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44 finAncE And dirEctors’ rEPort > TransGrid annual reporT 2008

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TransGrid annual reporT 2008 > FINANCE AND DIRECTORS’ REPORT 45

FINANCE AND DIRECTORS’ REPORT

ChARTERTransGrid was established as a state-owned Corporation on 14 december 1998, by and under the energy services Corporations act 1998.

section 6C of the energy services Corporations act gives TransGrid, as an energy transmission operator, two principal functions, viz.

a) to establish, maintain and operate facilities for the transmission of electricity and other forms of energy, and

b) to provide services for the transmission of electricity and other forms of energy in accordance with the relevant regulatory regime.

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

The principal legislation TransGrid operates under is the energy services Corporations act 1995, the electricity supply act 1995 and the state owned Corporations act 1998.

LEgISLATIvE ChANgEElectricity Supply Amendment (Offences) Act 2008The object of this Bill is to amend the electricity supply act 1995:

(a) to increase the maximum term of imprisonment for the offence of theft of electricity from 2 years to 5 years and to provide for the offence to be an indictable offence if committed by an individual, and

(b) to create a new offence of entering, climbing or being on electricity works (as defined in that act).

The Bill also makes a consequential amendment to the Criminal procedure act 1986 to provide for the summary disposal of the offence of theft of electricity.

Electricity Industry Restructuring Bill 2008The introduction of this Bill into parliament is a relevant legislative development which is already indirectly impacting on TransGrid. it will be voted on by the nsW parliament later this year.

The object of this Bill is to provide for the restructuring of part of the state’s electricity industry by authorising and facilitating any of the following transfers of assets to the private sector:

(a) the lease of the power stations of an electricity generator and the transfer of the rest of its business,

(b) the transfer of the retail business of an electricity distributor,(c) the transfer by initial public offer of the business of an electricity

generator (including power stations).

The Bill specifically provides that the distribution and transmission assets (the “poles and wires”) of an electricity distributor must remain in public ownership.

MINISTERFrom 1 July 2007 to 30 June 2008, TransGrid formed part of the portfolio of the Hon. ian Macdonald, MlC; Minister for primary industries, Minister for energy, Minister for Mineral resources, and Minister for state development.

ShAREhOLDERSTransGrid’s Board of directors is responsible and accountable to the voting shareholders, being the new south Wales Treasurer and the Minister for Finance, who each hold one share for and on behalf of the new south Wales Government in accordance with the state owned Corporations act 1989.

BOARD OF DIRECTORSThe Board is responsible for providing effective guidance and direction; independence in decision making; an effective system of corporate governance; and executive development and succession planning.

Board CharterThe principal objectives and functions of TransGrid and the structure and composition of the TransGrid Board are laid out in the energy services Corporations act 1995 no. 95; the state owned Corporations act 1989 no. 134 and TransGrid’s Constitution.

TransGrid’s Board operates in accordance with the broad principles set out in our Board Charter. This charter details the Board’s structure and responsibilities and is reviewed on an annual basis. in addition the Board has a Code of Conduct to which all directors must adhere and which is also reviewed on an annual basis.

Board StructureThe energy services Corporations act 1995 provides for the Board of TransGrid to consist of:

a. the Managing directorb. one director to be appointed by the voting shareholders on the

recommendation of a selection committee comprising: i. two persons nominated by the portfolio Minister; ii. two persons nominated by the labor Council of new south

Wales, each being a person selected by the committee from a panel of three persons nominated by the labor Council; and

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

The period of appointment of non-executive directors is at the discretion of the shareholders.

one director is to be appointed Chairperson of the Board.

Board ResponsibilitiesThe responsibilities of the Board are outlined in the Board Charter. The main responsibilities include:

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

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

> overseeing and monitoring:– organisational performance and achievement of strategic

goals and objectives.– compliance with the Corporation’s Code of ethics and Conduct.– progress on major capital expenditure and other significant

corporate projects.> Monitoring financial performance.> ensuring that an effective system of corporate governance exists.> ensuring effective management processes including executive

development and succession planning.

Chairman and Managing DirectorThe Board Charter outlines the role of the Chairman and Managing director.

The Chairman is to provide leadership and promote the cohesiveness and effectiveness of the Board. Key roles to be performed by the Chairman include:

> assisting the Board to develop good relationships with the shareholding Ministers and portfolio Minister, with the Managing director and with other key stakeholders and interested parties.

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

> Helping directors understand their risks and liabilities as individual members and as a Board.

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

46 FINANCE AND DIRECTORS’ REPORT > TransGrid annual reporT 2008

FINANCE AND DIRECTORS’ REPORT continued

section 20l (2) of the state owned Corporations act 1989 and article 16.7 (a) of TransGrid’s Constitution provide that the Managing director is responsible for the day to day management of operations of TransGrid in accordance with the general policies and specific directions of the Board.

Terms of Office and Remunerationin accordance with schedule 8, Clause 5 of the state owned Corporations act 1989, a director may be appointed to hold office for a period not exceeding five years.

The remuneration of each non-executive director is paid out of TransGrid funds, and is determined by the shareholders. The total income received, or due receivable, by all directors of TransGrid is listed in the notes to the Financial statements (note 28). The Managing director is not entitled to any additional remuneration for being an executive director.

Remuneration Paidnon-executive director/acting Chairman – Bruce Foy $75,028 Chairman (former)# – peter dodd $52,150 non-executive director – Matina papathanasiou $58,820 non-executive director** – John price $22,147 non-executive director – neville Betts $50,500 non-executive director* – Brian langton $31,885

# Tenure ceased on 2 February 2008* Tenure ceased on 14 december 2007** appointed on 5 February 2008

Commitmenteleven Board Meetings and one additional Board and executive Corporate planning session were held in the year ended 30 June 2008. of the eleven Board Meetings, one was held at the orange regional office in May 2008 to coincide with the official opening of the new regional depot at this site.

Conflict of InterestThe Board Code of Conduct stipulates that a director must disclose interests to the Board (which includes positions and pecuniary interests) in corporations, partnerships or other businesses that may be relevant to the activities of the Board or an associated Committee. a register of such interests is maintained by TransGrid.

There have been no conflicts of interest declared for the year ended 30 June 2008.

Independent Professional Advicedirectors and Board Committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at TransGrid’s expense.

Meetings of the BoardThe number of meetings of the Board of directors held during the year ended 30 June 2008, and the number of meetings attended by each director is disclosed below.

Name TransGrid BoardThe Board Audit and

Risk Committee

Board Committee – Remuneration and

StructureBoard Regulatory

Committee

Meetings Attended

Meetings Entitled to Attend

Meetings Attended


Meetings Attended


Meetings Attended


Mr B E Foy 11 11 5 5 4 4 2 2

Mr K N Murray 11 11 4 5 4 4 5 5

Ms M Papathanasiou 11 11 5 5 1 1 5 5

Mr N Betts 8 11 – – – – 4 5

The Hon. J Price** 4 4 1 1 2 2 – –

Dr P Dodd# 6 6 – – 2 2 3 3

The Hon B J Langton* 6 6 3 3 2 2 – –

# Tenure ceased on 2 February 2008* Tenure ceased on 14 december 2007** appointed on 5 February 2008

Board CommitteesTo assist the Board in fulfilling its corporate governance responsibilities, the Board utilises the executive Board Committee, the Board audit Committee, the Board Committee – remuneration and structure and the Board regulatory Committee. a charter governs these committees and the Board delegates specific powers and procedures. each charter details the committee’s primary function, structure and responsibilities. each charter is reviewed on an annual basis.

The Board audit Committee, the Board Committee – remuneration and structure and the Board regulatory Committee meet on at least a quarterly basis or at such times as considered appropriate.

The executive Board Committee meets as and when required.

non executive directors chair the Board Committees. The Managing director is also a member of the Board Committees (except the Board audit and risk Committee). senior executives and management may be invited to attend committee meetings.

a report detailing the items considered by the committee is tabled at the following Board Meeting.


Executive Board CommitteeThe executive Board Committee consists of the following directors:

Mr Bruce Foy (Chair of the Committee) Mr Kevin Murray

The primary function of the executive Board Committee is to consider matters between Board Meetings which would otherwise require Board approval. The matter is delegated to the executive Board Committee at the prior Board Meeting and a report is provided to the Board at the meeting following the exercise of the delegation.

Board Audit and Risk CommitteeThe Board audit Committee consists of the following directors:

The Hon. John Price (Chair of the Committee) Mr Bruce Foy Ms Matina Papathanasiou

The primary function of the Board audit Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing the overall audit process of the Corporation; the system of internal control which management and the Board of directors have established and the financial information which will be provided to the shareholding Ministers and others.

Board Committee – Remuneration and StructureThe Board Committee – remuneration and structure consists of the following directors:

Mr Bruce Foy (Chair of the Committee) The Hon. John Price Mr Kevin Murray (Managing Director)

The primary function of this Board Committee is to assist the Board in determining the remuneration and employment conditions of TransGrid’s executive and senior management and reviewing the organisational structure of the Corporation.

Board Regulatory CommitteeThe Board regulatory Committee consists of the following directors:

Ms Matina Papathanasiou (Chair of the Committee) Mr Bruce Foy Mr Neville Betts Mr Kevin Murray (Managing Director)

The primary function of this Board Committee is to assist the Board in managing and reviewing regulatory changes and/or regulatory decisions arising from the national electricity law, rules and regulations. during the year ended 30 June 2008, the committee’s main focus was on oversighting the preparation of the revenue submission to the australian energy regulator.

ExECuTIvE LEADERShIP TEAMPerformance SummaryMr K Murray, Managing Director, was assessed by the Board as having achieved all key performance criteria set in the Corporate plan and the statement of Corporate intent with the nsW Government including submission of TransGrid’s revenue submission for the 2009/2014 period and a continuing drive for improved efficiency, capital delivery, succession planning and customer focus.

Mr J Byrne, General Manager/Commercial, was assessed by the Managing director as having achieved all performance criteria, including the effective management of all TransGrid financial functions, conversion of mobile phone technology and successful renegotiation of fixed and mobile telephone charges, continued achievement of a significant level of non-regulated income, completed the refurbishment of Commonwealth street offices and made cost reductions through critical assessment of on-going expenditure.

Mr C FitzGerald, General Manager/Capital Program Delivery, was assessed by the Managing director as having achieved all performance criteria, including the significant progress of the major capital works program for the 2004 to 2009 regulatory period with over 60 projects underway, more than $240 million spent in 2007/08 and $400 million committed for 2008/09, including the critical Western 500kV project on time and to budget and with the final planning and commencement of the major projects in the 2009-2014 period and the increased capability of the Cpd Business unit resources to deliver this increased program of works.

Mr P McIntyre, General Manager/Network Development and Regulatory Affairs, was assessed by the Managing director as having achieved all performance criteria, including achievement of the transmission planning and development requirements to facilitate TransGrid’s significant capital program, the production of the 2008 annual planning report and the strategic network development plan, the implementation of the largest network support arrangement in the national electricity Market, improved customer and stakeholder relationships, the effective management of TransGrid’s input to the development of the regulatory regime for transmission in the neM and the development of TransGrid’s 2009-14 revenue submission to the australian energy regulator.

Mr V Galea, General Manager/Network Services, was assessed by the Managing director as having achieved all key network reliability, availability, maintenance and construction targets within approved budgets and timeframes while maintaining high level safety performance and environmental compliance. delivered and commissioned all planned major projects and asset replacement programs. developed strategies and new concepts that will improve project delivery processes to manage future capital works objectives and reduce some operational costs. Maintained a sustainable strategic Human resource plan that includes succession plans to meet future requirements.

Mr P Phillips, General Manager/Business Services, was assessed by the Managing director as having achieved all performance criteria including property acquisition, warehouse rationalisation, resource planning, implementation of the Future leaders program and development of the senior Manager and executive development projects, leading the information Technology enhancement program and TransGrid’s safety Commitment and maintaining certifications of TransGrid’s information security Management system to as 7799, environmental Management system to iso 14001 and Quality system to iso 9001.

