Annual Report 2014-15 - EnergexEnergex Annual Performance Report 2014/15 2 1.3 2014/15 Highlights...

Energex Annual Report

2014/15Connecting with you

Part AAnnual Performance Report

For general enquiries: www.energex.com.au

[email protected] 13 12 53 (8am to 5:30pm, Monday to Friday)

13 14 50 Telephone interpreter service

Follow us on twitter.com/energex Like us on facebook.com/energex

© Energex Limited 2015 ® Energex and Energex Positive Energy are registered trade marks of Energex Limited

Energex Limited ABN 40 078 849 055 GPO Box 1461, Brisbane QLD 4001

for the year ended 30 June 2015

8028 09.09.2015

1 Key information 1

1.1 About us A short history, our vision, our values and other Energex companies 1

1.2 Our customersA brief overview of Energex customers, their expectations and our engagement 2

1.3 HighlightsOur key achievements and challenges for the year 3

1.4 Five year summary (Historical)Our financial performance over the past five years 5

1.5 Five year summary (Restated)Our financial performance over the past five years 6

1.6 Statement of Corporate Intent Report Our actual performance against our targeted performance as agreed with our shareholders 7

1.7 Chair’s reviewOur Chair’s comments on our 2014/15 milestones 8

1.8 BoardprofilesAn overview of Energex Board members 10

1.9 ChiefExecutiveOfficer’sreportOur CEO reflects on our successes in achieving business priorities and focussing on future challenges 13

2 Corporate governance 15

2.1 Framework and organisational structureA diagram and description of our new structure 15

2.2 PrinciplesAn explanation of how we comply with the Corporate Governance Guidelines for Government Owned Corporations (GOCs) 16

3 Future opportunities and challenges 21

Contents

4 Performance 23

4.1 SafetyAn overview of our safety performance and initiatives delivered in 2014/15 23

4.2 Financial performanceA report on our financial strategies to deliver business efficiencies and price stability 26

4.3 Operational excellenceOur field performance and key operational achievements 28

4.4 Network performance The performance of our network throughout the year 33

4.5 PeopleKey initiatives for maintaining an adaptable, productive and engaged workforce 36

4.6 CustomerStrategies for delivering an exceptional service to our customers 39

4.7 CommunityOur community support program in 2014/15 42

4.8 EnvironmentDelivering environmental efficiencies for sustainable outcomes 44

5 Additional corporate reporting 47

6 Glossary and abbreviations 49

Key information 1.1 About Us

For more than 100 years Energex and its predecessors have provided a safe and reliable electricity supply to South East Queensland. Our network spans approximately 25,000 square kilometres stretching from Gympie in the north, to Withcott in the west and Coolangatta on the New South Wales border.

Our core role is to provide the necessary infrastructure to safely deliver a reliable electricity supply to almost 1.4 million homes and businesses. We provide a service for more than 290,000 solar photovoltaic (PV) connections which allows customers to sell electricity to the market. We also deliver electricity to a population base of around 3.3 million people via more than 52,000km of overhead and underground power supplies.

At Energex, our vision is to to be the preferred supplier of connected electricity services. We aim to achieve this by delivering choice and affordability to meet our customers’ evolving energy needs.

We are strongly focused on delivering the best service outcomes for our customers and work through any emergency event or severe weather to ensure this happens.

At the centre of our business is a high performing network worth almost $12 billion, the expertise of approximately 3,000 employees and a drive to provide our customers with a safe, reliable, and innovative service.

As a Government Owned Corporation (GOC), Energex operates under regulatory regimes established at both national and state levels. We have two shareholding Ministers: The Honourable Curtis Pitt, Treasurer; Minister for Employment and Industrial Relations, Minister for Aboriginal and Torres Strait Islander Partnerships, and The Honourable Mark Bailey, Minister for Main Roads, Road Safety and Ports and Minister for Energy and Water Supply.

Our values are the foundation for our everyday success:

• Put safety first Think safe, work safe, home safe. We are committed to achieving an injury free workplace.

• Deliver on our customer promise We are clear in what we promise customers and we deliver on our promise.

• Be a team player We operate as a team and leverage and learn from each other.

• Respect and support each other We value each other’s views. Together, we create success.

• Set a great example We live our corporate values every day. We create an environment that encourages people to grow, achieve and show courage in making changes for the better.

• Deliver balanced results We are passionate and disciplined about achieving our performance targets. We deliver sustainable performance.

1 Energex Annual Performance Report 2014/15

1

Our customers are the people of South East Queensland who benefit from the installation and supply of our electricity network.

Our customer base is comprised of four key groups, including:

We are committed to, and value, effectively engaging with our customers so we better understand their views. Our vision for customer engagement is to create a culture that recognises and values working with customers and the community for mutually beneficial outcomes in service delivery. With this knowledge we can better align our services, activities and interactions with our customers’ expectations.

We recognise that embedding customer engagement into our corporate culture is important but challenging. We are constantly working to improve our engagement alongside our customer groups, and have embedded customer engagement into our day-to-day activities through our Customer Engagement Framework, and other key initiatives such as electricity tariff reform.

Stakeholders – those who have vital interest in the efficient and service-oriented operation of Energex including shareholders, Government and Regulators, customer representative groups, regional councils, contractors and property developers

Partners – those in the electricity supply chain that help meet our customers’ needs including retailers, other distributors, electrical contractors, solar & alternative technology providers, and connection service providers

Connected customers – those who are direct recipients of our services including residential, commercial and industrial customers

Community – people who are potentially affected by the distribution infrastructure operated by Energex in-use or during installation and maintenance

Generation Distribution ‘us’

Retail / Billing Connected customer

‘you’

Transmission

=

Gympie

Noosa

NambourMaroochydore

Caloundra

Kilcoy Woodford

Toogoolawah Caboolture

Esk Redcliffe

FernvaleBrisbane

GattonIpswich

Beenleigh

Boonah Beaudesert Surfers Paradise

NSW

QLD

The Energex Network

Diagram 1 – The electricity network in South East Queensland

1.2 Our Customers

2Energex Annual Performance Report 2014/15

1.3 2014/15 Highlights

Restored power to more than 114,500 South East Queensland homes

and businesses following the November 2014 super storm and provided on-the-ground support to our distribution entity colleagues in response to February 2015 Tropical Cyclone Marcia in Rockhampton, and April 2015 New South Wales storms.

Exceeded our 2010-2015 target of 144 MVA by removing 180 MVA from demand forecasts at a

cost lower than budgeted by adopting new practices to lessen the demand on our network and building strong industry partnerships and support.

Launched the Contact Centre Technology (CCT) project,

a joint initiative between Energex, Ergon Energy and SPARQ Solutions to replace outdated infrastructure and prepare the foundation for future technology development. As the primary customer contact interface for Energex this critical replacement ensures reliability and robustness of our systems for our customers to reach us in major events.

Provided community support to the Princess Alexandra Research Foundation for a world-first skin cancer research project. Energex field staff are involved in a program which uses smart phones to monitor changes in their skin. The

program participants photograph sections of their skin each day with their phones and upload the images to the Princess Alexandra Research Foundation dermatologists who analyse the images for any changes. Ultimately the research team aims to develop a vaccine for skin cancer.

Implemented our customer engagement program to strengthen our relationships with

customers and build a greater understanding of current and future network management requirements and customer expectations.

Met our Minimum Service Standards (MSS) across all areas except CBD System Average

Interruption Frequency Index (SAIFI) which was impacted by a significant event at our Victoria Park substation

Welcomed 38 new recruits into our apprenticeship

program to complete technical training at our EsiTrain facility at Rocklea.

Delivered significant network improvements and increased capacity

through our Program of Work as we:

• replaced more than 2,500 poles to improve safety

• replaced more than 1,000 air break switches to meet service targets

• constructed or augmented 71 x 11,000 kilovolt (kV) major powerlines to maintain reliability

Implemented our new Energex Union Collective Agreement (EUCA) which will remain in place

for the next three years.

Received reaccreditation for our Gold Rated Wellness program under the

Queensland Government Healthier, Happier Workplaces initiative.

HIGHLIGHTS

We held 936 training courses with 13,616

participants attending face to face and on-line.


Our peak demand pool pump program has influenced the

current industry standard as the preferred energy efficient pump available in the market. Due to the success in the adoption of this technology, our program no longer needs to stimulate the market with customer incentives.

Prepared for and supported the G20 Brisbane Summit held in November

2014. This involved reviewing our operational processes, implementing substantial logistical and strategic plans for the G20 precinct while upgrading network security protocols and systems. Throughout the lead up to, and during the Summit, Energex staff worked closely with Queensland Police and Federal and State agencies to ensure a safe and secure power supply.

Continued to support local communities through a $1.12 million community support program.

Adjusting our business to meet shifts in energy usage patterns and adjusting our Program of Work to align with those changes.

Ensuring the ongoing safety of workforce during a period of significant change.

For community safety reasons, implemented a new flood alert system in Gympie that

is triggered by the rise of the Mary River. This system proactively de-energises nearby homes and businesses and dispatches crews to assist in flood events.

Recorded no significant safety incidents throughout the year and continued to foster a

culture focused on mitigating risk and reporting unsafe behaviour.

Continuing to adopt our customers’ changing energy

behaviours and attitudes which will affect the way we engage with them to deliver tariff reform.

Continuing to strengthen our relationships with customers to provide choice, affordability and control.

CHALLENGES

We delivered more than $20 million in annualised

cost savings through improved efficiencies within field services, asset management processes, administrative activities supporting the Program of Work, and procurement.

Achieved a Community Regard Index of 69.0 and a Service Performance Index of 85.4.


As at 30 June 2011 2012 2013 2014 20151

ProfitandLoss($M)Total revenue 1,736 2,005 2,274 2,594 2,575Materials and consumables (50) (48) (50) (51) (63)Solar photovoltaic feed-in tariff expense (19) (74) (167) (227) (204)Transmission use of system charges (344) (390) (394) (404) (388)Employee expenses (202) (198) (203) (199) (205)Termination benefits (1) (10) (51) (18) (26)Depreciation, amortisation and impairment (286) (329) (365) (385) (444)Contractors and consultants (156) (183) (119) (135) (136)Borrowing costs (294) (328) (366) (400) (326)Other operating expenses (52) (42) (57) (52) (50)Total operating expenses (1,404) (1,602) (1,772) (1,871) (1,842)Operatingprofitbeforeincometax 332 403 502 723 733Income tax equivalent (97) (121) (151) (215) (221)Netprofit 235 282 351 508 512Earnings before interest and tax (EBIT) 626 731 868 1,123 1,059Earnings before interest and tax and depreciation adjusted (EBITDA)2 912 1,061 1,233 1,508 1,503Capitalised interest 28 29 26 21 13BalanceSheet($M)Total assets 9,812 11,021 11,916 13,291 12,475Total debt 4,770 5,465 6,001 6,465 6,811Total shareholders' equity 2,922 3,117 3,335 3,825 2,073CapitalExpenditure($M)Corporate initiated augmentation 483 422 340 277 184Asset replacement 145 191 245 257 277Customer initiated capital works 186 184 184 160 181Other 172 198 226 135 181Total Capital Expenditure 986 995 995 829 823Share InformationDividends ($M)3 188 226 294 406 1,295Dividends per share (¢) 21.4 25.8 33.6 46.4 147.9Dividends/Net profit (%) 80.0 80.0 83.8 80.0 252.9RatiosEarnings per share (¢) 26.8 32.3 40.2 58.0 58.5Return on average shareholders' equity (%)4 8.5 9.4 10.9 14.2 17.4Debt/(Debt + Equity) (%) 62.0 63.7 64.3 62.8 76.7Return on average total assets (%)5 6.8 7.0 7.6 8.9 8.2Current ratio (%)6 110.6 121.2 79.7 98.1 42.0EBITDA interest cover (times)7 2.8 3.0 3.1 3.6 4.4

1.4 Five year summary (Historical)

4 Net Profit / Average of Opening and Closing Shareholders’ Equity 5 EBIT / Average of Opening and Closing Total Assets 6 Current Ratio = Current Assets / Current Liabilities 7 EBITDA / (Borrowing Costs + Capitalised Interest)

In the 2014/15 financial year Energex changed its accounting policy with respect to the recognition of regulated revenue. Under the previous policy, Energex recognised the full amount of revenue allowed under its revenue determination with any amounts under or over recovered recognised as an asset or liability. The revised policy recognises regulated revenue in the period which customer electricity consumption occurs with no recognition of under or over recoveries as an asset or liability. For further information, refer to the Annual Financial Report. The following table presents the historical information as previously published.

1 Amounts/ratios for 2015 reflect the change in the Group’s regulated revenue recognition policy, refer to Note 30 of the Financial Statements 2 Adjusted for total Depreciation, Amortisation and Impairment 3 The 2015 dividend includes an additional $783 million declared from retained earnings and reserves


As at 30 June 20111 20121 20131 20141 2015

ProfitandLoss($M)Total revenue 1,601 1,739 1,951 2,248 2,575Materials and consumables (50) (48) (50) (51) (63)Solar photovoltaic feed-in tariff expense (19) (74) (167) (227) (204)Transmission use of system charges (344) (390) (394) (404) (388)Employee expenses (202) (198) (203) (199) (205)Termination benefits (1) (10) (51) (18) (26)Depreciation, amortisation and impairment (286) (329) (365) (385) (444)Contractors and consultants (156) (183) (119) (135) (136)Borrowing costs (281) (323) (366) (400) (326)Other operating expenses (52) (42) (57) (52) (50)Total operating expenses (1,391) (1,597) (1,772) (1,871) (1,842)Operatingprofitbeforeincometax 210 142 179 377 733Income tax equivalent (60) (42) (54) (111) (221)Netprofit 150 100 125 266 512Earnings before interest and tax (EBIT) 491 465 545 777 1,059Earnings before interest and tax and depreciation adjusted (EBITDA) 777 794 910 1,162 1,503Capitalised interest 28 29 26 21 13BalanceSheet($M)Total assets 9,735 10,787 11,359 12,388 12,475Total debt 4,770 5,465 6,001 6,465 6,811Total shareholders' equity 2,942 2,954 2,946 3,193 2,073CapitalExpenditure($M)Corporate initiated augmentation 483 422 340 277 184Asset replacement 145 191 245 257 277Customer initiated capital works 186 184 184 160 181Other 172 198 226 135 181Total Capital Expenditure 986 995 995 829 823Share InformationDividends ($M) 188 226 294 406 1,295Dividends per share (¢) 21.4 25.8 33.6 46.4 147.9Dividends/Net profit (%) 125.3 226.0 235.2 152.6 252.9RatiosEarnings per share (¢) 17.1 11.4 14.3 30.3 58.5Return on average shareholders' equity (%) 5.3 3.4 4.2 8.7 19.4Debt/(Debt + Equity) (%) 61.9 64.9 67.1 66.9 76.7Return on average total assets (%) 5.3 4.5 4.9 6.5 8.5Current ratio (%) 126.7 112.1 64.2 65.0 42.0EBITDA interest cover (times) 2.5 2.3 2.3 2.8 4.4

1.5 Five year summary (Restated)

Additional network and customer statistics on page 48

1 Comparative amounts/ratios have been restated to reflect the change in the Group’s regulated revenue recognition policy

The following table presents historical information on a basis consistent with the revenue recognition policy adopted in the current year.


KRA MeasuresActual performance

Target performance

SafetyAchieve top quartile safety performance against peers and an injury free workplace

Lost Time Injury Frequency Rate (LTIFR) 4.38 <2.5

Total Recordable Injury Frequency Rate (TRIFR) 20.24 <20

Financial Performance Deliver a sustainable financial position

Operating Profit after Tax (OPAT)1 $512M >$466M

Return on Assets (ROA)2 8.5% >7.9%

Standard Control Services (SCS)Indirect Costs3 $396.6M <$419.9M

SCS OPEX $361.5M <$394.8M

SCS CAPEX4 $751.9M $807.8M (± 5%)

Operational PerformanceDeliver the Program of Work (PoW) cost effectively and optimise programs to meet customer and business requirements

Key Projects delivered5

Operating Efficiency Index6

PoW Delivery Index

100%

36.6

98%

>95%

<39.7

>90%

Network PerformanceOperate the network effectively to meet required performance standards

Minimum Service Standards (MSS)7 Unfavourable Performance

Favourable Performance

PeopleBe an employer committed to performance leadership providing a safe workplace and an engaged workforce

Employee Engagement Index Achieved Achieved targeted staff survey results

Customer and CommunityDeliver quality services to our customers and positively engage with our community

Service Performance Index8

Community Regard Index9

85.4%

69%

>80%

>63%

EnvironmentDeliver a sustainable environment position

Environment Operations Plan Achieved to plan

Tracking to plan

1.6 Statement of Corporate Intent (SCI) report

Performance targets and outcomes for 2014/15

1 OPAT performance for 2014/15 is measured based on a revised revenue recognition policy adopted for the year. The OPAT result for 2014/15 without this amendment would have been $553 million.2 Return on Assets (RoA) reflects EBIT divided by the average closing balance of total assets. The opening balance used in the averaging calculation has been restated to align with the new accounting policy adopted in the current year.3 Indirect Expenditure excluding corporate restructuring and sponsorship costs allocated to SCS pursuant to our Cost Allocation Methodology. 4 The SCS CAPEX target is a range of 5 per cent above or below target reflecting the natural variance in timing of expenditure for multi-year projects.5 These key projects due for completion in 2014/15 are included in the Distribution Annual Planning Report (DAPR).

6 This measures Total Expenditure relative to Energex’s existing asset base and Customer Density i.e. Efficiency Index = (SCS Totex ÷ SCS RAB) x 10,000 / (No. customers ÷ Network line length).7 Five of the six MSS targets were achieved. The Urban SAIFI target was not met primarily due to a fault at Victoria Park substation in Brisbane. More details on MSS in section 4.48 Based on an independent and random telephone customer survey on recent service interactions with Energex which measures service performance standards (Initial Contact and Delivery of Service). Represented as an index score out of 100.9 Based on an independent survey of customers’ perceptions on whether Energex plays a sustainable part in the community e.g. ethical business dealings, public confidence, community education, environmentally responsible, sustainable energy practices and vegetation management. Mean responses calculated and weighted by question importance to give an overall index score out of 100.


1.7 Chair’s review

I am pleased to have the opportunity to provide the Chair’s Report for the Energex 2014/15 Annual Performance Report. Having been a director on the board since 2008, it was an honour to be appointed as Chair of one of Queensland’s iconic companies in April this year.

Strong performance outcomesWhile the past year has seen a period of continued change and challenges for Energex, it is pleasing to advise that the business has delivered strong outcomes for the South East Queensland community and our shareholders, the Queensland Government.

These results have been achieved through our continued focus on prudency and efficiency within the business as a whole, as well as a strengthened focus on engaging our community consistent with the theme of this report, Connecting with you.

Stabilising the cost of our services has been a key focus for the business. In recent years Energex has undertaken comprehensive cost reduction programs with the aim of driving down the flow-on costs for customers through electricity prices. These initiatives have resulted in the first below inflation network price outcome for many years being delivered to our customers from 1 July 2015.

To maintain these positive outcomes for customers, Energex will be seeking to deliver further business efficiencies and, importantly, implement more appropriate and fairer pricing tariffs in the coming years. Energex will continue to engage with our customers, retailers, regulators and Government to meet our consumers’ changing energy use patterns while at same time ensuring the sustainable, reliable, and safe supply of electricity.

Throughout the year we have maintained strong levels of network performance in terms of safety and reliability, and our key community satisfaction measures are at near-record highs.

From a financial perspective, the business has again delivered excellent results for the Queensland Government. Our Operating Profit After Tax (OPAT) for 2014/15 is $512 million. In accordance with a shareholder direction, the Board has been able to declare a dividend of 100 per cent of OPAT and an additional dividend of $783 million for our shareholder.

Meetingthe challenges ahead On 30 April 2015 the Australian Energy Regulator (AER) delivered its Preliminary Determination for Energex to operate within for the next five years. I am pleased to report that the AER recognised the excellent efforts of staff from across the business in reducing our operational costs and has approved the operating expenditure levels put forward in our proposal. This gives some surety to the business to maintain our operational services for the years ahead.

However, there remain challenges regarding capital requirements for our network replacement program and we will be continuing to work with the AER regarding requisite capital expenditure levels in the lead up to the AER’s final decision due in October 2015. While we fully understand and support the regulator’s view that prices should be driven down, our customers have clearly told us that this should not come at the expense of reduced network performance, reduced customer service or at a risk to community safety. The safety of our people is also paramount.


1.7 Chair’s review (continued)

There is no doubt that readjusting our business to fit within the outcomes of the regulatory determination will bring challenges, but that is something Energex, and its people, has proven capable of meeting time and time again. Energex has been preparing for a more constrained regulatory determination by substantially adjusting the size of our business progressively over the past few years in response to a lower growth program of work in South East Queensland and changing customer usage patterns.

Impending industry changesFollowing their election in January 2015, the new Queensland Government made a number of major announcements which will impact on Energex and indeed the broader energy sector in Queensland. This includes plans to merge Energex with other Queensland Government-owned energy corporations. The Board and Executive Management team will work with Government through the merger as details regarding the proposal emerge later this year. In the meantime, I’m confident that our people will remain focused on continuing to deliver exceptional service to our customers.

In addition to the merger, the Government has also made announcements regarding: renewable energy through its one million solar homes target; a stronger focus on apprentices and trainees; electricity safety with the re-establishment of a stand-alone Electrical Safety Office; increased consumer protection through the National Electricity Customer Framework; and electricity pricing tariff reform including a review by the newly established Queensland Productivity Commission.

While Energex will be working with our shareholders on these issues, at the same time we are heavily involved with our counterparts across the country assessing the opportunities and challenges of future industry changes including battery storage, electric vehicles and other renewable energy sources.

Energex is well prepared for these developments, having already handled the operational and technical issues regarding soaring domestic solar PV installation in our area of operation. Solar PVs grew by almost 30,000 additional properties in 2014/15 and South East Queensland now has one of the highest levels of solar PV penetration in the world.

Our vision for 2015/16, ‘To Be the preferred supplier of connected electricity services’ shows that while Energex is currently the sole distributor of connected electricity services in South East Queensland, we cannot be complacent. The rapid changes in technology means customers will have more options available to them in how they consume, produce and manage their energy. Our updated vision reflects the need to continue to evolve our business to ensure Energex remains their supplier of choice.

Our people’s achievements I would like to pay tribute to the people who have delivered these strong outcomes for the community and our shareholders. Under the leadership of our hard-working and capable executive management team led by our CEO, Energex’s team has again done the Board and broader business proud.

While high profile events like the November ‘super storm’ in the Brisbane region, and support for Ergon in Central Queensland after Tropical Cyclone Marcia and Ausgrid in the Hunter Valley are easily noticed, it is the day-to-day work of our committed and talented people that contributes to the real success of our business.

Finally, I’d like to take this opportunity to give credit to the former Chairman, Hon Shane Stone, for his extensive input and leadership of the board for the past three years. I also acknowledge the dedication and contribution of my fellow directors throughout the year and welcome Gordon Jardine who joined the board in May and brings extensive industry experience to the business.

I am confident that Energex is well placed as we move into the future.

Kerryn Newton Chair,EnergexLtd


1.8 Board profiles

DirectorsKerryn Newton – Board Chair LLM, MBA, MA, Grad Dip (Applied Finance and Investment), FAICD, FAIM, FGIA

Kerryn was appointed as Chair of the Energex Limited Board on 23 April 2015. Kerryn first joined the Energex Limited Board in October 2008 and since that time has been a member of, and chaired, several of the Board Committees. She is currently a member of the Audit and Risk Committee and the People Committee.

Kerryn was admitted as a solicitor of the Supreme Court of Queensland in 1991 and has over 25 years’ experience working in various legal, management and commercial roles in the private and public sectors, and as a consultant working across the private, government, publicly-listed, and not-for-profit sectors in an extensive range of industries.

Kerryn has also been a member, and Chair, of a wide range of boards and committees, and was a member of the former Queensland Liquor and Gaming Commission. Currently, Kerryn is Managing Director of a national governance consulting firm and advises a wide range of organisations in the areas of governance, strategy and management.

MajorGeneralTheHonourablePeterArnison (Retd) AC, CVO – Director BEc, D Laws UQ, D Univ QUT, D Univ Griffith, D Letters USQ, D Univ SCU, Grad Dip (Applied Finance and Investment).

Peter Arnison was first appointed a non-executive Director of the Energex Limited Board in December 2004. He is Chairman of the Regulatory Committee and a member of the Network and Technical Committee and the People Committee.

Peter served for 37 years in the Australian Army in a variety of Infantry command appointments, retiring as Land Commander, Australia, in June 1996. He was appointed Queensland’s 23rd Governor, serving from July 1997 to July 2003. He was Chancellor of Queensland University of Technology for eight years (until September 2012) and has held a number of company and organisation board memberships. In 2011, Peter chaired the Brisbane City Council Flood Response Review Board.

Ken Clarke – Director B.Com (Hons) Grad Dip (Mgt - Stanford USA)

Ken Clarke was appointed a non-executive Director of Energex Limited Board in July 2012. He is a member of the Network and Technical Committee and the Regulatory Committee. Ken has an extensive career in public administration, with particular experience in public finance and governance.

A former Under Treasurer in the Northern Territory Government, Ken also has experience working in Canberra as well as in the United Kingdom and Papua New Guinea. Ken has held various Board appointments, including the NT Power and Water Corporation (current), In Motion Technologies Pty Ltd, Northern Territory University, and the Northern Territory Mango Industry Association.

He works as a consultant and has Board and executive roles in a company developing software and content for the education industry in Australia and overseas.


MervynDavies–Director BE (Hons), M.Eng.SC, B.Com

Mervyn Davies was appointed a non-executive Director of Energex Limited Board in July 2012. He is Chairman of the Network and Technical Committee and a member of the Audit and Risk Committee and the Regulatory Committee.

Mervyn is a career engineer, engineering consultant and professional company director. He has extensive experience in the electricity distribution industry and has served on many state and private energy boards. These companies and boards include EnergyAustralia (now Ausgrid) in NSW, Western Power Corporation (WA) and Northern Territory Power & Water Corporation, Country Energy (now Essential Energy) in NSW and Aurora Energy Pty Ltd (Tasmania).

After more than 30 years in a range of operational and management positions with EnergyAustralia, Mervyn established and operates an engineering consultancy practice specialising in electricity distribution, spending time developing and negotiating long-term capital expenditure plans and performance outcomes affecting the security of electricity supply to Sydney.

He also worked for the Independent Pricing and Regulatory Tribunal in NSW and for the Australian Competition and Consumer Commission. He holds Honours and Masters Degrees in Engineering and a Bachelor of Commerce (Economics) and has membership or affiliation with the Warren Centre – Energy Committee (University of Sydney), and the Electric Energy Society of Australia.

Sandra Deane – Director B.Com, LLB (Hons), Grad Dip CSP, GAICD

Sandra Deane was appointed as a non-executive Director of the Energex Limited Board in December 2012. She is Chairman of the People Committee and a member of the Audit and Risk Committee. Sandra is an experienced board member, tribunal member and an independent energy consultant with extensive private and public sector experience in highly regulated environments, including the energy and infrastructure sectors.

She brings experience from senior positions in the corporate (publicly listed, large private and government-owned corporations) and professional (legal) sectors. Sandra has over 20 years experience in legal practice in corporate and private practice and tribunal roles and brings professional expertise in contract management and negotiation, dispute resolution and compliance to the Energex Board.

She is currently a non-executive director of Stadiums Queensland, a sessional member of the Queensland Civil and Administrative Tribunal and a board member of Legal Aid Queensland. Sandra was Energex’s Gas Commercial Manager in 2005 to 2007 and worked in that role for AGL until 2009 including the transition period following the sale of the Energex gas business.

John Geldard – Director B.Com, BE, CPA FAICD

John Geldard was first appointed a non-executive Director of the Energex Limited Board in July 2005. He is Chairman of the Audit and Risk Committee and a member of the Regulatory Committee.

John has extensive experience within the private and public sectors in the manufacturing, mining and energy industries and has been involved with electricity industry reform in Queensland and Western Australia.

Previously, John has held executive positions at Energex, including Chief Executive Officer between March and December 2000, and Chief Financial Officer from July 1997 to April 2001. Prior to this, John served as the Chief Financial Officer for the Queensland Transmission and Supply Corporation. John is a Director of Energy Super (formerly ESI Super), The Private Capital Group and was a previous Deputy Member of the Queensland Treasury Corporation Board.

1.8 Board profiles (continued)


More informationFurther details of current directors and secretaries, with their qualifications and experience, can be found on the Energex website at: www.energex.com.au/about-us/ we-are-energex/board-members

Gordon Jardine – Director B.E ( Hons) , B.Com, M.Sc (Environmental), FAICD, FAIM, FIEAust, FTSE

Gordon was appointed to the Energex Board in May 2015. He is a member of the People Committee and the Regulatory Committee. He is also the independent Chairman of ElectraNet Pty Limited, the private company which owns and operates the high voltage electricity transmission grid in South Australia, a position held since 2011.

He has been an ElectraNet director almost continuously since 2000. From 1995 to 2011, he was CEO of Powerlink Queensland, which owns and operates the high voltage electricity transmission grid in Queensland. During this period, he was seconded to Energex as CEO for 9 months in 2004/05.

Gordon spent his early career in the computer software industry, where he held a number of national and international roles, and in the mining industry in Queensland and WA.

ChiefExecutiveOfficerTerry Effeney – Chief Executive OfficerBE (Hons), BEcon, MEng, FAICD, RPEQ, FIEAust, FAIM

Terry Effeney was appointed Chief Executive Officer of Energex in January 2007. Possessing extensive electricity industry experience, Terry held senior engineering and management roles within Ergon Energy and its predecessors prior to his Energex appointment.

Company SecretariesMichaelRussell–DirectorCorporateGovernance and Company Secretary BE, MBA, Grad Dip AppCorpGov, GAICD, ACIS, MIEAust, CPEng

Michael joined the organisation when it was operating as SEQEB in 1984, and has held various engineering and management positions.

His expertise in corporate governance has been developed through responsibilities that included the management of significant Energex investments in a listed telecommunications company and in a listed ceramic fuel cell development company.

MarnieWhite–CorporateGovernanceManagerandCompanySecretary LLB, BA, Grad Dip LP, Grad Dip App Corp Gov, GAICD

Marnie White was admitted as a solicitor in July 2000 and practiced in a national law firm before joining Energex as Legal Counsel Network in 2005. She was appointed as Secretariat and Governance Manager (Company Secretary) in December 2007 and became Corporate Governance Manager in 2011.

In 2009, she completed the Graduate Diploma in Applied Corporate Governance through Chartered Secretaries Australia. In 2015, she also completed the Company Directors’ Course through the Australian Institute of Company Directors.


1.9 Chief Executive Officer’s report

For Energex, 2014/15 was another year of change and challenge as we work to ensure our business remains in step with a rapidly evolving energy market and aligned with community expectations.

I wish to thank Energex staff for again delivering outstanding outcomes and high levels of service to the South East Queensland community throughout the year.

