture. Western Power’s OCI was first measured in November 2007 and at that time the survey revealed a business with a highly oppositional and avoidant culture, typical of many engineering and utility companies worldwide.

The OCI was conducted again in November 2009 and improvements included a decrease in all ‘defensive behaviours’ across the business, and an increase of one of the four ‘constructive behaviours’.


WESTERN POWER EMPLOyEE STATISTICS 2007/08 – 2009/10

2007/08 2008/09 2009/10

Employee headcount 2,509 2,813 2,943

Number of new starters 457 485 367

Employee turnover 9.82% 7.15% 7.9%

% of employees covered by collective bargaining agreements 52% 49% 49%

Absenteeism 4.2% 4.1% 3.5%

In 2009/10, as part of our DAIP we implemented the following:

Services – sponsorship recipients that use Western Power funding to run public events or provide services or information to the community have an obligation to do so in a way that is inclusive and accessible for people with a disability. In 2009/10 we updated our Sponsorship Guidelines to reflect this requirement.

Buildings – four floors of our head office facility were renovated. These floors now provide employees and visitors with accessible, well lit meeting rooms, work stations and food preparation areas. Work is underway to increase the number of disability accessible toilets at head office from two to five.

Information – we are continually reviewing our customer information to improve its readability and availability. In 2009/10 we began providing accessible versions of PDF documents on our website, converting two to MS Word format, and we revised the colour scheme of our ‘Plug In’ brochures to make them easier to read. We also began incorporating accessibility requirements into internal documents that guide how we develop and publish new customer information, such as our marketing campaign checklist. This is increasing awareness of the requirements and helping to embed them into standard practise.

Community consultation – we developed a Community Engagement Manual that provides our employees with information on the importance of, and how to go about, conducting accessible engagement. We engaged with six peak bodies from the disability services sector as part of a broader two-month public consultation, to obtain feedback on the accessibility of our services, information and facilities. Their valuable feedback helped us assess our progress to-date and develop new access and inclusion strategies for 2010 – 2015.

C O l l e C T i v e a g r e e M e n T s

We are committed to the fair and equitable treatment of employees. In November 2009 Western Power and the ASU signed the Enterprise Agreement. The agreement was ratified by Fair Work Australia on 18 March 2010 providing the foundation for shaping Western Power to deliver its goals over the next four years.


M a n a g i n g e n v i r O n M e n Ta l i M p a C T s

We are continually improving the identification and management of the environmental impacts of capital works and maintenance activities.

Our Corporate Environmental Policy guides our approach to environmental management. Western Power’s Environmental Management System provides a framework for continual environmental improvement for the business.

Below is a summary of achievements during the last year.

Contaminated sites - Our contaminated site program progressed in 2009/10 with the investigation of Picton Depot, former SECWA Wagin Depot, Hope Road Depot, Northam Depot and Substation and Northern Terminal Substation. Western Power worked with the current owners to remediate the fuel storage area at the former SECWA Wagin Depot and the contaminated soil stockpiles at Picton Depot.

vegetation clearing - During 2009/10, 114.12 ha of native vegetation was cleared, 23.18 ha of which was for transmission projects and 90.93 ha for distribution projects. Environmental approvals were secured from regulators prior to all clearing activities. Effective planning limited clearing to 23 ha in biodiverse areas.

To offset clearing within biodiverse areas, Western Power provided funding to the Department of Environment & Conservation for the purchase of one property totalling 33.5 ha. The property has been

incorporated into the conservation estate and will be managed for conservation purposes in perpetuity by the DEC.

Western Power also committed to undertake 56.5 ha of revegetation within degraded areas in the South West of Western Australia. Work associated with this revegetation will commence within the next financial year. Western Power also funded the purchase of an additional three properties which have been incorporated into an offset bank (1113.8 ha), which will be used to fulfil vegetation offset requirements of future projects.

Noise mitigation – Substantial capital investment in 2009/10 saw the successful completion of noise mitigation at University and Herdsman Parade Substations at an overall cost of $1.4M. Three other transmission substation sites are programmed for noise mitigation in 2010/11. Remedial strategies for ongoing compliance with noise regulations for our entire asset base have progressed in 2009/10 in consultation with the Department of Environment and Conservation (DEC). Significant investment is required to complete the program.

Aboriginal heritage - Western Power recognises the importance of consultation in the planning of new transmission and distribution lines. Fifteen groups were consulted for five projects scheduled for 2010/11; with the consultation processes resolving most issues by ensuring project design work avoids Aboriginal sites. One project was referred to the Department of Indigenous Affairs for determination under the Aboriginal Heritage Act 1972.

5 . 6 e n v i r O n M e n T

enVironment

> 114.12 hectares native vegetation cleared

> 33.5 hectares purchased to offset vegetation clearing

> 56.5 hectares revegetation offset commitment

> 1113.8 hectares purchased incorporated into offset bank for future projects

> 5 contaminated site investigations

> 2 substation noise mitigation projects completed


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Environmental Indicator Measurement 2008/09 Measurement 2009/10

Total native vegetation cleared (excluding maintenance)

4.18 ha 114.12 ha

Native vegetation cleared in area of significant biodiversity value

0.75 ha 23 ha

Total native vegetation offset 1.5 ha + sponsorship 90 ha comprised of 33.5 ha existing vegetation added to Conservation Estate & 56.5 ha to be revegetated in 2010-11

IMPACT ON BIODIvERSITy


Number of archaeological surveys conducted

12 surveys 5

Number of ethnographic surveys conducted

18 surveys 12

Number of formal meetings with Aboriginal representatives

49 meetings 15

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

6 applications 1

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

5 approvals* Final decision on submitted project yet to be received

IMPACT ON ABORIgINAL hERITAgE


Total number of notifiable pollution incidents to regulatory authorities

2 0

Number & monetary value of fines for environmental non-conformance

0 0



//' -//.17%.

Western Power’s response to climate change is informed by international developments to reduce greenhouse gases. These developments include:

the increase in renewable generation

the introduction of electric vehicles and energy storage

Federal legislation (Renewable Energy Target)

State Policy (contributing to the Strategic Energy Initiative and the net Feed-in-Tariff)

determinations by economic regulators

We continue to report our greenhouse gas emissions as required by the National Greenhouse Energy Reporting Act (NGERA).

The capacity of the SWIS to absorb increasing levels of intermittent generation such as wind and solar is limited due to its relatively small scale and lack of interconnection with other electricity markets. The longer term solution is likely to entail the provision of base-load renewable energy, coupled with increased energy efficiency and embedded renewable energy and storage.

In our response to climate change we have identified various spheres of influence:

Areas directly under our control - fleet emissions reduction, computer server operations, improved engineering standards and procurement policies are where improvements can and have been made. The largest source of emissions is related to line losses, where energy is lost in transit across powerlines over many hundreds of kilometres, requiring additional generation to compensate for the energy loss.

Areas outside our control – increased demand - energy consumption rises on average 5 per cent per year in existing residential suburbs largely due to the increased penetration of residential air conditioners, electronic games and consumer goods. This contributes towards a more pronounced critical peak electricity demand of shorter duration. The impact of this increased consumption on the network is significant, yet our ability to directly control consumer behaviour (to reduce consumption) is limited.

5 .7 C l i M aT e C H a n g e


Indicator Measurement 2009 Measurement 2010

Greenhouse gas emissions *982,586 t CO2-e *950,000 t CO2 – e

Line losses 6.7% (year ending Apr 09) 6.25% (year ending Dec 09)

Water consumption in head office 33.25 ML 35.57 ML


* 2009 figures updated inline with finalised National Greenhouse & Energy Report, 2010 figure provisional

Areas outside our control – increased renewables - increased levels of renewable energy are being stimulated through Federal and State policy and legislation. In the area of small scale renewables solar PV have been subsidised through the solar credits scheme and the Feed in Tariff. We have seen an increase in applications for connection of PV systems and in response we have improved our information provision on the website and at public expositions. In the Wholesale Electricity Market we continue to be part of the Renewable Energy working group, a sub-committee of the Market Advisory Committee.

W e s T e r n p O W e r ’ s T r e e p l a n T i n g p r O g r a M

During 2009/2010 the Western Power Tree Planting Program resulted in more than 115,000 native plant seedlings being planted on properties south-east of Perth. This program drew to a close after three successful years of revegetation activity. Approximately 500,000 plant seedlings were planted under the program, fulfilling the contract requirement with Carbon Neutral to offset 120,000 tonnes of greenhouse gas emissions at a total cost of $1.8 million.

As well as offsetting carbon emissions, the program will directly benefit the environment in the future by restoring biodiversity and addressing the problems of salinity and land degradation.

A final report on the program has been submitted outlining the benefits of the program to Western Power, the community and the environment.


Our six values are the beliefs of our organisation, the expression of what we stand for and how we will conduct ourselves. Values are the core of an organisation’s being and underpin policies, objectives, procedures and strategies providing an anchor and a reference point for all things that happen.

Our purpose unites us and provides us with a common purpose, connecting people with energy. It reminds us that the core of our business is connecting the customers and communities of Western Australia with electricity, and that we can undertake our work with ‘personal energy’ as we aim to get the job done well and to our customers’ satisfaction.

ThE FOUR qUADRANTS Transform the Core is represented by the circular diagram. At the centre is our objective – to transform the way we do business. The core activities and initiatives we will focus on in order to deliver our strategy are contained in the coloured quadrants of the diagram.

External connections has a focus on customer service and stakeholder engagement. We recognise we need to connect better with our customers, understand their expectations and build them into our business activities.

Operational excellence focuses on doing the core activities more efficiently and effectively – delivering a quality product on time and within budget. Initiatives in this quadrant are essentially the ‘big rocks’ projects,

5 . 8 T r a n s F O r M i n g T H e C O r e

In February 2010 our refreshed strategic direction for 2010-2013, Transform the Core, was launched.

Like any business, we took the opportunity to pause and review our corporate strategy to ensure it remains aligned with what is happening inside the organisation and changes to the market and external environment.

Transform the Core builds on the energy solutions business for a sustainable future strategy that served us well during the years following disaggregation, while giving a sharper focus on the areas we need to develop.

Transform the Core recognises our suite of business activities that must be performed well in order for us to deliver and exceed our customers’ and stakeholders’ expectations. Our goal is to enhance and improve these core activities while keeping an eye to future developments, understanding their potential impact and considering what we must do to be well placed to benefit from them.

v i s i O n , va l u e s a n D p u r p O s e

Our vision gives us a sense of the future by describing where we want to be in ten years time. It will guide decision making and strategy and is strongly connected to our values and purpose.

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which analyse core business processes and implement ways of improving how we operate as a business.

Regulatory excellence is about embedding regulatory and commercial thinking throughout the business, so that it becomes part of our DNA. Our regulator, the Economic Regulatory Authority (ERA), exists in the absence of a competitive market and the expectation is that we provide a quality service at a fair price and that we can justify our network investment with robust business cases. Crucial to our success is recognising that the regulatory process impacts every part of the business and we need to consider how to integrate commercial thinking into our roles.

Future positioning recognises that there are changes in technology and resources within the industry that have already started to impact Western Power’s business. Smart grids and sustainable energy sources will play a key role in shaping Western Power and Western Australian energy infrastructure. Our future positioning initiatives will enable us to be at the forefront of industry and technological changes.

ENABLINg STRATEgIES The outer circle of Transform the Core covers our enabling strategies. With People and culture we continue our journey to becoming a predominantly ‘blue’ or constructive culture whilst delivering professional development to improve leadership skills, and building a focus on commerciality throughout the business.

Improved information and communication technology will contribute to achieving operational

excellence and significantly enhancing our customer engagement. The IT Strategic Program of Work (SPoW), including the introduction of contemporary business systems will continue over the next three years.

Safety and health is a core value and remains fundamental to everything we do. The introduction of an improved safety and health management system, combined with a fundamental shift in the way we think and feel about safety will ensure we are able to deliver our core activities safely and effectively.

O p e r aT i O n a l e X C e l l e n C e – T r a n s F O r M i n g O u r C O r e b u s i n e s s

One of the key segments of the transform the core strategy is Operational Excellence. The Operational Excellence program has been in effect at Western Power since 2008 and has already delivered a number of process efficiencies to the business.

The Operational Excellence program partners with the business to deliver improved customer focused productivity, value for money and sustainable cost efficiency, whilst also embedding greater customer awareness, enhancing commercial acumen and building enterprise wide business improvement capability. The program consists of six sub-programs call “Big Rocks”.

For the period 2010 to 2013 the Operational Excellence program will focus on six key initiatives that will help improve the way we operate our core business and connect people with energy.

Network Investment Strategy - improving our holistic investment strategy, ensuring NFIT2 compliance and responsible risk management and well justified investment decisions

Driving value For Money – Streamlining the works planning and delivery process to demonstrate safe, efficient and effective delivery of the works program

Optimise Supply Chain – improvement of the end-to-end supply chain to enable efficient purchasing, accurate spend and inventory management and tight financial control

Engineering Standards – design and delivery of a suite of sustainable and NFIT2 aligned engineering standards, consistently applied from project planning to implementation

Optimise Works Management– Streamlining the works management system to improve and demonstrate productivity, cost efficient and well justified decision making.

End-to-End Pole Management – the establishment of an end-to-end pole management compliance plan driving safety, sustainability and reliability

Each of these initiatives includes a series of process improvement projects to ensure we are operating as a world-class commercial enterprise. During 2009/10 we achieved a number of milestones in each of these areas and expect to continue development and deliver further efficiencies over the next three years.

2 New facilities investment test. The formal methodology required by the Electricity Networks Access Code - and applied by the ERA - to assess the justification of each new network augmentation and our expenditure efficiency.


i n v e s T M e n T s T r aT e g Y

The Investment Strategy initiative has already identified capital expenditure benefits of $54.5 million over the next two years (2010/11 - 2011/12).

More than 14 improvement projects are being progressed, significantly improving our front end planning process, enhancing our network investment strategy and building robust processes that result in better investment decision making.

D r i v i n g va l u e F O r M O n e Y

A key initiative this year has been the identification of improvements for the communication of planned outages. This includes increasing frequency and lead-in times of messages and utilising a wider cross-section of communication channels to ensure we are reaching affected customers effectively.

A crucial initiative aimed at improving data quality management has also been launched. This is aimed at standardising how we capture field data to reduce duplication and create greater leverage for future work through the gathering of consistent, standardised data. Ultimately this will reduce difficulty currently experienced by field employees in procuring information.