Mr L Smyth, General Manager/Network Performance and Operations, was assessed by the Managing director as having achieved all performance criteria including network reliability and availability targets, improving the systems and processes across the Business unit, producing the new 5 Year and 30 Year network Management plans and providing continued leadership in restructuring of the business unit and refining the “Virtual Control room”.

Mr M Gatt, Executive Manager/Corporate, was assessed by the Managing director as having achieved all performance criteria, including effectively addressing the needs of stakeholders, managing media and government relations activities, delivering corporate communications, strategic development and associated corporate planning functions. The Corporate Business unit also refined processes for memberships and stakeholder management as well as managing a number of media issues and emergency communications protocols.



Remuneration

Objective The objective of TransGrid’s executive remuneration framework is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of shareholder value, and it conforms to market best practice for delivery of reward.

The Board Committee/remuneration and structure determines executive remuneration. each year the Committee commissions a report from an external executive remuneration consultant detailing equivalent market remuneration and a recommendation on suitable remuneration levels for all executive officers.

all executive officers have in place a written performance agreement aligned to TransGrid’s corporate goals. performance outcomes are matched to performance targets, with remuneration based on documented performance levels.

Remuneration Paid

Managing director K Murray $604,000

General Manager/Commercial J Byrne $333,000

General Manager/Capital program delivery C FitzGerald $295,750

General Manager/network development and regulatory affairs p Mcintyre $295,250

General Manager/network services V Galea $278,000

General Manager/Business services p phillips $275,750

General Manager/network performance and operations l smyth $258,000

executive Manager/Corporate M Gatt $230,250

Qualifications

Name Position Qualifications

Mr Kevin Murray executive director and Managing director Be (elec), dip Bus studies, FaiCd

Mr John Byrne General Manager/Commercial and Board secretary Comm (acctg proc) Cert, Cost acctg post Cert, Comm prog Cert, FCpa, FaiCd

Mr Chris FitzGerald General Manager/Capital program delivery Bsc, Be (Hons), Me, Grad dip (Bus admin), Fie aust, Cp eng

Mr peter Mcintyre General Manager/network development and regulatory affairs Bsc, Be (Hons), MBa (Technology Management), GaiCd

Mr Vic Galea General Manager/network services Be (elec), GaiCd

Mr paul phillips General Manager/Business services Be (Hons), Bsc, MMgt

Mr lionel smyth General Manager/network performance and operations Be (elec), Grad Mgt Qual, GaiCd

Mr Michael Gatt executive Manager/Corporate adv. Cert electrotechnology, dip.elec engineering, B.Comm (Business)

FaiCd – Fellow australian institute of Company directors GaiCd – Graduate australian institute of Company directors

guARANTEE OF SERvICETransGrid has defined service commitments with our customers through our Connection agreements. TransGrid’s service levels are monitored by the aer and the new south Wales department of Water and energy (dWe).

CONSuLTANT FEESduring the year, $75,830 was spent on consulting services for the preparation of environmental impact assessments and $22,482 was spent on an employee reward and recognition consultant.

RISk MANAgEMENT AND INSuRANCEThe executive audit and risk Committee is responsible for ensuring TransGrid’s risks are identified and effectively managed. implementation of risk management strategies are the responsibility of all levels of management within TransGrid and a framework exists to ensure that all risks are proactively and explicitly managed on an ongoing basis.

The Corporate audit and risk Group provides assistance in the development and maintenance of enterprise wide risk management plans, training staff in all aspects of risk management and the ongoing verification and review of risk mitigation actions across the organisation.

TransGrid’s insurance strategy is to obtain the most comprehensive insurance coverage available at the most economical cost. each year, TransGrid examines the risks for which it is prepared to seek cover, the available insurance coverage or other means to meet the remaining risks and the costs of covering these risks.

CODE OF EThICS AND CONDuCTTransGrid conducts its business based upon its values. These values are the driving forces that ensure we continue to aim for the highest standards of integrity, honesty and fairness in the way we work. our Board and executive Management team are committed to our Code of ethics and Conduct and continue to support its application in our working environment. our values have been developed by our staff and are now an integral part of our business promotion and philosophy. our staff continues to incorporate them into their daily work experience and also promote them amongst our many contractors and suppliers.


TransGrid maintains a suite of Codes;> TransGrid directors Code of ethics and Conduct, which are

guidelines for Board directors and associated Committees> our Code of ethics and Conduct distributed to all staff, and> Business ethics – a Guide to Contractors, Customers

and suppliersThese codes will continue to be distributed during 2008 to all staff and associated personnel in conjunction with our revised Corporate plan.

new employees continue to be introduced to TransGrid’s ethical standards through an online induction program relaying the importance of TransGrid’s image and reputation, ensuring their awareness and understanding.

our commitment to our community and to our stakeholders is such that we are committed to putting in place systems, processes and measures that allow our practices to be transparent and above reproach. TransGrid continues to monitor the standard of our business policies and practices by reviewing and modifying our corporate policies and procedures to ensure that ethical and community standards are upheld and embraced.

awareness and communication is provided on the TransGrid website, our intranet and internal communication reminders about ethical behaviour. TransGrid also maintains a 24 hour ethics Helpline which allows easy access for staff to seek ethical advice or relay concerns in a confidential manner.

TransGrid continued to support the st James ethics Centre, the Corruption prevention network and education programs with a number of staff attending seminars and events on ethical subjects and anti corruption measures.

FREEDOM OF INFORMATIONTransGrid received no Freedom of information (Foi) applications under the Freedom of information act 1989 in 2007/2008. However, TransGrid did receive two requests to provide third party consultation input in accordance with the act. in both instances, TransGrid advised the requesting parties that in our views, the information requested under the act is non-exempt.

The following table provides an overview of responses to requests made under the Freedom of information act 1989.

TOTAL

FOI Requests 2007 – 08 2006 – 07

numbers of requests received 0 3

Brought forward 0 0

Completed 0 3

Transferred out 0 0

unfinished (Carried forward) 0 0

Granted in full 0 3

partially granted 0 0

refused 0 1

Fees received 0 $90

during the 2007/2008 year:

> The impact of the requirements of the act on TransGrid’s activities was minor.

> no issues arose in connection with TransGrid’s compliance with the requirements of the act.

> no determination by TransGrid was the subject of review by the ombudsman, the administrative decisions Tribunal or the supreme Court.

PRIvACyTransGrid is committed to adherence with the principles of sound privacy practice to ensure that personal information is managed in accordance with the privacy and personal protection act 1998.

TransGrid has a privacy Management plan in place to facilitate adherence to the principles of the act and to communicate to our employees how privacy is managed within the organisation.

TransGrid’s privacy Management plan is available to all of our employees via the company intranet, Transnet.

no complaints were received and TransGrid conducted no internal reviews during the reporting period.

STATEMENT OF AFFAIRSinformation required under section 14(2) of the act, is located as follows:

> The agency’s structure and functions: about TransGrid> The way its functions affect the public: achievements;

Customers, stakeholders & Community; network strategy.> How the public may participate in agency policy development:

Customers, stakeholders & Community> The kinds of documents the agency holds: promotion> How members of the public can access and amend agency

documents: Freedom of information

CREDIT CARD uSAgECredit Card usage in TransGrid is in accordance with its detailed documented procedures. TransGrid continues to promote the correct usage of its corporate credit cards and there is a continuous review of usage characteristics and authorisations.



SIgNIFICANT COMMITTEES

Executive Audit and Risk CommitteeThe executive audit and risk Committee ensure that the effectiveness of management control is maintained. it oversees the setting of policies, co-ordination and communication of risk management strategies and ensures that TransGrid’s overall risk management framework operates effectively.

Executive Occupational Health and Safety CommitteeThe executive occupational Health and safety Committee provides direction on policies and procedures relating to occupational health and safety matters, and provides executive support to location managers and occupational Health and safety Committees.

Executive Revenue Reset CommitteeThe executive revenue reset Committee determines the strategy and direction of the revenue reset. The Committee endorses the revenue proposal’s key messages and structure. it determines Business unit responsibilities and provides resources for the revenue reset project.

Executive Environment CommitteeThe executive environment Committee sets corporate environmental policy and monitors the effectiveness of environmental management within TransGrid.

Capital Works Program (CAPEX) Steering CommitteeThe CapeX steering Committee monitors the capital works program in TransGrid and facilitates and coordinates the delivery of the program and specific individual projects as required. The Committee also monitors the efficiency and effectiveness of the capital works delivery process.

Executive Protective Security Committee MeetingThe executive protective security Committee oversees and coordinates protective security and business continuity activities within TransGrid.

Executive Team 1 2 3 4 5 6

Kevin Murray ~ ~ ~ ~ ~ ~ ~

John Byrne ~ ~ ~ ~ ~ ~

Chris FitzGerald ~ ~ ~ ~ ~ ~

Vic Galea ~ ~ ~ ~ ~ ~ ~

peter Mcintyre ~ ~ ~ ~ ~

paul phillips ~ ~ ~ ~ ~ ~ ~

lionel smyth ~ ~ ~ ~ ~ ~ ~

Michael Gatt ~ ~ ~ ~ ~

david van Beek ~

ian Harris ~

John robinson ~

lyn Cooper ~

Kevin dodds ~

Kevin stephenson ~

Tony Meehan ~

Megan Calvert ~

stuart Johnston ~

danny Gittani ~

Garrie Chubb ~

peter Holland ~

steve Jones ~

don paton ~

andrew power ~

peter Tanner ~

andrew Kingsmill ~

Gordon dunsford ~

John Howland ~

1 – executive audit and risk Management Committee2 – executive occupational Health and safety Committee3 – executive revenue reset Committee4 – executive environment Committee5 – Capital Works program (CapeX) steering Committee6 – executive protective security Committee


OvERSEAS vISITS

Name Title Countries Purpose of Visit

G. ebb Manager new Zealand attend 2007 CiGre apa2 Transformer Committee Meeting

M. Grierson engineering officer Thailand acceptance testing of 132kV 60MVa Transformer

M. Bradbery Manager new Zealand attend CiGre australian panel no B4 Meeting

J. Mouatt professional officer Japan & China design review of Toshiba’s Works in Japan and China

G. ebb Manager Japan & China design review of Toshiba’s Works in Japan and China

d. Guille engineering officer new Zealand design review and material inspection associated with Bayswater 500kV project

a. Klepac professional officer new Zealand design review and material inspection associated with Bayswater 500kV project

e. lamplough professional officer sweden inspection and Testing of shunt reactors for Tamworth substation

H. allen engineering officer Finland Witness testing of reactors for sydney north and east capacitor installations

J. Mouatt professional officer Japan Witness testing of 500kV power transformers for the Western 500kV project

C. FitzGerald General Manager China Visit aBB China factory to review manufacturing capability for 330kV transformers

G. ebb Manager China Visit aBB China factory to review manufacturing capability for 330kV transformers

p. antuch engineering officer China assembly inspection of towers to be used on the Wollar-Wellington 330kv line

d. dempsey professional officer China assembly inspection of towers to be used on the Wollar-Wellington 330kv line

r. Yazbeck professional officer Japan High voltage testing at nGK laboratory

a. Kingsmill Manager Canada participate in the iToMs results Workshop

J. Howland Manager Canada participate in the iToMs results Workshop

l. smyth General Manager uK, sweden & norway insurance underwriters Meetings and Benchmarking

G. ebb Manager Japan design review of 330/132kv, 375MVa transformers

M. Grierson engineering officer Japan design review of 330/132kv, 375MVa transformers

a further two trips, of which the majority of costs were funded by other organisations, were undertaken by TransGrid officers.