While I am proud of our staff in their quality day-to-day business interaction with customers, this year I was particularly impressed in their efforts to safely and promptly restore power to customers in our region after the November 2014 supercell storm, and the emergency response and assistance they provided Ergon Energy in Central Queensland after Cyclone Marcia and to AusGrid after the mid New South Wales coast’s devastating storms and floods caused by an intense east coast low weather system.

I’d also like to highlight the vast amount of work undertaken by Energex field and support staff in preparing for the Brisbane G20, an event that saw the leaders of the world’s largest economies meet in our State’s capital.

It was a great example of collaboration between our staff, external State Government agencies and law enforcement representatives to prepare for, and successfully host, this truly world event without incident.

SafetyThe safety of our staff and the community is paramount and although the organisation was involved in many emergency events and delivered a full gamut of Program of Works, I was pleased to see there were no high consequence injuries in 2014/15.

Of course much of this result can be attributed to the efforts of our staff to further implement safety into their daily routine.

It has also been a consequence of delivering many safety training initiatives that help staff to understand the conscious reasons behind unsafe behaviours and empowers them to “call” potential dangerous situations as they see it.

While it was great we achieved our Lead Safety Measures and to see that days lost due to injuries were down from 1,185 last financial year to 754 this year, we will always consider a single injury one too many and will continue to enforce the value of safety and educate our staff in incident prevention.

Our customersWe have continued to increase our engagement activities with our customers to ensure our services, and the way in which we deliver them, support their expectations.

This engagement assists us to evolve and diversify our organisation as we commit ourselves to remain the preferred supplier of connected electricity services both now and into the future.


Financial resultsEnergex’s continued implementation of additional business efficiencies and prudent capital expenditure has enabled us to deliver a strong after tax profit of $512 million for our shareholders and therefore the people of Queensland.

Moving forward, these efforts will enable us to continue to provide high quality customer services while delivering real reductions in network costs.

Program of work and reliabilityOver the past decade, Energex focused on upgrading and expanding an ageing network to ensure the South East Queensland community can enjoy the advantages of a safe and reliable power network.

This past investment has enabled us to become more prudent with capital spending in 2014/15 without adversely affecting the network’s performance and reliability.

This financial year we invested $654.6 million upgrading the network and a further $276.8 million operating the network which has enabled us to provide increased capacity to areas within our region that have been identified as expanding such as new domestic and commercial developments or areas with power assets at the end of their useful life.

Energex Union Collective Agreement (EUCA)It has also been a positive outcome for staff following an agreement being reached on wages and conditions through the new Energex Union Collective Agreement (EUCA) 2015. This was an important milestone that gives our staff certainty over the three year life of the agreement in terms of employment conditions and job security.

LookingforwardEnergex and our staff have always thrived on challenges and seized opportunities for the benefit of the organisation and community we proudly serve.

As a business in constant transition, we will continue to find more ways to be efficient in the face of a new Australian Energy Regulator’s Determination and to ensure our future impacts on energy price increases are minimal.

This drive for a more agile business will also assist us to deliver greater value to customers in the energy delivery market as deregulation increases and more choices become available through technological advancements in digital data information and controlling devices, energy microgeneration and power storage.

Undoubtedly these are all challenges, not just for Energex, but the entire sector. But as an organisation with an exceptional and innovative workforce we will continue to ensure we remain a leader in the energy delivery industry.

The State Government’s proposed merger of Queensland’s transmission and distribution companies also remains at the forefront of Energex’s challenges and opportunities.

The State Government announced in August 2015 how the electricity businesses may be merged in a measured and sound way. More information regarding the structure is expected to be revealed later in the 2015 calendar year.

Terry Effeney ChiefExecutiveOfficer


2.1 Framework and organisational structureCorporate Governance

Diagram 2 – Framework and organisational structure

*SPARQ Solutions Pty Ltd is a joint venture company, providing IT services to Energex and Ergon Energy Corporation Limited (Ergon).

Del

gatio

n to

CE

O

and

man

agem

ent A

ssurance and accountability from

m

anagement

Divisions

Shareholding Ministers

EnergexLimited Board

Board Committees

Management

Shareholding Ministers

Energex Limited Board

Subsidiary Boards

Chief Executive Officer

Executive Management

Team

Asset Management

Service Delivery

Procurement People & Services

Strategy, Regulation & Governance

Customer & Corporate Relations

Audit and Risk Committee

Network and Technical Committee

People Committee

Regulatory Committee

Oversight of unregulated business activities, including Energy Impact Pty Ltd.

Finance SPARQ*


2

Corporate GovernanceAs a GOC, Energex reports against the Corporate Governance Guidelines for Government Owned Corporations (the Guidelines) issued by the Queensland Government. The Guidelines provide the framework for all GOCs, including Energex, to develop, implement, review and report on their corporate governance arrangements under eight principles.

Principle 1 – Foundations of management and oversightShareholders

Energex is a public, unlisted company, with two shareholding Ministers who hold the shares on behalf of the State of Queensland. Our shareholding Ministers, as at 30 June 2015 were:

• The Hon. Curtis Pitt MP, Treasurer, Minister for Employment and Industrial Relations and Minister for Aboriginal and Torres Strait Islander Partnerships, holding 50 per cent of the A class voting shares and 100 per cent of the B class non-voting shares; and

• The Hon. Mark Bailey MP, Minister for Main Roads, Road Safety and Ports and Minister for Energy and Water Supply, holding the remaining 50 per cent of the voting shares.

Board Charter

Our Board Charter and Delegation of Authority Policy provide clear delineation between the roles and responsibilities of the Board and individual Directors and the matters which are delegated to management. Management’s responsibilities are well defined through job profiles, performance agreements and the Board-approved Delegation of Authority framework.

The Board has delegated certain aspects of its authority to the CEO, through a control framework which includes financial limitations, to operate the business on a day-to-day basis. The CEO and Executive General Managers from each division comprise the Executive Management Team (EMT). The EMT implements the Board’s strategies and policies through the Delegation of Authority Framework and Business Plan.

The Board Charter is reviewed every two years and its next review is due in 2016. The review ensures that the Charter continues to remain effective and current. A copy of our Board Charter is available at www.energex.com.au/about-us/right-to-information/publication-scheme.

Board Committees

The Board has established four committees to assist the Board in the performance of its functions in key areas:

• Audit and Risk Committee – provides oversight of financial integrity, risk management, effectiveness of the control framework, integrity, assurance over business operations and work place health and safety.

• Network and Technical Committee – provides oversight of technical and network standards for the delivery of electricity in a manner that meets the reasonable expectations of the community and complies with our legal and regulatory obligations. The Committee also has oversight of workplace health and safety, as related to network and technical matters.

• People Committee – provides oversight of remuneration and employment policies, workforce planning, diversity, staff establishment and company structure matters.

• Regulatory Committee – provides oversight of significant regulatory issues and related corporate projects, including the development of Energex’s 2015-2020 Regulatory Determination Proposal for submission to the Australian Energy Regulator (AER).

Board Handbook

Our Directors’ and Officers’ Handbook is distributed to Energex Directors and EMT and is used as an integral part of their induction process. The Handbook defines the Board governance systems and supports Directors in their governance responsibilities. During the year, a new edition of the Handbook was issued.

Directors’ induction

New Directors attend a structured induction session to provide them with an overview of our operations and information on the Board and committee functions. The induction assists Directors to understand their role and responsibilities, our business, and corporate expectations.

Assessing senior management performance

Power to Perform is the comprehensive and formal performance management program for all employees including senior management. The program includes individual executive performance agreements based on the achievement of well-defined Key Result Areas (KRAs) and Key Performance Indicators (KPIs) involving corporate, commercial and personal goals.

2.2 Principles


For further information on Power to Perform, see Principle 8.

During the year, the Board, through the People Committee, assessed the performance of the CEO and had oversight of the performance assessments of senior executives undertaken by the CEO.

Principle 2 – Structure the Board to add valueOur Directors

Our Board of Directors, including the Board Chair, are all independent, non-executive Directors. Our Directors are appointed by the Governor-in-Council in accordance with the Government Owned Corporations Act 1993 (Qld). As such, the Board does not play a formal role in selecting Directors or the size of the Board.

During the year, the Directors assessed their independence, with reference to the “factors relevant to assessing the independence of a director” in the ASX Corporate Governance Principles and Recommendations (3rd edition).

Where a Director has an interest or a material personal interest in a matter being considered by the Board, the Director will declare that interest in accordance with directors’ obligations under the Corporations Act 2001, the Energex Conflict of Interest Policy and the Energex Limited Constitution. The Constitution provides that a Director must absent themselves from a meeting, including all deliberations and voting on a matter where they have declared a material personal interest in the matter.

Details of Directors’ skills, experience and expertise relevant to their position are included in this report (page 10).

The terms of office and date of expiry held by each Director at the date of this report, as well as Directors’ attendances at Board and committee meetings, are set out in the 2014/15 Energex Annual Financial Report (see Part B).

A performance evaluation of the Board was held in 2014/15. The results show that Energex has in place strong corporate governance practices. However, the evaluation has prompted a number of agreed actions relating to governance refinements, which are now being implemented.

In accordance with the Guidelines, the Board wrote to the shareholding Ministers regarding the results of the evaluation.

Directors’ access to advice and training

The Board Charter provides that Directors may seek independent professional advice, at the company’s expense, to assist them to carry out their duties as a Director. The Board also has access to continuing education and training to maintain, update and enhance their skills, knowledge and experience.

Principle 3 – Promote ethical and responsible decision makingKey governance policies

We are committed to ethical and responsible decision making and have in place a suite of governance policies to establish this framework. These include the Code of Conduct, Compliance Policy, Fraud Control Policy, Delegation of Authority Policy, Conflict of Interest Policy, Public Interest Disclosure Policy, Lobbying Policy, Reportable Gifts Policy, Procurement Policy and the Energex Purchasing Manual.

The Energex Code of Conduct applies to Energex Directors, management, staff and contractors. New employees receive induction training on ethical business practices including the Code of Conduct. A copy of the Code of Conduct is provided to new employees and is readily available on the staff intranet.

Our advisers, consultants and contractors are expected to comply with high ethical standards aligned with the Code of Conduct. Our contracts with suppliers outline the expectations of the Code of Conduct. A copy of the Code of Conduct is available at www.energex.com.au/about-us/right-to-information/publication-scheme.

Directors have additional obligations and Directors’ duties under law. These are set out in the Energex Board Charter (which includes a Directors’ Code of Conduct) and the Directors’ and Officers’ Handbook.

Trading policy

As our company is government owned, no Director or employee holds or trades securities in any Energex Group Company. Our Conflict of Interest Policy includes a Share Trading Policy, which supplements the legal duties that apply to directors, officers and employees relating to the misuse of information or position and insider trading laws. A summary of this policy is available on our publication scheme website under ‘Our Policies’ at www.energex.com.au/about-us/right-toinformation/publication-scheme.

2.2 Principles (continued)


Principle 4 – Safeguard integrityinfinancialreportingAudit and Risk Committee

The role of the Audit and Risk Committee, comprised of independent Directors, is to oversee matters of financial integrity, risk management, effectiveness of the control framework, integrity and assurance over business operations.

The Committee’s duties and responsibilities are set out in its Charter, a summary of which is available on our website at www.energex.com.au/about-us/right-to-information/publication-scheme.

The role of Chairman of the Committee is not held by the Board Chair.

Details of members’ qualifications are included in this report (page 10).

Attendance at meetings is disclosed in the 2014/15 Energex Annual Financial Report (see Part B).

Principle5–Maketimelyandbalanced disclosureThe Board has reporting and continuous disclosure obligations to the shareholding Ministers under the GOC Act and Corporations Act 2001 (Cth).

We adopt a broad approach to disclosure to our shareholders. We take into consideration the obligations set out in legislation and relevant policies in order to ensure accountability to the shareholding Ministers, who are in turn accountable to Parliament. Our shareholding Ministers have access to material information concerning our company including our operations, financial performance, financial position and governance of our company and its subsidiaries.

This requirement is similar to the continuous disclosure obligations which apply to listed companies under the ASX Listing Rules. In addition to submissions on specific matters, including regular briefing notes, we provide a quarterly report to the shareholding Ministers.

A summary of our Government and Shareholder Disclosure Policy is available at www.energex.com.au/about-us/right-to-information/publication-scheme.

Principle 6 – Respect the rights of shareholdersReporting to our shareholders

We report to our shareholding Ministers in a timely manner on all issues likely to have a significant financial, operational, social or environmental impact in accordance with our obligations under legislation and government guidelines. We work cooperatively with the shareholding Ministers on these issues. Our Board Chair is the principal liaison officer with the shareholding Ministers, both on a formal and informal basis.

The CEO and certain managers and employees liaise with representatives of shareholder departments on a regular basis.

Our dividend policy

Between 1 and 16 May each financial year, our Board makes a dividend recommendation to our shareholding Ministers in accordance with section 131 of the GOC Act. On 29 June 2015 the shareholding Ministers issued a Direction to Energex under section 131 to pay a 2014/15 dividend of 100 per cent of Operating Profit After Tax and an additional amount of $783 million.

Principle 7 – Recognise and manage riskEnergex operates an Enterprise Risk Management (ERM) Framework that applies the principles of AS/NZS ISO 31000:2009 Risk management–Principles and guidelines for managing Risk.

Energex’s ERM Framework comprises the language, accountabilities, principles, practices, systems, tools and reporting processes used to manage risks in our business. Our Risk Management practices identify and manage material risks in the delivery of Energex’s balanced commercial outcomes. The Board articulates its risk appetite through approved Risk Appetite Statements.

Corporate risk plans have been developed and maintained for both long term strategic risks and those with a more operational focus. Risk management activities are integrated with strategic and business planning processes to ensure that risk management supports informed business decision making.

The ERM Framework has been adopted throughout the organisation to ensure material risks and compliance obligations are consistently identified and appropriately managed. The risks we manage include: network, financial, operational, people, compliance and strategic. Details of these risks and mitigation strategies and Controls are captured in risk registers managed by each division.


Responsibilities within the ERM Framework include:

• Board oversight of the ERM Framework’s effectiveness through the Audit and Risk Committee

• Board oversight of the internal control framework within Energex, which is designed to provide reasonable assurance regarding the achievement of the organisation’s objectives. The internal control framework is comprised of policies and procedures, including compliance training and assurance processes, to ensure the affairs of the organisation are being conducted in accordance with relevant legislation, regulations and codes of practice. These procedures enable the Board and the EMT to monitor, in a timely manner, any material matters affecting our operations.

• EMT responsibilities to ensure material business risks and compliance matters, and the effectiveness of risk management processes, are continuously monitored and reported to the Board on a monthly basis.

Risk management involves not only making certain that the distribution network is managed in an efficient and cost effective manner but also ensuring that our systems and processes operate effectively, including during times of stress or crisis. We continually improve our formal Business Continuity Management (BCM) Framework, with a focus on the currency of Business Continuity Plans (BCPs) for core functions where continued operation in times of disruption is regarded as critical. Business areas also maintained strong compliance practices and processes to ensure no significant noncompliance matters arose over the year.

FraudRiskManagement

We are committed to the prevention of fraud including corruption. To provide an effective fraud control framework that is closely integrated with the overarching ERM Framework, a suite of strategies and initiatives has been established comprising:

• the Code of Conduct deployment and relevant policy which actively discourages fraudulent activity and drives an ethical culture

• fraud registers to identify and document all fraud-related risks and the internal controls that currently exist to mitigate each identified fraud risk

• internal control measures embedded into business practices and processes

• fraud investigation capabilities, standards and protocols

• the independently operated 24 hour Disclosure Line

• fraud risk management plan.

Principle 8 – Remunerate fairly and responsiblyPeople Committee

The People Committee oversees employee remuneration and performance policies. Membership of the Committee is disclosed in the 2014/15 Energex Annual Financial Report (see Part B). During the year, the Board approved a restructure of the Committees, including the change of name of the Remuneration Committee to the People Committee. The responsibilities of oversight of staff establishment levels were transferred from the Regulatory Committee to the People Committee.

The Committee’s Charter sets out the roles and responsibilities of Committee members. A summary is available on our publication scheme website under ‘About Us’ at www.energex.com.au/about-us/right-to-information/publication-scheme.

2.2 Principles (continued)


Remuneration policy

Our remuneration strategy and practices are aimed at ensuring we attract, retain and motivate highly competent and capable employees at all levels by providing an appropriate combination of competitive, fixed and variable remuneration components.

We comply with government guidelines in relation to remuneration for executives to achieve a balance between public accountability and transparency and our need to attract and retain staff from competitive labour markets.

Assessing performance

To reinforce our performance-based culture, we offer an annual performance pay scheme which is linked to our KRAs and KPIs. During 2014/15, we measured progress towards the achievement of our vision and purpose through success against our KRAs and KPIs as set out in the SCI.

Our performance management program, Power to Perform, which incorporates the performance pay scheme, aims to improve performance management processes and practices across our business and strives towards a performance-focused culture which is critical to our people and safety strategy. The framework promotes continual performance and developmental conversations between the employee and their leader.


OurfiveyearfutureplanThe implementation of our customer engagement strategy, Connecting with you, has better focused our efforts on engaging customers to understand their expectations of Energex. It has provided us with opportunities to listen to and work with our customers on several key projects including the 2015-2020 regulatory submission and our tariff reform program, Your Network, Your Choices.

Published in November 2014, Our five year future plan, Regulatory Proposal Overview 2015-2020 is an example of our commitment to informing customers of our future plans.

Our approach to developing these initiatives has used different levels of engagement with our customers – from informing to involving them in our decisions – and has also provided us with an opportunity to demonstrate to customers our commitment to involve them in strategic issues that affect them and our delivery of services.

We aim to further enhance our customer engagement program over the next year with a stronger focus on working with customers to better understand and respond to their energy-related choices and remain the preferred supplier of connected electricity services in South East Queensland.

Statewide business mergerIt is the policy of the current State Government to merge Energex, Ergon Energy and Powerlink Queensland.

In August 2015, the Government indicated it was still considering how the State’s electricity businesses might be merged and that it was important this was done in a measured and sound way.

It is anticipated that more information about the proposed merger will be released later in the 2015 calendar year.

AER determinationIn late 2014, after consultation with 6,700 customers, we submitted our five-year funding proposal to the AER. The main focus of our proposal was to maintain high standards of service and deliver real cost reductions for our customers.

Our 2015-2020 regulatory proposal was directed at delivering network prices below Consumer Price Index (CPI) while achieving better utilisation of the existing network and maintaining current service levels, especially in regards to safety and reliability of power supply.

Key elements of our proposal sought:

• $1.76 billion across the five year period for operational expenditure

• $3.2 billion across the five year period for capital expenditure for the continued maintenance and upgrade of the South East Queensland electricity network

The AER’s interim determination received on 30 April 2015 approved the operational expenditure (the cost of running the network) as requested. However the AER has recommended a 17.3 per cent reduction in Total Revenue and 27.1 per cent reducation in capital expenditure.

This interim determination will be applied to 2015/16 and a further determination made after submission of our revised Regulatory Proposal for the following four years (1 July 2016 to 30 June 2020) in October 2015.

The financial implications of the AER’s determination will see Energex further implement changes to the business’ agility in terms of Program of Work, staffing and business model.

Future opportunities and challenges


3

Future opportunities and challenges

Pricing and tariffs moving forwardOver the last 10 years we have experienced unprecedented changes, not only in the way customers use electricity, but also in the technology available and integrated into our network. This has fundamentally changed the way we need to structure our network tariffs and pricing.

Over the past decade our network prices have increased due to a number of factors, including an increased investment in the network to meet rising energy and demand requirements and to ensure we continue to provide reliable and safe supply to our customers.

As a result of these changes we have developed a customer engagement program Your Network, Your Choices to work in consultation with our customers to introduce pricing reform and develop a new Tariff Structure Statement. To be submitted to the Australian Energy Regulator in late 2015, this statement outlines our move to more cost reflective network tariffs that align with our customers’ energy behaviours.

Changing energy patterns Together with Ergon Energy and Powerlink, we have been conducting the annual Queensland Household Energy Survey since 2009. The survey aims to identify trends in household energy use patterns and energy-saving attitudes and awareness across the State.

The survey results not only provide an invaluable snapshot of current and potential future energy use, but also assist with effective electricity network planning and the targeting of energy management programs to help in delivering the right balance between reliability of electricity supply and cost to consumers.

Launched online in October 2014, the sixth annual survey included more than 4,000 participants across Queensland and addressed key questions relating to customer installation and use of air-conditioners; the surge in large screen, higher energy-intensive televisions; growth in solar power; differences between private ownership and renters; and energy use patterns across regions around the State.

Key outcomes from the 2014 survey were that:

• ownership of essential and lifestyle appliances is stable, although newer technologies such as laptops and tablets are being adopted in replacement of desktop computers

• air-conditioner penetration has remained stable, however customers are looking to increase the number of units within their home

• our customers remain concerned about the price of electricity

• intent to purchase solar PV shows signs of slowing after consistent year on year growth however, the impact of solar PV may continue to increase as new customers install larger systems

• awareness of battery storage significantly increased over the past year to reach 45 per cent of households, yet the intent to purchase remains low

• customers are becoming less active in their efforts to reduce electricity consumption

• the majority of customers do not intend to go ‘off grid’ in the next three years.

Moving forward, these findings will shape our future business and network plans and be integrated into the development of our customer education and engagement programs.

Emerging technologiesOur business continues to become more flexible to enable our customers to take advantage of technological substitutes to electricity supplied from our distribution network. Increasingly, our customers are provided with greater choice in how they consume electricity.

Key technologies we are focused on include embedded renewables such as solar, battery storage systems, energy management systems, and electric vehicles, which represent both a challenge and opportunity for our business into the future.

Emerging technologies offering alternative sources of energy will continue to penetrate the market as our customers’ electricity consumption patterns continue to evolve.


4.1 SafetyPerformance

Whatwesetouttoachievethisyear How we performed

Lead Safety Measures Achieved Achieved

Progress the Safety Strategy through deployment of the 2013-2016 Safety Roadmap

On track through delivery of 90 day plans

Lost Time Injury Frequency Rate (LTIFR) – Employees

4.38

Total Recordable Injury Frequency Rate (TRIFR)

20.24

The safety of our people and community is our primary focus. Throughout the year we worked to gain a better understanding of the human factors that lead to safety incidents.

Put safety FIRST

Outlook

• Embed the learnings from our Leading Safety Program post-delivery to sustain a high performing safety culture

• Build internal capability to improve incident investigation outcomes

• Develop a revised safety strategy to 2020

Performance Indicators 2010/11 2011/12 2012/13 2013/14 2014/15

Lost Time Injury Frequency Rate (LTIFR) 4.15 5.17 4.97 3.67 4.38

Total Recordable Injury Frequency Rate (TRIFR) 31.8 35.6 32.08 22.49 20.24

Lost Time Injury Severity Rate (LTISR) 48.15 60.09 155.12 197.42 132.21

Lost Time Injuries (LTIs) 17 26 30 22 26

Days lost to LTIs 350 453 967 1185 754

Note: In 2013/14, LTIs were redefined to include identified onset and non-identified onset (occupational illness/injury) cases; CCFRS was ceased and TRIFR introduced.

Table 1 – Key safety performance indicators

Our performance

A key focus for the year was to prevent high consequence incidents among staff of the type that Energex experienced in the previous two years. A positive result has been achieved this year with no high consequence injuries. While LTIFR performance is unfavourable, there has been a reduction in the severity of injuries from 2013/14.

Contractor safety continued to improve with six LTIs recorded in 2014/15 compared with nine for 2013/14. We will continue our ongoing focus on lead measures to drive a positive safety culture for our workforce and the community.


4

Internal Safety programs

As part of Energex’s 2013-2016 Safety Roadmap, we continue to deliver a number of safety initiatives in line with our principles of Care, Ownership, Trust and Learning.

At Energex, we share our lessons learnt from safety incidents. In 2014/15 we improved our safety incident reporting process through the training program Understanding Human Factors in Incident Investigations. The program was attended by incident investigators, Safety Advisors and Business Managers to assist in understanding the contributing factors leading to incidents. A key element of this training course was an individual coaching program facilitated by external behavioural psychologists that has provided key strategies for managing human behaviour in order to prevent the future recurrence of incidents.

Fatigue Calculator

To assist our staff to remain safe when working longer hours during major emergencies and call-out events, during 2014/15 Energex developed a fatigue calculator which can be accessed from the Energex website. This enables our crews to input their combined work/rest hours and more accurately manage their likelihood of fatigue, during what can be situations of increased risk.

Skills and knowledge programs

Our Leading Safety Program was another key initiative for 2014/15. A joint program between Energex and worldwide safety experts, the program provides insight into the mindsets that personally motivates our behaviour.

The program provides staff with the skills and tools to help change their mindsets and behaviours so that everyone returns home safe each and every day. The design of the program has seen an improvement in activities including risk awareness and interrupting at-risk behaviours. Nearly 50 per cent of staff have completed the program and it will continue to be implemented into 2015/16.

Safety accountability and lead measures

This year we revised our safety accountability approach to recognise positive safety behaviours, and bring awareness and accountability to unsafe behaviours. Modelled on our safety principles, this revised approach is designed to ensure our process is more transparent and staff understand our expectations for managing safety in the workplace.

A new safety KPI was introduced this year – % High Potential Consequence Events Actioned – to focus and learn from incidents and near misses that could have resulted in serious consequences. Proactively focusing on these near misses allowed us to prevent any future serious safety incidents.

Promoting healthy habits

In recognising the importance of a healthy workforce, we continued to promote our employee Wellness Program which offers a range of initiatives including, Employee Assistance (EAP), Employee Resilience Training, Quit Smoking, Flu Vaccination, Global Corporate Challenge, Skin Check rebate and a Wellness blog.

Energex is also collaborating with a leading Australian university to determine the effectiveness of our employee resilience program.

Keeping the community safe

Safety is the cornerstone of Energex’s brand and during 2014/15 we continued our approach in being the go-to source for electrical safety around our network. We refreshed information on our website, community flyers and community speaker presentations with the aim of providing customer targeted safety-related messages for severe weather, power outages, seasonal, at home, at work and around the network. The Community Safety Plan was updated and released to detail the strategies and programs aimed at identifying, monitoring and managing risks and our continued partnerships with the Electrical Safety Office and Ergon Energy which resulted in three successful joint community campaigns: Electricity in the home, Electrical safety in ceiling spaces and Private Property Pole accountabilities.

We are available 24/7 to actively inform the public during severe weather events or large-scale outages. During these times we use mainstream media, website, social media channels and other methods of mass information distribution to inform of areas affected, safety messages, approximate restoration times and, where possible, the cause of the interruption.

We track the community’s response to our commitment to public safety. The community’s perception has been consistently high with an average score of 7.9 on a scale of 10 (where 10 was excellent).

The number of network asset-related shock incidents increased to 208 from the 176 events recorded during the 2013/14 period. Energex continues to actively deploy programs to reduce public exposure to future shocks.


Safety advertising

Our five-month summer safety campaign was completed late February 2015 and research into its effectiveness was undertaken by global market research company, TNS. The results were extremely pleasing with 56 per cent unprompted awareness of an electrical safety advertisement and 85 per cent prompted awareness of Energex’s summer campaign among respondents. Also, 90 per cent of respondents felt the advertisements made them more aware of the need to be careful around powerlines, while 90 per cent also felt they would make people think Energex is looking out for their safety.

While survey respondents know to stay away from fallen powerlines, there is still some belief that once on the ground they are de-energised. Thirty-two per cent of respondents wrongly believe fallen powerlines are only dangerous if there is a crackling noise, and 21 per cent believe not all fallen powerlines are ‘live’.

The importance of Energex undertaking safety advertising was measured with 80 per cent of respondents rating it at an eight out of 10 (where 10 is very important). This campaign complements our well established public communications through mainstream television, radio and newspaper, and our digital media channels allowing us the potential to reach a far greater number of customers to broaden brand awareness and influence positive electrical safety behaviour in the community. We will continue to ensure our advertising campaigns highlight important safety issues and address community misconceptions.

Engaging our contractors to work safely

We continue to work proactively with our network service providers by facilitating safety forums to discuss real incidents, investigation processes and determine corrective actions. Throughout 2014/15 we presented at several service providers’ Stop for Safety days and continue to recognise safety performance through our annual Chair’s Safety Award and Supplier Quality Awards.

The power of animation

Energex’s first digital media campaign on power outage safety was launched in December 2014 and distributed via social media. The purpose of these animations was to educate customers and allow them to share with family and friends via their own social networks. The campaign uses animation, which is about entertainment, shareability and flexibility, as a new way to tell the community our safety story. Six animations were created with each animation based around a power outage scenario, while also providing a safety message.

4.1 Safety (continued)

Picture 1 – Animation screenshots of“Whenthepowergoesout” digital media campaign



Deliver business efficiency initiativesDelivered more cost effective services and continued to reduce or eliminate unnecessary expenditure through delivery of business efficiency programs and reduced discretionary expenditure

Assess and agree balance sheet management strategies to meet shareholders’ objectives

Refinanced our debt portfolio and aligned refinancing activities with the regulatory framework

Submit Energex’s 2015-2020 Regulatory Proposal to achieve desirable revenue outcomes

Delivered network price stability to customers through our Regulatory Proposal

We continue to deliver business efficiencies across the organisation to ensure we maintain sustainable electricity prices for our customers and optimise returns for our shareholders.

4.2 Financial performance

Deliver balanced results

Outlook

• Continue to deliver operational cost savings to minimise the impact on electricity prices and propose solutions for a secure and cost-effective network

• Reductions in our indirect costs to reflect the revised Program of Work forecasts for the next five years

• Provide transparent pricing signals that incentivise efficient use of the network by customers

We aim to deliver balanced outcomes through business efficiencies and cost savings to our customers and, throughout the financial year, we have achieved this through the prudent management of our revenue and expenditure.

We have responded to changes to customer energy use. We are focused on driving business efficiencies and this has resulted in significant savings in operational cost. In turn, we have been able to stabilise network prices to assist our customers.

Our results

In addition to returning our total 2014/15 profit to our shareholder in the form of dividends, we declared an additional dividend of $783 million. This distribution from retained earnings and reserves will keep our balance sheet efficient while still leaving Energex in a sound position with assets of $12 billion exceeding liabilities by $2 billion.

During 2014/15 we continued to focus on initiatives for controlling our costs through our Business Efficiency Programs (BEPs). Our BEPs identified and delivered cost savings throughout the business and we delivered more than $20 million in annualised cost savings through improved efficiencies within field services, asset management processes, administrative activities supporting PoW, and procurement. Since the introduction of our BEPs, total annualised cost reductions of more than $140 million has been achieved.

Despite lower profitability anticipated in the next regulatory period, we will continue to provide appropriate returns to our shareholder through the pursuit of a growing revenue base, regulated revenue management and strong cost control.


4.2 Financial performance (continued)

Revenue

Total revenue of $2,575 million largely reflected the last year of the current regulatory determination period with $2,312 million or 90 per cent of the revenue reflecting the revenue allowance by the AER and related pass-through allowances.

Energex has been preparing for the new regulatory determination period which will see more revenue earned under a price control mechanism as opposed to a revenue control mechanism.