O p T i M i s e s u p p lY C H a i n

During 2009/10, key focus areas were:

improving the reverse logistics process for material returns

value creation through greater contestability of contracts via an improved sourcing process

improved processes to manage Transmission materials

The Optimise Supply Chain initiative has already identified capital and operating expenditure benefits of $13.5 million over the next two years compared to an initial target of $11.2 million.

e n g i n e e r i n g s Ta n D a r D s

An innovative approach to current network challenges in the North Country distribution network has resulted in the introduction of a STATCOM (Static Synchronous Compensator). The application of this innovative technology has enabled us to defer a significant network investment of $28.5 million in major transmission and distribution work over the coming years.

Western Power has worked with industry to develop an innovative solution to delivering underground services through cable ploughing. Current trials of this solution have highlighted a broad number of potential applications across the network.

A clear and robust process for options analysis has been developed where interactions between transmission and distribution lines occur. This ensures that critical safety and operational clearances are maintained, and the selected option is well justified and in some circumstances provides a lower cost solution.

O p T i M i s e W O r K s M a n a g e M e n T

This smaller program area has been focused on defining the process for capitalising assets ensuring better financial management and visibility of Western Power asset base.

The focus of the optimise works management program for next year will be on reducing the number of work orders required to manage work, improving the reliability of information captured on work orders, and the way this information supports reporting and management processes.

e n D -T O - e n D p O l e M a n a g e M e n T

The End-to-End Pole Management program has been largely focused on supporting Western Power operations to successfully implement the Energy Safety Audit recommendations.

As a consequence of the Energy Safety 2008 audit on Western Power’s wood pole management and the subsequent Order #01-2009, there have been significant improvements in the way wood poles are assessed for serviceability. Western Power has ensured compliance with Energy Safety’s prescribed recommendations and requirements and is on track to discharge these within the specified time frames.


5 .9 p O s i T i O n i n g F O r T H e F u T u r e

Two and a half years since the launch of Green Town in Denmark and Walpole, the project has received 92 per cent positive feedback from residents polled. This has been achieved through extensive consultation and working with the community to help them manage energy efficiency and change behaviour. The turnaround in community perception of Western Power in Denmark and Walpole has been an outstanding success story and the next phase of the project, a smart meter rollout, is about to begin.

The establishment of the ‘Smart Grid Architect team’ has assisted in the development of smart grid capabilities through integration with other utilities around Australia. Increasing recognition of Western Power’s capabilities in the smart grid arena has led to inclusion in Energy Australia’s Smart Grid, Smart City trial project.

Other successful trials include the Energy Edge project, which is trialling packaged, off-grid technology for remote locations, and the Heating, Ventilation and Air-conditioning (HVAC) project, in which Western Power is working with the City of Perth to test ‘responsive’ air conditioning systems.

Participation in the Stirling City Centre Alliance, a public private community partnership (PPCP) that is planning the redevelopment of Stirling as a high-density, mixed-use city centre striving for improved mass transit and increased energy efficiency and renewable energy. This initiative is characterised by members collaborating across traditional boundaries in the planning process to achieve more sustainable outcomes. The main convenors are WA Planning Commission and City of Stirling. Other members include Landcorp, Watercorp, Main Roads, Perth Transport Authority, Department of Building, Maintenance and Works, Public Housing, Private land holders, Industry bodies and Community representatives.

These successes are helping Western Power build a portfolio of solutions to address network challenges and meet the evolving energy needs of our customers.

Critical to Western Power’s long-term vision is to ensure Western Australia has a reliable and sustainable energy supply. To ensure this we are continually working with our customers, our industry peers and the Government to remain on the pulse of technological advances and consumption behaviours.

Smart meters, renewable energy, demand side management and the development of a smart grid are all potential aspects of Western Australia’s energy future. Below is a summary of the key achievements during 2009/10.

As part of Perth Solar City, a rollout of smart meters has begun in Perth’s eastern suburbs. This has included the successful integration of the meters and communications software into Western Power’s existing meter data management system. This rollout forms the foundation for our Smart Grid trial, which runs to 2013.

The launch of iconic solar installation projects at Midland Foundry and the Central Institute of Technology have successfully raised public awareness of Perth Solar City, smart grid and Western Power’s role in the new era of energy.


6 e x e C U t i V e t e A m A n d B o A r d

* In May 2010 as part of the Transform the Core Strategic Direction 2010-13, the organisational structure was reviewed and refreshed to better enable the delivery of our strategic objectives. Responsibility and title changes came into effect on 1 July 2010 and as such are not included in this report.

T H e e X e C u T i v e T e a M

Western Power’s Executive Team is responsible for driving the strategic direction of our business, ensuring we remain commercially focused and continue to deliver high quality energy solutions to our customers. The Managing Director and General Managers have responsibility for driving connectivity between operational and support functions and delivering the accountability requirements agreed annually with the Minister for Energy in the Statement of Corporate Intent.

During the 2009/10 financial year Western Power’s organisational structure comprised eight divisions, each headed by a General Manager, and a corporate services support function reporting directly to the Managing Director.*

CUSTOMER SERvICES Responsible for managing Western Power’s relationships with generators, retailers and smaller customers, asset planning and network performance, standards, policy and data quality, public safety, environment, community engagement and approvals; and strategic research, development and deployment of advanced energy initiatives.

SERvICE DELIvERy Responsible for delivering Western Power’s work program safely, on time, on budget and to agreed quality standards. This division designs, constructs, operates and maintains Western Power’s network to provide energy solutions to the community of Western Australia through an integrated team of employees, alliances and contract partners.

SySTEM MANAgEMENT Responsible for managing the power system including, generation dispatch, the Transmission and Distribution electricity networks and the physical operation of the Wholesale Electricity Market. This division maintains power system security whilst providing safe access to the networks for construction and maintenance activities. It also manages power system emergencies and faults. System management provides remote visibility and control of the Network including “Real Time” performance information to the wider Western Power business utilising an integrated SCADA system.

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


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REgULATION AND SUSTAINABILITy Responsible for Western Power’s access arrangement development, network pricing, technical rules, regulatory policy and sustainability strategy.

ENTERPRISE SOLUTIONS PARTNER Works in partnership with the business to deliver enterprise wide solutions to complex and critical business challenges. In doing so, Enterprise Solutions Partner (ESP) provides the necessary expertise and focus required to successfully deliver the business’s strategic initiatives, including managing the execution of our corporate strategy. The delivery arms of ESP include Operational Excellence (OE) and Strategic Program of Work (SPoW).

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

ChIEF FINANCIAL OFFICER Responsible for business analysis, accounting and taxation, information technology, risk management, treasury and commercial management of Western Power’s operations.

CORPORATE SERvICES Responsible for internal and external communication, marketing and education, media, government relations and strategic stakeholder engagement.

Clockwise from top left

> keVin gAitSkell general Manager enterprise solutions partner

> Anne-mArie ClArkgeneral Manager service Delivery

> greg monkhoUSegeneral Manager Human resources

> mArk de lAetergeneral Manager Customer services

> ken BroWngeneral Manager system Management

> mAlColm PeACoCkChief Financial Officer

> Phil SoUthWellgeneral Manager regulation and sustainabilty

> doUg ABerleManaging Director

> John PeASe general Counsel and Company secretary, legal and governance


,\ 9

K S

O u r b O a r D

MARk BARNABA Board Chair*, Independent, Non-executive Director

Special responsibilitiesChair of the People and Performance Committee

JOhN CAhILL Independent, Non-executive Director

Special responsibilitiesChair of the Finance and Risk Committee, member of the People and Performance Committee

MERvyN DAvIES Independent, Non-executive Director

Special responsibilitiesMember of the Finance and Risk Committee

PAUL UNDERWOOD Independent, Non-executive Director

Special responsibilities Member of the Finance and Risk Committee

DOUg ABERLE Managing Director

For biographies of the Western Power Board, refer to the Directors’ report on page 48.

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

Finance & Risk Committee; and

People & Performance Committee.

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

* Peter Mansell served Board Chair and independent, non-executive director from 1 April 2006 until 20 April 2010


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III

FINANCIAL RepoRt 2010

C o n n e C t i n g P e o P l e W i t h e n e r g y

C o n t e n t s

Directors’ report 47

Corporate governance statement 60

Financial statements 72

Statement of comprehensive income 73

Balance sheet 74

Statement of changes in equity 76

Statement of cash flows 76

Notes to the financial statements 78

Directors’ declaration 108

Corporate directory 109

Independent auditor’s report 110

Global Reporting Index 111

e L e C t R I C I t Y n e t W o R K s C o R P o R A t I o n t R A D I n G A s W e s t e R n P o W e R F I n A n C I A L R e P o R t F o R t H e Y e A R e n D e D 3 0 J U n e 2010

| 4 6 |

F I n A n C I A L R e P o R t

The directors of Electricity Networks Corporation trading as Western Power (Western Power) present this report in accordance with Schedule 3, clause 6, of the Electricity Corporations Act 2005 (WA) (Act).

W e s t e R n P o W e R ’ s D I R e C t o R s

The following persons were directors of Western Power during the year ended 30 June 2010 and up to the date of this report:

Name Duration

Mark Barnaba (Board Chair) (appointed as Board Chair from 21/04/2010)

John Cahill (Board Deputy Chair) from 01/08/2009 (appointed as Board Deputy Chair from 27/07/2010)

Doug Aberle (Managing Director)

Mervyn Davies

Paul Underwood

George Cash from 27/07/2010

Jenny Seabrook until 31/07/2009

Peter Mansell until 04/05/2010

| 4 7 |e L e C t R I C I t Y n e t W o R K s C o R P o R A t I o n t R A D I n G A s W e s t e R n P o W e R F I n A n C I A L R e P o R t F o R t H e Y e A R e n D e D 3 0 J U n e 2010

D I R e C t o R s ’ R e P o R t

INformAtIoN oN DIrectors

DireCtor exPerienCeCommittee resPonsibilities

mark barnaba

Board chair

Year of birth: 1963

Independent, NED

B.Comm

MBA

CitWA

Appointed with effect from 21/04/2009, current term expires on 20/04/2012. Appointed as Board Chair with effect from 21/04/2010.

experience and expertise Mr Barnaba is a co-founder and Co-Executive Chairman of Azure Capital, an independent boutique corporate adviser based in Perth which provides financial advisory services to clients. Prior to Azure Capital, Mr Barnaba spent time in industry, corporate advisory and management consulting, including a long period of time with McKinsey & Company in Australia, the UK and the RSA.

After graduating from Trinity College in Perth as Dux, Mr Barnaba attended the University of Western Australia and received a Bachelor of Commerce degree (1985) with first class honours, being awarded the JA Wood University Medal for top graduate, university wide across all faculties, of his year. He then directly entered Harvard Business School receiving an MBA in 1988 and graduating with high distinction as a Baker Scholar.

In 2002, Mr Barnaba was the joint winner of the inaugural WA Business News award for the most outstanding business leader in the State of Western Australia under the age of 40 and in 2009 he was the recipient of the WA Citizen of the Year Award in Industry and Commerce.

current directorships Director of Azure Capital Pty Ltd (since 2004 - also co-executive chair), Edge Employment Solutions Pty Ltd (since 2004 - also Board chair), West Coast Eagles Football Club (since 2000 - also Board chair), UWA Business School (since 2002 - also Chair & serves as an Adjunct Professor in investment banking and finance), the Australia Indonesia Institute (since June 2009) and Fortescue Metals Group Ltd (since February 2010).

P&PC member

Legend NED = Non-executive director F&RC = Finance & Risk Committee P&PC = People & Performance Committee


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D I R e C t o R s ’ R e P o R t ( C o n t I n U e D )


John Cahill

Board Deputy chair

Year of birth: 1956

Independent, NED

B.Bus

GradDipBus

Appointed with effect from 01/08/2009, current term expires on 31/07/2011. Appointed as Board Deputy Chair with effect from 27/07/2010.

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

current directorshipsNon-executive director of Emeco Holdings Ltd (since 2008, also Chair of its Audit & Risk Committee), Silver Chain Nursing Association Inc (since July 2010), Silver Chain Foundation (since July 2010) and CPA Australia Ltd (since 2007 - also Deputy President).

F&RC Chair

P&PC member

Doug aberle

managing Director

Year of birth: 1953

Executive director

B.E (Hons)

M.Eng.Sc

Appointed with effect from 01/04/2006, current term expires on 26/07/2011.

experience and expertise Mr Aberle has a detailed knowledge of all aspects of the electricity industry having formerly filled the positions of General Manager for Networks, Chief Operating Officer, General Manager for Generation and General Manager for Transmission within the old Western Power Corporation. He was also Chairman of Integrated Power Services, a company jointly owned by Western Power Corporation and Halliburton, and was Chief Executive Officer of the South West Development Commission during a six-month secondment. He is also a qualified psychotherapist and a registered member of the Psychology & Counselling Federation of Australia.

current directorshipsAustralian National Committee of CIGRE (since 2007 - also Deputy Chair).

Nil





mervyn Davies

Year of birth: 1944

Independent, NED

B.E (Hons)

M.Eng.Sc

B.Comm


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

current directorships Non-executive director of NT Power & Water Corporation (since 15/05/2009 - also Board deputy chair), New World Energy Limited (since April 2010) and Country Energy (since 01/05/2010). Director of Anrig Pty Ltd (since 15/03/2004 - also Board chair), and Girna Engineering Management Services Pty Ltd (since December 1983 - also Board chair).

F&RC member

Paul unDerWooD

Year of birth: 1955

Independent, NED

B.Bus

ACA

GradDipAppFin


experience and expertise Mr Underwood has over 30 years’ experience in chartered accounting and corporate advisory. He has 25 years’ experience in oil and gas production and exploration, including 11 years as (founding) Chief Executive Officer/Managing Director of Tap Oil Limited until January 2008 when he became a non-executive director of the company. He retired from the latter role in June 2009. Mr Underwood was a Board member for Australian Producers and Explorers Association between 1998 and 2006, being Vice Chairman for the latter two years. He is currently Chief Executive Officer of Nuenergy Capital Limited, a public listed Australian company focussed on coal bed methane in Indonesia.

In 2003 Mr Underwood won the Ernst and Young Western Australian Entrepreneur of the Year Award.

current directorships Not currently a director of any other entity.

F&RC member



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hon. george Cash am

Year of birth: 1946

Independent, NED

LLB(Hons)

LLM

BBus


experience and expertise Hon George Cash was a member of the Western Australian Parliament for nearly 25 years. He is a former Minister for Mines; Minister for Lands; Minister assisting the Minister for Public Sector Management; Minister assisting the Minister for Resources Development, Leader of the Government in the Legislative Council and President of the Legislative Council.

He was Chairman of the Australian and New Zealand Minerals and Energy Council during 1994-1995.

current directorships Not currently a director of any other entity.