Name Position Countries Purpose of Visit

s. Jones Manager rio de Janeiro attend CiGre study Committee a3 Meeting

a. Manglick Manager Japan attend aorC meetings and associated CiGre symposium

52 FINANCIAL STATEMENTS > TransGrid annual reporT 2008

INCOME STATEMENTFor THe Year ended 30TH June 2008

2008 2007 Note $’000 $’000

income 3 572,987 506,655

expenses excluding Finance Costs 4 (280,553) (264,366)

Finance Costs 4 (101,882) (100,726)

Profit/(Loss) Before Income Tax Expense & Superannuation Actuarial Gains/(Losses) 190,552 141,563

income Tax Benefit/(expense) Before superannuation actuarial Gains/(losses) 6(a)(i) (58,165) (45,531)

Profit/(Loss) Before Superannuation Actuarial Gains/(Losses) 132,387 96,032

superannuation actuarial Gains/(losses) (39,499) 29,891

income Tax Benefit/(expense) on superannuation actuarial Gains/(losses) 6(a)(i) 11,850 (8,967)

Profit/(Loss) For The Year 104,738 116,956

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

BEgINNINg OF AuDITED FINANCIAL REPORT

TransGrid annual reporT 2008 > FINANCIAL STATEMENTS 53

BALANCE ShEET as aT 30TH June 2008

2008 2007 Note $’000 $’000

CuRRENT ASSETS Cash and cash equivalents 7 30,571 10,403

Trade and other receivables 8 69,857 76,777

inventories 9 25,699 24,854

derivatives 10 66 2

other 11 1,331 22,336

127,524 134,372

non-current assets held for sale 12 – 1,685

Total Current Assets 127,524 136,057

NON-CuRRENT ASSETS available-for-sale financial assets 13 – 476

deferred tax assets 6(b) 34,504 23,156

property, plant and equipment 14 3,531,916 3,266,270

intangibles 15 523,067 503,017

other 16 3,603 –

Total Non-Current Assets 4,093,090 3,792,919

Total Assets 4,220,614 3,928,976

CuRRENT LIABILITIES Borrowings 143,485 253,557

Trade and other payables 18 144,318 86,162

provisions 19 169,541 134,785

Current tax payable 23,564 6,105

derivatives 20 11,222 8,264

other 21 67,494 61,564

Total Current Liabilities 559,624 550,437

NON-CuRRENT LIABILITIES Borrowings 1,388,107 1,199,956

Trade and other payables 18 5,413 8,870

deferred tax liabilities 6(b) 506,812 462,747

provisions 19 10,440 5,447

Total Non-Current Liabilities 1,910,772 1,677,020

Total Liabilities 2,470,396 2,227,457

Net Assets 1,750,218 1,701,519

EquITy Capital 22 651,967 651,967

reserves 23 986,779 933,658

retained earnings 24 111,472 115,894

Total Equity 1,750,218 1,701,519


54 FINANCIAL STATEMENTS > TransGrid annual reporT 2008

2008 2007 Note $’000 $’000

CASh FLOwS FROM OPERATINg ACTIvITIESCash receipts from Customers 579,981 531,938

Cash paid to suppliers and employees (164,290) (151,192)

Finance Costs paid (101,279) (101,979)

interest received 1,909 1,503

income Tax paid (18,905) (17,828)

net Cash Flows from operating activities 33(e) 297,416 262,442

CASh FLOwS FROM INvESTINg ACTIvITIESpurchase of property, plant and equipment, and intangibles (289,854) (212,361)

proceeds from the sale of property, plant and equipment 4,453 4,167

net Cash Flows from investing activities (285,401) (208,194)

CASh FLOwS FROM FINANCINg ACTIvITIES proceeds from Borrowings 361,835 249,240

repayments of Borrowings (282,200) (248,490)

dividends paid 19(a) (71,482) (69,500)

net Cash Flows from Financing activities 8,153 (68,750)

net increase / (decrease) in Cash and cash equivalents 20,168 (14,502)

Cash and cash equivalents at Beginning of the Financial Year 10,403 24,905

Cash and cash equivalents at the End of the Financial Year 33(a) 30,571 10,403


CASh FLOw STATEMENTFor THe Year ended 30TH June 2008

TransGrid annual reporT 2008 > FINANCIAL STATEMENTS 55

STATEMENT OF RECOgNISED INCOME AND ExPENSEFor THe Year ended 30TH June 2008

2008 2007 Note $’000 $’000

asset revaluation reserve: net increase/(decrease) in revaluations 23 75,958 68,663

net unrealised Gains/(losses) reserve: net gains/(losses) taken to 23 (426) 294 equity on available-for-sale financial assets

Cash Flow Hedge reserve: net unrealised gains/(losses) taken to equity 23 (2,895) (8,719)

income tax on items taken directly to equity 6(a)(ii) (22,766) (17,318)

Net income recognised directly in equity 49,871 42,920

profit for the year 104,738 116,956

Total recognised income and expense for the year attributable to members of TransGrid 154,609 159,876


56 NOTES TO ThE FINANCIAL STATEMENTS > TransGrid annual reporT 2008

NOTES TO ThE FINANCIAL STATEMENTSFor THe Year ended 30TH June 2008

1. CORPORATE INFORMATIONThe financial report of TransGrid for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the directors on 18 september 2008.

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

2. SuMMARy OF SIgNIFICANT ACCOuNTINg POLICIES(a) Basis of Preparation The financial report is a general-purpose financial report, and has been prepared in accordance with australian accounting standards including accounting interpretations; the requirements of the public Finance and audit act, and regulation; the state owned Corporations act, 1989; and relevant Treasury Circulars.

property, plant and equipment, assets classified as held for sale, derivative financial instruments, and available-for-sale financial assets are measured at fair value. other financial statement items are prepared in accordance with the historical cost convention, except as otherwise stated in the financial report.

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

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

(b) Statement of ComplianceThe financial report complies with australian accounting standards, which include the australian equivalents to international Financial reporting standards (aeiFrs). The financial report also complies with the international Financial reporting standards (iFrs).

(c) New Australian Accounting Standards and Interpretations not yet adoptedaustralian accounting standards and interpretations that have recently been issued or amended but are not yet effective have not been adopted by TransGrid in preparing this financial report.

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

> aasB 101 (issued september 2007) and aasB 2007-8 relates to presentation of financial statements.

> aasB 8 (issued February 2007) replaces the presentation requirements of segment reporting in aasB 114.

> aasB 2007-3 (issued February 2007) relates to amendments to existing accounting standards as a result of the new aasB 8.

all of these pronouncements are applicable for the year commencing 1 July 2009. The new standards are concerned with disclosures and will have no direct impact on TransGrid’s financial results.

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

(i) Significant accounting judgements

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

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

Long Service Leave ProvisionTransGrid’s liability for employee benefits relating to long service leave is measured using the current cost approach, which approximates the present value basis. periodic comparison is undertaken of the two measurement bases, in conjunction with an independent actuarial review. Management’s judgement, based on historical experience, is applied in determining whether the resulting difference materially impacts on the liability valuation recognised in the financial report and requires an adjustment to align to present value measurement.

Workers’ Compensation ProvisionThe liability for workers’ compensation is based on an annual independent actuarial assessment, supplemented by management considerations, to arrive at a best estimate of the expenditure required to settle present considerations at the reporting date. The estimate contains uncertainty because variables used in calculations cannot be easily quantified or measured in advance of a possible occurrence.

(ii) Significant accounting estimates and assumptions

Allowance for impairment loss on receivables from trade and other debtors Where receivables are outstanding beyond the normal trading terms, the likelihood of recovery of these receivables is assessed by management. This assessment is based on supportable past collection history and historical write-offs of bad debts.

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

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

(f) Property, Plant and Equipment(i) Acquisition of AssetsThe cost method of accounting is used for the initial recording of all acquisitions of assets controlled by TransGrid. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire the asset at the time of its acquisition or construction. Cost includes interest on borrowings related to Qualifying assets as detailed in 2(f)(iii).

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

(ii) Revaluationsproperty, plant and equipment are valued in accordance with nsW Treasury’s policy Tpp 07-1 “Valuation of physical non-Current assets at Fair Value”.

TransGrid annual reporT 2008 > NOTES TO ThE FINANCIAL STATEMENTS 57

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

TransGrid revalues depreciable property, plant and equipment by reference to current prices for assets newer than those being revalued, and adjusts those amounts to reflect the present condition of the asset. The accumulated depreciation for the revalued asset is restated proportionately with the change in the gross carrying amount of the asset, so that the carrying amount of the asset after revaluation equals its revalued amount, in line with nsW Treasury policy.

any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the Balance sheet, unless it reverses a revaluation decrease of the same asset previously recognised in the income statement.

any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus of the same asset in the asset revaluation reserve.

upon disposal, any revaluation reserve relating to the particular asset or parts of asset being sold is transferred to retained earnings.

property, plant and equipment comprise the following types of assets:

Regulated Assets regulated assets comprise property, plant and equipment used by TransGrid to provide electricity transmission services that are regulated by the australian energy regulator (aer). regulated assets as disclosed in notes 14(a) and (b) are:

> network asset> other assets

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

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

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

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

detailed valuations of system plant and equipment, buildings and communication equipment associated with optical fibres were undertaken by TransGrid staff as at 30 June 2004. a detailed valuation of land was undertaken as at 30 June 2005 by independent valuers.

Non-regulated Assetsnon-regulated assets comprise property, plant and equipment used by TransGrid to provide services other than regulated electricity transmission services. non-regulated assets as disclosed in notes 14(a) and (b) are:

• SystemPlantandEquipment• CommunicationEquipment• OtherAssets

Valuation of non-regulated assets is based on relevant commercial agreements, which define their earning capacity.

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

• acquisitionofanewunitofplant;• installationofanewunitofplant;• workperformedonaunitofplant,wheretheneedforthework

existed at the time the unit was acquired and the work was carried out prior to it being put into operation;

• replacementofaunitofplant,orofasubstantialpartofaunitofplant;

• anadditionoralterationtoaunitofplant,whichresultsinanincrease in economic benefits.

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

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

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

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

The useful lives presently assigned to TransGrid’s assets are shown in the table below:

Regulated Assets

network asset Buildings 30 years

system plant and equipment

40 – 50 years

Communication equipment

10 – 35 years

other assets 2 – 10 years

Non-regulated Assets

system plant and equipment

20 – 50 years

Communication equipment

35 years

other assets 2 – 10 years

58 NOTES TO ThE FINANCIAL STATEMENTS> TransGrid annual reporT 2008


(g) Intangible assets intangible assets comprise the following assets as disclosed in notes 15(a) and (b):

> easements;> Computer software; and> airspace rights

intangible assets are measured at cost.

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

> acquisition of computer software or easements;> installation of computer software;> an addition or alteration to computer software, which results in

an increase in economic benefits.

easements are a component of TransGrid’s infrastructure assets that provide electricity transmission services that are regulated by the australian energy regulator. easements are not amortised.

Computer software is amortised over a period of 5 years using the straight-line depreciation method. The useful life for software is reviewed annually, and adjustments where applicable, are made on a prospective basis.

airspace rights have been recognised when the cost of the asset can be measured reliably and it is probable that the asset will generate expected future economic benefits for TransGrid. airspace rights are not amortised.

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

(h) ImpairmentTransGrid’s business as a whole represents a cash-generating unit. at each reporting date, TransGrid’s specialised plant and infrastructure assets, land and buildings, and easements are tested for impairment as part of the cash-generating unit. if there is any indication that the cash-generating unit may be impaired, TransGrid makes an estimate of the recoverable amount of the unit.

as TransGrid’s revenue from electricity transmission services is determined by the australian energy regulator, the risks of impairment for the business as a whole during the regulatory period are considered to be extremely low.