The steady growth in unregulated revenue continued throughout 2014/15. This growth is expected to continue into the future as the AER encourages competition where appropriate and we look to leverage our experience through innovative new service offerings that complement our core business. While these changes will increase the volatility of revenue on a year on year basis, they also bring opportunity for Energex to harness its expertise, experience and strong brand to increase revenue and, ultimately, profitability. In addition to our work on more appropriate pricing signals to our customers, the recognition of regulated revenues based on actual amounts billed to our customers (as opposed to regulatory allowances*) will increase visibility of our true underlying performance and will send more appropriate signals to all our stakeholders.

Notwithstanding a lower allowed rate of return anticipated in the 2015-2020 regulatory determination period, we are positive about the opportunities that improved tariff structures and a proactive assessment of unregulated opportunities bring to the organisation.

Expenditure

Lower total operating expenses (compared to 2013/14) of $1,842 million reflects favourable borrowing costs supplemented by ongoing strong cost control. Total expenditure on our network for 2014/15 was 34.5 per cent lower than the expenditure allowed through our current regulatory determination.

While reduced operating spend is evident in our strong profitability, reduced capital spend will benefit future profitability and pricing outcomes for our customers and set us up for a sustainable future. Our expenditure includes appropriate spend on restructuring activities to ensure cost sustainability as we meet the challenges ahead of us.

Delivering strong returns to our shareholder

At Energex, we are committed to maintaining a sustainable financial position consistent with shareholder expectations, while meeting our customer and regulatory obligations. Through our BEPs and continued focus on prudent and efficient network investment we have increased our return on assets to 8.5 per cent on a restated like for like basis and delivered a dividend from profits to our shareholder, the Queensland Government, of $512 million.

*Refer Note 30 of the Financial Statements



PoW Delivery Index Achieved 98 per cent against a target of >90 per cent.

Operating Efficiency Index Achieved 36.6 against a target of <39.7.

Key Projects Delivered

Key projects identified in the Distribution Annual Planning Report (DAPR) were delivered on time, with selected projects delivered ahead of target. Selected portfolio changes were effectively managed to align with network risk and cost-effective resource management.

Standard Control Services System Capital Expenditure (SCS System CAPEX)

SCS System CAPEX results were positive with significant investments in complex, greenfield and brownfield network assets. Project portfolio changes were effectively managed in tandem with an overspend in the C25 Distribution Capital program (led by higher than expected customer driven and funded capital works and connections) and underspend in Energex pole replacements.

Standard Control Services System Operating Expenditure (SCS System OPEX)

SCS System OPEX underspend was driven by identifying less defects than planned and timing of costs for vegetation management.

We continue to prudently invest in the electricity network maintaining a reliable electricity supply to our customers without significantly impacting on prices.

4.3 Operational excellence

DeliveryofProgramofWork

In 2014/15, $654.6 million was invested in our network system capital program to meet service targets, maintain performance and align with future customer requirements. This resulted in significant network improvements and increased capacity and reliability for our customers throughout the region.

Throughout 2014/15 we:

• commissioned one new zone substation, upgraded capacity at nine zone substations and one bulk supply substation

• constructed or augmented 71 x 11,000 kilovolt (kV) major powerlines to maintain reliability

• replaced more than 1,000 air break switches to meet service targets

• replaced more than 2,500 poles to improve safety.

Set a great example

Outlook

• Deliver our PoW with improved commercial outcomes and ensure priority is given to high risk projects and programs

• Expand our programming and field operating efficiency program to improve our ability to respond to PoW changes, Alternative Control Services reform, and unplanned events

• Review and align our current ICT portfolio to ensure we leverage field connectivity and improved integration between asset information and work completion data


4.3 Operational excellence (continued)

Similarly, almost $276.8 million was invested in our network maintenance program to maintain reliability and complete customer requested work.

We maintain vegetation around our network in accordance with statutory safety clearances. In 2014/15 our vegetation management program continued to deliver good network outcomes and improved community safety. In the past year, we:

• trimmed vegetation along more than 19,000 km of the electricity network to maintain established clearance zones

• inspected 128,851 poles to ensure ongoing serviceability of the network

• patrolled more than 15,000 km of the overhead network from the air

• replaced more than 12,000 crossarms to improve safety.

CommunicatingourProgramofWork

To complement the delivery of our PoW, we continue to inform and engage the communities in which we operate. This PoW incorporates maintenance, upgrades and construction of our expanding electricity network. We communicate this information through traditional channels such as flyers and stakeholder meetings, and digital platforms including web updates and social media.

MajorprojectsThroughout 2014/15 we worked with several major projects across South East Queensland including Brisbane Showgrounds redevelopment, Legacy Way, Moreton Bay Rail Link, Sunshine Coast University Hospital, and 1 William Street. We will continue to provide support to these major projects as they progress through construction and into their operation and maintenance phases. Future South East Queensland projects we will support include Port of Brisbane Expansion and the ongoing development of Gold Coast 2018 Commonwealth Games infrastructure.

FieldefficiencyinitiativesService Delivery Division has initiated a comprehensive improvement program designed at driving efficiency and continual progress in the delivery of our PoW. Key projects during 2014/15 have included the:

• Distribution Review Project – geared to identify distribution based field efficiency improvements. In particular, this project has identified significant revenue and cost recovery opportunities associated with telephony and broadband attached to our poles, process efficiencies and a range of technology solutions that eliminate manual effort.

• Delivery Enhancement Project – focused on transmission and our capital program to identify and provide recommendations for improving our scheduling and delivery of work.

• Indirect optimisation – reviewed like-role functions across Service Delivery groups and consolidated functions and roles which resulted in economies of scale efficiency.

Another significant efficiency improvement has been the successful negotiation and implementation of standing council-based traffic permits. As a result this reduces paperwork and approval timeframes, removes considerable cost and time in individual applications for permits and provides greater access to roads as part of an improved traffic management system. We also looked at opportunities to further develop digital tools made available to crews via their ToughBooks (mobile computers). In addition to the current suite of tools, this system now features an upgraded version of EnerGISe Lite which allows for real time satellite views of our network.

A major benefit of this technology is the move from manually-based processes to provide a more efficient electronic solution to package, plan and dispatch work in a more timely and integrated manner.


Powering the G20Brisbane hosted the G20 Leaders Summit in November 2014 and for three days the city was the command post for the global event. Queensland Police Service was the lead agency for what was the largest peacetime security operation since World War II, offering special protection to 36 dignitaries. The eyes of the world were on Brisbane with more than 4,000 delegates and 2,500 media representatives monitoring every movement.

As a provider of critical infrastructure, Energex was an important behind the scenes contributor. In the two years leading up to G20, Energex – along with our colleagues in SPARQ, Powerlink Queensland, and Australian Energy Market Operator (AEMO) – quietly assembled and enacted comprehensive preparations to ensure there was no power interruption to the G20 precinct. Preparations covered a range of possibilities including technical faults and activities of malicious intent as well as preparations for wild weather with the event held during peak storm season.

The G20 event also coincided with an early summer heat wave, with temperatures spiking more than 40C sending electricity consumption soaring and creating a new peak demand record for a Sunday. However, the network remained solid throughout the weekend event.

Cyber defence was also an important consideration, with Energex and SPARQ implementing more than 200 initiatives across Corporate and Operational Technology Environments to improve our cyber defence capability. Energex considers its involvement with the G20 Leaders Summit as an outstanding success leaving a valuable legacy.

Implementing new systems During the financial year, we commissioned the final stage of our new Advance Distribution Management System (ADMS) using the GE Digital Energy PowerOn™ Fusion product. This delivery was the culmination of nearly eight years of investigation, development, testing, commissioning, and deployment of the new platform. ADMS is a business transformation exercise and integrates previously separated applications and workflows into a single environment.

This includes Supervisory Control and Data Acquisition (SCADA), Distribution Management System (DMS), Outage Management System (OMS), Switching Management and a Geographic Information System. PowerOn™ Fusion has an “Outage Prediction” feature that assists technical employees with identifying where a potential network fault is located. It is equipped with a Storm Manager module that assists with better forecasts of estimated time to restore power to customers and performed well during the super cell storm on 27 November 2014 by providing customers with a more accurate timeframe for power restoration.

For Energex customers, PowerOn™ Fusion will deliver faster power restoration after a fault. Looking forward, PowerOn™ Fusion will be the platform over the next five years to deliver operational efficiencies including electronic switching sheets and Distribution Power Analysis, which will lead to more efficient use of existing network assets and better employee productivity.

Contact Centre Technology

The Contact Centre Technology (CCT) project involved the establishment of a common technology platform for the Customer Contact Group within Energex. Whilst the joint CCT project between Energex, Ergon Energy and SPARQ Solutions commenced as a replacement system project, the service experience for Energex customers was enhanced through streamlined technologies to directly respond to customers’ enquiries. The new technology platform will result in modernised and rationalised numbers of systems to achieve reliable and capable customer service outcomes, seeking to improve our customer experience as well as increase our own efficiency.

Launched on 27 April 2015, the project included:

• Interactive Voice Response (IVR) and call flow platforms for general enquiries, loss of supply, emergency, retail support and internal (central dispatch and site access) queues

• Telephony and Desktop applications – including spectrum phones and Softphone internet software program

• Workforce Management software – to assist with resource forecasting, rostering and scheduling

• Call recording and analytics software; and Quality management software.

The CCT project has proved a successful transition for our Customer Contact Centre. We are continuing to identify further opportunities to enhance our customer experience.


The impacts of severe weather on our network Severe weather, especially storms, strong winds and extreme heat, can adversely impact our network. To mitigate these impacts, a comprehensive risk assessment and maintenance upgrade program was completed prior to the beginning of summer 2014. This summer proved challenging, with four significant storm events requiring dedicated restoration efforts from our crews.

November 2014 super cell storm

During November 2014, Energex crews worked tirelessly to restore power and repair fallen powerlines to 114,500 homes and businesses in South East Queensland following the worst single incident storm since The Gap storms in 2008. Winds at speeds of 140km/h, 6,000 lightning strikes, hail and torrential rain ripped down more than 600 powerlines. Some of the worst affected areas were in Brisbane’s western and southern suburbs. More than 150 crews and contractors worked in difficult conditions to make areas safe. We provided support to the local communities via our Energex Community Support van for access to respite and refreshments during this difficult time.

In November 2014, more than 350,000 visitor sessions were recorded on the energex.com.au and mobile websites – one of the highest monthly totals on record, with a peak of around 110,000 on November 27 during the storm event. Our customer contact centre received more than 40,000 calls reporting emergency outages.

Energex’s social media following, especially the corporate Facebook account, grew by more than 10 per cent in the month of November alone, due mostly to severe weather safety messaging and power restoration updates. Mainstream media messaging was overwhelmingly positive with media monitoring firm iSentia noting that Energex’s public safety and power restoration information was heard, read or seen 8.3 million times in the four days around the storm.

TropicalCycloneMarciarecovery

In late February 2015, a convoy of more than 50 Energex vehicles with 120 staff, travelled to Central Queensland to support Ergon Energy restore power supply to communities impacted by Tropical Cyclone Marcia. The communities of Rockhampton and Yeppoon faced severe destruction similar to that experienced in Cyclones Larry (2006) and Yasi (2011).

Staff from different parts of our business were involved in the cyclone response. This included field crews from the South Coast and Western hubs; as well as support staff from Plant Workshops, Human Resources, Business Support Services, and Corporate Communications. Field Services crews were met by the Energy Minister, Mark Bailey, at our Eagle Farm Distribution Centre before they set off. The recovery task involved the repair of more than 1,800 fallen powerlines and complete network reconstruction. Our Energex Community Support van provided food and water to our crews and the impacted community of Yeppoon.

We have a proud history of working with Ergon Energy in times of crisis and the efforts of our people were greatly appreciated by the communities they helped.

Hunter Valley restoration

More than 50 field services staff and emergency equipment left Queensland on 27 April 2015 destined for New South Wales to help restore power following wild weather to Sydney, Central Coast and Hunter districts.

Heavy rain and cyclonic wind gusts of up to 135 km/h cut power to more than 250,000 properties while flash flooding destroyed homes and caused traffic chaos across the region. Energex crews provided much needed support to NSW electricity distributor, Ausgrid, to rebuild the power network and safely restore power supplies.

Supporting South East Queensland

In May 2015 dozens of our crews worked in very difficult conditions to restore power to more than 30,000 homes. The wild weather saw crews battling 100km/h winds, heavy rainfall, floods and sodden ground to ensure our customers were swiftly and safely reconnected to the network. The worst hit areas included Caboolture, Morayfield, Carina, Sunshine Coast Hinterland and Gold Coast Hinterland. Our Contact Centre received more than 2,700 calls and the Corporate Communications team kept the community up-to-date through radio interviews and social media.

4.3 Operational excellence (continued)


36K total social media followers, a 21% increase from the previous year

4.4Mcustomers reached using radio and TV during November super storm

147K average reach of Twitter messages each month

77% average positive brand sentiment over the year

1.1Mvisitors to our websites with over 4 million page views

32.2K record Facebook post reach of crew deployment during Cyclone Marcia

38% of our online traffic is from smartphones and tablets

208K views to energex.com.au/portals

Mediaisinfluentialin emergency events

Media is integral to ensure the community remains informed, particularly during emergency events.

Radio, TV, newspapers, website and social media are the best way to spread our important safety messages. It’s immediate and allows us to proactively provide information to the broader community through a variety of ways.

Website and social media engagement is at an all time high during emergency events as our community does its part in sharing to a wider audience.

In 2014/15:

57.2Mtotal audience touchpoints via multiple TV, radio and newspaper articles


NormalisedReliabilityPerformanceMSS (Total of Planned & Unplanned)

2010/11 Actual

2011/12 Actual

2012/13 Actual

2013/14

Actual2014/15

Actual2014/15

MSS

SAIDI (mins)CBD 6.050 8.030 1.690 3.560 3.699 15.000Urban 79.700 64.700 72.700 74.864 90.851 106.000Short rural 201.600 198.000 160.500 173.392 178.790 218.000

SAIFI (events)CBD 0.010 0.035 0.015 0.058 0.158 0.150Urban 0.920 0.747 0.820 0.804 0.786 1.260Short rural 2.050 1.730 1.611 1.556 1.547 2.460


Service Target Performance Incentive Scheme (STPIS)

Manage performance for unplanned incidents

Meet our Minimum Service Standards (MSS) for network reliability and security

Met our MSS across all areas except CBD System Average Interruption Frequency Index (SAIFI) which was impacted by an outage

Meet national incentive-based performance targets

Met national incentive-based performance targets

Identify ways to reduce peak demand Embedded new practices to reduce peak demand

We continue to adapt our network to complement evolving technologies and align our service with our customers’ behaviours.

4.4 Network performance

Outlook

• Achieve our target for Minimum Service Standards (MSS) for network reliability and security

• Drive efficiency and improvements in the delivery of our Program of Work

• Continue to ensure our network and workforce is ready to respond to unplanned incidents and emergency response events

Deliver on our customer promise

Our network performance

In 2014/15 we completed our first five years of operating under the AER Service Target Performance Incentive Scheme (STPIS) for 2010-2015 regulatory period. The AER has now approved Energex’s new STPIS targets for the next five period to 2020.

This scheme operates simultaneously with our Minimum Service Standards (MSS) for maintaining network reliability and performance and stipulates the minimum service levels expected of Energex when providing electricity supply to our customers. In 2014/15 we met our MSS across all areas except CBD System Average Interruption Frequency Index (SAIFI) due to an interruption at Victoria Park substation. Table 2 highlights our reliability performance across System Average Interruption Duration Index (SAIDI) and SAIFI since 2010/11 and compares our 2014/15 network performance with our MSS targets.

Table 2 – Reliability Performance


Network reporting

Energex published its 2013/14 Distribution Annual Planning Report (DAPR) on 30 September 2014 in accordance with the National Electricity Rules. The annual DAPR outlines how Energex plans to safely and efficiently manage the electricity distribution network for customers across South East Queensland (SEQ). The DAPR provides information to assist interested parties to:

• identify locations that would benefit from significant electricity supply capability or demand side and non-network initiatives

• identify locations where major industrial loads could be located

• understand how the electricity supply system supports customer and participant needs

• provide input to the future development of the network.

Summer preparedness

South East Queensland is one of the most storm prone areas of the country and, on average, the region receives around 400,000 lightning strikes per year. In preparation for the 2014/15 storm season and to provide a more reliable network to our customers during severe weather, we conducted a series of network upgrades and operational enhancements especially targeted at poorer reliability areas. This work included extensive vegetation management around almost 11,000km powerlines, helicopter inspections and ground patrols to prepare our network against the impacts of severe weather such as strong winds, lightning, heavy rains and flooding.

Bushfireandfloodplansupdated

In the lead up to the traditional bushfire and severe weather seasons, we reviewed and updated key emergency response and community preparedness procedures and documentation.

The Summer Preparedness Plan details preparations that Energex carried out for summer 2014/15 to minimise power supply interruptions during extreme weather conditions, and where outages do occur, to ensure we keep the community fully informed and restore supply as quickly as possible. The Flood Risk Management Plan and Bushfire Risk Management Plan were also reviewed and updated with key initiatives for the 2014/15 year outlined. All three plans are available from the Energex website.

Graph 1 – System SAIDI (12 month)

Graph 1 displays our system SAIDI since 2010/11 and demonstrates the significant impact of Major Event Days on our 2010/11 and 2012/13 results which were

impacted by the January 2011 floods and January 2013 Australia Day long weekend weather events respectively.

0

100

200

300

400

500

600

2010/11 2011/12 2012/13 2013/14 2014/15Exclusions 449.1 3.8 471.3 30.6 95.6Planned 31.5 36.3 29.6 34.1 37.9Storm 9.8 14.6 8.9 12.5 18.3Non-Storm 70.5 49.4 55.0 54.4 58.6

Min

utes


A new procedure for the year was an alert process that is triggered, for community safety reasons, by the rise of Gympie’s Mary River. Upon the river reaching certain heights, alerts are automatically created to disconnect supply which enables a more efficient incident management and dispatch of crews. Previous to this auto alert system, all requests for assistance in flood emergencies were reactive and completed manually, usually after flood waters has risen and caused damage.

Managingpeakdemand

While overall energy use has generally been flattening in recent years, in the past 18 months a number of system peaks have been recorded in South East Queensland. On 4 January 2014 Energex saw the highest peak for a Saturday recorded, while a new peak for a Sunday was set on 18 January 2015.

Our peak demand for the summer of 4,614MW recorded on 5 March 2015 was the highest system peak in more than four years and the highest demand recorded for any day other than a Monday, as experienced in February 2011. All of the peak demands set in 2014/15 were recorded between the hours of 4.30pm and 5.45pm when the reduction of solar generation coincided with high domestic load driven largely by increasing air-conditioning usage on hot, humid afternoons and evenings.

To combat this, we continued to work with customers to reduce peak demand through our peak smart initiatives and Positive Payback program. This program includes a suite of initiatives introduced as an alternative solution to expanding our electricity infrastructure.

It is supported through strong collaboration with major manufacturers, Energy Networks Australia, Standards Australia, appliance retailers and a number of other electricity distributors to develop and provide cutting edge solutions for managing the demand to our network. Throughout 2014/15 we continued to experience growing customer support with an 89 per cent increase in residential customer enrolments in the program, equating to around 60,000 households with 70,000 appliances participating. A key success of the program has been our ability to remove 180MVA from demand forecasts, exceeding our demand reduction target for the 2010-2015 regulatory period. This target was achieved ahead of time and under budget, indicating efficient adoption of the program and the strong support received from our collaboration partners.

A second achievement for 2014/15 has seen our pool pump program influence the current industry standard as the preferred energy efficient pump available in the market. Due to the success in the adoption of this technology, our program no longer needs to be stimulated with customer incentives. As our demand management program continues to evolve, other electricity distributors across Australia are now expressing interest with some beginning to trial programs for managing peak demand in their region.

Solar PV

Solar PV is now steadily increasing at average of 2,370 connections per month with 28,552 systems connected in 2014/15. As at 30 June, 2015 there were 290,006 solar PV systems connected across South East Queensland with nameplate installed capacity of more than 980 megawatts.

At the same time an additional 1,500 distribution transformers now have penetration levels greater than 25 per cent (the threshold likely to cause network voltage impacts), which is a 26 per cent increase from 2013/14.

Similarly there are now 88 additional 11 kV feeders with more than 1MW of installed inverter capacity, an increase of 31 per cent from 2013/14.

Energex is currently conducting voltage investigations for an average of more than 30 solar related issues per month and remediating these issues with a number of measures including balancing the PV generation, changing transformer taps and installing new transformers. We are also trialling a number of new products to manage these issues such as installing monitors on our LV network and at customer premises, undertaking trials of new technologies such as LV regulators and on-load tapchangers, and developing models to predict the future impacts of these new technologies on our network.

The unprecedented uptake of solar over the last five years has resulted in Energex having one of the highest capacities of rooftop solar per capita in the world. Such a significant change introduces a set of new challenges to operate our network in a safe, reliable and economically sustainable manner. Into the future we will work to further streamline the solar PV connection process and offer customers greater choice leading to improved outcomes for the customer, solar industry and distributor.

4.4 Network performance (continued)



Maintain workforce safety, alignment, engagement and productivity

86 per cent response rate to staff survey, with an overall improvement in alignment and engagement on this year’s staff survey.Significant focus during the year on communicating with all staff about the changing business environment through face to face and a range of communication channels.

Align workforce capacity and capability with future business requirements

We continue to invest in training and development of key employee groups including apprenticeships, para-professional cadetships, graduates, as well as developing the skills of our leaders and supporting employee development across the business.

Implement People Plan initiativesKey initiatives delivered as per plan including developing our leadership capability, Energex Union Collective Agreement 2015, aligning our workforce to the PoW and promoting a diverse and inclusive workforce.

At Energex we believe a diverse and engaged workforce is imperative for innovation and success throughout our business.

4.5 People

Respect and support each other

Outlook

• Continue to deliver on our people strategy through our People Plan to support an adaptable, diverse, productive and engaged workforce capable of delivering strong business results.

• Following the new EUCA 2015 we will focus on making Energex the most efficient business it can be to help ensure we’re able to meet the changing needs of our customers and communities across South East Queensland.

• Continue to develop our diversity strategy focusing on better business through diversity of thought.

Building a workforce for the future

We are a significant employer in the South East Queensland region, employing 2,987 people as at 30 June 2015.

We recognise flexible working arrangements deliver benefits to the organisation and our employees. We have policies in place to facilitate home based work, job share and part-time employment.

In a period of considerable change, it is important that we maintain the right balance of knowledge, experience and skills to ensure workforce capability and flexibility align with changing business and customer requirements.


Fostering diversity and inclusion

Our Equal Employment Opportunity (EEO) and Anti-Discrimination policy demonstrates our commitment to ensure our workplace is free of discrimination and harassment. All employees and potential employees enjoy equal access to opportunities within the company based on their individual merit.

We are compliant with the Workplace Gender Equality Act 2012 requirements and submit compliance reporting in response to the Act. Reporting has highlighted some improvement opportunities and from this Energex has developed a diversity strategy, which supports better business through diversity of thought. While there are areas of opportunity for improving diversity and inclusion at Energex, a process of identifying priorities has been undertaken resulting in the key focus areas of 2015/16 being gender and indigenous employment. These focus areas are underpinned by a program of communication, education and awareness including targeted unconscious bias training.

Wellnessprogram

In 2014/15 we were the first Queensland business to successfully have our wellness program reaccredited as a Gold Rated program under the Queensland Government Healthier, Happier Workplaces initiative. This accreditation scheme requires annual reaccreditation with an independent professional panel reviewing business achievements in the area of workplace health. The Gold reaccreditation recognises Energex’s continued dedication to best practice in workplace health and solidifies the 2013/14 achievement of Energex being awarded the first ever Gold rating.

Building Effective leaders

Developing the skills of our leaders remains a focus for our leadership development programs. The programs include Certificate IV in Frontline Leadership, Conscious Leaders and short courses in leadership and management fundamentals.

The Certificate IV in Frontline Leadership qualification aims to equip new and emerging first line leaders with the knowledge and skills to succeed in their roles and continues to be well received by staff and managers. Our Conscious Leaders program has been a flagship program again in 2014/15, as established frontline and department leaders enhance their skills during this focused program. The leadership development program is also supported by a number of Leadership and Management Fundamental (LMF) short courses that can flexibly be delivered to meet business requirements. The number of LMF program participants for 2014/15 was 742. Our programs are supported by other development activities including job rotations, secondments and project roles to expand the knowledge and skills of our leaders.

Listeningtoourstaff

The annual Energex Staff Survey was conducted in April 2015, with an 86 per cent response rate, providing excellent feedback on issues of importance to our employees. The 2014/15 KPI target, Employee Alignment to Business Direction, was met with a slight improvement in results compared to last year. It measures employees’ understanding of the relationship between their roles, the role of their teams, and achieving business outcomes. This is a positive result, considering the significant changes occurring across the business.

Energex Union Collective Agreement 2015

Across 2014/15 we worked in collaboration with the Single Bargaining Unit (SBU) and Individual Bargaining Representatives (IBRs) to develop a new Union Collective Agreement to replace the expired Energex Union Collective Agreement (EUCA) 2011.

Accepted in an employee ballot in May 2015, the new EUCA provides certainty on future employment conditions for the almost 3,000 staff covered by the Agreement.

Key features of the 2015 EUCA include:

• three per cent pay rise per annum for three years

• all applicable allowances indexed by three per cent each year

• new salary rates and allowances

• back pay to 1 March 2015

• an Electricity Distribution Service Delivery (EDSD) allowance and payment as part of base salary

• guaranteed wages

• employment security provisions from EUCA 2011.

4.5 People (continued)


Developing our technical capability

We continued to invest in a range of development programs including apprenticeship, paraprofessional cadetships, graduate development and staff development. These programs assist in developing our employees’ skills, knowledge and experience.

To build advanced technical capability, we have two programs available including our Graduate Engineering Program and our Engineering Experience Program. Our four-year Graduate Engineering Program currently has eight participants and is designed to provide professional development and learning opportunities to graduates within the power industry.

The Engineering Experience Program has been established to ensure the development of competent professional engineers with leadership and technical capability to meet our future needs. The program has proved very successful with a rise in participation from seven engineers in 2013/14 to 41 in 2014/15.

We also operate a Registered Training Organisation (RTO), EsiTrain, which provides the trade and post-trade technical training required to work on our network for both internal and external participants. Throughout 2014/15 we held 936 training courses with 13,616 participants attending face to face and on-line.

Energex apprentice program

Energex apprentices play an integral part in providing electricity to 3.3 million people who live, work and play in South East Queensland. Our highly sought after program offers practical, on-the-job experience and leads to a nationally recognised qualification.

In 2014/15 another 38 participants joined the program alongside 200 apprentices at various levels of their training process. Our apprentices complete their training at EsiTrain at Rocklea before they join their assigned hubs. There are six hubs in South East Queensland: North Coast (Maroochydore), South Coast (Southport), Western (Ipswich), Metro South (Greenslopes), Central West (Kelvin Grove) and Metro North (Geebung).

In the past 10 years more than 730 men and women have undertaken apprenticeships with Energex.



Achieve a Service Performance Index (SPI) greater than 80 per cent

Achieved a SPI score of 85.4 percent

Ensure customer expectations are incorporated into our network planning and operation

Our Customer Engagement Strategy is currently underway with high participation rates

Continue to enhance our customer service standards to ensure we can adapt and respond to customers as their expectations of our services evolve

We are currently reviewing our Customer Service Standards Program to ensure we are meeting our customers’ evolving expectations

Focus on tariff reform including consulting on our pricing strategy and rolling out changes to large customer tariffs

Your Network, Your Choices will continue to engage customers as we introduce the new tariffs and monitor tariff performance over the next 3-5 years

Actively engage as part of the AER’s Better Regulation Program and Guideline consultation

We applied the guidelines that were developed as part of the Better Regulation Program in preparing the 2015-2020 Regulatory Proposal

We continue to work with our customers to form meaningful relationships that will ensure our operations and services match their expectations.

4.6 Customers

Outlook

• Continue to deliver positive Community Regard and Service Performance Index results

• Continue to seek opportunities to work with our customers on key projects

• Enhance strategic partnerships with consumer advocacy groups to engage on the future direction of Energex through a formal engagement group

• Continue to review and enhance our Customer Service Standards and report on our performance against the Standards

• Continue to involve and work with customers to deliver tariff reform in 2015/16


Our customer engagement strategy

At Energex we believe it is important to understand our customers’ expectations regarding their electricity supply and the services we offer. Developed from our 2013 customer engagement research program, our customer engagement strategy defines our approach towards ongoing interactions with our customers to determine what they expect from us.

Our engagement strategy is guided by the five key principles of being:

• transparent and open

• committed

• timely and meaningful

• accountable

• measureable


GSLEventTotalGSLClaimsPaid Energex Related Retailer Related

2013/14 2014/15 2013/14 2014/15 2013/14 2014/15

ReliabilityReliability - interruption duration 1,512 3,897 1,512 3,897 0 0

Reliability - interruption frequency 0 0 0 0 0 0

Total Reliability 1,512 3,897 1,512 3,897 0 0Customer ServiceNew Connection 26 32 25 31 1 1

Wrongful disconnection 150 179 114 90 36 89

Failure to reconnect 206 312 119 63 87 249

Hot water complaint - failure to attend 0 0 0 0 0 0

Missed scheduled appointment 390 238 390 225 0 13

Planned interruptions - business 60 171 60 171 0 0

Planned interruptions - residential 1,106 1,621 1,106 1,621 0 0

Total Customer Service 1,938 2,553 1,814 2,201 124 352GSLTotal 3,450 6,450 3,326 6,098 124 352

We have experienced high levels of participation in our Connecting with you program which is currently underway.

Significant customer engagement has also been undertaken to involve customers in our Your Network, Your Choices tariff reform program and we are currently implementing our Customer Engagement Strategy for Internal Staff to ensure we have embedded customer engagement into our organisation.

Our service guarantee

In 2014/15 we responded to more than 666,700 customer enquiries by phone. Contact volumes have increased when compared to 2013/14 year as the number of severe weather events recorded increased. We answered 71 per cent of calls to our general enquiries number within 20 seconds.

Under the Electricity Distribution Network Code we are required to meet Guaranteed Service Levels (GSL) for our small customers. As part of our commitment, we have an obligation to deliver specific services to customers within certain timeframes. If we do not meet these timeframes our customers may be eligible for compensation.

Our GSL payments increased in 2014/15 with the volume of Reliability Duration GSLs increasing as a result of the supercell storm on 27 November 2014. The storm caused extensive damage to the Energex network resulting in approximately 3,100 GSL payments for that event alone.

The Queensland Competition Authority deems electricity distributors accountable for the administration of the GSL program regardless of whether the error was caused by the distributor or retailer.

In 2014/15, a total of 6,450 GSL claims were paid as displayed in Table 3. Customer service related issues generated 2,553 GSL claims and reliability matters initiated the remaining 3,897 claims. All claims have been apportioned between the relevant stakeholders with 6,098 attributed to Energex and 352 to the retailers.

Table3–GuaranteedServiceLevels(GSLs)claimsbycategoryandentitysource


4.6 Customers (continued)

Tariff reform

We understand the importance of reducing the cost of living for customers while continuing to maintain services. It is our aim to deliver real cost savings for our customers.