P&PC Chair

DireCtors Who retireD During the year

Peter mansell

Board chair

Year of birth: 1946

Independent, NED

B.Comm

LL.B

Appointed with effect from 01/04/2006, Mr Mansell retired as a director with effect from 04/05/2010

experience and expertise Mr Mansell has practised as a business lawyer for 34 years, and has a wide range of experience in corporate matters. He was a corporate and resources partner of legal firm Freehills from 1988 to 2004 and at various times was the Freehills National Chairman (1995-2000), Managing Partner of the Perth Office (1992-2002) and a member of the firm’s National Board (1989-2002). He has extensive experience as a non-executive director and as a Board chair.

P&PC member

Jenny seabrook

Board Deputy chair

Year of birth: 1957

Independent, NED

B.Comm

Appointed with effect from 01/04/2006, Ms Seabrook retired as a director with effect from 31/07/2009.

experience and expertise Ms Seabrook has practised as an investment banker, capital markets adviser and chartered accountant for over 25 years. She is currently a Special Adviser to Gresham Partners Limited and a non-executive director of a number of listed and unlisted corporations.

F&RC Chair

P&PC member




R e v I e W o F o P e R At I o n s

Information on the operations and financial position of Western Power and its business strategies is set out in the performance review section on pages 10 to 19 of this Annual Report.

W e s t e R n P o W e R ’ s o P e R At I n G R e s U Lt s

Western Power achieved a profit after income tax of $97.288 million for the year ended 30 June 2010 (2009: $126.239 million).

D I v I D e n D s

Western Power declared a final dividend of $42.898 million on 30 June 2010 in respect of the year to 30 June 2009 (2008: $16.552 million (final) and $20.222 million (interim)). It was paid on 1 July 2010.

Since the end of the reporting period the directors have recommended, subject to the approval of the Minister, the payment of a final dividend of $63.237 million in respect of the year to 30 June 2010.

W e s t e R n P o W e R ’ s P R I n C I P A L A C t I v I t I e s

The principal continuing functions of Western Power are:

� to manage, plan, develop, expand, enhance, improve and reinforce the electricity transmission and distribution network known as the South West Interconnected System

� to provide and improve electricity transmission and distribution services

� to provide access to services of network infrastructure facilities as required and authorised by Part 8 of the Electricity Industry Act 2004 (which relates to network access)

� to provide services as required and authorised by Part 9 of the Electricity Industry Act 2004 (which relates to the wholesale electricity market)

� to provide services that improve the efficiency of electricity supply and the management of demand on electricity transmission and distribution systems

� to provide ancillary services.

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

There have been no changes in the nature of the principal activities in the year that is the subject of this financial report.

M At t e R s s U b s e q U e n t t o t H e e n D o F t H e F I n A n C I A L Y e A R

Since 30 June 2010, no matter or circumstance has occurred that has significantly, or may significantly, affect:

� Western Power’s operations in future financial years

� the results of those operations in future financial years

� Western Power’s state of affairs in future financial years.

On 13/08/2010 EnergySafety published its Final Electrical Incident Report in relation to the 2009 Toodyay bushfire, in which it expresses the opinion that the fire was caused by Western Power’s pole T303-43 falling to the ground and the resulting arcing of conductors igniting barley stubble.

Western Power is unable to accept that this opinion provides a sound or indeed any basis for determining what caused the fire because it represents a reversal of the conclusion expressed in EnergySafety’s report published in February 2010 and is contradicted by eye witness statements as well as expert reports.

In taking this position, Western Power fully appreciates that the fire has caused significant loss for a number of residents of Toodyay, some of whom are seeking compensation. However, in the absence of any reliable determination of cause and liability, Western Power is unable to accept compensation claims. Western Power remains committed to fully cooperating in any proceedings commenced to determine cause and liability to ensure an expeditious outcome for all affected.


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L I K e LY D e v e L o P M e n t s A n D e x P e C t e D R e s U Lt s o F o P e R At I o n s

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

� Western Power has committed to a significant investment program in order to meet its safety, reliability and efficiency requirements. Western Power is reliant on funding from its shareholder to meet these and any additional regulatory requirements.

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

b o R R o W I n G L I M I t

The maximum amount of borrowings permitted by the Department of Treasury and Finance (DTF) for the year to 30 June 2011 is currently $5,198.700 million. Western Power’s current forecast of gross borrowings is $5,198.200 million. Given this limited margin there is a possibility that Western Power will require additional borrowings above the DTF borrowing limit.

R o U n D I n G o F A M o U n t s

Amounts presented in the directors’ and financial reports have been rounded off to the nearest thousand dollars, unless otherwise stated.

D I R e C t o R s ’ At t e n D A n C e At M e e t I n G s

Details of the number of meetings of the Board (and of its committees) that directors were eligible to attend and the number of meetings attended by each of the directors for the year ended 30 June 2010 are as follows:

attenDee

boarDPeoPle & PerformanCe

Committee finanCe & risk Committee

eligible attenDeD eligible attenDeD eligible attenDeD

M Barnaba

J Cahill

D Aberle

M Davies

P Underwood

G Cash

P Mansell

J Seabrook

18

17

18

18

18

N/A

15

1

17

16

18

18

18

N/A

14

1

5

3

5*

N/A

N/A

N/A

4

1

5

3

5

N/A

N/A

N/A

3

1

N/A

8

9*

9

9

N/A

N/A

1

N/A

7

9

9

9

N/A

N/A

1

* Mr Aberle is not a member of the People & Performance Committee or the Finance & Risk Committee, but he is a standing invitee of both.



I n D e M n I t Y A n D I n s U R A n C e o F o F F I C e R s

Western Power has entered into deeds of indemnity, insurance and access with each of the persons listed as directors. The respective deeds are identical and in the following terms:

� Western Power indemnifies the person against all liabilities and costs relating to proceedings that are anticipated, threatened or commenced against the director by reason of him or her being or having been a director of Western Power.

� The indemnity does not extend to claims against the director by Western Power or a subsidiary, or to any liability or claim arising out of conduct involving a lack of good faith.

Western Power holds a directors’ and officers’ liability insurance policy. This cover will pay on behalf of the corporation (or its directors and officers), losses arising from a claim or claims made against them jointly or severally during the period of insurance by reason of any wrongful act (as defined by the policy) in the capacity of a director or officer of Western Power.

At the date of this report no claims have been made against the directors and officers component of the policy.

C o M P A n Y s e C R e tA R Y

John Pease LLM, the General Counsel & Company Secretary, has been practising law since the mid-1980s and has substantial commercial, as well as litigation, experience in a broad range of subject areas, including intellectual property, banking and finance, debt recovery, insolvency, trade practices, higher education and energy and infrastructure. He also has substantial in-house legal practice management experience. Prior to joining Western Power, Mr Pease has practised as a barrister at Western Australia’s independent Bar and also held various in-house, private practice and government positions.

e n v I R o n M e n tA L P e R F o R M A n C e

Full details of Western Power’s performance in terms of all applicable environmental legislative obligations are provided in the compliance disclosure section (section 9.6) of the corporate government statement included in this financial report.

A U D I t o R

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

n o n - A U D I t s e R v I C e s

Details of the amounts paid or due and payable to the Office of the Auditor General for the year ended 30 June 2010 are set out below. Neither the Office of the Auditor General nor his agent has provided any non-audit services during the reporting period.

2010 $’000

2009 $’000

Fees for the annual audit

345 330


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

A. Principles used to determine the nature and amount of remuneration

B. Details of remuneration

c. employment agreements

A . P R I n C I P L e s U s e D t o D e t e R M I n e t H e n At U R e A n D A M o U n t o F R e M U n e R At I o n

Western Power’s remuneration policy is to:

� provide market competitive remuneration to employees having regard to both the level of work assigned and the personal effectiveness in its performance

� allocate remuneration to employees on the basis of merit and performance

� adopt individual performance measures that are linked to Western Power’s objectives.

NoN-executIve DIrectors

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

mANAgINg DIrector AND executIves

Subject to the concurrence of the Minister, the Board approves the remuneration of the Managing Director. The People & Performance Committee (as delegate of the Board and on recommendation of the Managing Director) approves the remuneration of all General Managers, the Chief Financial Officer, the General Counsel & Company Secretary and the Director Enterprise Solutions Partner.

The remuneration framework for the Managing Director and executives is based on a total remuneration structure which consists of two components:

� a fixed remuneration component administered as total fixed remuneration

� a variable remuneration component administered as short-term incentives.

fIxeD remuNerAtIoN comPoNeNt

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

There are no guaranteed fixed remuneration increases included in any senior executives’ contracts.

vArIABLe remuNerAtIoN comPoNeNt

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

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


D I R e C t o R s ’ R e P o R t - R e M U n e R At I o n

b . D e tA I L s o F R e M U n e R At I o n

Details of the remuneration of the directors and key executives are set out in the following tables.

DIrectors’ remuNerAtIoN

salary & fees

short-term

inCentive Payments

non-monetary benefits

Post-emPloyment

suPer-annuation benefits

other long-term

benefitstermination

benefitstotal

benefits

name year $’000 $’000 $’000 $’000 $’000 $’000 $’000

M Barnaba 2010 82 - - 7 - - 89

2009 11 - - 1 - - 12

J Cahill 2010 50 - - - - - 50

2009 - - - - - - -

D Aberle 2010 353 92 31 72 10 - 558

2009 351 94 32 64 10 - 551

M Davies 2010 35 - - 25 - - 60

2009 - - - 60 - - 60

P Underwood 2010 55 - - - - - 55

2009 6 - - 1 - - 7

George Cash 2010 - - - - - - -

2009 - - - - - - -

P Mansell 2010 98 - 1 9 - - 108

2009 120 - 1 11 - - 132

J Seabrook 2010 28 - - 3 - - 31

2009 69 - 1 12 - - 82

2010 701 92 32 116 10 - 951

2009 557 94 34 149 10 - 844

The short-term incentive payments for 2010 are in respect of amounts earned for the year ended 30 June 2010. All amounts included for Mr D Aberle are subject to the approval of the Minister.


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D I R e C t o R s ’ R e P o R t - R e M U n e R At I o n ( C o n t I n U e D )

executIves’ remuNerAtIoN

salary & fees

short-term

inCentive Payments

non-monetary benefits

Post-emPloyment

suPer-annuation benefits

other long-term

benefitstermination

benefitstotal

benefits

name year $’000 $’000 $’000 $’000 $’000 $’000 $’000

K Brown 2010 185 65 25 101 7 - 383

2009 128 68 24 152 7 - 379

A-M Clark 2010 303 79 38 18 8 - 446

2009 288 81 40 28 8 - 445

M de Laeter 2010 290 66 1 31 7 - 395

2009 270 73 19 30 7 - 399

K Gaitskell 2010 165 57 1 105 6 - 334

2009 182 59 2 68 6 - 317

G Monkhouse 2010 244 57 1 52 7 - 361

2009 198 65 2 95 7 - 367

M Peacock 2010 301 71 24 22 8 - 426

2009 283 76 26 35 8 - 428

J Pease 2010 248 55 - 20 6 - 329

2009 230 60 15 22 6 - 333

P Southwell 2010 239 64 26 52 7 - 388

2009 232 66 36 45 7 - 386

2010 1,975 514 116 401 56 - 3,062

2009 1,811 548 164 475 56 - 3,054

The short-term incentive payments for 2010 are in respect of amounts earned for the year ended 30 June 2010.



c. emPLoymeNt AgreemeNts

Non-executive directors are subject to the duties and obligations prescribed by the Act. Under the Act, the Minister for Energy determines their remuneration.

The remuneration and other terms of employment for:

� the Managing Director and Director Enterprise Solutions are formalised in fixed term employment agreements; and � all other senior executives are formalised in ongoing employment agreements.

The terms of these agreements relating to remuneration are set out below.

Directors’ appointments

Position term of agreement

M Barnaba, Board Chair & non-executive director Appointed by the Governor for a term commencing on 21/04/2009 and expiring on 20/04/2012.

J Cahill, Board Deputy Chair & non-executive director Appointed by the Governor for a term commencing on 01/08/2009 and expiring on 31/07/2011.

D Aberle, Managing Director On 27/07/2010 the Governor reappointed Mr Aberle as a director for a one-year term expiring on 26/07/2011.

Mr Aberle is also employed as Western Power’s Chief Executive Officer pursuant to a fixed term employment agreement expiring on 01/04/2011.

M Davies, non-executive director Reappointed by the Governor for a two year term expiring on 26/07/2012.

P Underwood, non-executive director Appointed by the Governor for a term commencing on 25/05/2009 and expiring on 24/05/2012.

George Cash, non-executive director Appointed by the Governor for a term commencing on 27/07/2010 and expiring on 26/07/2013.

executives’ employment agreements

Position term of agreement

K Brown, General Manager System Management Ongoing employment agreement commencing from 01/04/2006.

A-M Clark, General Manager Service Delivery Ongoing employment agreement commencing from 01/04/2006.

M de Laeter, General Manager Customer Services Ongoing employment agreement commencing from 01/04/2006.

K Gaitskell, Director Enterprise Solutions Partner Fixed term employment agreement commencing from 28/07/2008 and expiring on 28/07/2013.

G Monkhouse, General Manager Human Resources Ongoing employment agreement commencing from 01/04/2006.

M Peacock, Chief Financial Officer Ongoing employment agreement commencing from 01/04/2006.

J Pease, General Counsel & Company Secretary Ongoing employment agreement commencing from 01/04/2006.

P Southwell, General Manager Regulation & Sustainability

Ongoing employment agreement commencing from 01/04/2006.


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This directors’ report is made in accordance with a resolution of the directors made on 30/08/2010.

Signed in Perth on: 30 August 2010

m BArNABA D ABerLe Chair of the Board Managing Director


D I R e C t o R s ’ R e P o R t - R e M U n e R At I o n ( C o n t I n U e D ) & C o n F I R M At I o n

2 . b o A R D o F D I R e C t o R s

2.1 BoArD roLe AND resPoNsIBILItIes (Asx PrINcIPLe 1.1)

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

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

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

� Appointments to the position of the Chief Executive Officer (ceo) - subject to the Minister’s endorsement - and oversight of appointments of the CEO’s direct reports

� Providing strategic direction, approving policies and reviewing major decisions, including capital expenditure proposals

� Approving budgets and financial performance

� Monitoring senior executives’ performance

1. C o R P o R At e G o v e R n A n C e I n W e s t e R n P o W e R

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

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

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

The ASX Principles require the Board to consider the development and adoption of appropriate governance policies and practices that are founded on the principles set out therein. Details of Western Power’s compliance with the ASX Principles are set out below and in the compliance checklist found on page 18 of this financial report. Details are also published in the corporate governance section of Western Power’s website (www.westernpower.com.au).

� Overseeing compliance with internal processes and regulatory requirements

� Assessing Board performance to ensure the Board’s effectiveness.