The recoverable amount of the cash-generating unit is based on the value in use for the business as a whole. in assessing value in use, the estimated future cash flows for the business are discounted to their present value using a pre-tax discount rate that reflects the risks specific to the business and relevant market assessments of the time value of money as applied by the australian energy regulator in determining TransGrid’s revenue cap.

if the carrying amounts of the assets exceed the recoverable amount of the business, the assets comprising the business as a whole are considered to be impaired. The assets are written down proportionately to ensure their carrying amounts reflect the recoverable amount.

(i) Investmentsinvestments are recognised at the fair value of the consideration given, including any acquisition charges associated with the investment, less any impairment.

Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is disposed of or determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

TransGrid does not actively engage in external investment activities.

(j) Non-current assets held for saleTransGrid has non-current assets classified as held for sale, where their carrying amount will be recovered principally through a sale transaction, not through continuing use. non-current assets held for sale are recognised at the lower of carrying amount and fair value less costs to sell. These assets are not depreciated while they are classified as held for sale.

(k) Inventoriesinventories of stores and Materials are valued at the average cost of items in store automatically adjusted at time of delivery of new items, separately determined for each location.

(l) Cash and cash equivalentsCash and cash equivalents in the Balance sheet and for purposes of the Cash Flow statement comprise cash at bank and deposits at call with financial institutions.

(m) Borrowings all borrowings are measured at amortised cost using the effective interest method. amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Finance costs include interest and costs incurred in connection with the arrangement of borrowings. discount/premium on loans is in the nature of a cost/cost reduction of borrowing. discount/premiums are amortised over the term of the loans. The amount applicable to each year is included in the income statement as part of TransGrid’s borrowing costs for the year.

discount on loans issued by nsW Treasury Corporation amounted to $21,886,000 (2007 – premium $4,254,000). The effective interest rate applicable for the debt portfolio is 6.2% (2007 – 6.2%).

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

The amount of interest attributed to qualifying assets during the year was $2,741,000 (2007 – $560,000) at a weighted average rate of 6.8% (2007 – 6.7%).

loans are classified as current when they have a maturity of less than one year from the reporting date. TransGrid expects to roll this debt upon maturity.

(n) Dividendsprovision is made for the amount of dividend payable in relation to the current financial year, in accordance with the dividend recognition policy set out in Treasury Circular nsW TC 05-11 “accounting for dividends”. accordingly, a dividend in relation to the financial year is taken to be determined before reporting date, consistent with the requirements of aasB 137 “provisions, Contingent liabilities and Contingent assets”.

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

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


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

(ii) Long Service LeaveThe liability for employee benefits relating to long service leave has been calculated on the basis of current salary rates to be paid by TransGrid resulting from employees’ services provided up to reporting date and includes related on-costs, in accordance with the guidelines of Treasury Circular nsW TC 07/04 “accounting for long service leave and annual leave”.

(p) SuperannuationTransGrid contributes to four defined Benefit superannuation schemes for which liabilities accrue.

The defined Benefit schemes comprise:

> energy industries superannuation scheme pool B (eiss);> state authorities superannuation scheme (sass);> state authorities non-Contributory superannuation scheme

(sanCs); and> state superannuation scheme (sss)

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

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

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

TransGrid recognises the net total of the following as an asset or a liability in its Balance sheet:

> present value of the defined benefit obligation at reporting date;> Fair value of plan assets in the defined benefit schemes at

reporting date.

The difference between the opening and closing balances of the net defined benefit asset or liability for the year, plus or minus employer contributions, is brought to account as revenue or expense in TransGrid’s income statement, depending on the direction of movement in the superannuation reserve.

TransGrid has determined that detailed disclosure of the defined Benefit schemes of sass, sanCs and sss will not materially influence the users of the financial report and therefore has not been disclosed.

(q) InsuranceTransGrid maintains a mix of external insurance policies and internal provisioning in accordance with aasB 137 “provisions, Contingent liabilities and Contingent assets”. The treatment of risks and associated liabilities are determined in conjunction with independent insurance advisers and loss adjusters. The main area of self-insurance is Towers and Wires where it is considered cost-effective to carry the risk internally.

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

(r) Trade and Other Receivables receivables from trade and other debtors, which generally have 20 to 30 day terms, are recognised at amounts due less an allowance for any uncollectible amounts. Collectibility of these receivables is reviewed on an ongoing basis. debts that are known to be uncollectible are written off when identified. an allowance for doubtful debts is raised when there is objective evidence that TransGrid will not be able to collect the debt.

(s) Payablesaccounts payable, including accruals not yet billed, are recognised when TransGrid has an obligation to pay as a result of the completion of a work or service. Trade accounts are usually settled within 60 days.

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

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

(ii) Rendering of servicesrevenue from electricity transmission services is subject to the application of an australian energy regulator determined revenue cap for the financial year. The revenue caps are determined by the aer at five-year intervals. TransGrid is in the fourth year of the current regulatory determination which operates from July 2004 to June 2009. The transmission service prices are set at the beginning of the financial year to achieve the revenue cap applicable for that year.

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

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

(iv) Contributions for Capital WorksCash and non-cash capital contributions have been recognised in accordance with accounting interpretation 1017 “developer and Customer Contributions for Connection to a price-regulated network”.

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

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

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

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



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

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

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

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

income taxes relating to items recognised directly in equity (such as asset revaluation and cash flow hedges) are recognised in equity and not in the income statement.

(v) Financial Risk ManagementOverviewTransGrid has exposure to the following risks from its use of financial instruments:

> Credit risk;> liquidity risk; and> Market risk

This note presents information about TransGrid’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report.

The executive audit and risk Committee is responsible for ensuring TransGrid’s risks are identified and effectively managed. implementation of risk management strategies are the responsibility of all levels of management within TransGrid, and a framework exists to ensure that all risks are proactively and explicitly managed on an ongoing basis.

risk management policies are established to identify and analyse the risks faced by TransGrid, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. risk management policies and systems are reviewed regularly to reflect changes in TransGrid’s activities and operating environment. TransGrid, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The main objective of TransGrid’s Treasury risk Management policy is to provide an overarching framework for managing the risks associated with treasury functions, and specifically to:

> minimise the cost of gross debt, within prudent risk parameters;> identify, minimise and effectively manage all the treasury related

risks of the organisation in a prudent manner; and> ensure professional interaction with financial markets.

Credit riskCredit risk is the risk that TransGrid suffers financial loss due to the inability of a counterparty to meet its financial obligations. The policy objective is to ensure that TransGrid does not suffer any loss due to credit risk.

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

TransGrid considers a concentration of credit risk to exist when an individual customer’s outstanding trade receivable balance exceeds 10% of the total trade receivables balance. approximately 66% (2007 – 79%) of TransGrid’s trade receivables balance is attributable to three distribution customers who have individual trade receivable balances in excess of 10% of the total balance.

TransGrid’s trade and other receivables balance relates mainly to TransGrid’s distribution customers. all of TransGrid’s distribution customers have been transacting with the organisation since its inception, with no credit losses occurring in that period of time.

in the event that there is objective evidence that TransGrid will not be able to collect a debt, TransGrid establishes an allowance for doubtful debts that represents the organisation’s estimate of incurred losses in respect of trade and other receivables. Where receivables are outstanding beyond the normal trading terms, the likelihood of recovery of these receivables is assessed by management. This assessment is based on a supportable past collection history and historical write-offs of bad debts.

InvestmentsTransGrid’s available-for-sale financial asset comprised listed shares in Geodynamics limited. This did not represent a material interest in the entity. The investment in Geodynamics limited was undertaken as part of TransGrid’s research and development activities to sponsor investigation of sustainable green energy through the generation of electricity from hot dry rocks (geothermal energy). as TransGrid does not actively engage in external investment activities, a decision was made to dispose of the investment within the financial year.

Liquidity riskliquidity risk is the risk that TransGrid will not be able to meet its financial obligations as they fall due. TransGrid’s approach to managing liquidity is to ensure that sufficient funds are available to meet its financial obligations, working capital and potential investment expenditure requirements in a timely manner. it is also associated with planning for unforeseen events which may curtail operating cash flows and cause pressure on TransGrid’s liquidity. The policy objective is to ensure that TransGrid meets its financial commitments in a timely manner.

Typically TransGrid ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

in addition, TransGrid maintains the following lines of credit:

• $2.2billionNSWTreasuryCorporationloansofwhich$1.5billionhas been drawn;

• $6.0millionOverdraftFacilitythatisunsecuredwithavariableinterest rate as at 30 June 2008 of 11.56%. This facility was undrawn at 30 June 2008.

• $4.0millionCreditCardLimit.Allcreditcardtransactionsasnotified by the bank were paid by due date as at 30 June 2008.


Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect TransGrid’s profit or loss, or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

TransGrid enters into derivatives, and also incurs financial assets and liabilities, in order to manage market risks. all such transactions are carried out within the guidelines set by TransGrid’s Treasury risk Management policy.

Currency riskCurrency risk is the risk that TransGrid will suffer financial loss due to movements in exchange rates. The policy objective is to ensure that TransGrid minimises the amount of foreign exchange risk faced.

TransGrid’s foreign exchange risk principally arises from supplier contracts and capital equipment purchases denominated in a currency other than australian dollars.

The currencies in which these transactions primarily are denominated are the european euro, united states dollar, Canadian dollar and Japanese Yen.

all individual foreign currency exposures in excess of aud 0.5 million equivalent are to be hedged. TransGrid uses forward foreign currency contracts to hedge its currency risk and when necessary, forward contracts are rolled over at maturity to match the underlying exposure.

at 30 June 2008, TransGrid had forward foreign currency contracts amounting to a net fair value of $11.2 million.

Interest rate riskinterest rate risk is the risk of a material change in earnings and ultimately dividend payments as a consequence of adverse movements in interest rates. The policy objective is to ensure that TransGrid is not exposed to interest rate movements which could adversely impact on its ability to meet its financial obligations as they fall due.

exposure to interest rate risk arises from assets and liabilities bearing variable interest rates. TransGrid’s exposure is limited due to the majority of its financial assets and liabilities being either non-interest bearing or held in fixed rates.

The effective weighted average interest rates for each class of financial asset and liability are disclosed in respective notes to the financial statements.

Borrowingsall TransGrid borrowings are issued by nsW Treasury Corporation with fixed coupon payments being made on a bi-annual basis.

Electricity Creditorselectricity Creditors relate to monies received for electricity transmission services that are above the revenue cap as determined by the australian energy regulator and from the national electricity Market settlement residues process.

in the event that these residues cause the total revenue received during the year to exceed TransGrid’s revenue cap, the excess is held in electricity Creditors and is taken into account when setting the next period’s transmission service prices, resulting in those prices being lower than they would have otherwise been.

electricity Creditors includes an interest charge based on the annual average of the 11 a.m. daily published cash rate for the financial year. in accordance with the requirements of the national electricity rules, the basis for the interest rate was approved by the australian energy regulator.

Other market price riskequity price risk arises from available-for-sale equity securities. Currently, TransGrid does not actively engage in external investment activities.

Capital managementTransGrid has been subject to the new south Wales Government’s Financial distribution policy since its inception and is fully committed to providing an adequate return to the shareholder. This objective must be managed within the regulatory framework provided by the national electricity rules, given that the vast majority of TransGrid’s revenue is subject to regulation.

TransGrid’s return on capital is based on a Weighted average Cost of Capital set by the australian energy regulator, as part of the revenue cap determination process at five-year intervals. The regulatory rate of return is set at a level deemed sufficient to ensure the continuing viability of TransGrid’s business and to encourage necessary investment in new and replacement assets. The Weighted average Cost of Capital applicable to TransGrid for the current five-year regulatory determination period is 8.92%.

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

TransGrid is not subject to externally imposed capital requirements.

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

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

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

The net amount of GsT recoverable from, or payable to, the australian Taxation office is included as a current asset or current liability in the Balance sheet.

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

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

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

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

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



(y) Segment ReportingTransGrid operates in one industry being the transmission of electricity in new south Wales. as such, TransGrid has only one business segment as well as one geographical segment in accordance with aasB 114 “segment reporting”, and this is reported in the financial statements.