The current tariffs, many of which were designed 30 years ago, do not cater for the use of new technologies or the ways customers now use electricity – our ‘one size fits all’ approach no longer works as effectively as it could. In recognising this, we are introducing a tariff reform package which will be developed from the results of our customer engagement program Your Network, Your Choices.

During the year we consulted with our customers to develop a Tariff Structure Statement which will be submitted to the AER in November 2015.

Your Network, Your Choices has seen us test our engagement practices by involving customers and consumer advocacy groups in the development of a tariff reform package that encompasses domestic, small-medium, and large business customers. Throughout the process, customer participation has provided key insights into particular elements of the proposed tariff structure.

These insights include an expectation of Energex to continue to assist vulnerable customers and educate the community in electrical safety and energy efficient practices. Moving forward, we will continue to work with our customers to explore our role in these areas and to improve our Tariff Structure Statement.

Service performance index

Understanding the expectations of our customer base is an important aspect of our service strategy – for both today and into the future.

To monitor the quality of customer service, we regularly measure our performance. Our Customer Contact Centre and field services are two key customer interface groups that we frequently assess to ensure we are delivering the best results possible. The results of this ongoing research are used to create a customer service index benchmark that is referred to as the Service Performance Index (SPI). This index assists us in continually improving our performance and service delivery.

We have a corporate key performance indicator related to the SPI which measures service in the following areas:

• phone call service

• customer service

• problem resolution

• customer confidence

• time

• quality

• staff behaviour

We continue to be proud of our Service Performance Index – consistently rated above 80 (out of 100) since 2009.

Digital strategy

In today’s world, customers expect the power to control when and how they engage with Energex. Research from our customer engagement program has shown that digital channels, including self-service, have grown significantly in popularity over the last decade and will quickly become the preferred method for engagement.

Throughout 2014/15, in response to this, we investigated ways to further enhance our customer experience through our digital platforms to address the changing pace of our customers’ values, lifestyle and technology choices.

84.6 85.2

84.3 85.4

80

81

82

83

84

85

86

2011-12 2012-13 2013-14 2014-15

Service Performance Index

70% of customers are satisfied at IVR (Interactive Voice Response) level via our Contact Centre

During 2014/15 our Contact Centre received a total of 755,000 calls, emails and letters

Graph 2 – Service performance index

Graph 2 highlights our service performance index during the past 4 years.



Achieve a Community Regard Index (CRI) greater than 63 per cent

Achieved a CRI score of 69.0

Support South East Queensland through our 2014/15 community support program

Continued to provide $1.12 million to South East Queensland communities

Progress customer and community engagement initiatives

Completed engagement on Energex’s 2015-2020 regulatory determination and engaged with the community on more than 200 local community projects

Implement Pricing Strategy initiativesLaunched and commenced “Your network, your choices” – Energex’s comprehensive engagement program on network tariff reform

We are committed to positively impacting the communities in which we operate and continue to support them through a variety of funding initiatives and educational programs.

4.7 Community


Outlook

• Continue to support South East Queensland through our Community and Sustainability Fund

• Continue to provide communication support in severe weather events, or large-scale emergency outages

• Continue to implement community safety education campaigns

Measuringourperformance

At Energex, we place great importance in understanding the public’s expectations so we can continue to improve our service to the community. Each year we measure our performance using the Community Regard Index (CRI). The CRI focuses on public perception of our role as an electricity distribution service provider, and is measured through public perceptions of media stories and events that have wide community impact or recognition.

We recorded our highest ever score of 71 (out of 100) in November 2012. We exceeded our overall target by more than 5 points, achieving 69.5 for 2012/13 and again in 2013/14 with a score of 69.8. While marginally lower for 2014/15, this score continues to position us as one of the top performing utilities in Australia.

68.8 69.5 69.8 69

45

50

55

60

65

70

75

2011-12 2012-13 2013-14 2014-15

Community Regard Index

Graph 3 – Community Regard Index

Graph 3 compares our performance in community regard since 2011.


Giving back to the community

We support our community across the areas of safety, education, environment and sustainability. In 2014/15 we provided $1.12 million in our community support program to:

• Queensland Museum – Support over five years for the The Nucleus and Anzac Legacy Gallery educational precincts at the museum.

• Queensland Rural Fire Service – Provided support to purchase vital lifesaving and fire fighting equipment.

• Volunteer Marine Rescue (VMR) – Assisting with safety on the water we provided support to VMR squadrons in Raby Bay, Sandgate and Bribie Island.

• Royal National Association of Queensland – For more than 30 years we have supported the EKKA.

• PA Research Foundation – Provided support for research into the development of a skin cancer vaccine with Energex staff involved in a pilot trial to improve the early detections of skin cancer.

• Queensland Theatre Company – This year we have supported the Queensland Theatre Company bring high-quality local productions to the stage such as Black Diggers and Brisbane.

• Queensland Ballet – The arts is important to the community and Energex and this year we provided support for five scholarships.

• Community events – In 2014/15 we provided support to RedFest in Redland City and the Ipswich Festival.

As part of our community support commitment, we also operate the Energex Community and Sustainability Fund which focuses on community groups that provide support to their local area. This Fund is fully funded by proceeds from scrap material sales retrieved from our works.

This program is closely monitored by our Community Support Committee comprised of our Chief Executive Officer and senior managers from across the business. The committee meets every second month to discuss key community support proposals and monitors existing commitments to ensure their effectiveness.

Safety

Environment (ECSF)

Education

Community

Total Community Support: $1,123,400

Graph 4 – Distribution of our community support funds 2014/15

A snapshot of the distribution of our community support funds within the key community support areas

4.7 Community (continued)

$325,000

$160,000

$268,500

$369,900



Maintain current performance during a period of significant change

Maintained performance

Deliver a sustainable environmental position

Delivered balanced sustainable outcomes

Exceed Environmental Management Systems requirements

Continued to comply with our Environmental Management System ISO 14001

We continue to reduce our environmental footprint and its resulting impact on customers by promoting sustainable behaviours and improved environmental efficiencies.

4.8 Environment

Deliver balanced results

Carbon emissions strategy

Reducing our carbon footprint and its resulting impact on customers is a key focus at Energex. We aim to achieve this through lowering our energy consumption, reducing waste and improving vehicle efficiencies. During the year we enhanced our environmental efficiencies by:

• continued consolidation of workplaces by increasing office utilisation rates and sub-leasing surplus space

• migrating to environmentally sustainable buildings

• improving waste recycling and disposal practices

• adopting more sustainable fleet vehicles.

This has led to:

• 13.4 per cent reduction in the Energex Corporate Property Portfolio energy consumption when compared to 2005/06

• 33.3 per cent increase in energy efficiency (kWh/m2) when compared to 2005/06

• 16 per cent reduction of carbon emissions from our total vehicle fleet compared to 2008/09

• 74 per cent of waste being diverted from landfill.

Environmental training

Our environmental training is designed to equip employees with environmental awareness, understanding and skills. It provides an education into the impacts we can have on the environment, and ways to mitigate our environmental footprint to maintain a sustainable service to our customers.

We currently deliver a suite of five environmental training modules:

• Environmental Awareness

• Oil Spill Management

• Declared Plants Management Awareness

• Sediment Control Awareness

• Fire Ant Awareness.


Environmental Awareness training is now compulsory for all employees to complete. The training is valid for five years after which staff members are required to repeat the training.

The expansion of training into specialised areas, such as Fire Ant Awareness, has been beneficial in enabling us to assist other government agencies in monitoring and controlling pests that threaten South East Queensland.

Environmental offset strategy

As part of our environmental strategy, we continue to invest in environmental enhancement projects to balance the impacts of our project construction. If environmental impacts to vegetation and wildlife are unavoidable due to the construction of electrical infrastructure, we implement our environmental offset policy. Key triggers for this policy include any disturbance to native plants, koala habitats, fish habitats, and regional ecosystems.

This year we partnered with several councils and community groups to deliver environmental offsets for our capital works projects. These partnerships included:

• a four year project with Brisbane City Council to revegetate more than five hectares of wetlands in the Oxley Creek Catchment, upstream from the Energex EsiTrain facility at Rocklea

• planning for restoration activities with Scenic Rim Regional Council and Tamborine Mountain Landcare Group to revegetate 11 hectares of cleared rainforest on Tamborine Mountain

• ecological restoration of Undullah, our 279 hectares environmental offset property, located in the Logan area, south of Brisbane. The property was purchased as an offset for several capital works projects in the surrounding area, including the 23 kilometre Logan to Jimboomba Network Upgrade. Restoration activities for the property will involve creating new koala habitats, restoring waterways, wetlands, and engender regional ecosystems.

• work with Seqwater to design a fish-passage on the Mary River that will remove one of the last waterway barriers to movement and breeding for species such as Lungfish, Mary River Cod, and Mary River Turtle.

Our environmental commitment is to replace every native tree that is unavoidably removed for new infrastructure with five saplings, regardless of whether an issue-specific environmental offset is triggered or not.

In honouring this commitment, we continue to manage successful revegetation projects in the Gold Coast, Redland, Scenic Rim, Somerset, Moreton Bay, Sunshine Coast and Gympie regions. Our tree plantings continue to flourish with many trees now reaching 10 metres in height, creating new koala habitat and restoring creeks and waterways.

Reduce

Reuse

Recycle

Dispose

Most preferable

Least preferable

Graph5–WasteReductionandRecyclingStandard

Our results 74% 26%

Recycled Disposed

4.8 Environment (continued)


Wastereductionand recycling strategy

Our Waste Reduction and Recycling Plan aims to reduce the inefficient use of resources by educating our staff in ways to manage waste. The primary aim of our waste policy is to promote waste avoidance and conserve resources by avoiding landfill disposal of waste.

Reusing or recycling waste materials rather than throwing them away also provides opportunities for turning waste into revenue streams. For example, income from our field recycling contributes to the Energex Community and Sustainability Fund which provides financial support to local community groups and initiatives.

Our Waste Reduction and Recycling Standard is based on the internationally recognised waste management hierarchy which describes the preferred order for managing waste to conserve resources. The hierarchy places waste reduction as the preferred management option, followed by reuse, through recycling and recovery options to disposal as the least preferred approach.

To promote this initiative within the business, several events were held throughout the year including road shows at Energex hubs and depots, and a special recycling campaign in the lead up to World Environment Day.

The Energex Best Bin Competition was aimed at encouraging recycling to reduce the amount of waste sent to landfill by closely monitoring the recycling of materials such as copper, aluminium, steel, cross arms and cardboard. The competition allocated a percentage of the funds from the sale of scrap metal to be used for the winners’ nominated charity. After six months of recycling, Boonah Depot was crowned 2015 Champion Recyclers and received $5,000 to donate to their charity. Other competition winners were Eagle Farm (Large Facility) and Gympie Depot (Encouragement Award) who each received $2,500 to support their preferred community cause.

In 2014/15 almost three quarters of all waste generated across Energex was recycled including 3,509 tonnes of scrap metal, 3,129 tonnes of timber and 632,200 litres of oil.

Buildingenergyefficiency

Since migration to environmentally sustainable buildings, the Energex Corporate Property Portfolio has reduced total energy consumption by 13.4 per cent and increased energy efficiency (kWh/m2) by 33.3 per cent when compared to the 2005/06 baseline year.

Sunshine Coast Solar Farm

During 2014/15 Energex continued to work with the Sunshine Coast Council in relation to their proposal to build a 15 megawatt solar farm at Valdora on the Sunshine Coast. The Council sees the solar farm as having the capability of offsetting the entire electricity consumption at its facilities and operations. The farm is well-located for the Energex network and we have been extensively involved with the development of the project’s feasibility study.

kWhTOTAL-Year-on-YearComparison Measure

2005/06

2011/12

2012/13

2013/14

2014/15

kWh Total 17,073,981 15,910,239 17,184,439 16,486,763 14,792,105

% change prev year -4.4% 8.0% -4.0% -10.3%

% change to 05/06 -6.8% 0.6% -3.4% -13.4%

Energyefficiencycomparison-kWhperm2

Portfolio m2 119,780.3 151,222.3 157,999.5 160,187.6 155,622.9

kW per m2 142.54 105.21 108.76 102.92 95.05

% change - -26.2% -23.7% -27.8% -33.3%

Table 4 – Comparison to previous years including benchmark 2005/06 year


DirectionsOn 28 August 2014, the Government issued a Direction to Energex under section 299 of the Electricity Act 1994 to provide information regarding the due diligence, preparatory and investigatory activities in relation to the potential issue of a ‘hybrid instrument’ as an alternative way of funding the future expansion of infrastructure of Energex’s distribution business.

After seeking community feedback, the Government decided to investigate a lease of Energex’s business, rather than a hybrid instrument. Accordingly, on 5 November 2014, a new Direction under section 299 of the Electricity Act 1994 was issued to reflect this change by removing the term ‘hybrid instrument’ and instead referring to a ‘lease’ transaction.

The Direction required Energex, its subsidiaries and SPARQ Solutions Pty Ltd, to disclose to the State and its advisors such documents, information, access and assistance as requested by the Under Treasurer or the Project Director from time to time for the purposes of the Project.

On 30 April 2015, following the change in State Government, the Government issued a further Direction to Energex under section 299 of the Electricity Act 1994 to provide all necessary information and assistance in relation to the Electricity Mergers Working Group’s program of work.

On 29 June 2015, the shareholding Ministers issued a Direction to Energex under section 131(3)(b) of the GOC Act in relation to the payment of the dividend for the 2014/15 financial year. The Direction was published in the Queensland Government Gazette on 20 July 2015.

MinisterialNotificationsOn 22 December 2014, the shareholding Ministers revoked the previous notification that applied the “Local Industry Policy” to Energex and its subsidiaries, in accordance with section 114 of the GOC Act.

Additional corporate reporting

Region Country Purpose No. of visits Subtotal($)

Europe United Kingdom London

To provide the key insurance stakeholders with information in regards to Energex insurance renewal to enable beneficial commercial outcomes in regards to premiums.

2 26,733

Total $26,733

Table 5 – International Travel Expenditure 2014/15

Summarised below is the international travel expenditure costs incurred by the Energex Group of companies for 2014/15.

Event Date Subtotal($)

Staff Recognition - 25 Years of Service 4 July 2014 5,000

Energex Apprenticeship Awards 15 May 2015 9,200

Energex Excellence Awards 1 May 2015* / 12 June 2015 29,706

Total $43,906

Table 6 – Corporate entertainment and hospitality events 2014/15

Summarised below are the corporate entertainment and hospitality events over $5,000 (including GST), incurred by the Energex Group of companies for 2014/15.

*The initial event was cancelled due to a severe storm. A smaller event was convened the following month.


5

Assets 2010/11 2011/12 2012/13 2013/14 2014/153

Total Overhead and Underground (km) 50,863 51,434 51,879 52,176 52,635

Lines-LengthofOverhead(km)Total 34,959 35,051 35,094 35,112 35,171

LV (Low Voltage) 14,287 14,274 14,262 14,242 14,226

11 kV 17,451 17,502 17,529 17,541 17,553

33 kV 2,080 2,098 2,130 2,196 2,219

132 kV and 110 kV 1,141 1,177 1,173 1,1734 1,1734

Cables-LengthofUnderground(km)Total 15,904 16,383 16,785 17,064 17,464

LV (Low Voltage) 9,990 10,262 10,457 10,599 10,848

11 kV 4,938 5,122 5,290 5,421 5,547

33 kV 843 866 892 892 913

132 kV and 110 kV 133 133 146 152 156

Other Equipment (Quantity)Bulk Supply Substations 40 41 41 42 42

Zone Substations 227 235 238 242 244

Poles1 647,648 653,741 658,886 661,714 667,469

Distribution Transformers 46,083 46,792 47,436 47,875 48,436

Street Lights2 333,797 340,248 345,807 348,716 354,691

Customer NumbersResidential 1,204,190 1,220,430 1,235,740 1,250,326 1,271,644

Other 111,950 113,185 111,455 113,489 113,801

Total 1,316,140 1,333,615 1,347,195 1,363,815 1,385,445

Statistical InformationMaximum Demand (MW) 4,687 4,447 4,475 4,373 4,614

Energy Delivered (GWh) 22,565 22,144 22,105 21,719 22,168Number of employees at year end5 3,835 3,804 3,433 3,141 2,987

1All poles including customer poles and streetlight poles.2 All streetlights including rate 3 streetlights.3 All information as at June 30 each year.4 Distance includes previously purchased 110kV lines from Powerlink that are currently out of service. 5 Active full time equivalents (FTEs)

The large number of Energex assets are managed across six hubs centred on geographical regions. These hubs provide regional asset and resource management, and can respond promptly to local network outages.

Table 7 – Summary of Network and Customer Statistics


Glossary and abbreviations

Term Definition

Assets The assets referred to in the revenue section of this document are made up of our financial assets and network equipment.

Australian Energy Regulator The Australian Energy Regulator is the economic regulator of the national electricity market established under Section 44AE of the Competition and Consumer Act 2010 (Commonwealth). It is their role to review our Regulatory Proposal and determine our funding for the five year regulatory period.

C20 CAPEX C20 Capital Expenditure – C20 is used to indicate sub-transmission network and distribution backbone capital projects.

C25 CAPEX C25 Capital Expenditure – C25 is used to indicate distribution capital projects for customer connections, company initiated and customer driven works.

Capital expenditure Expenditure typically resulting in additional or replacement of network equipment.

Consumer Price Index (CPI) Consumer Price Index is determined by the Australian Bureau of Statistics which measures changes in the price of consumer goods and services purchased by households.

Demand The amount of electricity being used at a given time measured in either kilowatts or kilovolt amperes.

Demand management programs Demand management programs provide solutions to our customers which are designed to reduce demand on our electricity supply network or part of the electricity supply network.

Electricity distributor An electricity distributor is an owner and operator of substations, poles and wires that transport electricity from high voltage transmission network to customers. It is also a provider of technical services including construction of power lines, inspection of equipment, maintenance and public lighting. We are an electricity distributor, operating as a registered participant in the National Electricity Market for the region of South East Queensland. There are sixteen electricity distributors which operate within the National Electricity Market.

Electricity use The amount of electricity used by a customer (or all customers) over a period of time. Electricity use is measured in terms of watt hours, kilowatt hours, megawatt hours or gigawatt hours.

Gigawatt hours (GWh) A measure of electricity volume or use.

Guaranteed Service Levels A Guaranteed Service Level is a commitment of Energex to meet standards defined by the Queensland Electricity Industry Code. The standards include; appointments, hot water, reliability etc. Where these service levels are not met, we are required to make a payment to the customer impacted.

Kilowatt hours (kWh) A measure of electricity volume or use.

Maximum allowable revenue The maximum revenue which can be recovered through network tariffs for the regulatory period.

Megavolt amperes (MVA) A measure of electricity volume or use.

Megawatt hours (MWh) A measure of electricity volume or use.

National Electricity Law The legislation that establishes the role of the Australian Energy Regulator as the economic regulator of the National Electricity Market and the regulatory framework under which the Australian Energy Regulator operates.


6

Term Definition

National Electricity Market The interconnected electricity grid covering Queensland, New South Wales, Victoria, Tasmania, South Australia and the Australian Capital Territory.

Nominal $m Nominal $m represents expenditure value in the year it is incurred.

Operating expenditure Operating expenditure is the combined total of maintenance and operating costs. Maintenance costs relate to the repair and maintenance of network equipment while operating costs relate to the day to day operations unrelated to maintenance costs.

Peak demand The peak demand recorded at a customer’s individual meter or the peak demand placed on the electrical distribution network system at any time or at a specific time or within a specific time period, such as a month. Maximum demand is an indication of the capacity required for a customer’s connection or the electrical distribution network.

Positive Payback A program which provides incentives to residential or business customers to participate in demand management programs.

Queensland Government Solar Bonus Scheme

A Queensland Government policy that pays small residential and business customers for the surplus electricity generated from roof-top solar PV systems that is exported to the Queensland electricity network

Regulation Regulations are delegated legislation made under or in relation to an Act of Parliament.

Regulatory Proposal A regulatory proposal is a submission we make to the Australian Energy Regulator every five years to outline our forecasts for expenditure and revenue for the relevant period.

Reliability Reliability means to how long and how often customers experience power outages.

Solar PV A system made up of an inverter and photovoltaic (PV) panels that uses sunlight to generate electricity for use at the customers property. These systems have the capability to feed electricity into the network.

Standard Control Service Services we provide where the entire community shares the cost are called standard control services. Standard control services include network services which ensure the operation of our network and delivery of electricity services. The costs for these services are shared by everyone who is connected to the network and are subject to a ‘revenue cap’. This means the total revenue is a fixed amount collected over a five year period.

SCS System CAPEX Standard Control Services System Capital Expenditure – A measure of the capital expenditure incurred by the Energex Group on standard control services system capital works to the end of the reporting period.

SCS System OPEX Standard Control Services System Operating Expenditure – A measure of the operational expenditure incurred by the Energex Group on standard control services works to the end of the reporting period.


Part BAnnual Financial Report

For general enquiries: www.energex.com.au

[email protected] 13 12 53 (8am to 5:30pm, Monday to Friday)

13 14 50 Telephone interpreter service

Follow us on twitter.com/energex Like us on facebook.com/energex

© Energex Limited 2015 ® Energex and Energex Positive Energy are registered trade marks of Energex Limited

Energex Limited ABN 40 078 849 055 GPO Box 1461, Brisbane QLD 4001

for the year ended 30 June 2015

Directors’ report 1

Auditor’s independence declaration 10

Income statement 11

Statement of comprehensive income 12

Balance sheet 13

Statement of changes in equity 14

Cashflowstatement 15

Notestoandformingpartofthefinancialstatements 16

1 Summary of significant accounting policies 16

2 Profit from operations 27

3 Income tax 28

4 Earnings per share 30

5 Cash and cash equivalents 30

6 Trade and other receivables 31

7 Inventories 32

8 Property, plant and equipment 32

9 Intangible assets 35

10 Other assets 35

11 Trade and other payables 36

12 Long-term borrowings 36

13 Employee benefits 37

Contents

14 Provisions 41

15 Other liabilities 41

16 Contributed equity 42

17 Reserves 42

18 Retained earnings 42

19 Dividends 43

20 Financial risk management objectives and policies 43

21 Financial instruments 45

22 Commitments for expenditure 47

23 Investment in controlled entities 48

24 Parent entity disclosures 49

25 Key management personnel 50

26 Related parties 56

27 Contingent assets and liabilities 57

28 Auditor’s remuneration 57

29 Events after the reporting period 57

30 Change in accounting policy 58

Directors’ declaration 61

Independent auditor’s report 62

Directors’ report

Page 1 of 63

The Board of Directors of Energex Limited (Energex) is pleased to submit this annual financial report of the Group, which comprises Energex (the Company), its subsidiaries and its interest in a jointly controlled entity, for the financial year ended 30 June 2015. In compliance with the provisions of the Corporations Act 2001, the Directors present the following:

Directors

The names of the Directors in office at any time during or since the end of the year are:

Appointment date Kerryn Lee Newton* (Appointed as Chair 23 April 2015) 2 October 2014 Shane Leslie Stone (Chairman resigned 20 March 2015) 31 May 2012 Peter Maurice Arnison* 2 October 2014 Kenneth Bruce Clarke 5 July 2012 Mervyn John Davies 5 July 2012 Sandra Gai Deane 20 December 2012 John Andrew Geldard* 2 October 2014 Gordon Hugh Jardine 14 May 2015

* The appointment terms for Kerryn Newton (original date of appointment 1 October 2008), Peter Arnison (original date of appointment 2 December 2004) and John Geldard (original date of appointment 1 July 2005) expired on 30 September 2014. All three Directors were subsequently reappointed on 2 October 2014.

Please refer to the ‘Board profiles’ section of the Energex Annual Performance Report 2014/15 for details of Directors’ qualifications, experience and special responsibilities.

Company Secretaries

Michael Wayne Russell Marnie Maree White

Please refer to the ‘Board profiles’ section of the Energex Annual Performance Report 2014/15 for details of the Company Secretaries’ qualifications, experience and special responsibilities.

Registered office

26 Reddacliff Street, Newstead QLD 4006 (GPO Box 1461, Brisbane QLD 4001).

Principal activities

The principal activities of the Group during the financial year were the design, construction, operation, maintenance and management of the South East Queensland (SEQ) electricity distribution network.

Operating and financial review

The Group continues its focus on prudent delivery of its Network expenditure programs together with ongoing realisation of business efficiencies to align its business with current trends in energy demand and consumption and to meet customer and other stakeholder expectations. This focus on improved business efficiency and alignment with market and industry trends will result in more sustainable pricing outcomes for customers. The Group’s broad based efficiency programmes which were initiated in 2010/11 continue to yield tangible results and sustainable cost savings. Ongoing programmes of targeted initiatives are expected to yield further benefits into the 2015-2020 regulatory control period. The business maintained its strong customer focus during the year, exceeding its reliability performance obligations in five of six measures.

Employee numbers continue to be re-aligned with stabilised demand and consumption forecasts and consequential reductions in capital and operating expenditure requirements. Reductions in employee numbers are effected in an ordered and systematic manner as the Group continues its focus on delivering balanced commercial outcomes. The number of employees reduced from 3,141 active full time equivalents at 30 June 2014 to 2,987 active full time equivalents at the end of the current period. The Group, consistent with its core values has managed this employee reduction process with care, respect and support for staff involved.

As the Group moves into the 2015-2020 regulatory control period with further reductions in operating and capital expenditure anticipated, the key focus is to maintain and operate the network in a safe and reliable manner for the benefit of the community, to invest prudently for a sustainable future, and to meet its commitment to deliver appropriate returns to shareholders.

1 Energex Annual Financial Report 2014/15

Directors’ report

Page 2 of 63

Summary of financial performance

2015 2014$M $M

Restated*

Total revenue 2,575 2,248 Total expenses (1,842) (1,871) Profit before income tax equivalent 733 377 Income tax equivalent (221) (111) ProfitfortheyearattributabletoownersofEnergexLimited 512 266 * Refer to Note 30.

The Group generated profit before income tax equivalent of $733 million (2014*: $377 million) of which $512 million, or the full after tax amount (2014: $406 million – 80 per cent of 2013/14 reported profit after tax equivalent), will be returned to the Queensland State Government as dividends. Income tax equivalent payments are also made to the Queensland State Government under the National Tax Equivalent Regime (NTER). In addition to 100 per cent of profit after tax being distributed as dividends, the Board declared an additional distribution of $783 million from retained earnings and reserves. This distribution and the increase in the dividend ratio to 100 per cent for 2014/15 were made in response to a direction from the shareholding Ministers, dated 29 June 2015, under section 131(3)(b) of the Government Owned Corporations Act 1993.

In the current year, the Group changed its accounting policy with respect to regulated revenue under and over recoveries. Previously, the Group recognised the full amount of revenue allowed under its revenue determination and recognised any under (or over) recovery of this amount as an asset (or liability) to be adjusted in future network charges levied on customers. The new policy, where distribution revenue is recognised in the period which customer electricity consumption occurs, results in more reliable and relevant information to users as it reflects a closer correlation between market conditions, shareholder and other regulatory policies and increases the correlation between profitability and cash flows.

With the change in accounting policy, comparative amounts for the prior year have been restated to disclose the financial performance on the same basis as the current reporting year. These restatements reduced the profit after tax equivalent as reported in 2013/14 by $242 million. Refer to Note 30 for a description and summary of these restatements.

Revenue Total revenue by function:

2015 2014$M $M

Restated*

Regulated standard control services: Distribution use of system (DUOS) 1,876 1,608 Community service obligation (CSO) 30 -Transmission use of system (TUOS) 406 407 Total network use of system 2,312 2,015 Non-refundable contributions for capital works 60 35 Other 2 18 Total regulated standard control services (SCS) 2,374 2,068 Regulated alternative control services (ACS) 90 84 Non-regulatedservices 111 96 Total revenue 2,575 2,248 * Refer to Note 30.

Revenue from regulated SCS represents a significant contribution to the Group’s revenue stream, being 92 per cent (2014*: 92 per cent).

The main component of revenue is DUOS revenue, which represents the regulated revenue approved by the Australian Energy Regulator (AER). The AER is Australia’s national energy market regulator, which administers and enforces the National Electricity Law, National Electricity Rules (NER) and other guidelines established by the Australian Energy Market Commission.

The revenue as approved by the AER is determined through application of the regulated building block approach which comprises a return on the Group’s regulated asset base, a return of the regulated asset base (recovery of depreciation), and a recovery of operating expenditure incurred in the fulfilment of its obligations as a distribution network service provider (DNSP). Revenue approved by the AER may also relate to pass through and Jurisdictional Scheme amounts and incentive scheme payments. Refer to Note 1.5 of the financial statements for disclosure of the revenue related regulation and mechanisms and the accounting policy applied in the recognition of revenue.

2Energex Annual Financial Report 2014/15

Directors’ report

Page 3 of 63

DUOS and CSO revenue received for the current year of $1,906 million (2014*: $1,608 million) was marginally below the approved revenue set by the AER, predominantly due to demand for electricity by medium sized business customers being lower than forecast. In accordance with the AER regulatory determination, this shortfall in revenue received in 2014/15 will be recovered in future periods through the pricing mechanism as outlined in the discussion of regulated revenue in Note 1.5. If consumption and demand in any year varies from that assumed in establishing prices for that year, then under or over recoveries arise for that year and are adjusted in future pricing.

In compliance with a ministerial direction notice issued under section 299 of the Electricity Act 1994 dated 15 May 2014, the network charges for the 2014/15 year were lower than the calculated price determined by Energex in compliance with the regulatory determination and approved by the AER. Energex has been compensated by the State Government for the revenue not recovered from customers through the established pricing mechanism. The amount of the CSO recognised for the year was $30 million (2014: nil).

TUOS revenue of $406 million represents a recovery of transmission charges predominantly paid to the transmission network service provider (Queensland Electricity Transmission Corporation Limited trading as Powerlink Queensland). The revenue from these charges is passed through to the providers of transmission services. TUOS revenue includes $17 million of prior period under recovered TUOS billed to customers in 2014/15.

Non-refundable contributions for capital works represent physical assets contributed to the Group or cash contributions by customers to the Group for expenditure incurred in the construction of capital works.

Other SCS revenue arises from time to time due to the sale of network assets such as land and motor vehicles.

Regulated ACS revenue is earned from the provision of other electricity related services ancillary to the ownership of the distribution network. These services include those requested by electricity retailers on behalf of customers, services requested directly by customers, operation and maintenance of streetlighting services and various other miscellaneous services regulated by the AER. The relative contribution from ACS will increase as the AER has reclassified several SCS services to ACS for the 2015-2020 regulatory control period.

Non-regulated services are those which are not regulated by the AER and are conducted in an open market. These services relate predominantly to sale of inventory, the provision of contestable meters and equipment related services such as the testing, inspection and calibration of equipment.