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

2.2 BoArD comPosItIoN (Asx PrINcIPLes 2.1, 2.2, 2.3 & 2.6)

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

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

� The Chair and the Deputy Chair must be independent, non-executive directors

� The role of the Chair and the CEO cannot be filled by the same person

� The CEO is to be resident in, or near, the town in which Western Power’s head office is located


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C o R P o R At e G o v e R n A n C e s tAt e M e n t

� The majority of the Board should comprise independent directors

� The Board should have the required blend of qualifications, experience and expertise.

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

2.3 DIrector INDePeNDeNce (Asx PrINcIPLe 2.1 AND 2.6)

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

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

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

The Board has considered the independence of each of the directors in office at the date of this report and its determination is set out in the director profiles on pages 1 to 2 of this financial report. None of the non-executive directors are considered to have a business, or other, relationship that could materially interfere, or could reasonably be perceived to interfere, with the exercise of the director’s unfettered and independent judgment.

2.4 coNfLIcts of INterest

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

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

2.5 BoArD successIoN PLANNINg

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

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

1 The relevant policies and procedures include

Western Power’s conflict of interest policy, an

outline of the duties and obligations of directors

and executive officers and a register of declared

interests maintained by the Company Secretary

and all Board and committee meetings having a

standing agenda item for declarations of material

personal interests to be made.


C o R P o R At e G o v e R n A n C e s tAt e M e n t ( C o n t I n U e D )

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

� Being the inaugural directors of Western Power, the information did not exist at the relevant time, e.g. details of meetings, committee work required, details of fellow directors

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

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

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

Criteria considered by the P&PC when evaluating prospective candidates are contained in the Board Charter, which is available in the corporate governance section of Western Power’s website.

2.6 terms of APPoINtmeNt, INDuctIoN trAININg AND coNtINuINg eDucAtIoN (Asx PrINcIPLes 1.1)

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

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

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

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

2.7 PerformANce evALuAtIoN (Asx PrINcIPLe 1.2, 1.3 & 2.5)

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

The performance evaluation of the Board as a whole and individual directors was conducted over March and April 2010 and comprised:

� An online evaluation survey of the Board’s effectiveness as a whole and of its members individually, completed by each member of the Board

� An online self-evaluation survey completed by individual directors


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� An online evaluation survey of the Board’s effectiveness as a whole and of it members individually, completed by members of the senior management team

� A confidential report detailing the results for the Board as a whole and of its individual members provided to the Board Chair, as well as a briefing regarding the collective and individual results provided by the external facilitator

� A confidential report provided to each director detailing the results for the Board as a whole and for that specific director, as well as an invitation to discuss the results with either the Board Chair or the external facilitator.

Further details of the Board and director evaluation process are available in the corporate governance section of Western Power’s website.

The Board reviews the performance of its committees annually, at its last meeting for each calendar year. In this reporting period, the Board reviewed reports from each of its committees in December 2009. The reports included the respective committees’:

� assessment of its performance against the requirements of its charter

� goals and objectives for the coming year

� recommendations for any improvements to its charter deemed necessary or desirable.

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

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

A description of the process for performance evaluation of the Board, its committees, individual directors and Western Power’s senior executives appears in the corporate governance section of Western Power’s website.

During July and August of each year the performance of the CEO and other senior executives is evaluated in accordance with the process disclosed on Western Power’s website.

2.8 BoArD Access to INformAtIoN AND ProfessIoNAL ADvIce (Asx PrINcIPLe 2.6)

Directors have direct access to members of Western Power’s management and information.

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

2.9 DIrectors’ remuNerAtIoN (Asx PrINcIPLe 8.2)

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

Western Power has a remuneration policy that distinguishes between the structure of non-executive and executive directors’ remuneration. Details of remuneration policy, together with details of the remuneration paid to Western Power’s directors (executive and non-executive) and all executive officers are set out on pages 6 to 8 of this financial report.

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

2.10 chAIr (Asx PrINcIPLes 2.2 & 2.3)

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

In compliance with the Act, the Board Chair and the CEO are not the same person.

The Chair is responsible for leadership of the Board, for the efficient organisation and conduct of the Board’s function and for the promotion of relations between Board members and between the Board and management that are open, cordial and conducive to productive co-operation. The Chair’s responsibilities are set out in more detail in the Board Charter.



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

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

3 . b o A R D C o M M I t t e e s

3.1 commIttees, memBershIP AND chArters (Asx PrINcIPLes 2.4, 2.6, 4.1, 4.2, 4.3, 4.4, 8.1 & 8.3)

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

� The Finance & Risk Committee (f&rc)

� The People & Performance Committee (P&Pc).

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

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

Mr Barnaba is also Chair/director of the companies listed on page 1 of this financial report. The Board considers that neither his chairmanship of the companies listed, nor any of his other directorship commitments as listed, interfere with the discharge of his duties to Western Power. The Board is satisfied that he commits the time necessary to discharge his role effectively.

2.11 comPANy secretAry (Asx PrINcIPLe 2.5)

The Company Secretary is Mr J Pease, who is also its General Counsel. His qualifications and experience are set out on page 4 of this financial report. The appointment and removal of the Company Secretary is a matter for decision by the Board.

The Company Secretary is responsible for ensuring that Board procedures are complied with and that governance matters are addressed. All directors have access to the Company Secretary’s advice and services.

2.12 BoArD meetINgs (Asx PrINcIPLe 2.6)

The Board meets at least eight times per year to address strategic issues and as needed to address urgent issues. During the year ended 30 June 2010, the Board held 18 meetings. Details of directors’ attendance at these meetings are set out on page 4 of this financial report.

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

The number of committee meetings held during the year, and members’ attendances at these meetings, are set out on page 4 of this financial report.

3.2 fINANce & rIsk commIttee (Asx PrINcIPLes 4.1, 4.2, 4.3 & 4.4)

The role of the F&RC is to assist the Board to meet its oversight responsibilities in relation to Western Power’s financial reporting, application of accounting policies, financial management and treasury function, internal control, risk management and compliance systems and the internal and external audit function. In doing so, the committee is to maintain free and open communication with the WA Auditor General, the internal auditors and management of Western Power. The committee’s terms of reference, detailing its duties, are available in the corporate governance section of Western Power’s website.

The members of the F&RC are Mr J Cahill (Chair), Mr M Davies and Mr P Underwood.

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


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3.3 PeoPLe & PerformANce commIttee (Asx PrINcIPLes 2.4, 2.6, 8.1 & 8.3)

The role of the P&PC is to assist the Board to meet its oversight responsibilities in relation to Western Power’s governance practices, review Board composition and succession planning for the Board and CEO and assist the Board in establishing remuneration, incentives and human resources policies and a performance review framework. The committee’s terms of reference, detailing its duties, are available in the corporate governance section of Western Power’s website.

The members of the P&PC are the Hon. George Cash (Chair), Mr M Barnaba and Mr J Cahill. Following changes in the Board’s composition in April 2010, the Board Chair also chaired one out of the P&PC’s five scheduled meetings during the year and the committee was comprised of only two non-executive directors. This temporary departure was as a result of the changes in Board composition between April and July 2010. All decisions of the P&PC are reported to the full Board.

The CEO, General Manager Corporate Services and General Counsel & Company Secretary attend committee meetings by invitation.

4 . P R o M o t I n G R e s P o n s I b L e A n D e t H I C A L b e H Av I o U R

4.1 coDe of coNDuct AND WhIstLeBLoWer PoLIcy (Asx PrINcIPLes 3.1 & 3.3)

The Board has approved:

� a code of conduct that applies to directors, officers and all employees of Western Power;

� a legislative and regulatory compliance policy; and

� a conflict of interest policy.

A copy of these codes of conduct and policies is available in the corporate governance section of Western Power’s website.

The code of conduct and the respective policies:

� promotes ethical and responsible decision-making and outline the minimum standards of conduct for all directors, officers and employees of Western Power

� outline Western Power’s position on a range of ethical and legal issues and summarise its policies on matters such as compliance with laws, occupational health and safety, corporate opportunity, confidentiality, protection of corporate assets and diversity in the workplace and responsibility for the environment

� guide compliance with Western Power’s legal and other obligations to its stakeholders, including the Minister and the Government, employees, customers, the community, unions and regulatory authorities

� are designed to reflect Western Power’s commitment to appropriate corporate practices.

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

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

In accordance with the Act, the Board has also adopted minimum standards of merit, equity and probity applicable to management of Western Power’s staff and a joint policy on staff transfers. The latter has been approved by the Minister and ensures that staff of Western Power and the other electricity corporations created by the Act have the opportunity to move between the corporations and their respective subsidiaries without loss of entitlements.

4.2 oWNershIP AND DeALINg IN securItIes (Asx PrINcIPLe 3.2)

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



reflects the particular relationship between Western Power (being a statutory corporation) and the Government and recognises that the Minister must receive information to enable him to discharge his ministerial duties.

5.2 coNtINuous DIscLosure AND mArket commuNIcAtIoNs (Asx PrINcIPLes 5.1 & 5.2)

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

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

� identify the relevant obligations and allocate responsibility for compliance

� provide education for all affected staff to ensure that there is an awareness of the compliance requirement

� ensure that compliance breaches are reported and remedial action monitored

� review the effectiveness of the framework on a regular basis.

5 . s H A R e H o L D e R

5.1 shArehoLDer commuNIcAtIoN (Asx PrINcIPLes 6.1 & 6.2)

Western Power does not have any issued shares. As Western Power’s governing body, the Board is responsible to the Minister for Energy for its performance. The Minister has various rights set out in the Act in relation to certain aspects of Western Power, such as Board nominations, approvals for certain transactions and access to information about the corporation.

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

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

Western Power has established a formal protocol to ensure comprehensive and effective communication with the Minister and the Minister’s office. The protocol

6 . FInAnCIAL RePoRtInG ( A sx PRInCIPLes 4 .1 & 7.3)

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

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

7. e x t e R n A L A U D I t o R R e L At I o n s H I P ( A s x P R I n C I P L e 4 . 4 & 6 )

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

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

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


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8 . R I s K M A n A G e M e n t ( A s x P R I n C I P L e s 7.1& 7. 2 )

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

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

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

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

9. C o R P o R At e C o M P L I A n C e D I s C L o s U R e s

9.1 freeDom of INformAtIoN

Under the Freedom of Information Act 1992 (foI Act) Western Power is, subject to certain exceptions, required to provide access to its documents where an application for access is made. The FOI Act also requires Western Power to publish an up-to-date information statement about the organisation. An up-to-date information statement, as well as a guide on how to make an application under the FOI Act are published on Western Power’s website and can be inspected free of cost at any time. The website address is www.westernpower.com.au.

9.2 eLectrIcIty LIceNces

The licensing framework under the Electricity Industry Act 2004 came into operation on 1 January 2005, and consequently an electricity supply licence is required for participants in the electricity industry who generate, transmit, distribute or sell electricity.

The Economic Regulation Authority has granted Western Power separate transmission and distribution licences for the construction and operation of transmission and distribution systems in the licence area covered by the South West Interconnected System.

Particular requirements of the licences include performance auditing, an asset management system and auditing, reporting and provision of information.

9.3 oBservANce of WesterN PoWer’s coDe of coNDuct

Section 33 of the Act requires the Board to report to the Minister on the observance of Western Power’s code of conduct by members of staff. This report is required at the same time as delivering Western Power’s Annual Report.

The Board confirms that consistent with section 31 of the Act, the code of conduct was developed after consultation with the Commissioner for Public Sector Standards and was adopted by the Board at its meeting on 24 March 2006. The code of conduct has been amended from time to time.

The code of conduct has been circulated to Western Power’s employees and is available on its website for employee reference.

As permitted by the Act, the Board has delegated accountability through the CEO to formal leaders in the organisation to ensure observance of the standards of conduct and integrity by members of staff.



9.5 PuBLIc INterest DIscLosure

The Public Interest Disclosure Act 2003 (PID Act) facilitates the disclosure of public interest information and provides protection for those who make disclosures and those who are the subject of disclosures.

Western Power is committed to the aims and objectives of the PID Act. The Board has approved a policy implementing the requirements of the PID Act and internal procedures have been developed that outline the manner in which Western Power will comply with its obligations under the PID Act. A copy of the policy and internal procedures are published on Western Power’s intranet for staff to review and information is provided about public interest disclosure as part of Western Power’s induction program for new employees. The Manager Risk Assurance & Audit has been appointed as Western Power’s Public Interest Disclosure Officer.

9.4 recorD-keePINg

Western Power maintains and supports quality record keeping practices in its day-to-day business activities. All records are managed according to the requirements of the State Records Act 2000 and Western Power’s approved record-keeping plan. Regular reviews are conducted of Western Power’s record-keeping systems and practices to ensure their efficiency and effectiveness.

New staff and contractors are provided with information on the record-keeping systems, both at induction and at compulsory training in the use of the system. The training programs are reviewed on an ongoing basis to ensure they reflect any new business requirements.

9.6 eNvIroNmeNtAL Due DILIgeNce/resPoNsIBILIty (scheDuLe 4, cLAuse 11(1)(f) of the Act)

Western Power recognises the importance of the environment in which it operates and that effective environmental management is vital to the sustainability of its business. Its sites are subject to State and Federal environmental legislation and regulations, and some are also covered by specific Ministerial conditions and environmental operating licences issued by the State. Complying with all regulatory and licence requirements is an integral part of Western Power’s commitment to practical environmental care at all time.

Corporate policies and strategies are in place encompassing environmental management principles, including community consultation, planning, compliance and sustainable development with continuous improvement objectives. Steps have been undertaken to strengthen assurance processes and practices associated with compliance controls, communication and audit to ensure focused verification of environmental compliance.

One Western Australian Department of Environment and Conservation licence is held by Western Power facilities.


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10 . A s x P R I n C I P L e s C H e C K L I s t

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

asx PrinCiPle referenCe ComPly

Principle 1 Lay solid foundations for management and oversight

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

2.1, 2.6, 3.1 Note1

1.2 Disclose the process for evaluating the performance of senior executives. 2.7

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

2.7

Principle 2 structure the Board to add value

2.1 A majority of the board should be independent directors. 2.2, 2.3

2.2 The board chair should be an independent director. 2.2, 2.3, 2.10

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

2.2, 2.10

2.4 The board should establish a nomination committee. 3.1, 3.3 Note 2

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


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

Principle 3 Promote ethical and responsible decision-making

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

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

4.1

3.1.2 the practices necessary to take into account Western Power’s legal obligations and the reasonable expectations of its stakeholders

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

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

4.2 Note 3


4.1, 4.2




Principle 4 safeguard integrity in financial reporting

4.1 The board should establish an audit committee. 3.1, 3.2

4.2 Structure the audit committee so that it consists of: (i) only non-executive directors; (ii) a majority of independent directors; (iii) an independent chair, who is not the board chair; and (iv) at least 3 members.