(z) Revenue/(Expenses) from Ongoing Activitiesrevenue/(expenses) from ongoing activities represent TransGrid’s financial performance on its day to day business operations, the activities of which TransGrid is able to exercise some degree of control over the outcomes.

3. INCOME

2008 2007 $’000 $’000

Revenue from Ongoing Activities Transmission of electricity 526,620 486,535

non-regulated Work 11,599 13,877

Capital Contributions 29,215 –

interest 1,909 1,496

sundry 3,644 2,930

Total Revenue 572,987 504,838

superannuation Gain, excluding actuarial gains – 1,817

Total Income 572,987 506,655

Capital Contributions relate to the transfer of transmission assets forming part of the uranquinty power station project.

4. ExPENSES

2008 2007 $’000 $’000

Expenses from Ongoing Activities excluding Losses & Finance Costs Transmission of electricity 261,128 254,829

other services 8,811 7,006

Total Expenses from Ongoing Activities excluding Losses & Finance Costs 269,939 261,835

net loss on disposal of property, plant and equipment 1,213 901

net loss on Cash Flow Hedges 223 192

impairment adjustment on non-current assets held for sale – 1,438

Total expenses from ongoing activities excluding Finance Costs 271,375 264,366

net superannuation expense, excluding actuarial losses 9,178 –

Total Expenses excluding Finance Costs 280,553 264,366

Finance Costs 101,882 100,726

Total Expenses 382,435 365,092

Total Expenses above include:

2008 2007 $’000 $’000

depreciation of property, plant and equipment (refer to note 14(b)) 138,112 131,642

amortisation of intangibles (refer to note 15(b)) 3,884 3,844

Bad debts / doubtful debts – 8

inventory expense 3,610 2,733

employee Benefits expense 80,304 75,302

Maintenance expenses are a subset of the above total expenses:

Maintenance Expenses: Transmission of electricity

employee-related maintenance expenses 23,601 23,117

other maintenance expenses 37,855 38,328

Transmission of electricity – Maintenance expenses 61,456 61,445

other services – Maintenance expenses 251 251

Total Maintenance Expenses 61,707 61,696


5. EISS SuPERANNuATION DEFINED BENEFIT PLANSThe following tables summarise the components of movement in employer’s superannuation reserve recognised in the income statement, and the funded status and amounts recognised in the Balance sheet for the eiss defined Benefit superannuation plans.

The assets and liabilities of TransGrid’s eiss defined Benefit plans are provided by the scheme’s actuary, Mercer Human resource Consulting.

(a) Movements in EISS Superannuation Reserve recognised in Income Statement

2008 2007 $’000 $’000

Current service cost (15,700) (3,428)

interest cost on benefit obligation (25,443) (23,738)

expected return on plan assets 31,919 29,006

Net gains/(expense), excluding actuarial gains/(losses) (9,224) 1,840

net actuarial gains/(losses) recognised in the year (39,429) 29,883

Net gains/(expense) (48,653) 31,723

(b) EISS Superannuation Surplus/(Liability)

2008 2007 $’000 $’000

Fair Value of plan assets at end of Year 385,164 430,848

present Value of defined Benefit obligation at end of Year (412,716) (409,747)

Net Asset /(Liability) Recognised in Balance Sheet at End of Year (27,552) 21,101

(c) Reconciliation of the present value of the EISS defined benefit obligations

2008 2007 $’000 $’000

Present value of defined benefit obligations at beginning of the year (409,747) (405,668)

Current service cost (15,700) (3,428)

interest cost (25,443) (23,738)

Contributions by scheme participants (3,787) (3,936)

actuarial gains/(losses) 32,850 5,103

Benefits paid 9,111 21,920

Present value of defined benefit obligations at the end of the year (412,716) (409,747)

(d) Reconciliation of the EISS fair value of plan assets

2008 2007 $’000 $’000

Fair value of plan assets at beginning of the year 430,848 387,067

expected return on plan assets 31,919 29,005

actuarial gains/(losses) (72,279) 24,779

employer Contributions – 7,980

Contributions by plan participants 3,787 3,937

Benefits paid (9,111) (21,920)

Fair value of plan assets at the end of the year 385,164 430,848

(e) Percentage invested in each asset class at reporting date:

2008 2007

australian equities 37.6% 38.9%

overseas equities 34.0% 36.9%

australian fixed interest securities 10.7% 7.1%

overseas fixed interest securities 6.3% 3.4%

property 3.2% 8.6%

Cash 6.0% 4.2%

other 2.2% 0.9%



(f) Fair value of EISS scheme assetsall scheme assets are invested by the Trustees at arm’s length through independent managers.

(g) Expected rate of return on assetsThe expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class. The returns used for each class are net of investment tax and investment fees.

(h) Actual return on EISS plan assets

2008 2007 $’000 $’000

actual return on plan assets (40,085) 55,093

(i) valuation MethodThe projected unit Credit (puC) valuation method was used to determine the present value of the defined benefit obligations and the related current service costs. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.

(j) Economic Assumptions

30 June 2008

investment return 7.0%

salary increase rate (excluding promotional increase) 6.0% pa until June 2009; 4.0% pa thereafter

expected rate of return on assets backing current pension liabilities 8.3%

expected rate of return on assets backing other liabilities 7.3% rate of Cpi increase 2.5% p.a.

discount rate 6.19% p.a.

(k) historical Information

2008 2007 $’000 $’000

present value of defined benefit obligation (412,716) (409,747)

Fair value of Fund assets 385,164 430,848

surplus/(deficit) in scheme (27,552) 21,101

experience adjustments – scheme liabilities 32,850 5,103

experience adjustments – scheme assets (72,279) 24,780

(l) Funding Arrangements for Employer Contributions(i) Net Surplus/(Liability)The following is a summary of the financial position of the defined benefit superannuation schemes at reporting date calculated in accordance with aas 25 “Financial reporting by superannuation plans”.

2008 2007 $’000 $’000

net Market Value of scheme assets 385,164 430,848

accrued Benefits (379,148) (373,009)

Net Surplus/(Liability) 6,016 57,839

(ii) Contribution recommendationsThe recommended contribution rates for TransGrid are nil.

(iii) Funding methodThe method used to determine the employer contribution recommendations at the last actuarial review was the Aggregate Funding method. The method adopted affects the timing of the cost to the employer.

under the Aggregate Funding method, the employer contribution rate is determined so that sufficient assets will be available to meet benefit payments to existing members, taking into account the current value of assets and future contributions.


6. INCOME TAx (a) Income Tax Expense Major components of income tax expense for the years ended 30 June 2008 and 2007 are:

(i) Income Statement

2008 2007 $’000 $’000

Current Income Tax Current income tax charge 36,681 16,731

adjustments in respect of current income tax of previous years (317) 553

Deferred Income Tax before Superannuation Actuarial Gains/(Losses) relating to origination and reversal of temporary differences 21,801 28,247

Income tax expense before Superannuation Actuarial Gains/(Losses) 58,165 45,531

Deferred Income Tax on Superannuation Actuarial Gains/(Losses) (11,850) 8,967

Total income tax expense reported in Income Statement 46,315 54,498

2008 2007 $’000 $’000

Total deferred income Tax expense reported in income statement 9,951 37,214

(ii) Statement of Recognised Income and Expense

2008 2007 $’000 $’000

Deferred Income Tax net tax gain on revaluation of property, plant and equipment 23,763 19,845

net tax gain/(loss) on available-for-sale financial assets (128) 88

net tax gain/(loss) on cash flow hedges (869) (2,615)

Income tax on items taken directly to equity during the year 22,766 17,318

adjustments to opening equity reserves – –

Income tax expense/(benefit) reported in equity 22,766 17,318

(iii) Reconciliation of income tax expense on pre-tax accounting profit to income tax expense reported in the Income Statement The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the income statement as follows:

2008 2008 2007 2007 $’000 $’000 $’000 $’000

profit/(loss) Before superannuation actuarial Gains/(losses) 190,552 141,563 and income Tax expense

income tax expense/(benefit) calculated at statutory income tax rate of 30% 57,166 42,469

Capital allowances 20 –

expenditure not allowed for income tax purposes 38 71

reversal of temporary differences recognised in previous years 1,258 2,438

adjustments in respect of current income tax of previous years (317) 553

Income tax expense before Superannuation Actuarial Gains/(Losses) 58,165 45,531 reported in Income Statement

superannuation actuarial Gains/(losses) (39,499) 29,891

income Tax expense on superannuation actuarial (11,850) 8,967 Gains/(losses) at 30% tax rate

Total income tax expense reported in Income Statement 46,315 54,498



(b) Deferred Income Taxdeferred income Tax at 30 June relates to the following:

Balance Sheet Income Statement

2008 2007 2008 2007 $’000 $’000 $’000 $’000

Deferred Tax Assets provisions 21,154 19,540 (1,614) (696)

superannuation liability 8,266 – (8,266) 5,581

property, plant and equipment 912 847 (65) 122

other 4,172 2,769 (516) (208)

Gross Deferred Tax Assets 34,504 23,156

Deferred Tax Liabilities property, plant and equipment and intangibles (505,292) (455,954) 25,576 26,690

superannuation surplus (31) (6,363) (6,332) 6,330

other (1,489) (430) 1,168 (605)

Gross Deferred Tax Liabilities (506,812) (462,747)

Deferred Tax Charge 9,951 37,214

7. CASh AND CASh EquIvALENTS

2008 2007 $’000 $’000

Cash on Hand 13 13

deposits at Call 30,558 10,390

Total 30,571 10,403

deposits at call bear average floating interest rates of 7.7% (2007 – 6.5%).

8. TRADE AND OThER RECEIvABLES

2008 2007 $’000 $’000

Current Debtors Trade debtors 60,777 72,714

debtors other Than Trade 6,640 3,978

67,417 76,692

allowance For doubtful debts – –

Total debtors 67,417 76,692

other 2,440 85

Total 69,857 76,777

9. INvENTORIES

2008 2007 $’000 $’000

Transmission plant spares 25,531 24,131

other 168 723

Total 25,699 24,854


10. DERIvATIvES (CuRRENT ASSET)

2008 2007 $’000 $’000

Forward Contract 66 2

derivatives represent forward foreign currency contracts to hedge risks associated with foreign currency fluctuations.

11. OThER CuRRENT ASSETS

2008 2007 $’000 $’000

superannuation surplus 103 21,209

prepayments 829 1,127

insurance recovery asset 399 –

Total 1,331 22,336

12. NON-CuRRENT ASSETS hELD FOR SALE

2008 2007 $’000 $’000

Network Assets land – 1,567

Buildings – 118

Total – 1,685

non-current assets held for sale comprise land and buildings that are available for immediate sale at reporting date. no assets were identified as being available for immediate sale at 30 June 2008.

13. AvAILABLE-FOR-SALE FINANCIAL ASSETS

2008 2007 $’000 $’000

investments – 476

TransGrid’s shares in listed Geodynamics limited were sold during the financial year.

14. PROPERTy, PLANT AND EquIPMENT (a) valuation and accumulated depreciation for each class of property, plant and equipment

2008 2007 $’000 $’000

Regulated Assetsnetwork asset 6,592,366 6,353,399

accumulated depreciation (3,469,037) (3,281,422)

Work in progress 318,546 138,793

3,441,875 3,210,770

other assets 78,030 78,420

accumulated depreciation (44,481) (43,869)


49,988 43,809

Total Regulated Assets 3,491,863 3,254,579

68 NOTES TO ThE FINANCIAL STATEMENTS> TransGrid annual reporT 2008


2008 2007 $’000 $’000

Non-regulated Assetssystem plant and equipment 41,035 13,128

accumulated depreciation (4,012) (2,751)

Work in progress 1,908 –

38,931 10,377

Communication equipment 198 198

accumulated depreciation (58) (50)

140 148

other assets 1,265 1,474

accumulated depreciation (325) (309)

Work in progress 42 1

982 1,166

Total Non-regulated Assets 40,053 11,691

Total Property, Plant and Equipment 3,531,916 3,266,270

(b) Reconciliations of the carrying amounts of each class of Property, Plant and Equipment at the beginning and end of the financial year property, plant and equipment is treated in accordance with the various explanations set out in note 2. property, plant and equipment are valued in accordance with nsW Treasury’s policy Tpp 07-1 “Valuation of physical non-Current assets at Fair Value”.