Expenses Total expenses by function:

2015 2014$M $M

Regulated standard control services: Transmission use of system charges 388 404 Finance costs 320 392 Depreciation, amortisation and impairment 381 352 Solar photovoltaic (PV) feed-in tariff payments 204 227 Planned maintenance and vegetation management 133 149 Network operating and support costs 127 107 Corrective repair 49 48 Customer services and call centre 20 23 Inspection 22 23 Termination benefits 26 18 Emergency response/storms 10 6Total regulated standard control services (SCS) 1,680 1,749 Regulated alternative control services (ACS) 67 67 Non-regulatedservices 95 55 Total expenses 1,842 1,871

Regulated SCS represent the costs of operating and maintaining Energex’s distribution business. Inspection, repair, maintenance, vegetation management, response to emergency situations and associated customer service activities represent key functions in support of the activities of the Group as a DNSP.

The rate of connection of new solar PV systems in the current year remained strong with approximately 29,000 new systems added. However, these new systems were not eligible for the State Government’s Solar Bonus Scheme. With the progressive reduction of existing systems eligible for the scheme, the cost of the Solar Bonus Scheme Feed-in Tariff continues a steady decline and was $204 million for the current year (2014: $227 million). There were 290,006 (2014: 261,454) solar PV systems in the Energex region as at 30 June 2015, representing approximately one in four homes in SEQ, with a combined generation capacity of 980.0 MW (2014: 843.1 MW).

Solar PV systems fed 703.5 GWh (2014: 584.9 GWh) into the electricity grid.


Directors’ report

Page 4 of 63

Savings were again achieved in ongoing network operating and support costs as the Group continues its internal review of work practices and organisational structure to align with demand forecasts and associated operational and maintenance requirements. Network operating and support costs relate to costs necessarily incurred in support of the network, such as network monitoring, meter reading, demand management, regulatory levies and corporate support functions such as legal, governance and other compliance functions. These costs include compliance costs incurred in response to AER reporting requirements.

Termination benefit expenses of $26 million (2014: $18 million) were incurred in ongoing organisational restructure initiatives.

Emergency response/storm costs are a normal part of maintaining the network and subject to cyclical fluctuations based on annual weather events. The current year costs include the restoration of power to more than 114,500 homes following a super storm event.

Summary of financial position

2015 2014$M $M

Restated*

Property, plant and equipment 11,472 11,685 Other assets 1,003 703 Total assets 12,475 12,388

Long-term borrowings 6,811 6,465 Other liabilities 3,591 2,730 Total liabilities 10,402 9,195

Total equity 2,073 3,193 * Refer to Note 30.

As noted above, the Group adopted a change in accounting policy relating to the recognition of regulated revenue recoveries in the current year. Comparative amounts have been restated to disclose the financial position on the same basis as the current reporting year. These restatements reduced the net assets as reported in 2013/14 by $632 million. Refer to Note 30 for a description and summary of these restatements.

Assets The primary asset of the Group, the supply system, is carried at a fair value of $10.7 billion (2014: $11.0 billion). The fair value measurement of the Group’s supply system uses an income approach based on a discounted cash flow methodology. The cash flows used in the valuation are based on the AER’s Preliminary Decision of April 2015 for the 2015-2020 regulatory control period. As the cash flows beyond 2020 are subject to a high level of uncertainty, the value of the cash flows from 2020 onwards (terminal value) is assumed to be the projected regulated asset base ($13.6 billion) at that time as determined by applying the current legislation and guidelines issued by the AER.

Following consultation and consideration of market evidence, the supply system was valued by applying a higher discount rate to these cash flows than the allowed rate of return as determined by the AER in their Preliminary Decision for the 2015-2020 regulatory control period (determined as an estimated weighted average cost of capital or WACC). The higher discount rate is considered to be more reflective of longer term commercial expectations for the WACC. Using this rate has led to a valuation of the supply system lower than that determined in the prior year. Refer to Note 8 for further disclosures regarding the valuation of the supply system.

The Group is committed to responsible capital expenditure in fulfilling its obligation to provide a safe and reliable distribution network to SEQ.


Directors’ report

Page 5 of 63

Total capital expenditure by function: 2015 2014$M $M

Regulated standard control services: Corporate initiated network augmentation 184 277 Asset replacement 277 257 Customer initiated capital works 181 160 Other supply system capital works 12 20 Total distribution network 654 714 Non-network 97 56 Total regulated standard control services (SCS) 751 770 Regulated alternative control services (ACS) 29 24 Non-regulatedservices 43 35 Total capital expenditure 823 829

As the regulated asset base (RAB) is a main driver of revenues, and consequently future pricing impacts to our customers, a key focus of the Group is the ongoing monitoring and management of its capital spend to ensure all spend added to the RAB is prudent and efficient. The Group further reduced total capital expenditure by $6 million (2014: $166 million) compared to the prior year spend. These ongoing reductions have been achieved by aligning network augmentation activities to revised energy and demand forecasts and continuing to seek out opportunities to achieve capacity expansion in more efficient ways. The Group also continued to implement the outcomes of the Electricity Network Capital Program (ENCAP) Review performed in 2011. The review highlighted that significant improvements have been made to network reliability since the 2004 State Government review which have enabled reductions in capital expenditure.

The efficiency focus extends beyond the supply system; yielding opportunities to reduce capital spend on non-network assets such as the vehicle fleet, property, tools and equipment, lower than the allowances provided by the AER in the 2010-2015 regulatory determination. The Group actively pursues opportunities to dispose of assets no longer required to reduce ongoing management and maintenance expenditure.

The Group is containing the cost of refurbishment and replacement activities related to distribution assets to maintain the existing network concurrent with the reduction in the level of investment in transmission and network augmentation.

Capital expenditure on ACS and non-regulated services correlate to market demand in those two areas.

LiabilitiesThe total Group liabilities of $10.4 billion (2014*: $9.2 billion) largely reflect the Group’s funding strategy, with reasonablelevels of long-term borrowings employed as an efficient form of financing.

The increased dividend ratio of 100 per cent of current year profit after tax equivalent and the additional dividend of $783 million facilitate the regearing of the Group and give rise to a provision for dividends of $1,295 million and a net current liability position of $1,063 million. The provision for dividends is expected to be settled in 2015/16 and to the extent necessary payment will be funded by increased long-term borrowings. Refer to Note 21.6 for further information regarding the Group’s financing arrangements.

To align with the regulatory funding framework, the Board approved a refinancing strategy which provides for a portion of the Energex portfolio of Queensland Treasury Corporation (QTC) funded debt to be rolled over annually. Refinancing a portion of the debt on a regular basis together with interest rate movements that correlate with the allowed rate of return reduces liquidity and debt pricing risks. The financial statements contain comprehensive discussion of the funding arrangements with QTC.

The Group carries a net deferred tax liability of $1.7 billion (2014*: $1.9 billion). This liability arises due to differences between the calculation of taxable income compared to the way accounting profit is determined in the income statement. The liability represents lower taxable income compared to accounting income and thus a deferral of actual income taxes payable. The liability is expected to be realised through actual tax payments or reversal of these differences in future periods. The financial statements contain further information related to the tax balances held by the Group.

* Refer to Note 30 relating to restatement of comparatives.


Directors’ report

Page 6 of 63

Changes in state of affairs

As a DNSP, the Group’s ongoing levels of capital investment and operational activity are subject to cyclical fluctuations in energy demand and consumption. Refer to the ‘Operating and financial review’ section for a discussion of the financial impacts of fluctuations in energy demand and consumption. Refer to the ‘Performance’ section of the Energex Annual Performance Report 2014/15 for a general discussion of energy demand and consumption.

In preparation for the next regulatory control period commencing on 1 July 2015, the QTC restructured the Group’s debt portfolio to reflect a debt maturity profile that is consistent with the AER’s 10-year trailing average return on debt approach. Under this new approach a tenth of the debt portfolio will be refinanced and repriced on an annual basis, as opposed to the previous structure whereby the whole debt portfolio was refinanced and repriced every five years.

Energex’s change in accounting policy relating to the recognition of regulated revenue recoveries may lead to increased volatility in revenue compared to the previous treatment. However, this change is expected to result in more reliable and relevant information to users, with better transparency about the actual revenues billed in a period. As the revenue reflects actual customer numbers and patterns of use, this provides information reported in the financial statements on a nearer real time basis.

The Group continued its internal review of work practices and organisational structure and has continued to improve efficiencies through the realignment of its structure with current demand forecasts and associated operational and maintenance requirements. The Group will continue to ensure that it responds appropriately to changing patterns of demand and consumption through appropriate investment and operational strategies and associated plans.

No other significant changes in the Group’s state of affairs occurred during the financial year.

Events after the reporting period

There are no matters, transactions or events that have arisen in the interval between the end of the financial year and the date of this report of a material nature likely, in the opinion of the Directors of the Company, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Future developments

The Group will continue its activities, including the design, construction, operation, maintenance and management of the SEQ electricity distribution network.

As reported publicly during the 2015 State election, the newly elected State Government has proposed a merger of the state’s electricity distribution and transmission businesses, Energex, Ergon Energy and Powerlink. Details and the terms of the proposed merger arrangements are not known at this stage.

The Group submitted its regulated revenue requirements, for the 2015-2020 regulatory control period, to the AER on 31 October 2014. Based on the AER’s Preliminary Decision, and the expected outcome of the AER’s Final Decision due on 31 October 2015, revenue is expected to be lower in the 2015-2020 regulatory control period compared to the current regulatory control period, which will lead to lower profitability over the period.

Risk management

Energex has adopted AS/NZS ISO 31000:2009 ‘Risk management–Principles and guidelines’ (ISO 31000), including ISO Guide 73:2009 ‘Risk management–Vocabulary’, as a guiding reference in the development of the Energex Enterprise Risk Management (ERM) Framework and Standard. Whilst the ERM Framework provides the overarching structure for the management of risk within Energex, it also benefits from integrated specialist risk sub-frameworks, including Environmental, Safety, Corporate Emergency Response and Business Continuity Management.

Energex's ERM Framework comprises the language, accountabilities, principles, practices, systems, tools and reporting processes used to manage risks in our business. The Board articulates its risk appetite through an approved statement and manages its risk through Corporate Risk Profiles and Plans to address both operational and strategic risks.


Directors’ report

Page 7 of 63

Environmental regulations

The Group’s operations are subject to environmental regulations under both Commonwealth and State legislation.

The Energex Board maintains oversight of key environmental risks and obligations and is committed to achieving a high standard of environmental performance. The Board has appropriate governance arrangements in relation to environmental matters, which includes an Environment Council, consisting of management representatives and the Corporate Environment Group, which regularly reviews and reports on environmental issues to the Audit and Risk Committee and the Board.

The Group’s Environment Council and Corporate Environment Group are responsible for the regular monitoring of environmental exposures, review of incident trends, environmental initiatives, endorsement of recommendations for environmental improvement policies, programs and investments, as well as compliance with environmental regulations.

To meet its responsibilities, the Environment Council meets monthly to receive progress reports on approved environmental action plans and environmental status reports via the Corporate Environment Group. Based on enquiries made, the Board is not aware of any significant breaches of environmental regulations during the period covered by this report.

For further environmental performance information, refer to the ‘Environment’ section of the Energex Annual Performance Report 2014/15.

Dividends

Dividends paid or declared by Energex since the end of the 2013/14 financial year were:

Type ofShares

Cents pershare

Total amount$M

Franked/ unfranked Date of payment

2014/15 dividend – current year profit after tax Ordinary 58.46 512 Unfranked Declared and unpaid

2014/15 dividend – additional Ordinary 89.43 783 Unfranked Declared and unpaid Final 2014/15 dividend - total Ordinary 147.89 1,295 Unfranked Declared and unpaid Final 2013/14 dividend Ordinary 46.38 406 Unfranked 31 December 2014

In addition to the 100 per cent of profit after tax equivalent distributed as dividends, the Board declared an additional distribution of $783 million. This distribution and the increase in the dividend ratio for 2014/15 were made in response to a direction from the shareholding Ministers, dated 29 June 2015, under section 131(3)(b) of the Government Owned Corporations Act 1993. To the extent necessary, the increased distribution will be funded from long-term borrowings. Energex has approval under the State Borrowing Program for the 2015/16 year of $1,125 million, which Energex believes is sufficient to meet operational requirements including the payment of the dividend for the 2014/15 year. Refer to Note 19 of the financial statements for further information regarding the dividends declared and paid.

Share options

There are no share options in existence at this time.

Directors' shareholdings

At the time of publication, no Director held any beneficial interest in the shares of Energex. The shareholding Ministers, on behalf of the State of Queensland, hold all issued shares.

Directors' benefits and interests in contracts

Between 1 July 2014 and 30 June 2015, no Director has received or became entitled to receive a benefit, other than those benefits disclosed in Note 25 of the financial statements.


Directors’ report

Page 8 of 63

Indemnification of Officers

Indemnification of Officers of Energex

Energex has agreed to indemnify current and former Officers of Energex against all liabilities to another person (other than Energex or a related body corporate) that may arise from their position as an Officer of Energex and its controlled entities, except where the liability arises out of conduct involving a lack of good faith or liability against which Energex isnot permitted by law to exempt or indemnify the Officer. The Energex Limited Constitution stipulates that, subject to its terms and the exceptions above, Energex will meet the full amount of any such liabilities, including costs and expenses.

Indemnification of Officers of the Energex controlled entities and/or associated entity

Energex has agreed to indemnify Terence Effeney, Christopher Arnold, Kevin Kehl and Peter Weaver, being current Directors of the Energex controlled entities and/or associated entity, and former Directors of the Energex controlled entities, against all liabilities to another person (other than Energex or a related body corporate) that may arise from their position as an Officer of the Energex controlled entities, except where the liability arises out of conduct involving a lack ofgood faith or liability against which Energex is not permitted by law to exempt or indemnify the Officer. The deed of indemnity stipulates that, subject to its terms and the exceptions above, Energex will meet the full amount of any such liabilities, including costs and expenses.

Energex has also agreed to indemnify Christopher Arnold, Darryl Bell, Jennifer Hocking, Kevin Kehl, Peter Price, Michael Russell, Jane Smith and Marnie White, being Officers of the Energex controlled entities during the reporting period, against all liabilities to another person (other than Energex or a related body corporate) that may arise from their position as an Officer of the Energex controlled entities, except where the liability arises out of conduct involving a lack of good faith or liability against which Energex is not permitted by law to exempt or indemnify the Officer. The deed of indemnity stipulates that, subject to its terms and the exceptions above, Energex will meet the full amount of any such liabilities, including costs and expenses.

Indemnification of Energex Officers appointed to external boards and committees

Energex has agreed to indemnify any Officers who are nominated by the Energex Board to represent Energex on external boards and committees as follows:

Indemnities provided to former Energex representative Directors continue following their resignation from that position, in accordance with the terms of the deed of indemnity.

Other Officers appointed to represent Energex on external boards and committees are indemnified in accordance with the terms of the Energex Directors’ and Officers’ liability insurance policy.

Insurance premiums

Premiums have been paid on policies of insurance for former and current Officers. Disclosure of the nature of the liability covered by and premiums paid under these contracts of insurance is prohibited by the terms of the insurance contracts.


Directors’ report

Page 9 of 63

Directors' meetings

The number of meetings of the Energex Board of Directors and of each Board Committee held and attended by each Director during the year ended 30 June 2015 were:

EnergexLimited Board Audit and Risk Committee

Regulatory Committee

Network and Technical

Committee

Remuneration/People

Committee2

Directors Attended Held1 Attended Held1 Attended Held1 Attended Held1 Attended Held1

Kerryn Newton (Chair)4,5,7,8,10,11 13 13 1 1 7 7 3 3 2 2

Shane Stone (Chairman)3 6 6 n/a n/a n/a n/a n/a n/a n/a n/a

Peter Arnison5 13 13 n/a n/a 8 9 4 4 5 5 Kenneth Clarke9 12 13 n/a n/a 7 8 4 4 3 3 Mervyn Davies 13 13 7 7 9 9 4 4 n/a n/a Sandra Deane6,7,8 13 13 7 7 2 2 3 3 5 5 John Geldard5 13 13 7 7 9 9 n/a n/a n/a n/a Gordon Jardine12,13,14 2 3 n/a n/a 0 0 n/a n/a 0 0

1 The number of meetings held represents the number of meetings held during the period the Director was in office and, where applicable, a member of the relevant Board Committee.

2 On 27 April 2015, the Remuneration Committee was renamed People Committee. 3 Resigned from the Energex Limited Board effective 20 March 2015. 4 Appointed as Energex Chair on 23 April 2015. 5 The terms of appointment expired on 30 September 2014. Reappointed as Director on 2 October 2014. 6 Appointed to the Regulatory Committee on 1 December 2014. 7 Ceased to be a member of the Regulatory Committee on 27 April 2015. 8 Ceased to be a member of the Network and Technical Committee on 27 April 2015. 9 Ceased to be a member of the People Committee on 27 April 2015. 10 Appointed to the People Committee on 27 April 2015. 11 Appointed to the Audit and Risk Committee on 27 April 2015. 12 Appointed to the Energex Limited Board on 14 May 2015. 13 Appointed to the Regulatory Committee on 29 June 2015. 14 Appointed to the People Committee on 29 June 2015.

Remuneration of Directors and Executives

Refer to Note 25 of the financial statements for details of Directors' and Executives' remuneration.

Rounding of amounts

The Group and Energex are of the kind specified in Class Order 98/100 dated 10 July 1998, issued by the Australian Securities & Investments Commission. In accordance with that class order, amounts in the financial report and Directors’ report have been rounded to the nearest million dollars, unless otherwise stated.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 10.

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

KERRYNNEWTON

Chair Energex Limited 24 August 2015 Brisbane, Queensland


Consolidated income statementfor the year ended 30 June 2015

The accompanying notes form part of these financial statements.

Page 11 of 63

2015 2014Note $M $M

Restated*

Revenue from rendering of services 2.1 2,423 2,124 Revenue from sale of goods 2.1 43 33 Government grant revenue 2.1,26.1 1 2Other revenue 2.1 108 89 Total revenue 2,575 2,248

Materials and consumables (63) (51) Solar photovoltaic feed-in tariff expense (204) (227) Transmission use of system charges (388) (404) Employee benefits expense (205) (199) Termination benefits (26) (18) Depreciation, amortisation and impairment expense 2.2,5.1 (444) (385) Contractors and consultants (136) (135) Finance costs 2.2 (326) (400) Other operating expenses (50) (52) Total expenses (1,842) (1,871)

Profit before income tax equivalent 733 377 Income tax equivalent 3.1 (221) (111) ProfitfortheyearattributabletoownersofEnergexLimited 5.1,18 512 266 * Refer to Note 30.

Consolidated income statementfor the year ended 30 June 2015


Page 11 of 63

2015 2014Note $M $M

Restated*

Revenue from rendering of services 2.1 2,423 2,124 Revenue from sale of goods 2.1 43 33 Government grant revenue 2.1,26.1 1 2Other revenue 2.1 108 89 Total revenue 2,575 2,248

Materials and consumables (63) (51) Solar photovoltaic feed-in tariff expense (204) (227) Transmission use of system charges (388) (404) Employee benefits expense (205) (199) Termination benefits (26) (18) Depreciation, amortisation and impairment expense 2.2,5.1 (444) (385) Contractors and consultants (136) (135) Finance costs 2.2 (326) (400) Other operating expenses (50) (52) Total expenses (1,842) (1,871)

Profit before income tax equivalent 733 377 Income tax equivalent 3.1 (221) (111) ProfitfortheyearattributabletoownersofEnergexLimited 5.1,18 512 266 * Refer to Note 30.


Consolidated statement of comprehensive incomefor the year ended 30 June 2015


Page 12 of 63

2015 2014Note $M $M

Restated*

Profit for the year 512 266

Other comprehensive incomeItems that will not be reclassified to profit or loss:Gain/(loss) on revaluation of property, plant and equipment, net of tax 8,17 (388) 343 Remeasurements of defined benefit plans, net of tax 18 51 45 Total items that will not be reclassified to profit or loss (337) 388 Total items that may be reclassified subsequently to profit or loss - -Other comprehensive income for the year, net of tax (337) 388

Total comprehensive income for the year 175 654 * Refer to Note 30.

Consolidated statement of changes in equityfor the year ended 30 June 2015


Page 14 of 63

AttributabletoownersofEnergexLimitedContributed

equity Reserves Retainedearnings

TotalEquity

$M $M $M $M Balance at 1 July 2014 (Restated*) 746 2,228 219 3,193

Profit for the year - - 512 512 Other comprehensive income - (388) 51 (337) Transfer from reserves to retained earnings on asset

disposal - (1) 1 - Total comprehensive income for the year - (389) 564 175 Transactions with owners in their capacity as

owners:

Dividends provided for or paid - (532) (763) (1,295) Balance at 30 June 2015 746 1,307 20 2,073* Refer to Note 30.

Balance at 1 July 2013 (Restated*) 746 1,896 303 2,945

Profit for the year - - 266 266 Other comprehensive income - 343 45 388 Transfer from reserves to retained earnings on asset

disposal - (11) 11 -Total comprehensive income for the year - 332 322 654 Transactions with owners in their capacity as

owners: Dividends provided for or paid - - (406) (406) Balance at 30 June 2014 (Restated*) 746 2,228 219 3,193 * Refer to Note 30.


Consolidated balance sheetas at 30 June 2015


Page 13 of 63

30 June 30 June 30 June2015 2014 2013

Note $M $M $MRestated* Restated*

ASSETSCurrent assets: Cash and cash equivalents 5 339 130 56 Trade and other receivables 6 353 306 265 Inventories 7 59 66 76 Other current assets 10 18 21 23 Total current assets 769 523 420 Non-currentassets:Trade and other receivables - - 1 Property, plant and equipment 8 11,472 11,685 10,780 Intangible assets 9 123 132 158 Employee benefits 13 105 42 - Other non-current assets 10 6 6 - Totalnon-currentassets 11,706 11,865 10,939 TOTALASSETS 12,475 12,388 11,359

LIABILITIESCurrent liabilities: Trade and other payables 11 189 184 181 Employee benefits 13 117 110 121 Current tax payable 184 64 10 Provisions 14 1,300 410 313 Other current liabilities 15 42 36 30 Total current liabilities 1,832 804 655 Non-currentliabilities:Long-term borrowings 12 6,811 6,465 6,001 Employee benefits 13 18 24 42 Net deferred tax liabilities 3.3 1,727 1,895 1,707 Provisions 14 14 6 5 Other non-current liabilities 15 - 1 4 Totalnon-currentliabilities 8,570 8,391 7,759 TOTALLIABILITIES 10,402 9,195 8,414

NET ASSETS 2,073 3,193 2,945

EQUITYContributed equity 16 746 746 746 Reserves 17 1,307 2,228 1,896 Retained earnings 18 20 219 303 Parent interest 2,073 3,193 2,945 TOTALEQUITY 2,073 3,193 2,945 * Refer to Note 30.

Consolidated balance sheetas at 30 June 2015


Page 13 of 63

30 June 30 June 30 June2015 2014 2013

Note $M $M $MRestated* Restated*

ASSETSCurrent assets: Cash and cash equivalents 5 339 130 56 Trade and other receivables 6 353 306 265 Inventories 7 59 66 76 Other current assets 10 18 21 23 Total current assets 769 523 420 Non-currentassets:Trade and other receivables - - 1 Property, plant and equipment 8 11,472 11,685 10,780 Intangible assets 9 123 132 158 Employee benefits 13 105 42 - Other non-current assets 10 6 6 - Totalnon-currentassets 11,706 11,865 10,939 TOTALASSETS 12,475 12,388 11,359

LIABILITIESCurrent liabilities: Trade and other payables 11 189 184 181 Employee benefits 13 117 110 121 Current tax payable 184 64 10 Provisions 14 1,300 410 313 Other current liabilities 15 42 36 30 Total current liabilities 1,832 804 655 Non-currentliabilities:Long-term borrowings 12 6,811 6,465 6,001 Employee benefits 13 18 24 42 Net deferred tax liabilities 3.3 1,727 1,895 1,707 Provisions 14 14 6 5 Other non-current liabilities 15 - 1 4 Totalnon-currentliabilities 8,570 8,391 7,759 TOTALLIABILITIES 10,402 9,195 8,414

NET ASSETS 2,073 3,193 2,945

EQUITYContributed equity 16 746 746 746 Reserves 17 1,307 2,228 1,896 Retained earnings 18 20 219 303 Parent interest 2,073 3,193 2,945 TOTALEQUITY 2,073 3,193 2,945 * Refer to Note 30.




Page 14 of 63



TotalEquity




owners:








Page 14 of 63



TotalEquity




owners:







Consolidated cash flow statement for the year ended 30 June 2015


Page 15 of 63

2015 2014Note $M $M

Cash flows from operating activities:Receipts from customers (inclusive of goods and services tax) 2,476 2,171 Payments to suppliers and employees (inclusive of goods and services tax) (1,038) (1,097)

1,438 1,074 Finance costs paid (337) (398) Income taxes paid (121) (35) Net cash provided by operating activities 5.1 980 641 Cash flows from investing activities:Payment for property, plant and equipment, and intangibles (728) (738) Payments for capitalised interest (13) (21) Proceeds from sale of property, plant and equipment 18 15 Proceeds from sale of business operations 1 -Interest received 5.1 8 6Net cash used in investing activities (714) (738) Cash flows from financing activities:Proceeds from borrowings 346 465 Repayable deposits received 3 -Dividends paid to owners of Energex Limited 19 (406) (294) Net cash provided by financing activities (57) 171 Net increase in cash and cash equivalents 209 74 Cash and cash equivalents at start of year 130 56 Cash and cash equivalents at end of year 5 339 130

Consolidated cash flow statement for the year ended 30 June 2015


Page 15 of 63

2015 2014Note $M $M

Cash flows from operating activities:Receipts from customers (inclusive of goods and services tax) 2,476 2,171 Payments to suppliers and employees (inclusive of goods and services tax) (1,038) (1,097)

1,438 1,074 Finance costs paid (337) (398) Income taxes paid (121) (35) Net cash provided by operating activities 5.1 980 641 Cash flows from investing activities:Payment for property, plant and equipment, and intangibles (728) (738) Payments for capitalised interest (13) (21) Proceeds from sale of property, plant and equipment 18 15 Proceeds from sale of business operations 1 -Interest received 5.1 8 6Net cash used in investing activities (714) (738) Cash flows from financing activities:Proceeds from borrowings 346 465 Repayable deposits received 3 -Dividends paid to owners of Energex Limited 19 (406) (294) Net cash provided by financing activities (57) 171 Net increase in cash and cash equivalents 209 74 Cash and cash equivalents at start of year 130 56 Cash and cash equivalents at end of year 5 339 130


Notes to consolidated financial statements for the year ended 30 June 2015

Page 16 of 63

1 Summary of significant accounting policies

1.1 General information

Energex Limited (Energex) is a company domiciled in Australia. The consolidated financial report for the year ended 30 June 2015 comprises of Energex (the Company), its subsidiaries and its interest in a jointly controlled entity (collectivelyreferred to as the Group).

The financial report was authorised for issue by the Company’s Directors (the Board) on 24 August 2015.

1.2 Statement of compliance

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards issued by the Australian Accounting Standards Board, the Corporations Act 2001 and the provisions of the Government Owned Corporations Act 1993 (GOC Act).

The accounting policies have been consistently applied except for the change in policy on the recognition of regulated revenue recoveries. The Group previously recognised the full amount of revenue allowed under its revenue determination with any amounts under or over recovered recognised as an asset or liability. The revised policy recognises regulated revenue only when it is billed with no recognition of under or over recoveries as an asset or liability. Refer to Note 30 for further information on the policy change.

The Group is a for-profit entity for the purpose of preparing financial statements.

Early adoption of Australian Accounting Standards

The Group has considered Australian Accounting Standards issued or amended but not yet effective for the annual reporting period ended 30 June 2015 and elected not to early adopt any standards under section 334(5) of the Corporations Act 2001.

New or amended Accounting Standards applicable for the first time

The Group has applied the following amendment to a standard for the first time for the annual reporting period commencing 1 July 2014:

AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-financial Assets

As a result of the amendments to AASB 136, the Group has expanded its disclosure of recoverable amounts when they are based on fair value less costs to sell and an impairment has been recognised.

Australian Accounting Standards not yet applicable and not early adopted

The Australian Accounting Standards issued or amended that are not yet effective and not elected to be early adopted relevant to the Group are shown below (those Australian Accounting Standards that have been assessed to result in no or minimal impact are not included below):

AASB 9 Financial Instruments

A complete version of AASB 9 was issued in December 2014 and replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements.

AASB 9 is effective for annual periods beginning on or after 1 January 2018 with early adoption permitted.

The extent of the impact on the Group has not yet been quantified.

AASB 15 Revenue from Contracts with Customers

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance including AASB 18 Revenue, AASB 111 Construction Contracts and Interpretation 18 Transfers of Assets from Customers.

AASB 15 is effective for annual periods beginning on or after 1 January 2017 with early adoption permitted.

The extent of the impact on the Group has not yet been quantified.



Page 17 of 63

1.3 Basis of preparation

Historical cost convention

The consolidated financial report has been prepared on the basis of historical cost, except where stated for certain financial assets and liabilities and supply system assets that are carried at fair value.

Functional and presentation currency

The consolidated financial report is presented in Australian dollars, which is the functional currency of the Company and its subsidiaries in the Group.

Critical accounting estimates and judgements

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in relevant future periods.

The estimates, assumptions and judgements that have a potential significant effect are discussed below.

MeasurementoffairvaluesThe Group’s accounting policies and disclosures require the measurement of fair values for certain non-financial assets included in property, plant and equipment and assets that are held for sale. The valuation of the supply system is based on an income approach which includes the use of inputs that are not based on observable market data (unobservable inputs). The valuation of assets held for sale is based on a market approach and utilises independent valuations that consider comparable transactions for similar assets. Significant valuation assumptions and estimates used in fair value measurements are reported to the Audit and Risk Committee and the Board.

Fair values are categorised into different levels in a fair value hierarchy based on the types of inputs used in the valuation techniques as follows:

- Level 1: quoted prices in active markets for identical assets or liabilities; - Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly or indirectly; and - Level 3: inputs for the asset or liability that are based on unobservable inputs.

If the inputs used to measure the fair value of an asset could be categorised in different levels of the fair value hierarchy, the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Further information about the assumptions made in measuring fair values is included in Note 8.

Impairment of property, plant and equipment, and intangible assets The Group assesses the carrying amounts of non-financial assets at the end of each reporting period by evaluating conditions that may indicate potential impairment of assets. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units or CGUs).

Depreciation Depreciation is calculated on a straight-line basis using the estimated useful life and estimated residual value of an asset. These estimates and assumptions are further discussed in Note 1.16.

Dismantled assets valuation The unit rates used to remove dismantled assets from the supply system are the estimated fair value of those assets.

Defined benefit superannuation fund obligations During the period the Group changed the discount rate used to calculate employee benefit liabilities from the Australian government bond rate to the high quality corporate bond rate and applied this change prospectively as a change in accounting estimate. For further discussion on estimates and assumptions used in the calculation of the Group’s defined benefit superannuation fund obligations, refer to Note 13.



Page 18 of 63

Employee benefits The Group recognises leave liabilities based on estimated employee benefits and assumptions described in Note 1.20.

Taxation The Group recognises deferred tax assets and deferred tax liabilities based on judgements described in Note 1.8.