3.1, 3.2

4.3 The audit committee should have a formal charter. 3.1, 3.2


3.1, 3.2, 7, Note 4

Principle 5 make timely and balanced disclosure

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

5.1, 5.2 Note 5


5.1, 5.2 Note 5

Principle 6 respect the rights of shareholders

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

5.1, 7, Note 6


5.1, 7, Note 6

Principle 7 recognise and manage risk

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

8

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

6, 8

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


8

10 . A s x P R I n C I P L e s C H e C K L I s t ( C o n t I n U e D )


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Principle 8 encourage enhanced performance

8.1 The board should establish a remuneration committee. 3.1, 3.3 Note 2

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

Remuneration report


3.1, 3.3, Remuneration report

1. The letter of appointment given to the current, inaugural, directors of Western Power did not contain all of the information recommended in this ASX Principle (see section 2.6 of the corporate governance statement). This has been rectified for all subsequent appointments.

2. Parts of recommendation 2.4 of the ASX Principles are not applicable to Western Power to the extent that the composition of the Board is ultimately determined by the Governor (on recommendation from the Minister). The People & Performance Committee, which serves as the Board’s nominations and remuneration committee, is ordinarily comprised of three independent, non-executive directors and is chaired by someone other than the Board Chair. Details of a departure from this standard practice for one of the committee’s five meetings during the year are discussed in section 3.3 of the corporate governance statement.

3. ASX Principle 3.2 has no relevance to Western Power because it is not a publicly listed entity (see section 4.2 of the corporate governance statement).

4. The independence of committee members is influenced by the process of appointment of Western Power’s directors namely by the Governor on the recommendation of the Minister and, therefore, the committee may not always have a majority of independent members. However, it currently does have the required majority. Under the Act, Western Power’s external auditor is the WA Auditor General. Therefore, recommendations in the ASX Principles as to independence and evaluation of the external auditor are not applicable.

5. ASX Principle 5 has no relevance to Western Power because it is not a publicly listed entity and therefore is not subject to the ASX Listing Rules (see section 5.2 of the corporate governance statement.

6. Western Power does not hold annual general meetings. However, the WA Auditor General reports directly to the Minister in respect of the audit of Western Power’s annual financial statements.



73

74

76

76

78

78

84

89

90

91

93

94

95

96

97

98

99

100

100

101

103

106

106

107

108

109

110

111

C o n t e n t s

Statement of comprehensive income

Balance sheet

Statement of changes in equity

Statement of cash flows

Notes to the financial statements

1 Summary of significant accounting policies

2 Financial risk management

3 Revenue and other income from continuing operations

4 Expenses from continuing operations

5 Income tax expense

6 Cash and cash equivalents

7 Trade and other receivables

8 Inventories

9 Derivative financial instruments

10 Property, plant and equipment and intangibles

11 Trade and other payables

12 Provisions

13 Deferred income

14 Borrowings

15 Deferred tax

16 Retirement benefit obligations

17 Contingencies

18 Commitments

19 Events occurring after the reporting date

Directors’ declaration

Corporate directory

Independent auditor’s report

Global Reporting Index

Electricity Networks Corporation trading as Western Power (Western Power) is incorporated under the Electricity Corporations Act 2005 (WA) (Act) and domiciled in Australia. Its registered office and principal place of business is 363 Wellington Street, Perth, Western Australia 6000.

A description of the nature of Western Power’s operations and its principal activities is included in the our core business section on pages 15 to 19 of this Annual Report and on page 52 of this financial report.

These financial statements cover Western Power as an individual entity and were authorised for issue by the directors on 30 August 2010. The directors’ have the power to amend and reissue the financial report.

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


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F I n A n C I A L s tAt e M e n t s

s tAt e M e n t o F C o M P R e H e n s I v e I n C o M e

for the yeAr eNDeD 30 JuNe 2010

notes2010

$’000 2009

$’000

revenue and other income from continuing operations 3 1,107,472 1,102,639

expenses from continuing operations

Raw materials and consumables used (369,427) (389,815)

Employee related expenses 4(A) (170,548) (137,450)

Depreciation and amortisation expense 4(B) (191,070) (170,318)

Other expenses 4(C) (24,508) (23,715)

Borrowing costs 4(D) (236,443) (204,884)

total expenses from continuing operations (991,996) (926,182)

Profit before income tax 115,476 176,457

Income tax expense 5 (18,188) (50,218)

Profit for the reporting period 97,288 126,239

other comprehensive income

Net losses on cash flow hedges (1,632) (596)

Net actuarial losses on retirement benefit obligations (192) (577)

total other comprehensive income for the reporting period, net of tax

(1,824) (1,173)

total comprehensive income for the reporting period 95,464 125,066

The above statement of comprehensive income should be read in conjunction with the accompanying notes.



b A L A n C e s H e e t

As At 30 JuNe 2010

notes2010

$’000 2009 $’000

Assets

current assets

Cash and cash equivalents 6 122,975 26,661

Trade and other receivables 7 186,912 136,105

Inventories 8 91,664 83,288

Derivative financial instruments 9 61 373

Current tax assets 1,878 -

total current assets 403,490 246,427

Non-current assets

Trade and other receivables 7 111 200

Derivative financial instruments 9 - 214

Property, plant and equipment 10 5,690,747 5,091,847

Intangibles 10 70,817 26,120

total non-current assets 5,761,675 5,118,381

total assets 6,165,165 5,364,808

Liabilities

current liabilities

Trade and other payables 11 144,748 201,587

Derivative financial instruments 9 3,704 1,881

Current tax liabilities - 23,793

Provisions 12 76,215 18,321

Deferred income 13 105,696 100,926

total current liabilities 330,363 346,508


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b A L A n C e s H e e t ( C o n t I n U e D )

As At 30 JuNe 2010

notes2010

$’000 2009 $’000

Non-current liabilities

Trade and other payables 11 9,809 10,742

Borrowings 14 4,680,521 3,927,497

Derivative financial instruments 9 167 1,130

Deferred tax liabilities 15 67,900 45,843

Provisions 12 9,257 17,677

Retirement benefit obligations 16 148 752

Deferred income 13 7,961 8,186

total non-current liabilities 4,775,763 4,011,827

total liabilities 5,106,126 4,358,335

Net assets 1,059,039 1,006,473

equity

Contributed equity 820,022 820,022

Reserve (2,242) (610)

Retained earnings 241,259 187,061

total equity 1,059,039 1,006,473

The above balance sheet should be read in conjunction with the accompanying notes.



s tAt e M e n t o F C H A n G e s I n e q U I t Y


ContributeD equity

$’000

heDging reserve

$’000

retaineD earnings

$’000total equity

$’000

Balance at 1 July 2008 813,371 (14) 98,173 911,530

Total comprehensive income for the year - (596) 125,662 125,066

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

Dividends provided for or paid - - (36,774) (36,774)

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

Balance at 1 July 2009 820,022 (610) 187,061 1,006,473

Total comprehensive income for the year - (1,632) 97,096 95,464

Dividends provided for or paid - - (42,898) (42,898)

Balance at 30 June 2010 820,022 (2,242) 241,259 1,059,039

The above statement of changes in equity should be read in conjunction with the accompanying notes.

s tAt e M e n t o F C A s H F L o W s


notes2010

$’000 2009

$’000

cash flows from operating activities

Profit before taxation 115,476 176,457

Adjustments for:

Depreciation and amortisation 191,070 170,318

Gain on disposal of fixed assets (5,037) (2,019)

Non-cash capital contributions (85,748) (71,961)

Movement in receivables (52,365) (4,531)

Movement in inventories (8,376) (17,670)

Movement in derivative financial instruments 1,386 906

Movement in payables (5,857) (96,215)

Movement in fair value of cash flow hedges (2,332) (910)

Movement in actuary losses on retirement benefit obligations (274) (825)


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s tAt e M e n t o F C A s H F L o W s ( C o n t I n U e D )


notes2010

$’000 2009

$’000

cash generated from operations 147,943 153,550

Income taxes (paid)/received (21,020) 8,791

Net cash generated from operating activities 126,923 162,341

cash flows from investing activities

Purchases of fixed assets (800,434) (933,668)

Proceeds on disposal of fixed assets 15,153 9,214

Net cash used in investing activities (785,281) (924,454)

cash flows from financing activities

Proceeds from long-term borrowings 2,696,590 1,983,500

Repayments of long-term borrowings (1,702,182) (962,703)

Interest received 1,647 1,280

Interest paid (241,383) (211,701)

Proceeds from contributed equity - 6,651

Distribution to equity holder - (36,774)

Net cash generated from financing activities 754,672 780,253

Net increase in cash and cash equivalents 96,314 18,140

Cash and cash equivalents at beginning of the reporting period 26,661 8,521

cash and cash equivalents at end of the reporting period 6 122,975 26,661

The above statement of cash flows should be read in conjunction with the accompanying notes.



crItIcAL AccouNtINg estImAtes AND JuDgmeNts

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying Western Power’s accounting policies.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The area(s) where assumptions and estimates are significant to the financial statements, or a higher degree of judgement or complexity is involved are disclosed below.

revenue recognition

Western Power has recognised revenue amounting to $146.080 million for unbilled network services during 2010. This is consistent with the revenue recognition methodology adopted in prior years and reflects the billing profile of Western Power customers. The unbilled network services revenue is calculated using projected revenue assumptions for unread, and as such unbilled, meters as at the end of the reporting period.

Western Power is confident that the unbilled network services revenue prudently reflects revenue due but not yet billed and it is therefore appropriate to recognise revenue on these amounts in 2010. Accordingly, significant adjustments to this amount are not expected.

1. s U M M A R Y o F s I G n I F I C A n t A C C o U n t I n G P o L I C I e s

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

(A) BAsIs of PrePArAtIoN

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards (AIFRS) and Urgent Issue Group Interpretations adopted by the Australian Accounting Standards Board (AASB) and the disclosure requirements of Schedule 4 of the Act. Western Power has been classified to be a not-for-profit entity and accordingly applies the not-for-profit elections available in the Australian Accounting Standards where applicable.

AccruAL AccouNtINg AND hIstorIcAL cost coNveNtIoN

The financial statements are prepared on the accrual accounting basis and in accordance with the historical cost convention, except for derivative financial instruments that are measured at fair value, and certain non-current financial assets and financial liabilities that are measured at amortised cost.

comPArAtIve AmouNts

Comparative amounts are for the year ended 30 June 2009.

fINANcIAL stAtemeNt PreseNtAtIoN

Western Power has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. Comparative information has been re-presented so that it is also in conformity with the revised standard. There has been no change in the amounts recognised in the financial statements.

(B) foreIgN curreNcy trANsLAtIoN

fuNctIoNAL AND PreseNtAtIoN curreNcy

This financial report is presented in Australian dollars, which is the functional and presentation currency of Western Power.

trANsActIoNs AND BALANces

Transactions in currency other than the functional currency of Western Power are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at closing exchange rates. All foreign currency translation differences are recognised in profit or loss, except when deferred in equity for translation differences of qualifying cash flow hedges.


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n o t e s t o t H e F I n A n C I A L s tAt e M e n t s

1. s U M M A R Y o F s I G n I F I C A n t A C C o U n t I n G P o L I C I e s ( C o n t I n U e D )

(c) reveNue recogNItIoN

Revenues primarily represent the sales value derived from the transmission and distribution of electricity and the provision of related services and is measured at the fair value of the consideration received or receivable, net of the amount of goods and services tax. Revenues are recognised when the amount of revenue can be measured reliably; it is probable that future economic benefits will flow to the entity; and specific criteria have been met as described below.

NetWork servIces reveNue

Western Power is subject to a regulatory agreement, which determines the revenues receivable for its network services. No liabilities are recognised when revenues received or receivable exceed the maximum amount permitted by regulatory agreement and adjustments will be made to future prices to reflect this over-recovery. Similarly, no assets are recognised when a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery of permitted revenues.

DeveLoPer AND customer coNtrIButIoNs

Western Power receives developer and customer contributions toward the extension of electricity infrastructure to facilitate network connection. Contributions can be in the form of either cash contributions or gifted network assets. Cash contributions received are initially deferred and subsequently recognised as revenue

when the customers or developers are connected to the network in accordance with the terms of the contributions. Gifted network assets are recognised as revenue at the point the assets are energised and are measured at their fair value. The network assets resulting from contributions received or gifted are recognised as property, plant and equipment and depreciated over their expected useful life.

(D) INcome tAx

The income tax expense for the reporting period comprises current and deferred tax. Income tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current tax is the expected tax receivable/payable on the taxable income for the reporting period and any adjustment to tax in respect of previous years. Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the tax balances relate to the same taxation authority.

INvestmeNt ALLoWANces

On 22 May 2009 the Parliament of the Commonwealth of Australia

introduced a temporary bonus income tax deduction for new investment in tangible depreciating assets undertaken between 13 December 2008 and 31 December 2009. The one-off tax deduction, equal to either 10% or 30% of the cost of the eligible capital expenditure, is a permanent difference that reduces income tax payable and current tax expense.

(e) LeAses

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the term of the lease.

(f) ImPAIrmeNt of Assets

At each reporting date, Western Power considers any indicators of impairment to its assets. Impairments are calculated as the difference between the carrying value of each individual asset and its recoverable amount, if lower. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. Value in use is determined using the depreciated replacement cost of the asset.

Impairment losses are recognised in profit or loss and, where material, are disclosed separately.

(g) cAsh AND cAsh equIvALeNts

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash at bank and other short-term deposits that have an original maturity of three months or less, net of outstanding bank overdrafts.



(J) DerIvAtIve AND heDgINg ActIvItIes

DerIvAtIve fINANcIAL INstrumeNts

Derivative financial instruments are initially recognised at fair value and are subsequently remeasured to their fair value at each reporting date. Changes in the fair value of derivative financial instruments are included in profit or loss to the extent that hedge accounting is not applied. Fair value is based on quoted market prices at the reporting date.

Financial instruments are derecognised when Western Power no longer controls the contractual rights that comprise the financial instrument.

heDge AccouNtINg

For all derivative transactions designated as a cash flow hedge, the portion of gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and accumulated in the hedging reserve. The ineffective portion is recognised in profit or loss immediately. When the cash flows occur, the amount that has been deferred to equity is transferred either to the carrying value of the asset, in the case of non-financial assets, or reclassified to profit or loss as appropriate.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss recognised in equity is immediately reclassified to profit or loss.

(k) ProPerty, PLANt AND equIPmeNt

Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. Historical cost


(h) trADe AND other receIvABLes

Trade and other receivables are non-interest bearing, unsecured and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. They are usually settled on 14 and 30 day instalment payment terms.