Carrying Amount at Non-current Revaluation Carrying Beginning Assets held Increments/ Amount at of year Additions Disposals for Sale Depreciation Impairment (Decrements) End of year 2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Regulated Assets:network asset 3,210,770 282,992 (597) 1,685 (128,933) – 75,958 3,441,875

other assets 43,809 17,902 (3,665) – (8,058) – – 49,988

Total Regulated 3,254,579 300,894 (4,262) 1,685 (136,991) – 75,958 3,491,863 Assets

Non-regulated Assets:system plant 10,377 29,419 – – (865) – – 38,931 and equipment

Communication 148 – – – (8) – – 140 equipment

other assets 1,166 713 (649) – (248) – – 982

Total Non-regulated 11,691 30,132 (649) – (1,121) – – 40,053 Assets

Total 3,266,270 331,026 (4,911) 1,685 (138,112) – 75,958 3,531,916


Carrying Amount at Non-current Revaluation Carrying Beginning Assets held Increments/ Amount at of year Additions Disposals for Sale Depreciation Impairment (Decrements) End of year 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Regulated Assets:network asset 3,095,868 168,245 (480) (100) (121,426) – 68,663 3,210,770

other assets 36,709 20,673 (4,221) - (9,352) – – 43,809

Total Regulated 3,132,577 188,918 (4,701) (100) (130,778) – 68,663 3,254,579 Assets

Non-regulated Assets:system plant 10,992 (19) – – (596) – – 10,377 and equipment

Communication 156 – – – (8) – – 148 equipment

other assets 1,405 865 (844) – (260) – – 1,166

Total Non-regulated 12,553 846 (844) – (864) – – 11,691 Assets

Total 3,145,130 189,764 (5,545) (100) (131,642) - 68,663 3,266,270

(c) Cost Model

Accumulated Cost Depreciation Net Book value As at 30 June 2008 $’000 $’000 $’000

Regulated Assets:network asset 2,887,418 (702,741) 2,184,677

Accumulated Cost Depreciation Net Book value As at 30 June 2007 $’000 $’000 $’000

Regulated Assets:network asset 2,787,530 (613,126) 2,174,404

15. INTANgIBLES(a) valuation and Accumulated Amortisation of Intangibles

2008 2007 $’000 $’000

easements 487,139 459,439


493,975 481,348

Computer software 40,240 43,477

accumulated amortisation (29,353) (32,387)


21,877 14,454

airspace rights 7,215 7,215

Total Intangibles 523,067 503,017



(b) Reconciliations of the carrying amounts of intangibles at the beginning and end of the financial year

Carrying Amount at Carrying Beginning Amount at of year Additions Disposals Amortisation Impairment Adjustment End of year 2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Intangible Assetseasements 481,348 12,634 (7) – – – 493,975

Computer software 14,454 11,335 (28) (3,884) – – 21,877

airspace rights 7,215 – – – – – 7,215

Total 503,017 23,969 (35) (3,884) – – 523,067

Carrying Amount at Carrying Beginning Amount at of year Additions Disposals Amortisation Impairment Adjustment End of year 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Intangible Assetseasements 455,031 26,317 – – – – 481,348

Computer software 16,175 2,123 – (3,844) – – 14,454

airspace rights 7,215 – – – – – 7,215

Total 478,421 28,440 – (3,844) – – 503,017

16. OThER NON-CuRRENT ASSETS

2008 2007 $’000 $’000

insurance recovery asset 3,603 –

Total 3,603 –

17. ExPENDITuRE COMMITMENTS (a) Capital expenditure commitments Commitments arising from contracts for expenditure in respect of property, plant and equipment and intangibles, to the extent not provided for in the accounts:

2008 2007 $’000 $’000

payable Within one Year 426,407 195,321

payable one to Five Years 106,418 95,941

payable later than Five Years – –

Total (including GST) 532,825 291,262

Total expenditure Commitments above include input tax credits of $48,438,000 (2007 – $26,478,000) that are expected to be recoverable from the australian Taxation office.

(b) Operating expenditure commitments Major commitments arising from contracts for expenditure associated with network support, to the extent not provided for in the accounts:

2008 2007 $’000 $’000

payable Within one Year 39,663 –

payable one to Five Years 20,900 48,400

payable later than Five Years – –


Total expenditure Commitments above include input tax credits of $5,506,000 (2007 - $4,400,000) that are expected to be recoverable from the australian Taxation office.


18. TRADE AND OThER PAyABLES

2008 2007 $’000 $’000

CurrentCreditors 102,826 45,430

accrued Finance Costs 41,492 40,480

other – 252

144,318 86,162

Non-Current Creditors 5,413 8,870

Total 149,731 95,032

The weighted average effective interest rate applicable to accrued Finance Costs is 6.8% (2007 – 6.7%).

19. PROvISIONS

2008 2007 $’000 $’000

Currentdividend 105,910 71,482

employees’ accrued Benefits 62,274 62,138

insurance 1,357 1,165

169,541 134,785

Non-Currentemployees’ accrued Benefits 2,847 2,235

insurance 7,593 3,212

10,440 5,447

Total 179,981 140,232

(a) Dividends

2008 2007 $’000 $’000

opening Balance 71,482 69,500

dividend payments (71,482) (69,500)

dividend for the year 105,910 71,482

Closing Balance 105,910 71,482

(b) Employees’ Accrued Benefits The following table shows a breakdown of the employees’ accrued Benefits provision at reporting date:

2008 2007 $’000 $’000

annual leave 16,985 16,380

long service leave 48,136 47,993

Total 65,121 64,373

The following table shows a breakdown of the Current portion of the employees’ accrued Benefits provision at reporting date, split into the period of time the benefits are expected to be settled:

2008 2007 $’000 $’000

Within one year 13,589 12,023

later than one year 48,685 50,115

Total 62,274 62,138

all of the above liabilities have been fully provided. during the financial year, $11,411,000 (2007 - $11,983,000) was contributed to the above provisions.



(c) Insurance in accordance with Condition 6(a)(iii) of the license granted under section 211 of the Worker’s Compensation act, 1987, the provision for total outstanding workers’ compensation claims liability including incurred but not reported claims and administration is $8,950,000 (2007 - $4,281,000). during the financial year, $5,914,000 (2007 - $564,868) was contributed to the provision for Workers’ Compensation.

The provision includes $4,002,000 for a workers’ compensation claim that has been activated under TransGrid’s reinsurance policy. reinsurance recoveries have commenced and future recoveries for this claim are considered to be virtually certain. TransGrid has recognised an insurance recovery asset of $4,002,000 based on independent actuary advice (refer to notes 11 and 16).

The following table details the movements in the insurance provision during the year.

Opening Balance Contributions Payments Closing Balance Class $’000 $’000 $’000 $’000

General 96 – (96) –

Workers’ Compensation 4,281 5,914 (1,245) 8,950

Total 4,377 5,914 (1,341) 8,950

20. DERIvATIvES (CuRRENT LIABILITy)

2008 2007 $’000 $’000

Forward Contract 11,222 8,264

derivatives represent forward foreign currency contracts to hedge risks associated with foreign currency fluctuations.

21. OThER CuRRENT LIABILITIES

2008 2007 $’000 $’000

electricity Creditors 37,414 61,501

superannuation liability 27,552 –

other 2,528 63

Total 67,494 61,564

The weighted average effective interest rate applicable to the electricity Creditors component is 6.8% (2007 – 6.1%).

22. CAPITAL TransGrid commenced operations on 1 February 1995 on separation from pacific power under the electricity Transmission authority act, 1994 at which time a series of assets and liabilities were transferred.

TransGrid was corporatised as a statutory state owned Corporation on 14 december 1998, with share capital of two $1.00 shares. These shares were issued to the Treasurer and the Minister for Finance, as Voting shareholders on behalf of the nsW Government, as at 30 June 2008. The $2.00 is reported as part of Capital.

2008 2007 $’000 $’000

Capital opening Balance 651,967 651,967

Movements – –



23. RESERvES

Net unrealised Asset gains/ Cash Flow Revaluation (Losses) hedge Reserve Reserve Reserve Total Reserves $’000 $’000 $’000 $’000

At 1 July 2006 890,959 92 320 891,371

revaluation of property, plant & equipment (note 14(b)) 68,663 – – 68,663

Tax effect of property, plant & equipment revaluation (note 6(a)(ii)) (19,845) – – (19,845)

Transfer to retained earnings – revaluation reserve (633) – – (633) for assets disposed (note 24)

unrealised net Gains/(losses) on available-for-sale Financial assets – 294 – 294

Tax effect: unrealised net Gains/(losses) on available-for-sale – (88) – (88) Financial assets (note 6(a)(ii))

unrealised net Gains/(losses) on Cash Flow Hedges – – (8,719) (8,719)

Tax effect: unrealised net Gains/(losses) on Cash Flow Hedges (note 6(a)(ii)) – – 2,615 2,615

At 30 June 2007 939,144 298 (5,784) 933,658

revaluation of property, plant & equipment (note 14(b)) 75,958 75,958

Tax effect of property, plant & equipment revaluation (note 6(a)(ii)) (23,763) (23,763)

Transfer to retained earnings – revaluation reserve 3,250 3,250 for assets disposed (note 24)

net Gains/(losses) on available-for-sale Financial assets transferred (426) (426) to profit or loss upon sale of TransGrid’s shares in Geodynamics limited

Tax effect: net Gains/(losses) on available-for-sale Financial assets 128 128 transferred to profit or loss (note 6(a)(ii))

unrealised net Gains/(losses) on Cash Flow Hedges (2,895) (2,895)

Tax effect: unrealised net Gains/(losses) on Cash Flow Hedges (note 6(a)(ii)) 869 869

At 30 June 2008 994,589 – (7,810) 986,779

Nature and Purpose of ReservesAsset Revaluation ReserveThis reserve is used to record increases in the fair value of property, plant and equipment, and decreases to the extent that such decreases relate to an increase on the same asset previously recognised in equity. assets are revalued in accordance with nsW Treasury’s policy Tpp 07-1 “Valuation of physical non-Current assets at Fair Value”.

Net Unrealised Gains/(Losses) ReserveThis reserve records fair value changes on available-for-sale investments.

Cash Flow Hedge ReserveThis reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be effective.



24. RETAINED EARNINgS

2008 2007 $’000 $’000

opening Balance 115,894 69,787

net profit/(loss) Before dividend 104,738 116,956

dividend (105,910) (71,482)

Transfer from asset revaluation reserve (3,250) 633


Impact of Prior Year Adjustment for Loan Guarantee FeeTransGrid has always maintained an accounting policy of recognising the loan Guarantee Fee for a financial year based on the amount paid during the year (typically in september).

Following a directive from nsW Treasury, TransGrid has changed its basis for recognition of loan Guarantee Fee. accordingly, loan Guarantee Fee for the year is recognised on the basis that payment is made in arrears in the following financial year. a prior year adjustment has been undertaken to reflect the change in recognition of loan guarantee fee.

reconciliation of retained earnings due to prior year adjustment for loan guarantee fee:

30 June 2007 1 July 2006 $’000 $’000

retained earnings prior to loan Guarantee Fee adjustment 123,441 77,147

loan Guarantee Fee adjustment (7,547) (7,360)

Retained Earnings after Loan Guarantee Fee Adjustment 115,894 69,787

25. DIvIDEND AND CONTRIBuTIONS TO ShAREhOLDERa dividend of $105,909,554 (2007 – $71,481,740) has been recognised for distribution to the shareholder. The dividend will be paid during the course of the 2008/09 financial year and is represented by the dividend provision.