1.4 Principles of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

The balances and effects of transactions between Group entities are eliminated in preparing the consolidated financial statements.

Where control of an entity commences or ceases during a financial year, the profits or losses are included in the consolidated income statement from the date control commenced to the date control ceased. Investments in controlled entities are carried in the financial statements of the Company at the lower of cost and recoverable amount.

Joint arrangements

The Group has a 50 per cent interest in a joint operation, SPARQ Solutions Pty Ltd (SPARQ) with the remaining interest held by Ergon Energy Corporation Limited (Ergon Energy). SPARQ is a proprietary company limited by shares and is incorporated and domiciled in Australia. The principal activity of SPARQ is the provision of Information Communications and Technology (ICT) services to the Group and Ergon Energy.

This joint arrangement is classified as a joint operation and the Group recognises its share of assets, liabilities, revenue and expenses. All transactions and balances with SPARQ are eliminated upon consolidation of their results.

SPARQ’s registered office and its principal place of business are as follows:

Registered office: 420 Flinders Street, Townsville QLD 4810 Principal place of business: Level 6, 26 Reddacliff Street, Newstead QLD 4006

1.5 Revenue

Revenue is measured at the fair value of the consideration received or receivable net of goods and services tax (GST). Revenue is recognised when the amount can be reliably measured and it is probable that future economic benefits will flow to the Group or benefits have already flowed to the Group.

Revenue is recognised for the major business activities as follows:

Rendering of services

Network use of system

Energex is subject to regulation under the National Electricity (Queensland) Law, the National Electricity Rules, and other rules established by the Australian Energy Market Commission as administered and enforced by the Australian Energy Regulator (AER). There are two broad categories of regulated distribution services applicable to Energex, being Standard Control Services (SCS) and Alternative Control Services (ACS). SCS comprise network services, connection services and metering services. ACS includes streetlighting services, quoted services and fee-based services. These two categories of regulated distribution services earn revenue under one of two regulated revenue models known as a revenue cap and a price cap. The revenue cap applies to SCS activities and entitles the Group to a pre-determined allowance for Distribution Use of System (DUOS) charges. The price cap applies to ACS activities and is determined as a price per unit of service (refer to the service charges section below).

Assets utilised in the provision of SCS form part of the regulated asset base (RAB) and earn a regulated return over their life under the revenue cap. ACS related assets are generally subject to the price cap with the revenue recognised on commissioning and, therefore, do not generally earn a regulated return over their life. SCS and ACS assets are measured at fair value.

DUOS is billed to customers based on a combination of energy consumption, demand, capacity and fixed charges at AER approved prices which are calculated to recover the revenue cap for the financial year.



Page 19 of 63

Regulated network use of system (NUOS) revenue is determined based on the allowed revenue cap for DUOS services plus regulated transmission use of system charges (TUOS, also referred to as designated pricing proposal charges - DPPC) paid predominantly to the transmission network service provider (Queensland Electricity Transmission Corporation Limited trading as Powerlink Queensland). The revenue from the TUOS charges is passed through to the providers of transmission services.

Under the current regulatory determination, the Group is entitled to recovery of excess solar photovoltaic (PV) feed-in tariff payments made in the current period. This recovery is included in NUOS revenue as it is billed to customers.

Any current period under or over recovery is recovered from or returned to customers in future periods through an adjustment to prices. Where over recoveries occur they are deducted from revenue in the period in which they are returned to customers. Under recoveries are recognised as revenue in the period in which they are billed to customers. This represents a change in accounting policy (refer Note 30).

When circumstances arise which, in the opinion of the Directors, significantly change the assumptions on which the revenue cap is based, the AER is advised and the adjustments are reflected against the revenue cap and prices.

The AER also administers a Service Target Performance Incentive Scheme (STPIS). The purpose of the scheme is to provide financial incentives for distribution network service providers to maintain and improve service performance levels. The scheme enables the Group to earn a reward or incur a penalty capped at ±2.0 per cent of allowed revenue as set by the AER. The STPIS reward or penalty is recovered from or returned to customers in future periods through the pricing mechanism and is recognised in the period in which it is billed to customers.

Community service obligation Direction notices that are issued by the shareholding Ministers which result in the non-recovery of AER approved revenue from customers may qualify as a community service obligation (CSO) under section 112 of the GOC Act. Where a direction notice qualifies as a CSO, Energex has an entitlement to recover any such revenue shortfalls from the State Government. CSO revenue is recognised when the Group becomes entitled to submit a claim to the State Government for foregone revenue.

Service charges Revenue is earned for the provision of other electricity-related services, including additions and alterations to meters and service connections, ancillary metering services and temporary supply services. These are known as fee-based services and are subject to a price cap determined by the AER. However, the price charged for some of these services is capped under section 226 (2) and Schedule 8 of Queensland’s Electricity Regulation 2006 which overrides the AER price caps. Where applicable, revenue is recognised when the service is provided.

ACS revenue is also earned for the construction and maintenance of streetlighting and for other quoted services which represent customer requested works and recoveries for damage to Energex property. This revenue is recognised when the work has been completed or with reference to the stage of completion of the works.

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods, and effective control over the goods, have been passed to the buyer and the amount can be measured reliably.

Non-refundablecontributionsforcapitalworks

The Group finances part of its capital works program through non-refundable contributions from customers which are applied to the cost of these works. The contributions to capital works are categorised either as revenue relating to SCS or ACS. SCS comprise network services and connection services with the associated assets forming part of the RAB. ACS includes services such as streetlighting and large customer connections with the associated assets excluded from the RAB.

Contributions towards assets which form part of the RAB are included in regulated revenue at the fair value of the contribution. In-kind contributions of assets which are regulated under the price cap are recognised at the rates proposed to and approved by the AER.

All non-refundable contributions, in-kind and in-cash, are initially recognised as unearned revenue in the balance sheet. These contributions are subsequently recognised as revenue when the associated assets are brought into commercial operation. Contributions of fully constructed non-current assets are recognised at the fair value of the contributed asset on the date when control passes to the Group and the assets are ready for use.



Page 20 of 63

Interest revenue

Interest revenue is recognised as it is earned using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset.

Government grants

When there is reasonable assurance the Group will comply with all conditions attached to government grants and thus the grants will be earned, they are recognised in the balance sheet as unearned revenue. Grants that compensate the Group for expenses incurred are recognised as revenue in the income statement. This occurs on a systematic basis as the conditions of the grants are fulfilled.

1.6 Goods and services tax

Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables, payables and commitments in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis where major classes of cash receipts and cash payments are disclosed inclusive of GST. The GST component of cash flows arising from investing and financing activities that is recoverable from, or payable to, the taxation authority is classified as operating cash flows on the basis that the GST receivable or payable is operating in nature.

1.7 Finance costs

Finance costs charged by the lender include administration fees, capital market fees, and interest on the principal. A competitive neutrality fee is also paid.

Interest costs on the Group’s long-term borrowings are calculated by Queensland Treasury Corporation (QTC) in accordance with its book rate methodology, which equates to amortised cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument.

Finance costs directly attributable to the construction of assets that take more than 12 months to prepare for their intended use are added to the cost of those assets.

Finance costs which are not directly attributable to qualifying assets are expensed in the period in which they arise.

All other finance costs are recognised as expenses in the period in which they are incurred.

1.8 Income tax

Income tax equivalents

The Group is required to make income tax equivalent payments to the Queensland Government pursuant to subsection 129(4) of the GOC Act. These payments are administered by the ATO under the National Tax Equivalent Regime (NTER).

The NTER broadly utilises the provisions of the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and associated legislation, as well as rulings and other pronouncements by the ATO to determine the tax payable by the Group. The Group entities are not required to maintain a franking account.

Income tax equivalent accounting

The current income tax expense is based on the profit for the year adjusted for any items that are non-assessable or non-deductible in relation to the current tax year. It is calculated using the tax rates that have been enacted or substantively enacted by the end of the reporting period.

Current tax payable is the expected tax payable on the taxable profit for the year, at tax rates applicable to the income tax year, less instalments paid.

Deferred tax assets and liabilities are calculated by comparing the carrying amounts of assets and liabilities in the balance sheet with the tax bases of assets and liabilities determined in accordance with the relevant taxation legislation.



Page 21 of 63

Deferred tax is calculated at the tax rates expected to apply when the temporary differences between accounting carrying amounts and tax bases of assets and liabilities reverse.

Deferred tax is recognised as an income or expense in the income statement with the exception of those items that may be credited or charged directly to equity. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Capital losses are not recognised as a deferred tax asset as it is not considered probable they can be utilised in the future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset deferred tax balances, those balances relate to the same taxation authority and the intention is to settle on a net basis or realise the asset and settle the liability simultaneously.

The amount of deferred tax benefits brought to account, or which may be realised in the future, is based on the assumption that no adverse change will occur in income taxation legislation. It is also anticipated that the Group will derive sufficient future assessable income to enable the benefit to be realised and will comply with the conditions of deductibility imposed by the law.

Income tax consolidation

The Group has implemented the tax consolidation legislation and is, therefore, taxed as a single entity. Energex is the ‘head-entity’ in the tax-consolidated group and makes income tax payments on behalf of wholly-owned subsidiaries.

Tax funding agreement

Entities within the Energex tax-consolidated group have signed a tax funding agreement designed to bind all entities within the tax-consolidated group. Under the terms of the tax funding agreement, each of the subsidiary entities in the tax-consolidated group have agreed to pay or receive a tax equivalent payment to or from the head entity, based on the current tax payable liability or current tax receivable asset of the subsidiary entity.

1.9 Earnings per share

Basic earnings per share is determined by dividing profit after tax attributable to members of Energex by the weighted average number of ordinary shares on issue during the financial year.

The weighted average number of shares on issue during the financial year is calculated by applying a time weighting factor to shares issued or redeemed throughout the year.

1.10 Dividends

A provision is made for the amount of any dividend declared by the Board on or before the end of the financial year but not distributed at the end of the reporting period. The provision is recognised in the reporting period in which the dividends are declared for the entire undistributed amount.

1.11 Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash at bank, call deposits and other short-term highly liquid investments with original maturities of three months or less.

1.12 Trade and other receivables

Trade and other receivables are recognised when the Group has a legal right to receive cash, cash equivalents or economic benefits and are measured at amounts due at the time of sale or service delivery. Trade receivables are due for settlement within 10 to 30 days of the customer being billed. Other receivables are due in accordance with their contractual terms.

Collectibility of trade receivables is reviewed on an ongoing basis. A provision for impairment of receivables is raised when the collection of the full amount of the debt is no longer probable. Bad debts are written off when it has been identified that there is no reasonable prospect of recovery. Movements in the provision are recognised in the income statement.



Page 22 of 63

1.13 Financial instruments

Initial recognition and measurement

Financial instruments are initially measured at fair value when the related contractual rights or obligations arise (refer Note 21).

Subsequent measurement

Financial instruments classified as fair value through profit and loss are measured at fair value at the end of each reporting period subsequent to their initial recognition. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the profit or loss when incurred unless hedge accounting is applied.

Financial instruments classified as loans and receivables are measured at amortised cost subsequent to their initial recognition, using the effective interest method less provision for impairment. The effective interest rate is the rate that discounts estimated future cash flows over the life of the asset.

Other non-derivative financial assets and liabilities are recognised at amortised cost subsequent to their initial recognition. For borrowings, this comprises original debt less principal payments and amortisation.

1.14 Inventories

The majority of the Group’s inventories are used in the maintenance and construction of supply system assets. Some inventories are sold to contractors for the development of subdivisions. Inventories are measured at the lower of cost and net realisable value.

1.15 Assets held for sale

Non-current assets are reclassified to held for sale if it is highly probable that they will be recovered primarily through salerather than through continuing use. This is demonstrated where management is committed to a sale plan, the assets are actively marketed and sale is expected within the next 12 months.

Assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell. The asset is tested for impairment prior to classification as held for sale and any impairment loss is recorded against the asset revaluation reserve to the extent available and then as an impairment expense. Once classified as held for sale, the asset is no longer depreciated and any subsequent gain or loss on remeasurement is recognised in the income statement.

1.16 Property, plant and equipment

Each class of property, plant and equipment is carried at fair value or cost less any accumulated depreciation and impairment losses where applicable. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Supply system assets are measured at fair value using an income approach based on discounted future cash flows. Valuations are undertaken annually to ensure that the carrying value of the assets does not differ materially from that which would be determined using fair value at the end of the reporting period.

The supply system includes land and building assets which are utilised for warehousing and logistics purposes, training and pole depot facilities, and field response activities. These properties are equipped with specialised facilities to meet the specific needs of the network field operations. These land and building assets are integral in supporting the operation of the electricity network and form part of the regulated asset portfolio subject to the same revenue cap form of regulation.

Other property, plant and equipment, and work in progress are carried at cost less accumulated depreciation where applicable. The carrying amount for these assets does not differ materially from their fair value.

Acquisition of assets

All assets acquired are recorded at their cost of acquisition plus incidental costs directly attributable to the acquisition.



Page 23 of 63

Non-currentassetsconstructedbytheGroup

The cost of non-current assets constructed by the Group includes the cost of materials, direct labour, other costs directly attributable to the assets and, where appropriate, finance costs. Finance costs that are directly attributable to the construction of assets are capitalised as part of the cost of those assets. The current rate of finance costs is applied to the outstanding work in progress (WIP) balance once the project life exceeds 12 months and the WIP project balance exceeds $0.2 million.

Contributed assets

Contributed assets are those that are funded by customers and either constructed by the Group or constructed by an external party and then gifted to the Group. Contributed assets are recognised at fair value on the date when control passes to the Group and the assets are ready for use.

Repairs and maintenance

Items of property, plant and equipment are maintained on a regular basis and these costs are expensed as incurred. Where the costs extend the useful life of the asset, or upgrade the asset beyond its originally designed function or capacity, such costs are capitalised.

Gains and losses on disposal

A gain or loss on disposal is recognised in the income statement and is the difference between the net sale proceeds and the carrying amount of the asset at the time of disposal.

Depreciation

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Depreciation is calculated on a straight-line basis using the estimated useful life of specific classes of property, plant and equipment. Depreciation is provided for from the time units of property, plant and equipment commence operation. Estimates of the remaining useful lives and residual values of property, plant and equipment are reviewed annually. The useful life estimate is determined with consideration of expected usage based on the asset’s capacity, expected physical wear and tear, and expected technical or commercial obsolescence. When changes to the useful lives are made, adjustments are reflected prospectively in current and future periods only. The Group determines an asset’s residual value based on the amount expected to be obtained on disposal.

The estimated useful lives used for each class of depreciable assets are:

Supply system 5 – 70 years Other property, plant and equipment 3 – 35 years

The supply system is treated as a complex asset. A complex asset is a physical asset capable of disaggregation into identifiable components that are subject to regular replacement. These components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly.

Asset revaluation reserve

If an item of property, plant and equipment is revalued, the entire class to which that asset belongs is revalued on a consistent basis. The supply system is treated as a complex asset for the purposes of revaluation increments and decrements, such that increments and decrements can be offset.

Revaluation increments, net of tax, are recognised in the asset revaluation reserve except for amounts reversing a decrement previously recognised as an expense, which are recognised in the income statement. Revaluation decrements are only offset against revaluation increments applying to the supply system, and any excess is recognised as an expense.

Where an asset is sold, dismantled or scrapped, any remaining revaluation amount held in the asset revaluation reserve, after any impairment loss has been recognised, is transferred directly to retained earnings.

1.17 Intangible assets

Computer software

The cost of internally generated computer software includes the cost of all materials and direct labour used during development of the software and other costs directly attributable to the asset. Capitalisation includes costs incurred from the point of project approval until the software is available for use. Other computer software is carried at cost.



Page 24 of 63

Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and the expenditure can be measured reliably. Development costs have a finite life and are amortised on a straight-line basis over the useful life of the asset.

Amortisation

Intangible assets are amortised on a straight-line basis over their estimated useful lives. The Group determines an asset’s residual value based on the amount expected to be recovered on disposal.

The estimated useful lives for intangible assets with finite lives are as follows:

Computer software 1 – 9 years

The useful lives of intangible assets are reviewed annually and are altered if estimates have changed significantly.

Acquisition of intangible assets

All intangible assets acquired are recorded at their cost of acquisition plus incidental costs directly attributable to the acquisition.

Derecognising intangible assets

Intangible assets are derecognised on disposal or when no future economic benefits are expected to arise from continued use of the assets. Gains and losses on the disposal of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of assets, and are recognised in the income statement.

1.18 Impairment

Each reporting period, the Group reviews its CGUs to determine whether there is any indication of impairment. If any such indication exists, then the CGU’s recoverable amount is determined.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of a CGU’s fair value less costs to sell and its value-in-use.

Value-in-use is the present value of future cash flows expected to be derived from a CGU.

Impairment losses are recognised in the income statement, unless an asset has previously been revalued. In this case the impairment loss is treated as an adjustment to the asset revaluation reserve to the extent available.

Impairment losses are reversed when there is an indication the impairment loss may no longer exist and there has been a change in the estimated recoverable amount. An impairment loss is reversed only to the extent that a CGU’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

1.19 Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year where payment has not been made. Trade and other payables are recognised when the Group has a legal or constructive obligation to pay. Trade and other payables are recognised at cost, which approximates their fair value. Trade payables are unsecured and payment is normally made by the end of the month following the Group’s receipt of the supplier’s invoice. Other payables are settled in accordance with their contractual terms.

1.20 Employee benefits

A liability is recognised for benefits accruing to employees for annual leave, long service leave and vesting sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Employee benefits are classified as a current liability where the Group does not have an unconditional right to defer settlement beyond 12 months. Although the amount classified as current vests with the employee, it may not be paid within the next 12 months.



Page 25 of 63

Short-termemployee benefits

Liabilities recognised for employee benefits expected to be settled wholly within 12 months after the period in which the employees render the related service are measured at their nominal value using remuneration rates expected to apply at the time of settlement and include relevant on-costs.

Otherlong-termemployeebenefits

Liabilities recognised for employee benefits which are not expected to be settled wholly within 12 months after the period in which the employees render the related service are measured at the present value of the estimated future cash flows to be made by the Group for services provided by employees up to the end of the reporting period. These cash flows are discounted using rates attaching to high quality corporate bonds at the end of the reporting period which most closely match the terms of maturity of the related liabilities.

Termination benefits

A liability is recognised for the obligation to provide termination payments to employees where there is a valid expectation in those affected that the Group will progress with a restructuring.

Superannuation plans

Defined contribution plans Contributions to defined contribution plans are expensed when incurred.

Defined benefit plans The cost of providing benefits under defined benefit plans is determined using the projected unit credit method. The projected unit credit method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Defined lump sum benefits based on years of service and final average salary are provided in Note 13.

Post-employment benefit obligations are discounted using market yields at the end of the reporting period on high quality corporate bonds, with terms to maturity and currency of the bonds that match, as closely as possible, to the estimated term of the benefit obligations. This represents a change of estimate. Previously, these obligations were discounted using market yields at the end of the reporting period on government bonds.

Any net defined benefit asset or liability recognised in the balance sheet represents the present value of the defined benefit obligation, net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service costs, plus the present value of available refunds and reductions in future contributions to the plan. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the end of the reporting period, calculated by an independent actuary.

Actuarial valuations are carried out at each reporting period. Any resulting remeasurements calculated by the actuary, including actuarial gains and losses are recognised in full, directly in retained earnings, in the period in which they occur and are presented in the statement of comprehensive income. Consideration is given to future wage and salary levels, experience of employee departures and periods of service.

Past service cost is recognised immediately in the income statement to the extent that benefits are already vested, and otherwise amortised on a straight-line basis over the average period until the benefits become vested.

1.21 Provisions

Provisions are recognised when the Group has a legal or constructive present obligation, as a result of past events, where it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. A legal obligation arises by contract, legislation or other operation of the law. A constructive obligation arises from an established pattern of past practice, published policies or an indication to other parties that the Group will accept certain responsibilities, which results in a valid expectation on the part of other parties that the Group will discharge specific responsibilities.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account risks and uncertainties. Where a provision is measured using the cash flows estimated to settle the present obligation, the carrying amount is the present value of those cash flows.

Provisions are reviewed on an annual basis and adjustments made where appropriate. Where the adjustment relates to a change in an estimate, the amount is recognised in the income statement prospectively. Only expenditures that relate to the original provision are offset against it.



Page 26 of 63

A provision which is not expected to be settled within 12 months is discounted to present value where the impact of discounting is material. The discount rate used reflects the risks specific to the liability.

Provision for site restoration/rehabilitation

A provision is raised for the obligation to restore property sites in the future on expiration of associated contracts or when the obligation arises in the course of business. The provision is determined with reference to an independent estimate of the cost to restore, repair, dismantle or rehabilitate the site.

Provision for public liability insurance

The Group is separately insured where the cumulative claim value per incident is more than $1 million. A non-current provision is raised to cover any public liability insurance claim less than $1 million as these are settled by the Group. The provision is maintained for up to six years as public liability claims typically have a statutory limitation period of six years for non-personal injury claims, and three years for personal injury claims. This provision is based on an independent actuarial valuation obtained for each insurance year, and is also internally assessed at the end of each reporting period for sufficiency and appropriateness. Due to the uncertainty relating to the appropriate allocation between the current and non-current portions, the entire provision is classified as non-current.

Provision for environmental offsets

A provision is raised where there is an obligation to provide environmental offsets to counterbalance unavoidable, negative impacts on the natural environment resulting from an activity or development. The estimated costs required to settle the obligation are attributed to the specific capital project to which the environmental offsets relate.

1.22 Borrowings

Borrowings are initially recognised at fair value net of transaction costs incurred and are subsequently measured at amortised cost, using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument.

Principal repayments are not required for the long-term debt funding with QTC under the terms and conditions of the loans and amounts can only be called by QTC giving 12 months and one day notice. Consequently the total long-term debt is non-current in nature. QTC funds the debt through a notional pool of QTC bonds which is maintained to mirror the characteristics of a debt maturity profile consistent with the regulators’ cost of debt approach.

The working capital facility is short-term in nature with the outstanding balance paid down regularly. Refer to Notes 21.1 and 21.6 for further details.

1.23 Leases

Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

1.24 Share capital

Ordinary shares are classified as equity.

1.25 Rounding of amounts

The Group has applied the relief available to it under ASIC Class Order 98/100 dated 10 July 1998. Therefore amounts in the financial report, including the Directors’ report, have been rounded to the nearest million dollars, unless otherwise stated.

1.26 Comparatives

Comparative figures have been restated for the change in the regulated revenue recognition policy. These revisions are shown in Note 30.2.

1.27 Parent entity financial information

The financial information for the parent entity, Energex Limited, as disclosed in Note 24 has been prepared on the same basis as the consolidated financial statements.



Page 27 of 63

2 Profit from operations

2.1 Revenue

Revenue from operations consisted of the following items: 2015 2014

Note $M $M Restated*

Revenue from rendering of services:Network use of system 2,282 2,015 Community service obligation 26.1 30 -Service charges 111 109 Total revenue from rendering of services 2,423 2,124 Revenue from sale of goods 43 33 Government grant revenue 26.1 1 2Other revenue:Non-refundable contributions for capital works 84 53 Interest revenue – other parties 8 6Gain on disposal of property, plant and equipment 5.1 - 3Sundry revenue 16 27 Total other revenue 108 89 Total revenue 2,575 2,248 * Refer to Note 30.

2.2 Expenses

Expenses consisted of the following significant items: 2015 2014


Finance costs:QTC 26.1 284 369 Competitive neutrality fee 26.1 55 52 Less: capitalised financing costs 8.2,8.8 (13) (21) Total finance costs 326 400

Depreciation, amortisation and impairment expense:Depreciation: Supply system assets 8.2 363 319 Other property, plant and equipment 8.2 57 56 Total depreciation expense 420 375 Amortisation: Computer software 9 7Total amortisation expense 9 7Impairment loss: Supply system assets 8.2 14 3Other property, plant and equipment 8.2 1 -Total impairment loss 15 3Total depreciation, amortisation and impairment loss 5.1 444 385

Other expenses included:Cost of inventory sold 31 25 Operating lease rental expense 24 23 Superannuation defined benefit plan expense 13.3 13 18 Superannuation defined contribution plan expense 24 23 Provision for impairment of receivables 5.1 3 1Provision for inventory obsolescence 5.1 (1) (3)



Page 28 of 63

3 Income tax

3.1 Income tax reported in the income statement

2015 2014 Note $M $M

Restated*

Current income tax:Current income tax charge 239 90 Adjustments for current income tax of previous years 2 -Deferred income tax: Relating to origination and reversal of temporary differences (19) 22 Adjustments for deferred income tax of previous years (1) (1)Income tax equivalent reported in the income statement 221 111

The aggregate amount of income tax equivalent attributable to the financial year differs from the amount calculated on the operating profit. The differences are reconciled as follows:

Profit before income tax equivalent 733 377 Income tax equivalent calculated at 30% (2014: 30%) 220 113

Equivalenttaxeffectonnon-temporarydifferences:Non-assessable capital gains - (1)Incometaxequivalentadjustedfornon-temporarydifferences: 220 112 (Over)/under provision of prior year 1 (1)Income tax equivalent reported in the income statement 221 111 * Refer to Note 30.

3.2 Income tax equivalent reported in the statement of comprehensive income

2015 2014 Note $M $M

Restated*

Deferred income tax related to items charged or credited directly to equity:

Property, plant and equipment revaluation/(devaluation) 17 (167) 147 Actuarial movements on defined benefit plans 18 22 18 Income tax equivalent reported directly in equity (145) 165 * Refer to Note 30.



Page 29 of 63

3.3 Deferred tax balances 2015 2014


Deferred tax assets

The balance comprises temporary differences attributable to:

Amounts recognised in the income statement:Provisions and accrued expenditure not currently deductible 48 45 Unearned revenue 9 5Reclassification from deferred tax liabilities - 1Gross deferred tax assets - Energex and wholly-owned subsidiaries 57 51 Gross deferred tax assets - Joint arrangements 13 16 Grossdeferredincometaxassets-Group 70 67

Set-off of deferred tax liabilities pursuant to set-off provisions (70) (67) Net deferred tax assets - -

Movementsindeferredtaxassets:Balance at start of year 67 80 Charged to the income statement 6 (8)Credited/(charged) to equity - (5)(Over)/under provision of prior year 1 -Reclassification from deferred tax liabilities (1) -Movement relating to joint arrangements (3) -Balance at end of year 70 67

Set-off of deferred tax liabilities pursuant to set-off provisions (70) (67) Net deferred tax assets - -

Deferred tax liabilities

The balance comprises temporary differences attributable to:

Amounts recognised in the income statement:Difference in capitalisation, depreciation and amortisation of property,

plant and equipment for accounting and tax purposes 945 953 Expenditure currently deductible for tax but deferred and amortised for

accounting purposes 12 14 Defined benefit fund surplus - income (3) -Amounts recognised directly in equity: Revaluation of property, plant and equipment 793 960 Defined benefit fund surplus - equity 33 12 Reclassification to deferred tax assets - 1Gross deferred tax liabilities - Energex and wholly-owned subsidiaries 1,780 1,940 Gross deferred tax liabilities - Joint arrangements 17 22 Grossdeferredincometaxliabilities-Group 1,797 1,962

Set-off of deferred tax assets pursuant to set-off provisions (70) (67) Net deferred tax liabilities 1,727 1,895

Movementsindeferredtaxliabilities:Balance at start of year 1,962 1,787 Charged to the income statement (14) 16 Charged to equity (145) 159 (Over)/under provision of prior year - (1)Reclassification to deferred tax assets (1) -Movement relating to joint arrangements (5) 1Balance at end of year 1,797 1,962

Set-off of deferred tax assets pursuant to set-off provisions (70) (67) Net deferred tax liabilities 1,727 1,895 * Refer to Note 30.



Page 30 of 63

4 Earnings per share

4.1 Operations

Note 2015 2014 Restated*

Total basic earnings per share (cents) 58.46 30.30

$M $MThe earnings and weighted average number of ordinary shares used in the

calculation of basic earnings per share are as follows: Profit attributable to members of Energex Limited 5.1,18 512 266 * Refer to Note 30.

Number NumberWeighted average number of ordinary shares used in the calculation of

basic earnings per share 16 875,532,774 875,532,774

5 Cash and cash equivalents 2015 2014

Note $M $M

Cash on hand and at bank 21.5 31 98 Short-term deposits 21.5,26.1 308 32 Total cash and cash equivalents 339 130

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 the Group. The average effective interest rate on short-term deposits was 3.3 per cent (2014: 3.4 per cent) inclusive of fees charged.

5.1 Reconciliation of net profit after tax to net cash flows from operations

2015 2014 Note $M $M

Restated*

Profit after income tax 4.1,18 512 266

Adjustmentsfornon-cashandotherincomeandexpenseitems:Depreciation, amortisation and impairment 2.2 444 385 Gain on disposal of property, plant and equipment 2.1 - (3)Provision for impairment of receivables 2.2 3 1Provision for inventory obsolescence 2.2 (1) (3)Sale of business operations recognised in investing activities (1) -Interest revenue classified as investing activities (8) (6)

Changes in operating assets and liabilities1:(Increase)/decrease in trade and other receivables (99) (74) (Increase)/decrease in inventories 8 12 (Increase)/decrease in other assets (65) (39) (Decrease)/increase in trade and other payables 1 3(Decrease)/increase in current tax payable 120 54 (Decrease)/increase in provisions and employee benefits 83 20 (Decrease)/increase in net deferred tax liabilities (22) 22 (Decrease)/increase in other liabilities 5 3Net cash provided by operating activities 980 641 * Refer to Note 30. 1 Excludes the impact of items in investing and financing activities.



Page 31 of 63

6 Trade and other receivables 2015 2014


Current: Trade receivables 320 274 Provision for impairment of receivables (3) (2)Other receivables 36 34 Total current trade and other receivables 353 306 * Refer to Note 30.

6.1 Past due but not impaired

As at 30 June 2015, trade and other receivables of $10 million (2014: $11 million) were past due but not impaired. The ageing analysis of these trade and other receivables is as follows:

2015 2014 Note $M $M

Up to 30 days overdue 4 731 to 60 days overdue 4 2Later than 60 days overdue 2 2Total past due but not impaired 10 11

The method of calculating any impairment for risk is based on past experience, current and expected changes in economic conditions and changes in client ratings.

6.2 Impaired trade and other receivables

As at 30 June 2015, current trade and other receivables of the Group with a nominal value of $4 million (2014: $2 million) were past due and impaired. The amount of the provision for impairment of trade and other receivables is $3 million (2014: $2 million). Included in the provision is an individually impaired debtor in the amount of $1 million (2014: nil) which has been placed into liquidation. The impairment recognised represents the difference between the carrying amount of these trade and other receivables and the present value of expected proceeds. Trade and other receivables have been impaired based on historical recovery trends, an estimated percentage being applied to the outstanding amount to calculate the provision amount. The Group does not hold any collateral over these balances.

In determining the recoverability of trade and other receivables, the Group considers any change in the credit quality of the trade and other receivable from the date credit was initially granted up to the end of the reporting period.