Trade and other receivables are determined to be impaired when there is objective evidence that Western Power will not be able to collect all amounts due. The amount impaired is the difference between the carrying value of the receivable and the net present value of estimated future cash flows discounted at the original effective interest rate. Amounts impaired are recognised in profit or loss. When a trade receivable for which an impairment provision has been recognised becomes uncollectible in a subsequent reporting period it is written off against the provision account. Subsequent recoveries of amounts written off are credited to profit or loss.

(I) INveNtorIes

Inventories are stated at the lower of weighted average cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated selling costs.

includes all expenditure directly attributable to the acquisition or construction of the asset. Cost may also include transfer from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Depreciation is calculated using the straight-line method over the estimated useful economic lives listed below. Property, plant and equipment received on disaggregation of Western Power Corporation are depreciated over their residual useful economic lives.

Depreciation periods for categories of property, plant and equipment

Buildings 40 years

Substation plant, overhead lines & cables

50 years

Protection, control & communication equip.

Up to 10 years

Plant & equipment 10 years

Leasehold improvements 10 years

Office equipment 10 years

Motor vehicles 5 years

Computer equipment 4 years

Low value pool 3 years

The residual value and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at the end of each reporting period.

No depreciation is provided on freehold land and assets in the course of construction.

An item of property, plant and equipment is derecognised upon disposal. Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised in profit or loss.


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(L) INtANgIBLes

Intangibles represent identifiable internal capitalised software costs and intellectual property, and are recorded at historic cost less accumulated amortisation and any provision for impairment.

Internally generated intangibles are recognised only if an asset is created that can be identified; it is probable that the asset created will generate future economic benefits; and that the development cost of the asset can be measured reliably. Where no internally generated asset can be recognised the development expenditure is recorded in profit or loss.

Capitalised software and intellectual property are amortised using the straight-line method over the estimated useful economic lives listed below:

Amortisation periods for categories of intangibles

Intellectual property 25 years

Software (major developments/enhancements)

10 years

Software (minor purchases/enhancements)

2.5 years

The residual value and useful lives of intangibles are reviewed, and adjusted as appropriate, at the end of each reporting period.

An intangible asset is derecognised upon disposal. Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised in profit or loss.

(m) trADe AND other PAyABLes

Trade and other payables are non-interest bearing, unsecured and are initially recognised at fair value and subsequently measured at amortised cost. They are usually settled within 30 days of recognition.

(N) BorroWINgs

Borrowings are initially recognised at fair value net of transaction costs incurred and then subsequently measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless Western Power has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(o) BorroWINgs costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (being assets that necessarily take a substantial period of time to get ready for their intended use) are added to their cost. Such additions cease when the assets are substantially ready for their intended use. All other borrowing costs are expensed when incurred.

(P) ProvIsIoNs

Provisions are recognised when Western Power has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to

determine the present value reflects the market assessments of the time value of money and the risks specific to the liability.

(q) emPLoyee BeNefIts

WAges AND sALArIes, ANNuAL LeAve

Liabilities arising in respect of employee benefits that are expected to be settled within 12 months of the reporting date are recognised in other payables and are measured at their nominal amount based on remuneration rates that are expected to be paid when the liabilities are settled.

LoNg servIce LeAve

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Expected future payments are discounted using the Commonwealth Bond rates whose terms most closely match the terms of the related liabilities.



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

Contributed equity includes subsidies made by the State Government for the Regional Power Investment Program. No shares have been allotted.

(s) DIvIDeNDs

Dividends approved but not distributed to the State Government at the reporting date are recognised in the reporting period in which the dividends are authorised by the Minister of Energy.

(t) gooDs AND servIces tAx (gst)

Revenue, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable, or payable to, the taxation authority is included in other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.


(q) emPLoyee BeNefIts (coNtINueD)

retIremeNt BeNefIt oBLIgAtIoNs

Contributions to defined contribution plans are recognised as an expense as they become payable.

A liability or asset in respect of defined benefit superannuation plans is recognised in the balance sheet and is measured as the present value of the defined benefit obligation at the reporting date less the fair value of the funds assets at that date and any unrecognised past service cost.

The retirement benefit obligations recognised in the balance sheet represent the present value of the defined benefit obligations at the reporting date. The cost of providing benefits in respect of defined benefit superannuation plans is determined using the projected unit credit method with actuarial valuations being carried out at each reporting date. Current service cost is recognised in full in profit or loss in the reporting period in which the obligation increases as a result of employee services. Actuarial gains and losses are recognised directly in other comprehensive income.

(r) reserve AND coNtrIButeD equIty

Equity consists of the hedging reserve, contributed equity and retained earnings.


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(u) NeW AccouNtINg stANDArDs AND INterPretAtIoNs

The following Standards, amendments to Standards and Interpretations have been identified as those which may impact Western Power in the reporting period of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing this financial report.

title anD toPiC issueDeffeCtive Date to Western PoWer

imPaCt to Western PoWer in 2010 rePorting PerioD

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from Annual Improvements Project (AASB 5,8,101,107,117,118,136&139)

(Minor accounting changes for presentation, disclosure, recognition and measurement purposes. The impact, if any to Western Power is not expected to be significant).

May 2009 1 July 2010 No impact

Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards

(Simplifies and clarifies the intended meaning of the definition of a related party and provides a partial exemption from the disclosure requirements for government-related entities. The full impact, if any to Western Power is still to be assessed).

December 2009 1 July 2011 No impact

AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9

(Addresses the requirements for the classification and measurement of financial assets resulting from the first part of phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement. Retrospective application is generally required. The standard is not applicable to Western Power until 1 July 2013. The full impact, if any to Western Power is still to be assessed).

December 2009 1 July 2013 No impact



2 . F I n A n C I A L R I s K M A n A G e M e n t

The principal risks arising from Western Power’s operations are:

(i) market risk (including interest rate risk, currency risk and commodity risk);(i) credit risk; and(ii) liquidity risk.

Management of these risks is carried out in accordance with Board approved policies that are reviewed annually.

The details regarding Western Power’s exposure to the above risks, including the objectives, policies and processes for measuring and managing the risks, and the quantitative disclosures are further presented in this note.

(A) fINANcIAL Assets AND LIABILItIes

Western Power uses a range of financial instruments to support the operations of the business. The carrying amounts at the reporting date are as follows:

2010 2009

Current non-Current Current non-Current

notes $’000 $’000 $’000 $’000

financial assets

Cash and cash equivalents 6 122,975 - 26,661 -

Trade and other receivables 7 180,434 111 129,432 200

Derivative financial instruments 9 61 - 373 214

total financial assets 303,470 111 156,466 414

financial liabilities

Trade and other payables 11 144,748 9,809 201,587 10,742

Trade payables and accruals 85,762 - 151,729 -

Other payables 53,740 - 45,682 -

Contributory extension scheme 5,246 9,809 4,176 10,742

Borrowings 14 - 4,680,521 - 3,927,497

Derivative financial instruments 9 3,704 167 1,881 1,130

total financial liabilities 148,452 4,690,497 203,468 3,939,369

Derivative financial instruments are used to hedge cash flow exposures to movements in interest rates, exchange rates and commodity prices that arise from operational activities. Speculative trading of derivatives is strictly prohibited under Western Power’s treasury policy.


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2 . F I n A n C I A L R I s K M A n A G e M e n t ( C o n t I n U e D )

(B) fAIr vALue meAsuremeNts

The fair values of Western Power’s financial assets and financial liabilities at the reporting date are assumed to approximate the above carrying amounts except for the contributory extension scheme payables which are recorded at amortised cost. The fair value of these non-interest bearing liabilities at 30 June 2010 is $18.588 million (30 June 2009: $19.021 million).

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

(c) fINANcIAL rIsk fActors

(I) mArket rIsk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Western Power has exposures to movements in interest rate, exchange rate and commodity markets.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Western Power has an interest rate risk management strategy which aims to mitigate the significant exposures to interest rate risk through the active management of interest rate related risks. Debt portfolio structure guidelines are set to manage the interest rate risks arising from Western Power’s regulatory environment. Debt maturity guidelines are set to ensure that Western Power is not exposed to excess risk from interest rate volatility. Interest rate forecasts are continuously monitored and, where appropriate, exposures to interest rates are managed through the use of Board-approved hedging instruments.

currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk in Western Power arises from future commercial transactions expressed in foreign currency, principally the purchase of capital equipment. Western Power’s foreign exchange risk management strategy aims to mitigate significant exposures to foreign currency movements. Foreign currency exposures are managed through the use of forward exchange contracts. Western Power’s exposure to foreign currency risk at the reporting date is as follows:

2010 2009

euro

us Dollars

sWeDish krona

CanaDian Dollars euro

us Dollars

sWeDish krona

CanaDian Dollars

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Weighted average exchange rate

0.5465 0.8844 6.5077 0.0000 0.5582 0.7375 5.4488 0.8703

Forward exchange contracts maturing

within one year 17,465 1,181 146 - 24,954 901 7,475 325

later than one year but within 5 years

- - - - 12,420 - - -

commodity risk

Commodity risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in commodity prices. Commodity risk arises from variability in commodity prices contained in commercial transactions and is managed through the use of forward contracts. Western Power has not entered into any commodity swaps in the current reporting period (30 June 2009: $0.006 million).




(c) fINANcIAL rIsk fActors (coNtINueD)

sensitivity analysis

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

interest rate risk foreign CurrenCy risk

Carrying amount

imPaCt on Post-tax Profit +/- 1%

imPaCt on other equity +/- 1%

imPaCt on Post-tax Profit

+/- 10%imPaCt on other

equity +/- 10% $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 30 June 2010

Financial assets

Cash and cash equivalents 122,975 1,272 (1,272) - - - - - -

Trade and other receivables 180,545 - - - - - - - -

Derivatives-FX contracts2 61 - - - - - - (125) 152

Financial liabilities

Trade and other payables 154,557 - - - - - - - -

Borrowings1 4,680,521 (5,930) 5,930 - - - - - -

Derivatives-FX contracts2 3,543 - - - - - (1,246) 1,523

Derivatives-interest rate swaps3

328 18 (18) 27 (27) - - - -

At 30 June 2009

Financial assets

Cash and cash equivalents 26,661 250 (250) - - - - - -

Trade and other receivables 129,632 - - - - - - - -

Derivatives-FX contracts2 587 - - - - - - (1,359) 1,661

Financial liabilities

Trade and other payables 212,329 - - - - - - - -

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

Derivatives-FX contracts2 1,865 - - - - - - (2,668) 3,261

Derivatives-interest rate swaps3

1,140 53 (53) 62 (62) - - - -

Derivatives-commodity contracts4

6 - - - - - - - -

1 In line with the Board-approved treasury policy, the majority of Western Power’s borrowings are at fixed interest rates. Interest rate risk exposure is limited to Western Power’s floating rate borrowings of $593.3 million (30 June 2009: $493.3 million).

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

3 Derivatives - Interest rate swaps are all designated as cash flow hedges and used to hedge against floating interest rate exposures. All interest rate swaps have remained 100% effective throughout the reporting period. A shift in interest rates of +/- 1% results in an impact on derivative valuation of $0.027 million/$(0.027 million) and on realised receipts/(payments) during the period of $0.018 million/$(0.018 million).

4 Derivatives - Commodity contracts have not been included in the sensitivity analysis due to their immaterial fair value.


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(II) creDIt rIsk

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

Western Power uses a formalised process to manage the collection of debts through regular reminders and renegotiations. This process allows appropriate legal action to be taken where necessary.

(III) LIquIDIty rIsk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Western Power is governed by the Treasury Management Framework which requires active management of cash and ensures adequate facilities are in place to satisfy ongoing funding requirements.

financing arrangements

Western Power has a borrowing facility with Western Australian Treasury Corporation with a limit of $7,000.000 million (30 June 2009: $7,000.000 million). As at 30 June 2010 the unused portion of this facility was $2,369.791 million (30 June 2009: $3,116.400 million). The planned usage of the facility is governed by the Strategic Development Plan (SDP) agreed with the Minister of Energy. Actual borrowings at 30 June 2010 were $58.000 million (30 June 2009: $210.800 million) below the budgeted borrowings in the SDP. The maximum amount of borrowings permitted by the Department of Treasury and Finance (DTF) for the year to 30 June 2011 is currently $5,198.700 million (30 June 2010: $4,688.200 million).





mAturItIes of fINANcIAL LIABILItIes

fixeD rate borroWings

$’000

floating rate notes

$’000

CPi linkeD Debt $’000

Contrbtry extension

sCheme $’000

others* $’000

total $’000

At 30 June 2010

Weighted average interest rate 6.0% 4.6% 3.1% 13.2% -

undiscounted contractual cash flow maturing:

within one year 1,049,370 381,767 7,899 4,045 139,781 1,582,862

later than one year but not later than 5 years 2,405,049 243,601 128,308 7,700 107 2,784,765

later than 5 years 1,162,069 - 170,341 11,603 - 1,344,013

Total contractual cash flows 4,616,488 625,368 306,548 23,348 139,888 5,711,640

Effect of discount rates (684,218) (30,580) (82,121) (8,293) (13) (805,225)

total financial liabilities 3,932,270 594,788 224,427 15,055 139,875 4,906,415

At 30 June 2009

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

undiscounted contractual cash flow maturing:

within one year 848,899 191,521 - 2,892 197,136 1,240,448

later than one year but not later than 5 years 2,131,791 332,893 - 8,473 583 2,473,740

later than 5 years 1,234,426 - - 13,287 - 1,247,713

Total contractual cash flows 4,215,116 524,414 - 24,652 197,719 4,961,901

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

total financial liabilities 3,548,135 492,734 - 14,918 197,671 4,253,458

* Others is inclusive of interest rate swaps.

Borrowing facilities are in Australian dollars. Funds may be drawn at any time with an average maturity of 3.2 years (30 June 2009: 3.4 years).


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3 . R e v e n U e A n D o t H e R I n C o M e F R o M C o n t I n U I n G o P e R At I o n s

2010 $’000

2009 $’000

rendering of services (note (A))

Network services revenue 905,936 807,968

Developer and customer contributions 192,955 288,469

1,098,891 1,096,437

other

Gain on disposal of fixed assets 5,037 2,019

Interest received 1,647 1,280

Rent received 1,382 1,606

Other 515 1,297

8,581 6,202

total revenue and other income from continuing operations 1,107,472 1,102,639

(A) uNDerLyINg eArNINgs

Annual network target revenue as reported in the performance review section of the Annual Report is made up of electricity transmission revenue and developer and customer contribution revenue. Electricity transmission revenue is earned at tariff rates approved by the Economic Regulation Authority. Variations from this target revenue can occur as a result of variations in:

� volume of electricity transported across the network; � actual developer and customer contributions received.