26. SECuRED LIABILITIESat reporting date, there was no loan liability of TransGrid secured by a charge over TransGrid’s assets.

27. AuDIT FEESamounts received, or due and receivable, by the auditors for:

2008 2007 $’000 $’000

auditing the financial report 188 178

28. COMPENSATION OF kEy MANAgEMENT PERSONNEL

2008 2007 $’000 $’000

short-term employee benefits 2,032 1,919

post-employment benefits 839 770

other long-term benefits 226 203

Total 3,097 2,892

Fees Paid to DirectorsFees, including superannuation benefits paid to directors, other than salaries paid to full-time directors, were $316,678 (2007 - $360,709).


29. CONTINgENT LIABILITIES AND CONTINgENT ASSETS(a) Contingent Liabilities

2008 2007 $’000 $’000

Contract liability 40 108

Othera claim for compensation is being pursued via arbitration against TransGrid, for alleged reduction in the value of a coal mine due to the construction of a transmission tower. at this stage, it is not possible for management to form an opinion about the likely outcome of the arbitration.

a common law claim for alleged personal injury damages has been filed against TransGrid. at this stage, it is not possible for management to form an opinion about the likely outcome of the claim.

(b) Contingent AssetsTransGrid has initiated legal proceedings to recover damages of $16,088,000 associated with its contractor. at this stage, it is not possible for management to form an opinion on the likely outcome of the proceedings.

30. EvENTS OCCuRRINg AFTER REPORTINg DATE subsequent to the reporting date, a development project associated with the Haymarket substation was suspended. The commercial opportunities associated with this project are the subject of re-evaluation and may adversely impact on the carrying value of the asset during 2008/09.

31. FAIR COMPENSATION TRuST FuNDin accordance with the land acquisition (Just Terms Compensation) act, TransGrid maintains a Trust account. The account balance at reporting date was $298,829 (2007 - $278,914).

32. LEASES TransGrid has no finance lease commitments. The following lease commitments disclosed are in the nature of operating leases.

LesseeTransGrid has operating lease commitments under commercial leases, which expire in 2008 and 2013 respectively. The lease expenditure for the financial year, GsT-exclusive, was $2,048,353 (2007 - $2,030,857).

Minimum rentals payable GsT-inclusive, as at 30 June are as follows:

2008 2007 $’000 $’000

Within one year 1,881 2,168

later than one year but not later than 5 years 7,489 7,517

later than 5 years – 1,759


33. NOTES TO CASh FLOw STATEMENT(a) Reconciliation of Cash Cash as at the end of the financial year as shown in the Cash Flow statement is reconciled to the related items in the Balance sheet as follows:

2008 2007 $’000 $’000

Cash and Cash equivalents 30,571 10,403

(b) Dividends and Taxesno dividends were received. dividends and tax equivalents paid during the year amounted to $90,387,000 (2007 – $87,328,000).

(c) Acquisitions and Disposals of Entitiesno entities were acquired or disposed of during the year.

(d) Financing ArrangementsTransGrid is required to borrow all new money through nsW Treasury Corporation. TransGrid has an overdraft facility of $6,000,000 with the Westpac Bank and this facility was undrawn at reporting date. TransGrid also has approval for an indemnity guarantee facility for $16,000,000 of which $5,873,000 has been drawn.



(e) Reconciliation of Profit after Income Tax Equivalent Expense to Net Cash Provided by Operating Activities

2008 2007 $’000 $’000

Profit/(Loss) after Income Tax Equivalent Expense 104,738 116,956

Add/(Less): Items Classified as Financing/Investing Activities

loss/(Gain) on repayment of Borrowings – 16

loss/(Gain) on disposal of property, plant and equipment 1,213 901

Add/(Less) Non-Cash Items

depreciation and amortisation 141,996 135,486

amortisation of (premium)/discount on loans (1,556) (2,553)

impairment adjustment – 1,438

allowance for doubtful debts – –

Capitalised interest (2,741) (560)

Capital Contributions (29,215) –

accruals relating to other than operating activities (670) 626

Net Cash Provided by Operating Activities Before Change in Assets and Liabilities 213,765 252,310

Net Changes in Assets and Liabilities During the Financial Year

(increase)/decrease in Trade debtors & other receivables 6,668 (30,912)

(increase)/decrease in inventories (845) 1,341

(increase)/decrease in other Current assets 21,005 (22,226)

(increase)/decrease in other non-Current assets (3,603) –

increase/(decrease) in Trade Creditors & other payables 21,765 13,819

increase/(decrease) in provisions 5,321 2,064

increase/(decrease) in income Tax & deferred Taxes 27,410 36,670

increase/(decrease) in other Current liabilities 5,930 9,376

Net Cash Provided by Operating Activities 297,416 262,442

34. FINANCIAL INSTRuMENTS DISCLOSuRE(a) Credit Risk Exposure to credit riskThe carrying amount of TransGrid’s financial assets represents the maximum credit exposure. TransGrid’s maximum exposure to credit risk at the reporting date was:

2008 2007 Carrying Amount Note $’000 $’000

available-for-sale financial assets 13 – 476

Trade and other receivables 8 69,857 76,777

Cash and cash equivalents 7 30,571 10,403

Forward exchange contracts used for hedging (assets) 10 66 2

100,494 87,658

Impairment lossesBased on historic default rates, TransGrid believes that no impairment allowance is necessary in respect of trade receivables either not past due or past due. The trade receivables balance, which includes the amounts owed by TransGrid’s three most significant customers, relates to customers that have a good credit history with TransGrid.

The aging of TransGrid’s trade and other receivables at the reporting date was:

gross Impairment gross Impairment Receivables Losses Receivables Losses 2008 2008 2007 2007 $’000 $’000 $’000 $’000

not past due 68,301 – 64,138 –

past due 0-89 days 1,556 – 12,625 –

past due 90-180 days – – 7 –

More than 180 days – – 7 –

69,857 – 76,777 –

The above table defines the Gross receivables expected to be received by TransGrid.


(b) Liquidity Risk The following are the contractual maturities of financial liabilities, including estimated interest payments:

Carrying Contractual Less than 1 year to More than Amount Cash flows 1 year 5 years 5 years 30 June 2008 $’000 $’000 $’000 $’000 $’000

Non-derivative financial liabilitiesBorrowings 1,531,592 2,089,759 237,153 922,213 930,393

Trade and other payables 149,731 149,731 144,318 5,413 –

other financial liabilities 37,414 37,414 37,414 – –

Derivative financial liabilities Forward exchange contracts used for hedging: net outflow 11,156 128,743 87,878 40,865 –

Total 1,729,893 2,405,647 506,763 968,491 930,393

Carrying Contractual Less than 1 year to More than Amount Cash flows 1 year 5 years 5 years 30 June 2007 $’000 $’000 $’000 $’000 $’000

Non-derivative financial liabilitiesBorrowings 1,453,513 1,846,462 341,463 926,937 578,062

Trade and other payables 95,032 95,032 86,162 8,870 –

other financial liabilities 61,501 61,501 61,501 – –

Derivative financial liabilities Forward exchange contracts used for hedging: net outflow 8,262 76,262 21,398 54,864 –

Total 1,618,308 2,079,257 510,524 990,671 578,062

(c) Currency RiskCash Flow HedgesThe cash flows arising from cash flow hedges are not expected to affect profit or loss.

Cash Flow Hedge Equity Movements

Amount Carrying removed Amount Carrying Amount at Amount from equity removed Amount at beginning recognised in and included from equity end of of period equity during in Income and included period (1/7/07) the period Statement in assets (30/6/08) 2008 $’000 $’000 $’000 $’000 $’000

Equity (8,262) (4,089) – 1,195 (11,156)

Amount Carrying removed Amount Carrying Amount at Amount from equity removed Amount at beginning recognised in and included from equity end of of period equity during in Income and included period (1/7/06) the period Statement in assets (30/6/07) 2007 $’000 $’000 $’000 $’000 $’000

Equity 457 (8,798) – 79 (8,262)



Sensitivity analysisTransGrid employs cash flow hedges to remove currency risk associated with purchase of overseas equipment.

a 10 percent strengthening and weakening of the australian dollar against the following currencies would have increased (decreased) equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007.

as these are all effective cash flow hedges, there are no profit or loss impacts.

Effect on Equity in thousands of AuD +10% -10% $’000 $’000

30 June 2008 usd (244) 74

Canadian dollar (1,241) 214

euro (2,367) 2,346

Yen (17,994) (725)

30 June 2007 usd (97) (59)

Canadian dollar (26) 36

euro (1,433) 143

Yen (12,956) (909)

(d) Interest Rate Risk interest rate risk is the risk of a material change in earnings and ultimately dividend payments as a consequence of adverse movements in interest rates. The policy objective is to ensure that TransGrid is not exposed to interest rate movements which could adversely impact on its ability to meet its financial obligations as they fall due.

Cash flow sensitivity analysis for variable rate instrumentsa change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2007.

Profit or Loss

100bp 100bp increase decrease $’000 $’000

30 June 2008 electricity Creditors (478) 478

Cash flow sensitivity (net) (478) 478

30 June 2007 electricity Creditors (461) 461

Cash flow sensitivity (net) (461) 461


(e) Net Fair value of Financial Assets and Liabilities The net fair value of financial assets and liabilities, with the exception of borrowings, is reflected by their carrying amounts in the Balance sheet, in accordance with aasB 132 and aasB 7.

The net fair value of borrowings is based on market value derived by nsW Treasury Corporation using market interest rates current at reporting date.

The carrying amounts and net fair values of financial assets and liabilities at reporting date are:

2008 2007

Carrying Net Fair Carrying Net Fair Amount value Amount value $’000 $’000 $’000 $’000

Financial Assets Cash 30,571 30,571 10,403 10,403

receivables 69,857 69,857 76,777 76,777

available-for-sale financial asset – – 476 476

Forward contract 66 66 2 2

Total Financial Assets 100,494 100,494 87,658 87,658

Financial Liabilities accounts payable 149,731 149,731 95,032 95,032

Borrowings 1,531,592 1,484,958 1,453,513 1,416,362

other financial liabilities 37,414 37,414 61,501 61,501

Forward contract 11,222 11,222 8,264 8,264

Total Financial Liabilities 1,729,959 1,683,325 1,618,310 1,581,159

END OF AuDITED FINANCIAL REPORT

80 STATEMENT By MEMBERS OF ThE BOARD > TransGrid annual reporT 2008

STATEMENT By MEMBERS OF ThE BOARD

TransGrid annual reporT 2008 > INDEPENDENT AuDITOR’S REPORT 81

INDEPENDENT AuDITOR’S REPORT

82 INDEPENDENT AuDITOR’S REPORT > TransGrid annual reporT 2008

INDEPENDENT AuDITOR’S REPORT continued

TransGrid annual reporT 2008 > APPENDIx 83

APPENDIx

CONSuMER RESPONSE

TransGrid receives property information inquiries from solicitors, conveyancers and the general public regarding TransGrid’s rights and interests that may affect title to land. For the year ending 30th June 2008, TransGrid responded to 59,575 such inquiries. response times were within designated timeframes.

More than 90% of these inquiries were processed using online access facilities provided by the Central register of restrictions administered by the department of lands.

COST OF ANNuAL REPORTTransGrid’s annual report was produced under the guidance of TransGrid’s Communications Manager in conjunction with an external graphic design firm. The total external cost incurred in the production of the annual report was $43,808.60. The annual report is available on TransGrid’s website (www.transgrid.com.au).