The ageing of these trade and other receivables past due is as follows:

2015 2014 Note $M $M

One to six months - -Over six months 4 2Total nominal value of impaired trade and other receivables 4 2

Movements in the provision for impairment of trade and other receivables are as follows:

Carrying amount at the start of the year (2) (2)Increases in provision for impairment losses recognised during the year 2.2 (3) (1)Amounts written off during the year as uncollectible 2 1Carrying amount at the end of the year (3) (2)

The creation and release of the provision for impaired trade and other receivables has been included in other operating expenses in the income statement. Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.



Page 32 of 63

7 Inventories 2015 2014

Note $M $M

Maintenance and construction stocks 58 64 Work in progress 1 2Total inventories 59 66

Maintenance and construction stocks include a provision for inventory obsolescence of $2 million (2014: $2 million) as a result of ongoing reviews to assess the net realisable value of inventory and identification of items that are subject to factors such as technological obsolescence or loss of service potential. The creation and release of this provision is included in other expenses.

8 Property, plant and equipment 2015 2014

Note $M $M

Supply system At Directors’ valuation 16,203 16,283 Less: accumulated depreciation (5,461) (5,333)

10,742 10,950 Other property, plant and equipmentAt cost 576 534 Less: accumulated depreciation (317) (275)Less: accumulated impairment losses (17) (10)

242 249 WorkinprogressAt cost 488 486 Total property, plant and equipment 11,472 11,685

8.1 Measurementoffairvalue

The fair value measurement for supply system assets of $10,742 million (2014: $10,950 million) has been categorised as a Level 3 fair value based on the inputs to the valuation technique applied (refer Note 1.3).

The discount rate used by the Group to discount future cash flows is higher than the allowed rate of return as established by the regulator in its Preliminary Decision for the regulatory control period 2015-2020 (which is the rate applied to the regulated asset base (RAB) to determine future cash flows). Historically the assumed regulated rate of return approximated the rate applied to discount future cash flows. The use of a discount rate higher than the regulated rate of return leads to an estimated fair value below the value of the RAB as determined by the regulator and has resulted in a revaluation decrement (or devaluation) of the supply system compared to previous estimates. The basis for the Group’s discount rate is outlined in Note 8.3.

The reconciliation from the opening balances to the closing balances for the Level 3 fair value for the supply system assets is included in Note 8.2.



Page 33 of 63

8.2 Movementsincarryingamounts

Supply system

Otherproperty, plant and

equipment Workin

progress Total Note $M $M $M $M

Yearended30June2015

Carrying amount at start of year 10,950 249 486 11,685Additions - - 777 777Capitalised interest 2.2,8.8 - - 13 13Disposals (1) (8) - (9)Depreciation (recognised in profit and loss) 2.2 (363) (57) - (420)Revaluation decrement (net) (recognised in

other comprehensive income) 17 (555) - - (555)Transfer from intangibles 9.1 - - 1 1Transfer from work in progress 739 50 (789) -Transfer to assets held for sale (5) - - (5)Transfer between asset classes (9) 9 - -Impairment losses 2.2 (14) (1) - (15)Carrying amount at 30 June 2015 10,742 242 488 11,472

Yearended30June2014

Carrying amount at start of year 9,995 259 526 10,780Additions - - 792 792Capitalised interest 2.2,8.8 - - 21 21Disposals - (10) - (10)Depreciation (recognised in profit and loss) 2.2 (319) (56) - (375)Revaluation increment (net) (recognised in

other comprehensive income) 17 490 - - 490Transfer from work in progress 797 56 (853) -Transfer to assets held for sale (10) - - (10)Impairment losses 2.2 (3) - - (3)Carrying amount at 30 June 2014 10,950 249 486 11,685

8.3 Valuation technique and significant unobservable inputs

Valuation technique

The Group has undertaken a valuation of its supply system assets as at 30 June 2015 using an income approach with the following key assumptions:

The Group’s supply system assets are subject to regulation in the form of a revenue cap and it is assumed that they will continue to be subject to regulation in the future.

Cash flows have been projected based on forecasts of prudent and efficient operating costs and revenue consistent with: - the building block methodology outlined in Chapter 6 of the National Electricity Rules; and - the AER’s April 2015 Preliminary Decision on the Energex Determination 2015 to 2020 (AER’s Preliminary

Decision). Future capital expenditure has been included in the cash flows as it is assumed that future capital expenditure is

required to ensure the security and reliability of the electricity network and to continue the realisation of future economic benefits.

Post-tax cash flows have been projected over a five year term on a basis consistent with the AER’s approach, whereby the tax deductibility of debt, capital raising costs and imputation credits are reflected in the projected cash flows as opposed to the discount rate.

The terminal value was derived with reference to a forecast RAB and associated cash flows based on the current regulatory model.

Consistent with historical valuation techniques, prior period regulated revenue under recoveries have been excluded from the cash flows for valuation purposes and no allowance has been made for future period under or over recoveries. If prior period Distribution Use of System revenue under recoveries were included in the cash flows, the valuation of the supply system would increase by $281 million as at 30 June 2015.



Page 34 of 63

Valuation inputs and relationships to fair value

Significant unobservable inputs Inter-relationshipbetweensignificant unobservable inputs and fair value measurementThe estimated fair value would increase/(decrease) if:

Revenue cash flows for the 2015-2020 regulatory control period are based on the AER’s Preliminary Decision. The AER allowed rate of return is 5.85 per cent.

allowed rate of return was higher/(lower).

The projected cash flows have been discounted at a rate of 7.04 per cent (2014: 7.47 per cent). This rate has been determined in consultation with independent experts and represents a reasonable rate of return expected by market participants.

the discount rate was lower/(higher).

The terminal value at 30 June 2020 has been assumed to be the RAB as per the AER’s Preliminary Decision and a terminal value multiple of 1.00.

the terminal value was higher/(lower).

Capital expenditure is based on the AER’s Preliminary Decision. future capital expenditure was lower/(higher).

8.4 Historical cost basis

If property, plant and equipment were stated on a historical cost basis, the carrying amount at the end of the reporting period would have been:

2015 2014$M $M

Supply system 8,490 8,031

8.5 Fullywritten-downassetsstillinuse

The Group has property, plant and equipment with a gross carrying amount of $983 million (2014: $755 million) and a written down value of nil that is still in the asset register. These assets have been confirmed to be still in use at the end ofthe reporting period.

8.6 Asset retirements

During 2014/15, the Group disposed of assets with a carrying amount of $9 million (2014: $9 million). Profit and losses on disposal are recognised in the income statement. These disposals also resulted in a transfer of $1 million (2014: $11 million) from the asset revaluation reserve to retained earnings (refer Notes 17 and 18).

8.7 Property, plant and equipment impairment

The annual impairment trigger review across the Group’s cash-generating units (CGUs) resulted in the recognition of property, plant and equipment impairment losses of $15 million (2014: $3 million). There were no reversals of prior year impairment losses in the current year (2014: nil).

Dismantled supply system assets, assets held for sale or property assets decommissioned for remediation are removed from the relevant CGU and impaired once the decision is made to dismantle, sell or decommission and remediate. The resulting impairment loss is treated as a revaluation decrement and recorded directly in equity to the extent of any credit balance existing in the revaluation reserve in respect of that asset, with the remainder recognised in the income statement. The recoverable amount of property assets is deemed to be fair value less costs to sell as determined by an independent market valuation.



Page 35 of 63

8.8 Capitalised finance costs

2015 2014 Note $M $M

Finance costs capitalised during the financial year 2.2,8.2 13 21Weighted average interest rate on funds borrowed 5.12% 6.70%

9 Intangible assets 2015 2014

Note $M $M

Computer softwareAt cost 382 366Less: accumulated amortisation (278) (239)Software work in progress 19 5Total intangible assets 123 132


Computer software

Software work in

progress Total Note $M $M $M

Yearended30June2015

Carrying amount at start of year 127 5 132Additions - 33 33Transfer to property, plant and equipment 8.2 - (1) (1)Amortisation (41) - (41)Transfer from work in progress 18 (18) -Carrying amount at 30 June 2015 104 19 123

Yearended30June2014

Carrying amount at start of year 139 19 158Additions - 17 17Amortisation (43) - (43)Transfer from work in progress 31 (31) -Carrying amount at 30 June 2014 127 5 132

10 Other assets 2015 2014

Note $M $M

Current: Prepayments 16 14Assets held for sale 2 7Total current other assets 18 21

Non-current:Prepayments 4 4Advance environmental offsets 2 2Totalnon-currentotherassets 6 6



Page 36 of 63

10.1 Assets held for sale

Throughout 2014/15 management continued to rationalise the property portfolio and dispose of certain properties where there were opportunities to do so. Certain properties have been classified as assets held for sale where management is committed to sell, the asset is available for immediate sale, and it is expected to sell within the next 12 months.

The assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Impairment losses of $2 million (2014: $1 million) for write downs of the assets to the lower of carrying amount and fair value less costs to sell have been included in ‘impairment loss’.

11 Trade and other payables 2015 2014

Note $M $M

Current:Trade payables 21.4 143 118Accrued wages and salaries 21.4 21 33Accrued interest and charges 21.4,26.1 18 30Refundable deposits 21.4 7 3Total current trade and other payables 189 184

12Long-termborrowings2015 2014

Note $M $M

Non-current:QTC loans – unsecured 21.4,26.1 6,811 6,465Totalnon-currentborrowings 6,811 6,465



Page 37 of 63

13 Employee benefits

2015 2014Note $M $M

Non-currentassets:Net defined benefit fund asset 105 42Totalnon-currentemployeebenefitassets 105 42

Current liabilities:Accrued leave entitlements 102 108Termination benefits 15 2Total current employee benefit liabilities 117 110

Non-currentliabilities:Accrued non-vesting long service leave 18 24Totalnon-currentemployee benefit liabilities 18 24

13.1 Discount rate

During the period the Group changed the discount rate used to calculate employee benefit liabilities from the Australian government bond rate to a high quality corporate bond rate. This change is the result of authoritative views that the Australian high quality corporate bond market is sufficiently deep. As a result of this change in accounting estimate, actuarial gains of $52 million were recognised in other comprehensive income. Net interest was unaffected in the current period. The Group estimates the impact of the change in estimate on the net defined benefit expense in the next reporting period to be a $5 million decrease. Due to the inherent uncertainty in measuring net defined benefit assets/liabilities, the Group is unable to predict the impact of the change to a high quality corporate bond discount rate in periods beyond the next reporting period.

The carrying amounts of annual leave and long service leave were reduced by $3 million and $7 million respectively in the current year upon application of this revised estimate in discount rate. These reductions were recognised through profit and loss.

13.2 Defined benefit fund

The Group contributes to an industry multiple employer superannuation plan, the Energy Super Fund. Members are entitled to benefits from this fund on retirement, resignation, retrenchment, total and permanent disablement or death. The defined benefit account of this fund is a funded plan which provides defined lump sum benefits based on years of service and final average salary. Contributions to the fund are based on a percentage of employees’ gross salaries.

Energy Super is managed by a trustee company, Electricity Supply Industry Superannuation (Qld) Ltd. The Trustee is responsible for managing Energy Super for the benefit of all members, in accordance with the trust deed and relevant legislation. At 30 June 2015, the Trustee consisted of four member representative directors, four employer representative directors and one independent director.

Energy Super is regulated by the Australian Prudential Regulation Authority under the Superannuation Industry (Supervision) Act 1993.

The average future-working lifetime of defined benefit members is approximately 10 years which indicates a medium to longer term time horizon. To match this liability profile, the defined benefit assets are invested in a balanced investment portfolio with holdings in all the major investment asset classes with approximately 77 per cent invested in growth assets such as shares and property assets and approximately 23 per cent invested in defensive assets such as fixed interest and cash. This portfolio exposes the fund to market risk.



Page 38 of 63

13.3 Reconciliation of movements in the net defined benefit asset/(liability)

Net definedDefined Fair value benefitbenefit of plan asset/

obligation assets (liability)$ M $M $M

Yearended30June2015 Carrying amount at start of year (386) 428 42 Included in profit or loss Current service cost (15) - (15)Interest income/(cost) (14) 16 2 (29) 16 (13)Included in other comprehensive income Remeasurement gain/(loss):

Actuarial gain/(loss) arising from: Changes in financial assumptions 52 - 52 Experience adjustments1 (1) - (1)

Return on plan assets excluding interest income - 22 22 51 22 73

Other Contributions by the employer - 3 3 Contributions by fund participants (4) 4 - Benefits payments and tax 31 (31) -

27 (24) 3 Carrying amount at 30 June 2015 (337) 442 105

Yearended30June2014 Carrying amount at start of year (457) 442 (15)Included in profit or loss Current service cost (18) - (18)Interest income/(cost) (14) 14 - (32) 14 (18)Included in other comprehensive income Remeasurement gain/(loss):

Actuarial gain/(loss) arising from: Changes in financial assumptions 13 - 13 Experience adjustments1 14 25 39

Return on plan assets excluding interest income - 11 11 27 36 63

Other Contributions by the employer - 12 12 Contributions by fund participants (4) 4 - Benefits payments and tax 80 (80) -

76 (64) 12 Carrying amount at 30 June 2014 (386) 428 421 Experience adjustments are the effects of differences between previous actuarial assumptions and what has actually occurred.



Page 39 of 63

13.4 The major categories of plan assets are as follows:

2015 2014$M $M

Cash 53 43Fixed interest 29 43Australian shares 111 120International shares 121 94Alternatives - growth 63 64Alternatives - defensive 20 21Property 45 43Total fair value of plan assets 442 428

All shares and fixed interest plan assets have quoted prices in active markets. The actual return on plan assets for 2014/15 was a profit of $38 million (2014: $51 million).

13.5 Key actuarial assumptions used at the reporting date are as follows:

2015 2014% %

Discount rate 4.4 3.5 Future salary increases 3.0 3.5

At 30 June 2015, the weighted average duration of the defined benefit obligation was 10 years (2014: 10 years).

The expected maturity analysis of undiscounted defined benefit obligations is as follows:

2015 2014$M $M

Not later than one year 21 21Later than one year and not later than five years 108 104Later than five years 631 701Total undiscounted defined benefit obligations 760 826

13.6 Sensitivity analysis

The sensitivity of the defined benefit obligation to changes in the significant assumptions, holding other assumptions constant, were as follows:

% Change in obligationIncrease in

assumption Decrease in assumption

30 June 2015 Discount rate (0.5% movement in assumption) (4.9) 5.2Future salary increases (0.5% movement in assumption) 5.6 (5.3)

30 June 2014 Discount rate (0.5% movement in assumption) (5.4) 5.8Future salary increases (0.5% movement in assumption) 5.7 (5.4)

The above sensitivity percentages were determined based on consideration of high quality corporate bond rate movements (2014: Australian government bond rate movements) and historical movements in salary increases.



Page 40 of 63

13.7 Funding method and contribution recommendations

Funding method

The method used to determine the employer contribution recommendations at the last actuarial review was the aggregate method. The method adopted affects the timing of the cost to the employer. Under the aggregate method, the future contribution rates are determined, and are expected to be sufficient to fund the difference between the value of the future benefits for existing defined benefit members, and the value of plan assets attributable to defined benefit members, over the future working lifetime of existing defined benefit members.

Compared to other funding methods, the aggregate method can be expected to produce a higher level of volatility in recommended employer contribution rates, particularly as the defined benefit membership ages and reduces in size. Variations between actual and expected experience have a greater financial effect on future employer contribution rates as the future working lifetime of the existing defined benefit members reduces.

Principal economic assumptions adopted for the last actuarial review of the Fund (as at 30 June 2013) include:

%

Expected rate of return on plan assets in year one 12.0 Expected rate of return on plan assets thereafter 7.0 Expected salary increase rate 5.0

Contribution recommendations

For the financial year ended 30 June 2015, the Group contributed four per cent (2014: 13 per cent) of defined benefit members’ salaries. The Group expects to retain a contribution rate of four per cent to the defined benefit plan during the next financial year. Accordingly, the Group expects to contribute $3 million (2014: $3 million) to its defined benefit plan in 2015/16. Funding recommendations are made by the actuary based on their forecast of various matters including future plan assets performance, interest rates and salary increases. The Group will assess this contribution rate in the future to ensure it remains appropriate.

13.8 Net financial position of plan

The superannuation plan computes its obligations in accordance with AAS 25 Financial Reporting by Superannuation Plans (AAS 25) which prescribes a different measurement basis to that applied in this financial report, pursuant to AASB 119 Employee Benefits. Under AAS 25, and in accordance with the Occupational Superannuation Standards Regulation, the Energy Super Fund is required to undertake actuarial investigations at least every three years. The last reporting period for the Energy Super Fund Actuarial Report for Energex was 30 June 2013. The next Actuarial Report as at 30 June 2016 will be completed in the 2016/17 financial year.

Surplus/(deficit)

The following is a summary of the most recent financial position of the Energy Super Fund (with respect to both defined benefit and accumulation members for the Group’s participation in the Fund) calculated in accordance with AAS 25:

Lastreportingperiod $M

Accrued benefits 30/06/2013 (650)Net market value of plan assets 30/06/2013 674Net surplus 30/06/2013 24

13.9 Nature of asset/liability

The Energy Super Fund does not impose a legal liability on the Group to cover any deficit that exists in the Fund. If the Fund was wound up, there would be no legal obligation on the Group to make good any shortfall. The Trust Deed of the Fund states that if the Fund winds up, after the payment of all costs and member benefits for the period up to the date of termination, any remaining assets are to be distributed by the Trustee of the Fund, acting on the advice of the actuary, to participating employers.

The Group may at any time by notice to the Trustee terminate its contributions. The employer has a liability to pay the monthly contributions due prior to the effective date of the notice, but there is no requirement for an employer to pay any further contributions, irrespective of the financial condition of the Fund.



Page 41 of 63

The Group may benefit from any surplus in the Fund in the form of a contribution reduction or contribution holiday. Any reduction in contributions would normally be implemented only after advice from the Fund’s actuary.

The Group is committed under the terms of its union collective agreement to keep the Defined Benefit Fund open for the current fund members for the life of the agreement. The union collective agreement has an expiry date of 28 February 2018 but will continue after its nominal expiry until such time as it is replaced or terminated. The Board has resolved that the Group will make additional contributions when necessary to meet its obligations in relation to the Defined Benefit Fund.

14 Provisions 2015 2014

Note $M $M

Current:Dividends 19 1,295 406Site restoration/rehabilitation 1 1Environmental offsets - 2Other provisions 4 1Total current provisions 1,300 410

Non-current:Site restoration/rehabilitation 7 2Public liability insurance 6 4Environmental offsets 1 -Totalnon-currentprovisions 14 6

Total provisions 1,314 416

Also refer to Notes 1.10 and 1.21 for further information in relation to the provisions.


Carrying amount at

start of year Additions Utilised Reversal

Carryingamount at

end ofyear

$M $M $M $M $M

Dividends 406 1,295 (406) - 1,295Site restoration/rehabilitation 3 5 - - 8Public liability insurance 4 6 (3) (1) 6Environmental offsets 2 - (1) - 1Other provisions 1 4 - (1) 4Total 416 1,310 (410) (2) 1,314

15 Other liabilities 2015 2014

Note $M $M

Current:Unearned revenue – government grant 26.1 1 3Unearned revenue – unbilled receipts 5 13Unearned revenue – capital contributions 30 14Unearned revenue – other 6 6Total current other liabilities 42 36

Non-current:Unearned revenue – other - 1Totalnon-currentotherliabilities - 1



Page 42 of 63

16 Contributed equity 2015 2014 2015 2014 Note Number Number $M $M

A Class ordinary shares – voting1 122,600,006 122,600,006 122 122B Class ordinary shares – non-voting1 752,932,768 752,932,768 624 624Total contributed equity 4.1 875,532,774 875,532,774 746 7461 There was no movement in the number of shares during the financial year.

17 Reserves The asset revaluation reserve (ARR) is used to record increments and decrements on the revaluation of non-current assets, as described in Note 1.16. For the 2014/15 financial year, the Board declared an additional distribution of $783 million which included $532 million from reserves (refer to Note 19 for further details).

2015 2014Note $M $M

Restated*

Balance at start of year 2,228 1,896Revaluation of supply system (net) 8.2 (555) 490Deferred tax effect on revaluations 3.2 167 (147)Transfer ARR to retained earnings for disposed/dismantled assets 8.6,18 (1) (11)Dividends provided at 30 June 2015 19 (532) -Balance at end of year 1,307 2,228* Refer to Note 30.

18 Retained earnings 2015 2014


Balance at start of year 219 303Remeasurements of defined benefit plans 13.3 73 63Deferred tax on remeasurements of defined benefit plans 3.2 (22) (18)Transfer from asset revaluation reserve – net of tax 17 1 11Net profit attributable to members of Energex Limited 4.1,5.1 512 266Total available for appropriation 783 625Dividends provided at 30 June 2014 19 - (406)Dividends provided at 30 June 2015 19 (763) -Balance at end of year 20 219* Refer to Note 30.



Page 43 of 63

19 Dividends 2015 2014 Cents per Cents per 2015 2014 share share $M $M

Dividends on ordinary shares

Dividends declared during the year:Unfranked dividend – current year profit after tax 58.46 46.38 512 406 Unfranked dividend – additional 89.43 - 783 -Total dividends declared during the year 147.89 46.38 1,295 406

Dividends paid during the year:Final unfranked dividend declared in prior

financial year and paid in current financial year 46.38 33.59 406 294 Total dividends paid during the year 46.38 33.59 406 294

The 2014/15 dividend is based on 100 per cent (2014: 80 per cent) of profit after tax equivalent and an additional distribution of $783 million from retained earnings and reserves. This distribution and the increase in the dividend ratio for 2014/15 were made in response to a direction from the shareholding Ministers, dated 29 June 2015, under section 131(3)(b) of the Government Owned Corporations Act 1993 and will be funded from long-term borrowings to the extent necessary.

The 2014/15 dividend declared and provided for consists of:

Retainedearnings Reserves Total

Note $M $M $M Current year profit after tax 512 - 512 Additional distribution 251 532 783 Total dividends for the 2014/15 year 17,18 763 532 1,295

The 2013/14 dividend of $406 million was based on 80 per cent of 2013/14 reported profit after tax equivalent and was paid in the 2014/15 year (refer Note 26.1).

During 2013/14 a dividend of $294 million was paid on the basis of 80 per cent of 2012/13 reported profit after tax equivalent plus the remaining 20 per cent of the post-tax component of the community service obligation received as additional Distribution Use of System revenue.

The Group operates under the National Tax Equivalent Regime where income tax equivalent payments are made to the Queensland Government. As Energex is a Queensland government owned corporation, with all shares owned by the shareholding Ministers on behalf of the Queensland Government, dividend payments are unfranked.

20 Financial risk management objectives and policies

Financial risk management is carried out by Energex’s Treasury Department (Energex Treasury) under policies approved by the Board of Directors. Energex Treasury manages the cash flow needs of the Group on a net basis and ensures a consistent approach to managing financial arrangements and their associated risk across the business. The Energex Treasury Policy applies to all of the entities within the Group and its objective is to ensure compliance with the Code of Practice for Government-Owned Corporations’ Financial Arrangements issued by Queensland Treasury.

The Group’s principal financial instrument is a debt portfolio provided by QTC. The main purpose of this financial instrument is to provide finance for the Group's operations. It is the Group’s policy that financial instruments are not to be used for speculative purposes.

Other financial assets and liabilities include trade receivables, trade payables and short-term deposits which arise directly from the Group’s operations.

Details of the significant accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised for each class of financial asset, financial liability and equity instrument are disclosed in Note 1.13.



Page 44 of 63

The Group is exposed to the following financial risks:

credit risk: the risk of a financial loss if a counterparty to a transaction does not fulfil its financial obligations (also called default risk).

commodity and foreign currency risk: the risk that contract prices will move as a result of adverse movements in market prices.

funding risk: the risk that the Group will be unable to refinance existing debt or raise additional debt. interest rate risk: the risk that actual financing costs are greater than that allowed for by Energex’s regulator. liquidity risk: the risk of insufficient funds to fulfil the Group’s cash flow obligations on a timely basis. operational risk: the inherent risk resulting from internal processes and systems or from external events. capital structure risk: the risk of the Group structuring its balance sheet inefficiently resulting in suboptimal returns to

the shareholders.

Credit risk The Group seeks to minimise credit risk by actively managing its credit exposure within the context of its operating environment. The most significant credit risk exposure is the risk of a retailer defaulting on its obligations. The Group operates in accordance with the Credit Support Guidelines (Guidelines) issued by the Queensland Competition Authority (QCA). The Guidelines align with the National Energy Customer Framework credit support arrangements implemented by Energex from 1 July 2015.

Credit support arrangements refer to commercial arrangements between retailers and the Group, which impacts the ability to manage the risk of non-payment of network charges by the retailer. Under the Guidelines, the ability to seek credit support is based on an assessment of the retailer’s network charge liability compared to their credit allowance and payment history. The Group is unable to seek credit support from retailers outside the constraints of the Guidelines. A combination of alternative mitigation strategies against retailer failure are employed. In the event of a significant retailerfailure, an application to recoup such losses under the provisions applicable to general nominated pass through events, available through the AER, would be considered where appropriate. To further mitigate the risk of retailer default, trade credit insurance (TCI) is taken out for all qualifying retailers. In addition, the Group exercises operational risk management through relationship management and close monitoring of retailer payments. Refer to Note 21.3 on the credit risk exposure.

Other credit risks across the business are managed in accordance with the Energex Treasury Policy and Credit Policy. This requires that a bank guarantee from an investment grade bank, letter of surety, cash deposit or prepayment be taken as security where significant credit exposure exists.

Commodity and foreign currency risk

The Group is exposed to commodity price risk and foreign currency risk in the normal course of its operations through its procurement contracts. The Group reviews new large contracts and large contracts that are to be extended, prior to the Group being irrevocably committed to any arrangements to determine whether any risk mitigation strategies should be applied to reduce this risk. There were no financial assets or liabilities at 30 June 2015 (2014: nil) with a material exposure to foreign currency or commodity price risk.

Funding risk

The Group’s term debt, provided exclusively by QTC, is interest only in perpetuity with no set repayment date. The debt portfolio is comprised of a notional pool of QTC bonds which is structured by QTC in accordance with instructions given by the Group. This portfolio is structured to reflect a debt maturity profile that is consistent with the regulator’s 10-year trailing average return on debt approach. In consultation with QTC, this current structure was established during 2013/14 and the current financial year in advance of the regulatory control period commencing on 1 July 2015.

QTC actively manages the portfolio, including issuing new debt in advance of requirements, to ensure it can meet its ongoing funding commitments to the Group.

Interest rate risk

The Group formally considers and manages interest rate risk.

The cost of the Group’s debt comprises a competitive neutrality fee (CNF), administration fee and a book interest rate. The book interest rate is calculated periodically by QTC based on bonds held by QTC that have been notionally allocated to the Group’s portfolio of debt.

The CNF is charged by the State of Queensland to ensure the Group does not obtain an economic benefit from funding at a lower cost through QTC than could be achieved by a private sector operator.



Page 45 of 63

The Group’s cost of debt is subject to repricing following reviews of the book interest rate undertaken by QTC. The Group is exposed to book interest rate movements on a periodic basis that reflect the cost of new debt and replacement of existing debt, which is obtained at the prevailing interest rate. The weighted average interest expense on interest-bearing borrowings in 2014/15 was 5.00 per cent (2014: 6.58 per cent).

The Group aims to mitigate interest rate risk by aligning its interest rate risk management strategy with the assumptions applied by the regulator for its determination of the benchmark cost of debt used in the calculation of an allowed return on assets for the regulatory control period commencing on 1 July 2015.

The Group may incur market value realisation charges if the Group makes repayments of borrowings to QTC as part of its strategy to manage surplus cash balances. Such market value realisation charges will be included as an adjustment to finance charges in the income statement. The Group does not foresee making repayments in the foreseeable future.

The loan agreement with QTC requires that the Group complies with debt covenants that include an earnings before interest, tax, depreciation and amortisation (EBITDA) interest cover ratio and a total debt to fixed assets cover ratio. Failure to meet specific ratios may result in the Group being charged a line fee by QTC on the total debt outstanding. Currently these ratios are well within the parameters as specified in the loan agreement.

Liquidityrisk

To manage the Group’s liquidity risk, a daily cash flow forecast is maintained for a rolling 12 month period. The Group had a $400 million (2014: $400 million) working capital facility with QTC which operates as an overdraft arrangement and is used to cover temporary funding deficits, and is fully fluctuating. The working capital facility is a “come and go” facilityand is reviewed by QTC in July of each year to ensure that the facility is operated in a manner consistent with the terms of the agreement.

Operational risk

Operational risk refers to the extent that process, system, compliance or fraud matters could impact the financial risk profile. This includes consideration of the integrity of information used to make decisions and business continuity. The Group recognises operational risk as a separate risk category and manages it within acceptable levels through continuous development and improvement of its guidelines, standards, methodologies and systems to identify and address this risk.

Capital structure risk

The Board’s policy is to maintain a strong capital base so as to preserve investor, creditor and market confidence and to sustain future development of the business. The Group monitors the return on capital, which is defined as net operating income divided by total shareholders’ equity. The Group also monitors the level of dividends to ordinary shareholders.

The Group seeks to maintain a balance between the higher return on equity that might be possible with higher levels of borrowings, and the advantages and security offered by a sound capital position.

In response to a direction from the shareholding Ministers dated 29 June 2015, under section 131(3)(b) of the Government Owned Corporations Act 1993, an additional dividend was declared as discussed in Note 19 to facilitate the regearing of the Group.

21 Financial instruments

21.1 Fair value of financial assets and liabilities

The fair values of financial assets and financial liabilities, other than derivative financial instruments, are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and

the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The Group considers the carrying amount of financial assets and financial liabilities recorded in the financial statements to approximate their fair value, excluding borrowings. Borrowings are initially recognised at fair value, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost with any difference between cost and the redemption amount being recognised in the income statement over the period of the borrowings on an effective interest basis (refer to Note 1.22). The fair value of borrowings at 30 June 2015 is disclosed in Note 21.4.

The Group has not designated any financial instruments at fair value through profit or loss.



Page 46 of 63

21.2 Derivative financial instruments

As at 30 June 2015, the Group does not hold any derivative financial instruments (2014: nil).

21.3 Credit risk exposure

The credit risk on financial assets of the Group which have been recognised on the balance sheet is generally equal to the carrying amount net of any provisions for impairment of receivables. Refer to Note 20 for related risk management policies and procedures that are in place to minimise credit risk. At 30 June 2015, three customers represented 86.6 per cent of trade receivables (2014: three customers represented 87.9 per cent).

21.4 Liquidityriskexposure

The Group’s exposure to liquidity risk is set out in the following table:

Carrying amount

Contractual cash flows

1 year or less

1 to 5 years

Morethan 5 years

Note $M $M $M $M $M

As at 30 June 2015 Non-derivativefinancial

liabilitiesTrade and other payables 11 182 (182) (182) - -Refundable deposits 11 7 (7) (7) - -Borrowings – QTC

unsecured1 12,26.1 6,811 (8,193) (298) (1,188) (6,707)Total financial liabilities 7,000 (8,382) (487) (1,188) (6,707)1 Market value of the borrowings as at 30 June 2015 as advised by QTC was $6,986 million (2014: $6,683 million). QTC borrowings are

interest only with no fixed repayment date for the principal component. For the purposes of completing the maturity analysis, theprincipal component of these loans has been included in the more than five year time band with no interest payment assumed in thistime band.