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

The revenue reported in these financial statements does not include any revenue adjustments arising from variations occurring in the reporting period as these price adjustments are included in the transmission and distribution charges to customers in future periods. These adjustments are included in the underlying earnings of Western Power, which are reported in the performance review section of the Annual Report.



4 . e x P e n s e s F R o M C o n t I n U I n G o P e R At I o n s

Profit before income tax includes the following specific expenses:

(A) emPLoyee reLAteD exPeNses

note2010

$’0002009

$’000

Employee benefit expenses (145,462) (116,891)

Payments to defined contribution plans (24,753) (20,435)

Cost of defined benefit plans 16(D) (333) (124)

(170,548) (137,450)

(B) DePrecIAtIoN exPeNse

2010 $’000

2009 $’000

Buildings (2,872) (4,658)

Plant and equipment (174,040) (149,535)

Capitalised depreciation 2,455 2,223

(174,457) (151,970)

Amortisation expense

Intangibles (16,613) (18,348)

(16,613) (18,348)

total depreciation and amortisation expense (191,070) (170,318)

(c) other exPeNses

note

2010 $’000

2009 $’000

Insurance (15,199) (17,919)

Operating lease costs (5,203) (5,456)

Impairment of trade receivables 7(A) (3,687) 135

Audit services (Office of the Auditor General) (158) (358)

Other (261) (117)

(24,508) (23,715)


| 9 0 |


4 . e x P e n s e s F R o M C o n t I n U I n G o P e R At I o n s ( C o n t I n U e D )

(D) BorroWINg costs

2010 $’000

2009 $’000

Domestic currency loans (246,522) (217,193)

Unwinding of discount on contributory extension scheme (1,442) (1,501)

Currency and interest rate swaps 144 (257)

Capitalised borrowing costs (note (E)) 11,377 14,067

(236,443) (204,884)

(e) cAPItALIseD BorroWINg costs

Interest charges on borrowings incurred on qualifying projects are capitalised. The capitalisation rate used is a weighted average interest rate of 5.7 per cent (30 June 2009: 6.1 per cent).

5 . I n C o M e tA x e x P e n s e

(A) INcome tAx exPeNse

2010 $’000

2009 $’000

Current tax - 26,230

Deferred tax 21,994 24,610

Adjustment for current tax of prior periods (4,651) (3,832)

Adjustment for deferred tax of prior periods 845 3,210

18,188 50,218

Income tax expense is attributable to:

Profit for the reporting period 18,188 50,218

Deferred income tax (revenue)/expense included in income tax expense comprises:

Increase in deferred tax assets (note 15) (20,841) (1,584)

Increase in deferred tax liabilities (note 15) 43,680 29,404

22,839 27,820



5 . I n C o M e tA x e x P e n s e ( C o n t I n U e D )

(B) NumerIcAL recoNcILIAtIoN of INcome tAx exPeNse to PrImA fAcIe tAx PAyABLe

2010 $’000

2009 $’000

Profit before income tax 115,476 176,457

Tax at the Australian tax rate of 30% (30 June 2009: 30%) 34,643 52,937

Tax effect of:

Non deductable expenses 47 231

Research and development incentives (1,324) (545)

Investment allowance (11,372) (1,783)

Current income tax expense 21,994 50,840

Adjustment for current tax of prior periods (4,651) (3,832)

Adjustment for deferred tax of prior periods 845 3,210

total income tax expense 18,188 50,218

(c) tAx exPeNse recogNIseD DIrectLy IN equIty

2010 $’000

2009 $’000

Other temporary differences (700) (698)

(700) (698)

(D) tAx exPeNse reLAtINg to Items of other comPreheNsIve INcome

2010 $’000

2009 $’000

Actuarial adjustment on retirement benefit obligations (82) (247)

(82) (247)


| 9 2 |


6 . C A s H A n D C A s H e q U I vA L e n t s

2010 $’000

2009 $’000

Cash at bank 82,975 1,661

Domestic currency deposits 40,000 25,000

122,975 26,661

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of Western Power, and earn interest at the respective short-term deposit rates.

(A) rIsk exPosure

Western Power’s exposure to market risk is presented in note 2(C)(i).

(B) fAIr vALue

The fair values of cash and cash equivalents equal the above carrying amounts (refer to note 2(B)).



7. t R A D e A n D o t H e R R e C e I vA b L e s

2010 $’000

2009 $’000

current

Trade receivables 182,622 125,277

Less: Provision for impairment of trade receivables (note (A)) 4,104 1,133

178,518 124,144

Prepayments 6,478 6,673

Other receivables 1,916 5,288

186,912 136,105

Non-current

Other receivables 111 200

111 200

(A) ImPAIreD trADe receIvABLes

As of 30 June 2010 trade receivables with a nominal value of $0.716 million (30 June 2009: $0.727 million) were impaired. The amount of the provision was $4.104 million (30 June 2009: $1.133 million).

Movement in the provision for impairment of trade receivables during the reporting period is as follows:

$’000

At 1 July 2008 1,995

Provision for impairment recognised during the reporting period (135)

Receivables written off during the reporting period as uncollectable (727)

At 30 June 2009 1,133

Provision for impairment recognised during the reporting period 3,687

Receivables written off during the reporting period as uncollectable (716)

At 30 June 2010 4,104

There is no collateral security in place in respect of these amounts. There are no material amounts of past due financial assets whose terms have been renegotiated.


| 9 4 |


7. t R A D e A n D o t H e R R e C e I vA b L e s ( C o n t I n U e D )

(B) trADe receIvABLes PAst Due But Not ImPAIreD

As of 30 June 2010 trade receivables of $9.063 million (30 June 2009: $7.822 million) were past due but not impaired. The ageing analysis of these receivables is as follows:

2010 $’000

2009 $’000

between 1-59 days 3,057 3,557

between 60-89 days 1,397 302

more than 90 days 4,609 3,963

9,063 7,822

(c) rIsk exPosure

Western Power’s exposure to market and credit risks is presented in note 2(C)(i) and 2(C)(ii) respectively.

(D) fAIr vALue

The fair values of trade and other receivables (excluding prepayments) is assumed to approximate the above carrying amounts (refer to note 2(B)).

8 . I n v e n t o R I e s

2010 $’000

2009 $’000

current

Raw materials and stores 91,664 83,288

91,664 83,288

(A) INveNtory exPeNse

Inventories recognised as expense during the year ended 30 June 2010 amounted to $5.962 million (30 June 2009: $12.522 million).

Write-downs of inventory to net realisable value recognised as expense during the year ended 30 June 2010 amounted to $0.979 million (30 June 2009: $0.113 million). The expense has been recognised in ‘raw materials and consumables used’.



9. D e R I vAt I v e F I n A n C I A L I n s t R U M e n t s

2010 $’000

2009 $’000

current assets

Forward exchange contracts (note (A)) 61 373

61 373

Non-current assets

Forward exchange contracts (note (A)) - 214

- 214

current liabilities

Forward exchange contracts (note (A)) 3,543 1,525

Interest rate swaps (note (B)) 161 350

Commodity swaps (note (C)) - 6

3,704 1,881

Non-current liabilities

Interest rate swaps (note (B)) 167 790

Forward exchange contracts (note (A)) - 340

167 1,130

(A) forWArD exchANge coNtrActs - cAsh fLoW heDges

Western Power has entered into forward exchange contracts in order to hedge against the foreign exchange risk arising from the future purchase of capital equipment in foreign currencies. There is no profit or loss sensitivity in the current or prior reporting periods. This is because the hedges are 100% effective.

(B) INterest rAte sWAPs - cAsh fLoW heDges

Western Power has entered into interest rate swaps in order to hedge against floating interest rate exposures. All interest rate swaps remained 100% effective in the current and prior reporting periods.

(c) commoDIty sWAPs - cAsh fLoW heDges

Western Power enters into commodity swaps in order to hedge against the variability of commodity prices in commercial transactions. Western Power has not entered into any commodity swaps in the current reporting period (30 June 2009: $0.006 million).

(D) rIsk exPosure

Western Power’s exposure to market and liquidity risks is presented in note 2(C)(i) and 2(C)(iii) respectively.

(e) fAIr vALue

The fair values of derivative financial instruments is assumed to approximate the above carrying amounts (refer to note 2(B)).


| 9 6 |


10 . P R o P e R t Y, P L A n t A n D e q U I P M e n t A n D I n tA n G I b L e s

lanD $’000

builDings $’000

Plant anD equiPment

$’000

Works unDer ConstruCtion

$’000

total ProPerty, Plant anD equiPment

$’000intangibles

$’000

At 1 July 2008

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

Accumulated depreciation - (9,854) (264,575) - (274,429) (32,915)

closing net book amount 76,919 48,833 3,340,373 780,081 4,246,206 34,094

year ended 30 June 2009

Opening net book amount 76,919 48,833 3,340,373 780,081 4,246,206 34,094

Cost on addition (notes (A),(B)) - - - 1,017,403 1,017,403 -

Cost of transfer in/(out) 27,947 13,804 890,032 (942,375) (10,592) 10,592

Cost on disposal - - (14,697) - (14,697) (657)

Accumulated depreciation on disposal - - 7,720 - 7,720 439

Depreciation and amortisation (note (C)) - (4,658) (149,535) - (154,193) (18,348)

carrying amount at 30 June 2009 104,866 57,979 4,073,893 855,109 5,091,847 26,120

At 1 July 2009

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



year ended 30 June 2010

Opening net book amount 104,866 57,979 4,073,893 855,109 5,091,847 26,120

Cost on addition (notes (A),(B)) - - 9,645 837,593 847,238 -

Cost of transfer in/(out) 21,995 20,778 1,069,525 (1,172,921) (60,623) 60,623

Cost on disposal (3,335) - (14,462) - (17,797) -

Accumulated depreciation transfers (in)/out - - (687) - (687) 687

Accumulated depreciation on disposal - - 7,681 - 7,681 -

Depreciation and amortisation (note (C)) - (2,872) (174,040) - (176,912) (16,613)

carrying amount at 30 June 2010 123,526 75,885 4,971,555 519,781 5,690,747 70,817

At 30 June 2010

Cost 123,526 93,269 5,544,991 519,781 6,281,567 137,567





10 . P R o P e R t Y, P L A n t A n D e q U I P M e n t A n D I n tA n G I b L e s ( C o n t I n U e D )

(A) coNtrIButeD Assets

Western Power receives non-cash capital contributions in the form of gifted network assets. The fair value of the non-cash capital contributions included in additions to works under construction in the reporting period was $85.748 million (30 June 2009: $71.961 million).

(B) cAPItALIseD BorroWINg costs

Additions include borrowing costs of $11.377 million (30 June 2009: $14.067 million) attributable to assets in the course of construction and capitalised in the reporting period at a weighted average interest rate of 5.7 per cent (30 June 2009: 6.1 per cent).

(c) DePrecIAtIoN AND AmortIsAtIoN

Depreciation and amortisation represent charges to operating expenses of $191.070 million (30 June 2009: $170.318 million) together with capitalised depreciation charges of $2.455 million (30 June 2009: $2.223 million)

(D) chANge IN estImAtes

During the year ended 30 June 2010 Western Power revised the estimated useful lives for computer equipment from 3 years to 4 years, and major software from 2.5 years to 10 years. This is to more accurately reflect the total useful lives of these assets. In addition, the method for depreciating low value pool assets was revised from diminishing value to the straight-line method. This is consistent with the method used for all other Western Power assets.

The estimated effect of these changes on depreciation and amortisation, recognised in expenses from continuing operations, in current and future periods is as follows:

2010 $’000

2011 $’000

2012 $’000

2013 $’000

2014 $’000

later $’000

Decrease/(increase) in depreciation expense 868 685 72 (1,352) (273) -

Decrease/(increase) in amortisation expense 13,307 13,374 6,436 (4,517) (4,938) (23,662)

11 . t R A D e A n D o t H e R P AYA b L e s

2010 $’000

2009 $’000

current

Trade payables and accruals 85,762 151,729

Other payables 53,740 45,682

Contributory extension scheme (note (A)) 5,246 4,176

144,748 201,587

Non-current

Contributory extension scheme (note (A)) 9,809 10,742

9,809 10,742


| 9 8 |


11. t R A D e A n D o t H e R P AYA b L e s ( C o n t I n U e D )

(A) coNtrIButory exteNsIoN scheme

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

(B) rIsk exPosure


(c) fAIr vALue

Unlike trade and other payables, the fair value of the contributory extension scheme payables are not assumed to approximate the above carrying amount (refer to note 2(B)).

12 . P R o v I s I o n s

2010 $’000

2009 $’000

current

Dividends 42,898 -

Employee benefits 32,394 17,014

Environmental (note (A)) 923 1,307

76,215 18,321

Non-current

Employee benefits 7,513 15,696

Environmental (note (A)) 1,744 1,981

9,257 17,677

(A) eNvIroNmeNtAL ProvIsIoNs

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

(B) movemeNts IN ProvIsIoNs

Movements in each class of provision during the reporting period, other than employee benefits, are as follows:

DiviDenDs $’000

environ. $’000

At 1 July 2009 - 3,288

Additions in the reporting period 42,898 -

Utilised in the reporting period - (621)

At 30 June 2010 42,898 2,667



13 . D e F e R R e D I n C o M e

2010 $’000

2009 $’000

current

Deferred income 105,696 100,926

105,696 100,926

Non-current

Deferred income 7,961 8,186

7,961 8,186

Deferred income relates to contributions received in advance from developers and customers (refer to note 1(C)).

(A) movemeNt IN DeferreD INcome

Movement in deferred income during the reporting period is as follows:

$’000

At 1 July 2009 109,112

Additions in the reporting period 197,500

Earned in the reporting period (192,955)

At 30 June 2010 113,657

14 . b o R R o W I n G s

2010 $’000

2009 $’000

Non-current

Domestic currency loans (note (A)) 4,630,209 3,883,621

Accrued interest 50,312 43,876

4,680,521 3,927,497

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

(A) DomestIc curreNcy LoANs

Western Power’s domestic currency loans are ultimately secured by Government Guarantee.