As at 30 June 2014Non-derivativefinancial

liabilitiesTrade and other payables 11 181 (181) (181) - -Refundable deposits 11 3 (3) (3) - -Borrowings – QTC

unsecured1 12,26.1 6,465 (8,023) (404) (1,619) (6,000)Total financial liabilities 6,649 (8,207) (588) (1,619) (6,000)1 Refer to footnote 1 above.

Refer to Note 21.6 for financing arrangements to cover future liquidity requirements.

21.5 Interest rate risk exposure

Sensitivity analysis

The following interest rate sensitivity analysis depicts the impact on profit and loss (excluding tax) if interest rates changeby ±1.0 per cent for cash funds (2014: ±1.0 per cent) from the year-end rates. With all other variables held constant, the Group would have a surplus/(deficit) of $3 million (2014: $1 million). There would be no impact to equity (2014: nil).

Carrying amount

(1.0)% Profit

(pre-tax)

1.0%Profit

(pre-tax) Note $M $M $M2015 interest rate risk Cash on hand and at bank 5 31 - -Short-term deposits 5 308 (3) 3

2014 interest rate risk Cash on hand and at bank 5 98 (1) 1 Short-term deposits 5 32 - -

The above sensitivity percentages were determined based on consideration of official cash rate movements.



Page 47 of 63

21.6 Financing arrangements

2015 2014$M $M

The Group has access to the following lines of credit: Total facilities available – unsecured loans 7,221 6,875Facilities used at the end of the reporting period – unsecured loans 6,812 6,466Facilities not used at the end of the reporting period – unsecured loans 409 409

Approved borrowings under the State Borrowing Program (SBP) for 2014/15 were $396 million (2014: $465 million). The amount drawn at the end of the year was $346 million (2014: $465 million) with $50 million undrawn (2014: nil). The 2014/15 borrowings drawn under the SBP were funded through the Group’s loan account with QTC.

Energex has approval under the SBP for the 2015/16 year of $1,125 million, which Energex believes is sufficient to meet operational requirements including the payment of the dividend for the 2014/15 year.

21.7 Guarantees

Guarantees held

The Group holds bank guarantees from customers and suppliers totalling $43 million (2014: $37 million), relating to subdivision works and construction of assets for customers, and procurement guarantees from suppliers.

Guarantees issued

The Group has in place a bank guarantee facility of $1 million. As at 30 June 2015, there are no guarantees issued on behalf of the Group (2014: nil).

22 Commitments for expenditure

22.1 Capital expenditure commitments

2015 2014$M $M

Commitments for capital expenditure contracted for at the end of the reporting period but not recognised as liabilities 115 114

These commitments consist of open purchase orders and are valued at price levels and foreign currency exchange rates as at the end of the reporting period.

22.2 Operating lease commitments

2015 2014$M $M

Commitments in relation to non-cancellable operating leases contracted for at the end of the reporting period but not recognised as liabilities:

Not later than one year 32 29Later than one year and not later than five years 122 110Later than five years 193 204Total operating lease commitments 347 343

The Group leases various corporate premises, depots and storage sites under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. On or prior to renewal, the terms of the leases are renegotiated.

The Group subleases various corporate premises to tenants. The total future minimum sublease payments expected to be received under non-cancellable subleases as at the end of the reporting period is $13 million.



Page 48 of 63

23 Investments in controlled entities

Interests are held in the following controlled companies:

Country of Ownership interestName Note incorporation 2015 2014

% %

Energy Impact Pty Ltd 23.1,23.2 Australia 100 100 Metering Dynamics Business Support Pty Ltd 23.2 Australia 100 100 Varnsdorf Pty Ltd 23.1,23.2 Australia 100 100 VH Operations Pty Ltd 23.1,23.2 Australia 100 100

23.1 Energex issued an unlimited indemnity dated 29 June 2012 to Energy Impact Pty Ltd and limited indemnities to Varnsdorf Pty Ltd and VH Operations Pty Ltd in relation to certain claims, for specific amounts and periods.

23.2 The entities are small proprietary companies and are therefore relieved from the requirement for preparation, audit and lodgement of annual financial statements.

Subsidiary name Purpose of entity Total assets

Total liabilities

Total revenue

Profit/(loss)

before tax $M $M $M $M

30 June 2015

Energy Impact Pty Ltd (Consolidated)

Consolidated Group 17 - 5 -

Energy Impact Pty Ltd1 Provides generation services 17 - 5 -Metering Dynamics

Business Support Pty Ltd Dormant entity - - - -

Varnsdorf Pty Ltd1 Dormant entity - - - -VH Operations Pty Ltd1 Dormant entity - - - -1 These entities form the Energy Impact Consolidated Group.

30 June 2014

Energy Impact Pty Ltd (Consolidated)

Consolidated Group 18 1 5 -

Energy Impact Pty Ltd1 Provides generation services 18 1 5 - Metering Dynamics

Business Support Pty Ltd Dormant entity - - - -

Varnsdorf Pty Ltd1 Dormant entity - - - - VH Operations Pty Ltd1 Dormant entity - - - - 1 These entities form the Energy Impact Consolidated Group.



Page 49 of 63

24 Parent entity disclosures

As at, and throughout the financial year ended 30 June 2015, the parent entity of the Group was Energex Limited (Energex).

24.1 Summary financial information

The following aggregate amounts are disclosed in respect of Energex:

2015 2014$M $M

Restated*Financial performance:Revenue 2,583 2,259Expenses (1,851) (1,883)Profit before income tax equivalent 732 376Income tax equivalent (221) (111)Profit for the year 511 265Other comprehensive income (338) 386Total comprehensive income for the year 173 651

Financial position:Current assets 795 556 Non-current assets 11,645 11,803 Total assets 12,440 12,359

Current liabilities 1,814 796 Non-current liabilities 8,573 8,388 Total liabilities 10,387 9,184

Net assets 2,053 3,175

Equity Contributed equity 746 746 Reserves 1,307 2,228 Retained earnings - 201 Total equity 2,053 3,175 * The table includes restatement of comparatives that relate to Energex’s change in accounting policy (refer to Note 30).

24.2 Parent entity contingent liabilities

Refer to Note 27 for contingent liabilities of Energex.

24.3 Parent entity capital commitments for acquisition of property, plant and equipment

As at 30 June 2015, Energex had contractual commitments to purchase property, plant and equipment for $115 million (2014: $114 million).

24.4 Parent entity guarantees in respect of the debts of its subsidiaries and jointly controlled entity

In 2011/12 Energex issued an unlimited indemnity to Energy Impact Pty Ltd. Energex also issued limited indemnities of $15 million for general claims and unlimited indemnities for specific claims to both Varnsdorf Pty Ltd and VH Operations Pty Ltd. Energex warrants that sufficient financial support up to a limit of $10,000 will be provided to Metering Dynamics Business Support Pty Ltd to ensure that the business is able to pay its debts as and when they fall due.

Energex has agreed to cover its share of obligations of SPARQ Solutions Pty Ltd (SPARQ) to protect against insolvency. Terence Effeney, Christopher Arnold and Peter Weaver were executives of Energex and Directors of SPARQ, a jointly controlled entity during the financial year. Christopher Arnold was appointed a Director of SPARQ on 1 August 2014. They did not receive any remuneration for their positions as Directors of this entity.



Page 50 of 63

25 Key management personnel

The following disclosure is provided pursuant to Queensland Treasury Policy “Supplementary Requirements for Disclosure of Government Owned Corporation Directors’ and Chief and Senior Executives’ Remuneration”.

25.1 Compensation principles

Directors

All remuneration of Directors, including Directors’ fees and Board committee fees, is established by the shareholding Ministers. Directors do not receive any performance-related remuneration.

Term of appointment Appointment expiry dateDirectors as at 30 June 2015 Kerryn Newton1 1 year 6 months 31 March 2016 Shane Stone – resigned 20 March 2015 3 years 4 months 30 September 2015 Peter Arnison1 1 year 6 months 31 March 2016 Kenneth Clarke 3 years 3 months 30 September 2015 Mervyn Davies 3 years 3 months 30 September 2015 Sandra Deane 2 years 9 months 30 September 2015 John Geldard1 1 year 6 months 31 March 2016 Gordon Jardine 3 years 3.5 months 30 September 2018 1 The previous appointments of Kerryn Newton, Peter Arnison and John Geldard expired on 30 September 2014. They were

subsequently reappointed to the Board on 2 October 2014 for an additional eighteen month term, expiring on 31 March 2016.

Senior executives

The following are Directors of controlled entities and/or associated entity and received no remuneration for their roles as executive Directors:

Terence Effeney Christopher Arnold Kevin Kehl Peter Weaver

The senior executive remuneration strategy and practices of the Group are designed to assist the Group to attract, retain and motivate high calibre individuals in senior executive positions. This is achieved by providing an appropriate combination of competitive fixed and variable remuneration components. Shareholder guidelines and policies related to executive remuneration are followed.

The fixed component of remuneration is linked to an assessment of the job size and value based on independent market evaluation. The fixed remuneration on appointment is up to market median for the position size in accordance with the Office of Government Owned Corporations guidelines. Annual increases are in accordance with recommendations approved by the Board in line with the governance arrangements for chief and senior executives provided by the Government. A variable component of remuneration is provided to members of the senior executive as described in Note 25.5.

Senior executive employment contracts

Remuneration and other terms of employment for each senior executive are formalised in executive employment contracts. Each of these contracts makes a provision for fixed remuneration and performance pay.

Application to the Chief Executive Officer (CEO)

Upon termination the executive is entitled to pay in lieu of the executive’s entitlements to annual leave and long service leave, calculated with reference to the executive’s total fixed remuneration up to the date on which the termination takes effect. If the employment of the executive is terminated by Energex, except in the event of serious misconduct or incapacity, the executive is entitled to:

i. salary for the balance of the notice period; and ii. a termination payment of six months superannuable salary.

The CEO is engaged on a tenured agreement under the Policy for Government Owned Corporation Chief and Senior Executive Employment Arrangements (‘Policy’).



Page 51 of 63

ApplicationtoExecutiveGeneralManagerStrategy,RegulationandGovernance,ExecutiveGeneralManagerCustomer and Corporate Relations, ExecutiveGeneralManagerAssetManagement,ExecutiveGeneralManagerProcurement, People and Services and the Chief Financial Officer

Upon termination the executive is entitled to pay in lieu of the executive’s entitlements to annual leave and long service leave, calculated with reference to the executive’s total fixed remuneration up to the date on which the termination takes effect. If the employment of the executive is terminated by Energex, except in the event of serious misconduct or incapacity, the executive is entitled to:

i. salary for the balance of the notice period; and ii. a termination payment of three months superannuable salary.

Each of the above-mentioned executives are engaged on tenured agreements under the Policy.

ApplicationtoExecutiveGeneralManagerServiceDelivery

Where employment is terminated by the employer due to the employer’s operational requirement and no other suitable position for redeployment is able to be identified, the executive is entitled to a severance payment of three weeks per year of service, together with a proportionate amount for an incomplete year of service. The minimum and maximum payment will be three weeks and 75 weeks respectively. An early separation incentive payment of 13 weeks may be paid where applicable, as well as a long service leave payment of 1.3 weeks for each completed year of service and pro-rata for an incomplete year of service up to the date of termination. Accumulated annual leave as well as any pro-rata balance of annual leave to the date of termination is also payable.

The Executive General Manager Service Delivery is engaged on a tenured agreement.

All remuneration component amounts are reviewed annually by the People Committee and the Board. All amendments to the remuneration policy for senior executives are reviewed by the People Committee for endorsement prior to submission to the Board and shareholding Ministers.

25.2 Compensation disclosures by category – Directors and Executives

2015 2014$’000 $’000

Short-term employee benefits 3,353 2,832 Non-monetary benefits 39 38 Post-employment benefits 292 256 Other long-term benefits 325 268 Total compensation 4,009 3,394



Page 52 of 63

25.3 Compensation – Directors

NameShort-term

benefits

Non-monetary benefits1

Post-employment

benefits2 Total $’000 $’000 $’000 $’000

20153 Kerryn Newton 59 3 6 68 Shane Stone 63 2 6 71 Peter Arnison 52 3 5 60 Kenneth Clarke 51 3 5 59 Mervyn Davies 54 - 5 59 Sandra Deane 55 3 5 63 John Geldard 49 3 5 57 Gordon Jardine 6 - 1 7 Total 389 17 38 444

20143 Kerryn Newton 42 3 4 49 Shane Stone 78 3 7 88 Peter Arnison 33 2 3 38 Kenneth Clarke 40 3 4 47 Mervyn Davies 45 3 4 52 Sandra Deane 43 3 4 50 John Geldard 31 2 3 36 Linda Mackenzie4 28 2 3 33 Total 340 21 32 3931 Non-monetary benefits represent the value of car parking provided to the Directors. 2 Post-employment benefits represent superannuation contributions made by the Group to a superannuation fund. 3 Refer to the Directors’ report for details of appointment and resignation dates. 4 Linda Mackenzie resigned effective 16 February 2014.

The service and performance criteria set to determine remuneration are outlined in Note 25.1.



Page 53 of 63

25.4 Compensation – Senior Executives

Short-termbenefits Non-monetary benefits3

Post-employ-

mentbenefits4

Otherlong-term

benefits5 TotalSalary

and fees1Cash

bonus2

$’000 $’000 $’000 $’000 $’000 $’000 2015

T Effeney - Chief Executive Officer 592 92 3 65 73 825 P Price - Executive General Manager Asset

Management 345 51 3 39 44 482 P Weaver - Executive General Manager Service

Delivery 335 53 3 38 43 472 C Arnold - Executive General Manager

Procurement, People and Services 354 50 3 39 44 490 P Scott - Chief Financial Officer6 269 - 3 13 31 316 D Rowell - Acting Chief Financial Officer10 99 - 1 6 9 115 K Kehl - Executive General Manager Strategy,

Regulation and Governance 335 52 3 38 42 470 D Grant - Executive General Manager Customer

and Corporate Relations7 299 38 3 16 39 395 Total 2,628 336 22 254 325 3,565

2014

T Effeney - Chief Executive Officer 589 66 3 62 71 791 P Price - Executive General Manager Asset

Management 332 40 3 37 41 453 P Weaver - Executive General Manager Service

Delivery 326 40 3 37 42 448 C Arnold - Executive General Manager

Procurement, People and Services 347 40 3 37 41 468 D Busine - Chief Financial Officer8 182 41 1 9 20 253 K Kehl - Executive General Manager Strategy,

Regulation and Governance9 329 38 3 34 38 442 D Grant - Acting Executive General Manager

Customer and Corporate Relations7 122 - 1 8 15 146 Total 2,227 265 17 224 268 3,001



Page 54 of 63

1 Short-term benefits – salary and fees include all payments made to the executive during the year (total fixed remuneration excludingsuperannuation) less payments for annual leave and long service leave taken. Annual leave and long service leave benefits accruedduring the year are included in other long-term benefits.

2 Short-term benefits – cash bonus represents individual at-risk performance payments made to the executive. 3 Non-monetary benefits represent the value of car parking provided to the executive. 4 Post-employment benefits represent superannuation contributions made by the employer to the superannuation fund at the rates

prescribed in the executives’ employment contracts. Some executives are members of the defined benefit superannuation fund to which Energex made contributions at a rate of four per cent of defined benefit members’ salaries during the 2014/15 financial year (2014: 13 per cent) at the recommendation of the actuary. The post-employment benefit reported above is based on a 10 per cent superannuation contribution rate (as part of the total fixed remuneration package). Refer to Note 13 for further information on the defined benefit obligations of the Group.

5 Other long-term benefits represent annual leave and long service leave benefits accrued during the year. This disclosure excludesadjustments for on-costs, inflation and discount factor which form part of the calculation of the employee benefit liability in Note 13. Long service leave may be taken when an employee has completed 10 or more years of continuous service with a Queensland electricity corporation. Pro-rata long service leave may be taken or paid on termination, after seven calendar years of continuousservice, when certain conditions are met in accordance with Electricity Regulation 2006 and the relevant leave policy. Long service leave will be paid where an employee is made redundant at a rate of 1.3 weeks per year with a pro-rata amount for an incomplete year of service.

6 Peter Scott commenced in the position of Chief Financial Officer on 13 October 2014. 7 Dayle Grant commenced acting in the role of Executive General Manager Customer and Corporate Relations on 12 January 2014 and

was appointed to this position effective 7 July 2014. 8 Darren Busine resigned effective 13 December 2013. 9 Kevin Kehl commenced in the new position of Executive General Manager Strategy, Regulation and Governance on 2 June 2014.

Prior to this, Kevin Kehl was in the role of Executive General Manager Customer and Corporate Relations and was seconded into theposition Executive General Manager Finance, Regulation and Strategy on 12 January 2014. His full year’s remuneration has been included under his current role.

10 Darryl Rowell was acting in the position of Chief Financial Officer from 1 July 2014 to 12 October 2014. The amounts disclosed are only those earned by the individual during the period acting in this role.

The service and performance criteria set to determine remuneration are included in Note 25.1.

2015 2014Total fixed remuneration package11 $’000 $’000

Chief Executive Officer 718 685 Executive General Manager Asset Management 428 406 Executive General Manager Service Delivery 422 410 Executive General Manager Procurement, People and Services 428 406 Chief Financial Officer12 420 422 Executive General Manager Strategy, Regulation and Governance 415 390 Executive General Manager Customer and Corporate Relations13 384 352

3,215 3,071 11 The total fixed remuneration (TFR) package differs from the Compensation – Senior Executives disclosures above due to the

exclusion of cash bonus, non-monetary benefits and timing differences between leave taken and leave accrued. The Compensation –Senior Executives disclosure reflects the cost to the Group.

12 The 2014 TFR for the Chief Financial Officer, who resigned effective 13 December 2013, has been adjusted to reflect a nominal fullfinancial year TFR for comparison purposes only. The 2015 TFR for the Chief Financial Officer, who commenced on 13 October 2014,has been adjusted to reflect a nominal full financial year TFR for comparison purposes only.

13 The 2014 TFR for the Executive General Manager Customer and Corporate Relations, who commenced on 13 January 2014, has been adjusted to reflect a nominal full financial year TFR for comparison purposes only.

25.5 At-riskperformancecompensation

Performance payments to employees

Financial year

Aggregateat-riskperformance

remuneration1

Total fixedsalaries and wages

payments2

Number of employees receiving performance

payments $’000 $’000

2015 15,640 370,479 3,2222014 13,037 377,849 3,523 1 The aggregate at-risk performance remuneration each year represents the annual actual payment granted in September for prior

year’s performance for award, non-executive contract, individual employment agreements, executive contract and senior executivecontract employees.

2 Amounts shown above include capitalised employee benefits not shown in the income statement. The amount represents remuneration paid to employees which includes performance payments but excludes termination payments.



Page 55 of 63

Key management personnel (senior executives) and other executives

A variable component of remuneration is provided to members of the executive teams through an annual performance payment scheme. This scheme is designed to effectively reward a combination of key behaviours, capability and performance aligned with objectives and associated targets of the Group. The maximum funds made available for such payments are 15 per cent of total fixed remuneration. Actual performance payments are based on performance measured against predetermined key performance indicators, as detailed in the annual statement of corporate intent (which is approved by the shareholding Ministers) and the executive’s performance agreement. Senior executive performance agreements comply with the format approved by the shareholding Ministers. Senior executive performance payments recommended by the CEO are submitted to the People Committee for endorsement and are recommended to the Board for approval. Performance payments made to the CEO during 2014/15 were based on a formal review led by the Chairman of the People Committee for endorsement and recommended to the Board for approval. The shareholding Ministers are advised of the actual performance payment within one month of payment. The payment date for both senior executives and executives’ performance payment made in the 2014/15 financial year for 2013/14 performance outcomes was 18 September 2014 (2014: 19 September 2013).

Non-executivecontractemployeesandemployeescoveredbyawards

For the year ended 30 June 2015, the Group’s performance pay scheme provides for the establishment of action plans and performance indicators against which performance is assessed for performance pay purposes. Employees develop performance agreements with their managers for a performance pay period (normally 12 months), with assessments for performance payments being conducted on completion of the assessment period.

All full-time and part-time employees are eligible to participate in the scheme (including permanent and fixed term). Participation in the scheme is voluntary. To be eligible for payment, the employee and the manager have a discussion to develop agreed targets which must be documented in the performance agreement. This agreement must be signed by both parties. The employee must also be employed at the end of the performance pay period to be eligible.

The size of the pool available for performance pays is at the discretion of the CEO and reflects performance outcomes of the Group and shareholder expectations for the year ended 30 June 2015. There is a maximum pool of six per cent of remuneration for award employees.

The payment date for the performance payment made in the 2014/15 financial year for 2013/14 performance outcomes was 18 September 2014 (2014: 19 September 2013).

25.6 Transactions with related parties of key management personnel

A number of key management persons (that is, Directors and senior executives) or their related parties hold positions in other entities that may result in them having control or significant influence over the financial or operating policies of those entities. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-related entities on an arm’s length basis.

Significant transactions with related parties of key management personnel that occurred during the financial year are noted below. The related party disclosures are those in connection with the Group and the related parties of Group Directors and senior executives, as follows:

John Geldard is a Director of Energy Super. The Group contributed to the Energy Super Fund based on actuarial advice and the total payments for the year were $40,700,284 (2014: $45,793,647).



Page 56 of 63

26 Related parties

26.1 State-ownedparties

Energex is a Queensland Government owned corporation, with shares held by the shareholding Ministers on behalf of the State of Queensland. All State of Queensland controlled entities meet the definition of a related party of the Group.

The following relates to transactions with state-owned entities:

2015 2014 Note $M $M

Revenues/(expenses) Transmission use of system charges (387) (402)Interest expense – QTC 2.2 (284) (369)Competitive neutrality fee expense 2.2 (55) (52)Other expenses (42) (45)Government grant revenue 2.1 1 2Community service obligation revenue 2.1 30 -Other revenue 20 15

Aggregate amounts receivable from state-owned entities at the end of the reporting period:

Short term deposits 5,21.5 308 32 Community service obligation receivable 6 -Other assets 1 1

Aggregate amounts payable to state-owned entities at the end of the reporting period:

Current tax payable 184 64 Current trade payables 33 36 Government grant unearned revenue liability 15 1 3Dividend 19 1,295 406 Accrued interest and charges – QTC 11 18 30 Long-term borrowings – QTC 12,21.4 6,811 6,465

No provision for impairment of receivables was raised for any outstanding balances and no expense was recognised for bad or impaired debts due from state-owned entities.

26.2 Key management personnel

Disclosures relating to key management personnel are set out in Note 25.

26.3 Guarantees

There were no guarantees issued to related parties as at the end of the reporting period.

26.4 Terms and conditions

The terms of the tax funding agreement are set out in Note 1.8.

Transactions with state-owned electricity entities were made in accordance with the National Electricity Rules for transmission use of system charges. Other transactions are based on normal commercial terms and conditions and at market rates.

Outstanding balances are unsecured and are repayable in cash.



Page 57 of 63

27 Contingent assets and liabilities

27.1 Legalproceedings

A number of common law claims are pending against the Group and liability is not admitted. The amount of claims due to litigation and associated legal fees is insignificant (2014: nil).

27.2 Other possible claims

From time to time the Group receives formal notifications from third parties which might indicate intention to lodge formal claims against the Group. The Group investigates these matters and responds appropriately to such communications in order to minimise potential future claims. Energex carries third party liability insurance to cover valid liability claims over$1 million. Third party liability settlements less than the excess of $1 million are self-funded. There are no significant claims that are expected to have an impact on the Group’s future financial position.

27.3 Environmental remediation

The Group provides for all known environmental liabilities. The Group estimates that current provisions for environmental remediation are adequate based on current information. However, there can be no assurance that new material provisions will not be required as a result of new information or regulatory requirements with respect to known sites or identification of new remedial obligations at other sites.

28 Auditor’s remuneration

2015 2014$’000 $’000

Remuneration to Group auditors: Audit services:

Annual financial statements 494 483 Regulatory information notices 321 604

815 1,087 Non-audit services:

Employee hotline services 11 5Total auditor’s remuneration 826 1,092

The audit of the 2014/15 financial statements of the Group is conducted by KPMG as Delegate of the Auditor-General of Queensland. Amounts include payments to the Auditor-General of Queensland (for audit services) and to KPMG directly (non-audit services). While assigned as the contract auditor, engagement of KPMG for non-audit services is at the discretion of the Auditor-General of Queensland.

29 Events after the reporting period

There are no matters or occurrences that have come to the Group’s attention up to the time of signing which would materially affect the results disclosed in the financial report.



Page 58 of 63

30 Change in accounting policy

30.1 Regulated revenue

With effect from 1 July 2014, the Group changed its accounting policy with respect to regulated revenue under and over recoveries. Previously, the Group accrued or deferred allowed regulated revenues through recognising the full amount of revenue allowed under its revenue determination and recognising any under (or over) recovery of this amount as an asset (or liability) to be adjusted in future revenues to be received from customers.

There is no definitive guidance on the accounting treatment for regulatory receivables or provisions within existing accounting standards. However the Australian Accounting Standards Board (AASB) has commented, in response to the International Accounting Standards Board’s (IASB) Invitation to Comment ITC32 Reporting the Financial Effects of Rate Regulation; that it has a view that, in most cases, regulatory deferral account balances do not meet the asset and liability recognition criteria as contained in the Conceptual Framework. To date, consensus has not been achieved and divergent views continue to be debated by the IASB.

The new policy, where the accrued (or deferred) revenues are not recognised, results in more reliable and relevant information to users as it reflects a closer correlation between market conditions, shareholder and other regulatory policies and profitability.

The Group has applied the change in accounting policy retrospectively and restated the comparative period to not recognise the receivable for regulated revenue under recoveries as previously recognised at 30 June 2014. The impacts on the Group’s consolidated financial statements are shown in Note 30.2.

30.2 Restatement of comparatives

A reconciliation of restated amounts to those amounts previously reported is presented below.

As Change in previously accounting As

reported policy restatedBalance sheet $M $M $Mas at 1 July 2013

ASSETS Current assets: Trade and other receivables 367 (102) 265 Total other current assets 155 - 155 Total current assets 522 (102) 420 Non-currentassets:Trade and other receivables 456 (455) 1 Total other non-current assets 10,938 - 10,938 Totalnon-currentassets 11,394 (455) 10,939 TOTALASSETS 11,916 (557) 11,359

LIABILITIESTotal current liabilities 655 - 655 Non-currentliabilities:Net deferred tax liabilities 1,874 (167) 1,707 Total other non-current liabilities 6,052 - 6,052 Totalnon-currentliabilities 7,926 (167) 7,759 TOTALLIABILITIES 8,581 (167) 8,414

NET ASSETS 3,335 (390) 2,945

EQUITYContributed equity 746 - 746 Reserves 1,896 - 1,896 Retained earnings 693 (390) 303 Parent interest 3,335 (390) 2,945TOTALEQUITY 3,335 (390) 2,945



Page 59 of 63


reported policy restatedBalance sheet $M $M $Mas at 30 June 2014

ASSETS Current assets: Trade and other receivables 572 (266) 306 Total other current assets 217 - 217 Total current assets 789 (266) 523 Non-currentassets:Trade and other receivables 637 (637) - Total other non-current assets 11,865 - 11,865 Totalnon-currentassets 12,502 (637) 11,865 TOTALASSETS 13,291 (903) 12,388

LIABILITIESTotal current liabilities 804 - 804 Non-currentliabilities:Net deferred tax liabilities 2,166 (271) 1,895 Total other non-current liabilities 6,496 - 6,496 Totalnon-currentliabilities 8,662 (271) 8,391 TOTALLIABILITIES 9,466 (271) 9,195

NET ASSETS 3,825 (632) 3,193

EQUITYContributed equity 746 - 746 Reserves 2,228 - 2,228 Retained earnings 851 (632) 219 Parent interest 3,825 (632) 3,193TOTALEQUITY 3,825 (632) 3,193


reported policy RestatedIncome statement $M $M $Mfor the year ended 30 June 2014

Revenue from rendering of services 2,373 (249) 2,124 Revenue from sale of goods 33 - 33 Government grant revenue 2 - 2 Other revenue 186 (97) 89 Total revenue 2,594 (346) 2,248

Totalexpenses (1,871) - (1,871)

Profit before income tax equivalent 723 (346) 377Income tax equivalent (215) 104 (111) ProfitfortheyearattributabletoownersofEnergexLimited 508 (242) 266

Total basic earnings per share (cents) 57.97 (27.67) 30.30



Page 60 of 63


reported policy restatedStatement of comprehensive income $M $M $Mfor the year ended 30 June 2014

Profit for the year 508 (242) 266

Other comprehensive income for the year, net of tax 388 - 388Total comprehensive income for the year 896 (242) 654


reported policy restatedStatement of changes in equity1 $M $M $Mfor the year ended 30 June 2014

Balance at 1 July 2013 693 (390) 303

Profit for the year 508 (242) 266 Other comprehensive income 45 - 45 Transfer from reserves to retained earnings on asset disposal 11 - 11 Total comprehensive income for the year 564 (242) 322Transactions with owners in their capacity as owners:Dividends provided or paid (406) - (406) Balance at 30 June 2014 851 (632) 2191 Retained earnings column only.

Cash flow statement

The change in accounting policy is non-cash related and therefore there is no restatement of the cash flow statement for the year ended 30 June 2014.


Directors’ declaration for the year ended 30 June 2015

Page 61 of 63

The Directors of Energex Limited (the Company) declare that the financial statements and notes:

(a) comply with Australian Accounting Standards, the Corporations Regulations 2001, the Government Owned Corporations Act 1993; and

(b) give a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the financial year ended on that date.

In the Directors’ opinion:

(a) the consolidated financial statements and notes are in accordance with the Corporations Act 2001;

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

(c) as at the date of this declaration, there are reasonable grounds to believe that the Company and the Group entities identified in Note 23 will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the Deeds of Indemnity as described in Note 23.

The declaration is made in accordance with a resolution of the Directors.

KERRYNNEWTON

Chair Energex Limited 24 August 2015 Brisbane, Queensland


Independent auditor’s report

Page 62 of 63

TotheMembersofEnergexLimited

Report on the Financial Report

I have audited the accompanying financial report of Energex Limited, which comprises the consolidated balance sheet as at 30 June 2015, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

My responsibility is to express an opinion on the financial report based on the audit. The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence

The Auditor-General Act 2009 promotes the independence of the Auditor-General and all authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can be removed only by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant.

In conducting the audit, the independence requirements of the Corporations Act 2001 have been complied with. I confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Energex Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In my opinion –

(a) the financial report of Energex Limited is in accordance with the Corporations Act 2001, including –

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.


Annual Report 2014-15 - EnergexEnergex Annual Performance Report 2014/15 2 1.3 2014/15 Highlights...

Documents

Transcript of Annual Report 2014-15 - EnergexEnergex Annual Performance Report 2014/15 2 1.3 2014/15 Highlights...