(B) rIsk exPosure


(c) fAIr vALue

The fair value of borrowings is assumed to approximate the above carrying amount (refer to note 2(B)).


| 1 0 0 |


15 . D e F e R R e D tA x

(A) DeferreD tAx Assets

The balance of deferred tax assets comprises temporary differences attributable to:

2010 $’000

2009 $’000

Provisions for employee benefits 22,473 20,120

Other temporary differences 2,870 2,873

Actuarial adjustments to retirement benefit obligations 82 247

Tax losses 18,738 -

Total deferred tax assets 44,163 23,240

Set-off deferred tax liabilities pursuant to set-off provisions (44,163) (23,240)

Net deferred tax assets - -

Deferred tax assets expected to be recovered within 12 months 44,163 17,690

Deferred tax assets expected to be recovered after more than 12 months - 5,550

44,163 23,240

movemeNts IN DeferreD tAx Assets

Movement in deferred tax assets during the reporting period is as follows:

$’000

At 1 July 2008 20,711

Charged to profit or loss 1,626

Charged to other comprehensive income 247

Adjustment to income tax provided in prior years (42)

Charged directly to equity 698

At 30 June 2009 23,240

At 1 July 2009 23,240


Charged to other comprehensive income 82

Adjustment to income tax provided in prior years (265)

Charged directly to equity -

At 30 June 2010 44,163

| 1 0 1 |e L e C t R I C I t Y n e t W o R K s C o R P o R A t I o n t R A D I n G A s W e s t e R n P o W e R F I n A n C I A L R e P o R t F o R t H e Y e A R e n D e D 3 0 J U n e 2010


15 . D e F e R R e D tA x ( C o n t I n U e D )

(B) DeferreD tAx LIABILItIes

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

2010 $’000

2009 $’000

Property, plant and equipment 110,898 66,163

Contributory extension scheme 1,143 2,920

Other temporary differences 22 -

Total deferred tax liabilities 112,063 69,083

Set-off deferred tax assets pursuant to set-off provisions (44,163) (23,240)

Net deferred tax liabilities 67,900 45,843

Deferred tax liabilities expected to be recovered within 12 months 22 -

Deferred tax liabilities expected to be recovered after more than 12 months 112,041 69,083

112,063 69,083

movemeNt IN DeferreD tAx LIABILItIes

Movement in deferred tax liabilities during the reporting period is as follows:

$’000

At 1 July 2008 39,679


Charged to other comprehensive income -

Adjustment to income tax provided in prior years 3,168

Charged directly to equity -

At 30 June 2009 69,083

At 1 July 2009 69,083


Charged to other comprehensive income -

Adjustment to income tax provided in prior years 580

Charged directly to equity (700)

At 30 June 2010 112,063


| 1 0 2 |


16 . R e t I R e M e n t b e n e F I t o b L I G At I o n s

2010 $’000

2009 $’000

Present value of unfunded defined benefit obligations - 740

Present value of funded defined benefit obligations 1,352 1,272

Fair value of plan assets (1,204) (1,260)

recognised liability for defined benefit obligations 148 752

(A) DefINeD BeNefIt oBLIgAtIoNs

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

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

The defined benefit sections provide either a pension or lump sum benefit based upon years of service and final average salary, averaged over a number of years in accordance with the relevant governing rules. Each of the defined benefit sections is closed to new members and the Western Power Superannuation Fund was closed to further contributions from its existing members from 18 May 2006. Western Power settled its liability in respect of past service entitlements to members of these funds with contributions of $1,208,355 and $35,818,343 to the Government Employees Superannuation Board on 30 June 2010 and 17 November 2007 respectively. The only remaining obligation in respect of these funds will be in respect of current service entitlements earned by members after 30 June 2010.

Western Power also funds a defined benefit scheme for seven members administered by AustralianSuper. At 30 June 2010 the present obligations of the scheme attributable to these members of $1.352 million exceeded the attributable assets by $0.148 million (30 June 2009: $0.012 deficit). The assets of this scheme consist of the following:

2010 $’000

2009 $’000

Equity securities 722 718

Property 145 151

Bonds 96 114

Other securities 181 252

Cash 60 25

1,204 1,260



16 . R e t I R e M e n t b e n e F I t o b L I G At I o n s ( C o n t I n U e D )

(B) movemeNt IN LIABILIty for DefINeD BeNefIt oBLIgAtIoNs

Changes in the present value of the defined benefit obligations during the reporting period are set out below:

unfunDeD Plans funDeD Plans

2010 $’000

2009 $’000

2010 $’000

2009 $’000

Balance at beginning of reporting date 740 276 1,272 1,335

Amounts transferred out (1,208) - - -

Current service cost 314 246 - -

Interest cost 39 18 68 76

Actuarial movement for the reporting period 118 200 15 (138)

Benefits paid (3) - (3) (1)

Net liability in the balance sheet - 740 1,352 1,272

(c) movemeNt IN PLAN Assets

Movement in the plan assets during the reporting period is set out below:

unfunDeD Plans funDeD Plans

2010 $’000

2009 $’000

2010 $’000

2009 $’000

Balance at beginning of reporting date - - 1,260 1,808

Employer contributions 3 - - -

Benefits paid by the plan (3) - (3) (1)

Expected return on plan assets - - 88 216

Actuarial movement for the reporting period - - (141) (763)

fair value of plan assets - - 1,204 1,260

(D) AmouNts recogNIseD IN ProfIt or Loss

2010 $’000

2009 $’000

Current service cost 314 246

Interest cost 107 94

Expected return on plan assets (88) (216)

total included in employee related expenses 333 124


| 1 0 4 |


16 . R e t I R e M e n t b e n e F I t o b L I G At I o n s ( C o n t I n U e D )

(e) AmouNts recogNIseD IN other comPreheNsIve INcome

2010 $’000

2009 $’000

Actuarial losses recognised in the reporting period 274 825

274 825

Cumulative actuarial losses recognised 4,186 3,912

4,186 3,912

(f) PrINcIPAL ActuArIAL AssumPtIoNs

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

2010 2009

Discount rate 5.5% 5.3%

Expected return on plan assets 7.0% 7.0%

Expected future salary increases 4.5% 4.5%

Expected future pension increases 2.5% 2.5%

(g) hIstorIc summAry

2010 $’000

2009 $’000

2008 $’000

2007 $’000

2006 $’000

Present value of defined benefit obligations 1,352 2,012 1,611 23,870 18,190

Fair value of plan assets 1,204 1,260 1,808 2,264 1,991

Deficit/(surplus) in scheme 148 752 (197) 21,606 16,199

Experience adjustments on scheme liabilities 122 162 (2,674) 5,016 (243)

Experience adjustments on scheme assets 140 763 n/a n/a n/a



17. C o n t I n G e n C I e s

coNtINgeNt LIABILIty

On 13 August 2010 EnergySafety published its Final Electrical Incident Report in relation to the 2009 Toodyay bushfire, in which it expresses the opinion that the fire was caused by Western Power’s pole T303-43 falling to the ground and the resulting arcing of conductors igniting barley stubble.

Western Power fully appreciates that the Toodyay bushfire has caused significant loss for a number of residents of Toodyay, some of whom are seeking compensation. However, in the absence of any reliable determination of cause and liability, and because of continuing uncertainty in this regard, Western Power is not in a position to recognise a liability, if any, in these financial statements.

Western Power remains committed to fully cooperating in any proceedings commenced to determine cause and liability to ensure an expeditious outcome for all affected.

18 . C o M M I t M e n t s

(A) LeAse commItmeNts

NoN-cANceLLABLe oPerAtINg LeAses

Western Power leases premises under a non-cancellable operating lease expiring within two years. An option to renew for a further five years is expected. Western Power also leases motor vehicles and equipment under cancellable operating leases requiring no more than six months notice of termination.

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

2010 $’000

2009 $’000

operating leases (non-cancellable)

Payable within one year 589 612

Payable later than one year but not later than 5 years 2,667 2,771

Payable later than 5 years 1,147 2,032

4,403 5,415

(B) cAPItAL commItmeNts

Capital expenditure on fixed assets contracted for at the reporting date but not recognised as liabilities is as follows:

2010 $’000

2009 $’000

Payable within one year 154,060 286,222


160,542 312,898


| 1 0 6 |


18 . C o M M I t M e n t s ( C o n t I n U e D )

(c) other exPeNDIture commItmeNts

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

Western Power has the following commitments to pay Tariff Equalisation Contributions:

2010 $’000

2009 $’000

Payable within one year 175,700 122,100


543,500 554,432

19. e v e n t s o C C U R R I n G A F t e R t H e R e P o R t I n G D At e

Other than the matter disclosed in note 17, there are no matters or circumstances that have arisen in the interval between the end of the reporting period and the date of this report that are likely, in the opinion of the directors, to affect significantly the operations of Western Power, the results of those operations, or the state of affairs of Western Power, in subsequent financial years.



In the directors’ opinion:

(a) the financial statements and notes comply with the accounting standards

(b) the financial statements and notes give a true and fair view

(c) there are reasonable grounds to believe that Western Power will be able to pay its debts as and when they become due and payable

(d) the financial statements comply with Schedule 4 of the Electricity Corporations Act 2005.

This declaration is made in accordance with a resolution of the directors.

m BArNABA D ABerLe Chair of the Board Managing Director

30 August 2010


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D I R e C t o R s ’ D e C L A R At I o n

PrINcIPAL regIstereD offIce IN AustrALIA

363 Wellington Street Perth, Western Australia 6000 Telephone (08) 9326 4911

AuDItor

The Auditor General of Western Australia 2 Havelock Street West Perth, Western Australia 6000

BANkers

Commonwealth Bank of Australia 150 St Georges Terrace Perth, Western Australia 6000

WeBsIte ADDress

www.westernpower.com.au

DIrectors

mark BarnabaChair of the Board

Doug AberleManaging Director

John cahill

hon george cash A.m.

mervyn Davies

Paul underwood

geNerAL couNseL AND comPANy secretAry

John Pease

DIvIsIoNAL geNerAL mANAgers

ken BrownGeneral Manager System Management

Anne-marie clarkGeneral Manager Service Delivery

mark de LaeterGeneral Manager Customer Services

kevin gaitskellDirector Enterprise Solutions Partner

greg monkhouseGeneral Manager Human Resources

malcolm PeacockChief Financial Officer

Phil southwellGeneral Manager Regulation & Sustainability


C o R P o R At e D I R e C t o R Y

Auditor General

4th Floor Dumas House 2 Havelock Street West Perth 6005 Western Australia Tel: 08 9222 7500 Fax: 08 9322 5664

INDEPENDENT AUDIT REPORT ON ELECTRICITY NETWORKS CORPORATION

To the Parliament of Western Australia

I have audited the financial statements of the Electricity Networks Corporation. The financial statements comprise the Balance Sheet as at 30 June 2010, and the Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year ended on that date, a summary of significant accounting policies, other explanatory Notes and the Directors’ Declaration.

Directors’ Responsibility for the Financial Statements The directors of the Electricity Networks Corporation are responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the Electricity Corporations Act 2005. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Summary of my Role As required by the Electricity Corporations Act 2005, my responsibility is to express an opinion on the financial statements based on my audit. This was done by testing selected samples of the audit evidence. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Further information on my audit approach is provided in my audit practice statement. This document is available on the OAG website under “How We Audit”.

An audit does not guarantee that every amount and disclosure in the financial statements is error free, nor does it examine all evidence and every transaction. However, my audit procedures should identify errors or omissions significant enough to adversely affect the decisions of users of the financial statements.

Audit Opinion In my opinion, the financial statements of the Electricity Networks Corporation are in accordance with schedule 4 of the Electricity Corporations Act 2005, including: (a) giving a true and fair view of the Corporation’s financial position as at 30 June 2010

and of its performance for the year ended on that date; and (b) complying with Australian Accounting Standards and the Corporations Regulations

2001.

COLIN MURPHY AUDITOR GENERAL 31 August 2010


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I n D e P e n D e n t A U D I t o R ’ s R e P o R t

The table below summarises the Global Reporting Index disclosures address by this annual report. This is part of Western Power’s commitment to reporting best practice.

For more information about GRI reporting visit www.globalreporting.org.

grI coNteNt INDex

seCtion full DisClosure Partial DisClosure

a. About Our Report 3.1, 3.3, 3.4, 3.6, 3.13 3.2, 3.7, 4.12*

1. Connecting People with Energy 2.1, 2.2, 2.4, 2.6, 2.7, 2.8 EU3, EU4

2. Review

Chairman’s review 1.1

Managing Director’s Review 1.1

3. Achievements and challenges 2.10

4. Performance EU29 EC1*, PR5

5. Our Core Business

5.1 Operating & improving the network EU23 DMA Economic, EU6*

5.2 Connecting with customers EU8 4.16*, EU6*, EU7, EU8, EN6*, EU19*, SO1*

5.3 Community investment EC1*

5.4 Safety and Health EU16

5.5 People and culture EU14* DMA Labour , LA1, LA2*, LA4, LA7*, LA8,

5.6 Environment 4.8*, EN28* DMA Environment

EN3, EN4, EN12*, EU13, EN13, EN14*, EN23

5.7 Climate Change EN16*, EN26 1.2, EC2*, EN8, EU12*, SO5

5.8 Transforming the core

5.9 Positioning for the future EU8 EN5, EU7, EU8

6. Executive Team and Board 2.3, 4.1*, 4.2*, 4.3*

7. Directors report 4.5*,

8. Statement of Corporate Governance 4.6*, 4.7*, 4.8*, 4.9*, 4.10*

9. Financial Report

10.GRI Content Index 3.12


G L o b A L R e P o R t I n G I n D e x

key:

DmA – Disclosure of management Approach* this GRI indicator has been selected in the Energy Supply Association of Australia’s (esaa) Sustainability Practice Framework (SPF) for target reporting by signatories. Please refer http://www.esaa.com.au/images/stories/spf/esaaspf.pdf

For more about the Global Reporting Initiative, please visit http://www.globalreporting.orgFor our detailed disclosure table please visit http://www.westernpower.com.au

esaa sPf indicators not referenced: 4.4*, 4.14*, 4.15*, 4.17*, EC8*, EN18*, EN21*, EN22*, EU18*, LA6*, LA10*, LA14*, HR4*, SO8*, EU25*, PR9*

other grI indicators not referenced: 2.4, 2.5, 2.6, 2.9, 3.2, 3.5, 3.13, 4.11, 4.13, 4.14, 4.15, 4.17, EC3, EC4, EC5, Ec6, EC7, EC9, EU10, EN1, EN2, EN7, EN9, EN10, EN11, EN15, EN17, EN19, EN20, EN24, EN27, EN29, EN30, EU15, EU17, LA3, LA5, LA9, LA11, LA12, LA13, DMA – Human Rights, HR1, HR2, HR3, HR5, HR6, HR7, HR8, HR9, DMA – Society, EU20, EU21, EU22, SO2, SO3, SO4, SO5, SO7, EU24, PR1, PR2, PR3, PR4, PR6, PR7, PR8, EU26, EU28

other grI indicators not applicable: EU1, EU2, EU5, 3.8, 3.9, 3.10, 3.11, EU9, EU11, EN25, SO6, EU27,EU30


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G L o b A L R e P o R t I n G I n D e x

ConneCting PeoPle With energy

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