EEO DISCLOSuRES

Trends in the Representation of EEO Groups % of Total staff (refer note 1)

eeo Group 2002 2003 2004 2005 2006 2007 2008

Women 12 13 13.2 13 13 14 14

aboriginal and Tsi 0.73 0.73 0.62 0.52 0.64 0.63 0.59

people whose first language was not english 10 10 10.47 11 11 11 13

people with a disability 2 6 4.71 4.9 4.97 4

people with a disability requiring work-related adjustment

1 0.51 0.42 0.42 0.42

Note1. excludes casual staff

Trends in the Distribution of EEO Groups distribution index (refer note 3)

eeo Group 2002 2003 2004 2005 2006 2007 2008

Women 116 124 129 129 125 134 136

aboriginal and Tsi 7 7 6 5 6 6 5

people whose first language was not english 96 98 102 104 102 106 128

people with a disability 18 53 46 47 47 35

people with a disability requiring work-related adjustment

13 5 4 4 4

Notes1. Current staff numbers are as at 30 June 20082. excludes casual staff3. a distribution index of 100 indicates that the centre of the distribution of the eeo group across salary levels is equivalent to that

of other staff.

ELECTRONIC SERvICE DELIvERy TransGrid provides electronic services to our staff and partners. This includes facilitating the ability to securely access electronic corporate applications remotely and through the internet.

gOvERNMENT ENERgy MANAgEMENT POLICyTransGrid has provided a report for the 2006/07 period as required. The Government energy Management policy report for 2007/08 is currently being prepared.

hERITAgE MANAgEMENTTransGrid has submitted a draft Heritage asset Management strategy to the department of planning. TransGrid does not have assets listed as heritage items as defined under the legislation.

INDuSTRIAL RELATIONS POLICIES AND PRACTICESTransGrid continued to consult with unions and employees on a range of industrial matters. This consultative approach has resulted in no time lost as a result of organisational industrial disputes during the reporting period.

JuDICIAL DECISIONSThere were no judicial decisions affecting TransGrid this year.

LAND DISPOSALThe following surplus land was disposed of during 2007/08:

> residue of transfers from pacific power – lots 4, 5 and 6 in section B of dp 3998 and lot 1 in dp 184422 sandford avenue, lithgow. Vacant embankment land containing rail Corp infrastructure. sites transferred to rail Corp on 14th september 2007 at nil value.

> staff cottages (65 Wynella street, Gulgong) were identified as surplus to operational requirements and sold to the tenant at a market value of $155,000 on 17th august 2007.

> Mt Bootheragandra rrs formed part of the 1996 transfer of assets agreement to energy south, now Country energy. legal title issues have been resolved and the land was transferred to Country energy in accordance with the 1996 agreement. it was transferred on 22nd May 2008 at nil value.

> a vacant parcel of land, lot 66 dp 16629 approximately 480m2 landlocked within the Wolli Creek regional park, earlwood. The land was identified as being surplus to TransGrid’s operation requirements. For environmental purposes, the land was transferred to the department of environment and Climate Change (deCC) on 28th May 2007 at nil value.

> sale of 1.08ha of vacant land being lot 1 dp 1126914 (formerly part lot 2 in dp 259306) at scenic drive, doyalson, to energy australia for the purposes of a substation. The land sold at a market value of $430,000 with settlement on 19th June 2008.

84 APPENDIx > TransGrid annual reporT 2008

APPENDIx

STAFF NuMBERS – COMPARISON OF STAFF NuMBERS AS AT 30 JuNE 2008

Total Staff No. P/T Staff Equiv. F/T of P/T Equiv. F/T Staff

senior Contract officers 92 0 0 92

professional officers 211 7 4.72 208.72

engineering officers 254 1 0.91 253.91

administrative officers 151 19 11.81 143.81

Tradespersons 73 1 0.8 72.8

power Workers 49 0 0 49

Team leader - network 19 0 0 19

operator 24 0 0 24

lineworker 38 0 0 38

apprentice 57 0 0 52

Total 968 28 18.24 953.24

STAFF NuMBERS – STAFF By CATEgORy AS AT 30 JuNE 2008

Category Description 2008 2007 2006 2005 2004

administrative officer 151 162 158 165 166

apprentice 57 54 52 42 41

engineering officer 254 232 233 225 229

lineworker 38 33 60 64 65

operator 24 26 27 30 32

professional officer 211 174 173 175 177

power Worker 49 52 54 59 63

senior Contract officer 92 94 101 106 110

Team leader – network 19 20 21 22 24

Tradesperson 73 95 64 65 67

Total 968 942 943 953 974

STAFF NuMBERS – NuMBERS OF ExECuTIvE OFFICERS

30 June 2008 30 June 2007

number of executive officers at ses level 1 or above 85 87

number of Female executive officers at ses level 1 or above 7 8

PROMOTION TransGrid is committed to providing a variety of communication vehicles to inform the public, customers, stakeholders, employees and suppliers. Throughout the reporting period, publications included:

> annual report> nsW annual planning report> network asset Management plan> TransTalk: internal newsletter> Variety of Brochures and advertisements informing stakeholders

about TransGrid’s projects (e.g. Fact sheets, project newsletters)

> review of environmental Factors – Kempsey to port Macquarie rebuild – Yass to Wagga 132kV Transmission line 990 reconstruction – Bannaby 500kV substation – Temporary Transmission line

rearrangements – Bannaby 500kV substation – steel structure Transmission

line Connections – Macarthur 330kV substation – Transmission line Connection – Macksville 132kV substation (Ce) – 132kV interconnecting

line – nambucca 132kV substation – installation of 2nd

Transformer, associated switchbays and line rearrangements

TransGrid annual reporT 2008 > APPENDIx 85

REPORTINg ExEMPTIONSThe following reporting exemptions have been granted by nsW Treasury to enable financial reporting requirements that apply, to be broadly consistent with Corporations act reporting requirements, given that the entity operates in the competitive national electricity Market:

Statutory Requirements Act/Regulation References

Comments

Budgets

•detailedbudgetfortheyearreportedon s.7(1)(a)(iii)arsBa

•outlinebudgetfornextyear s.7(1)(a)(iii)arsBa

•particularsofmaterialadjustmentstodetailed budget for the year reported on

cl 6 arsBr

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

Management and activities schedule 1 arsBr exemption subject to the condition that relevant information is to be disclosed in a summarised form.

research & development schedule 1 arsBr

Human resources schedule 1 arsBr

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

land disposal schedule 1 arsBr

payment of accounts schedule 1 arsBr

Time for payment of accounts

schedule 1 arsBr

report on risk Management and insurance activities

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

investment performance cl 12 arsBr

liability Management performance cl 13 arsBr

Abbreviations:arsBa annual reports (statutory Bodies) act 1984 arsBr annual reports (statutory Bodies) regulation 2005

wASTE REDuCTION AND PuRChASINg POLICyTransGrid has an ongoing commitment to incorporating the principles of the nsW Government’s Waste reduction and purchasing policy (Wrapp) into its operations. since 1999, TransGrid has aimed to support the Wrapp framework by maximising resource efficiency and reducing waste generation through avoidance, reduction, reuse and recycling.

TransGrid’s Wrapp plan includes the following waste reduction initiatives for the office environment:

> reduction in paper use.> an increase in paper reuse and recycling.> education programs to inform staff about environmental issues

including resource consumption.

in the operational environment, TransGrid’s Wrapp plan includes waste reduction and/or recycling initiatives for maintenance and construction activities including:

> Vegetation materials.> Construction, demolition and excavated materials.

during 2007, TransGrid developed a Waste Management database to facilitate the collection of waste data for TransGrid’s Wrapp reporting. This database was designed for easy use through the TransGrid intranet and allows waste data to be easily analysed and reported.

86 INDEx > TransGrid annual reporT 2008

INDEx

aboriginal employment and development strategy 36

achievements 14

appendix 83

apprentices 35

asset Management and Maintenance 30, 39

Balance sheet 53

Board of directors 4, 45

Capital expenditure ($Million) 16

Cash Flow statement 54

Chairman and Managing director’s review 2

Charter 45

Code of ethics and Conduct 48

Community 26

Completed investments 40

Consultant Fees 48

Consumer response 83

Cost of annual report 83

Credit Card usage 49

Current investments 41

Customers 25

demand Management and planning project (dMpp) 30

disability action plan 37

eeo achievements (2007-2008) 37

eeo disclosures 83

eeo planned achievements (2008-2009) 37

electronic service delivery 83

environmental award 37

environmental incident notification 17

environmental Management system 31

ethnic affairs priority statement (eaps) 37

executive Team 12, 47

Financial report 52

Freedom of information 49

Government energy Management policy 83

Graduate and Cadet program 35

Guarantee of service 48

Heritage Management 83

income ($Million) 16

income statement 52

independent audit report 81

industrial relations policies and practices 83

information Technology 31

innovation 28

internet Contact details inside Back Cover

Judicial decisions 83

Key Commercial performance indicators (excluding superannuation gains/losses) 16

Key Commercial performance indicators (including superannuation gains/losses) 17

land disposal 83

leadership programs 34

legislative Change 45

letter to shareholders inside Front Cover

Meetings of the Board 46

Minister 45

national electricity Market 19

network availability (%) 16

network reliability (system Minutes lost) 16

non-network solutions 30

notes to the Financial statements 56

occupational Health and safety strategies 33

occupational Health and safety statistical information 34

our Business 7

our direction 10

our network 8

overseas Visits 51

partnerships 26

performance review and development 35

performance summary: executive 47

privacy 49

promotion 84

remuneration: Board of directors 46

remuneration: executive 48

reporting exemptions 85

research and development 31

return on assets (%) 17

return on equity (%) 17

risk Management and insurance 48

pricing 20

Qualifications: executive 48

revenue determination (2009 – 2014) 21

safety (lTi’s) 17

safety award 36

shareholders 45

significant Committees 50

sponsorships 27

staff numbers: Comparison of staff numbers as at 30 June 2008 84

staff numbers: staff by Category as at 30 June 2008 84

staff numbers: numbers of executive officers 84

stakeholders 26

statement of recognised income and expense 55

statement by Members of the Board 80

statement of affairs 49

TransGrid Contact details inside Back Cover

Waste reduction and purchasing poliCY (Wrapp) 85

Western 500kV Conversion project 41

Workforce diversity strategy 36

TransGrid annual reporT 2008 > gLOSSARy 87

gLOSSARy

Term Explanation/Comments

aCCC australian Consumer and Competition Council

aer (“the regulator”) The australian energy regulator

aeMC The australian energy Market Commission

annual national Transmission statement (anTs)

a document produced annually by the national electricity Market Management Company (neMMCo) that focuses on the status and options for development of Major national Transmission Flow paths

annual planning report (apr 200X) a document that sets out issues and provides information to the market that is relevant to transmission planning in new south Wales. This document is the apr 2008

annual planning review The annual planning process covering electricity transmission networks in new south Wales

“assets” TransGrid’s ‘poles and wires’, all the substations and electricity transmission lines that form our network

CBd Central Business district

Constraint an inability of an electricity transmission or distribution system to supply a required amount of electricity to a required standard

Customers TransGrid’s customers are those directly connected to our network. They are either distribution network service providers, directly connected generators, large industrial customers, customers connected through inter-regional connections or potential new customers

diTM department of information Technology and Management. a nsW Government scheme facilitating the provision of leased telecommunications services

dM demand management. a set of initiatives that is put in place at the point of end-use to reduce the total and/or peak consumption of electricity

dMpp demand Management and planning project

dnsp (distributor) distribution network service provider. a body that owns, controls or operates a distribution system in the neM

dWe nsW department of Water and energy

easement an easement over a property gives TransGrid the right to construct and maintain our assets, while ownership of the property remains with the original landowner.

FaCTs Flexible aC Transmission systems

GWh a unit of energy consumption equal to 1,000 MWh

HVdC High Voltage direct Current

interconnection The points on an electricity transmission network that cross jurisdictional/state boundaries

iparT independent pricing and regulatory Tribunal of nsW

irpC The inter-regional planning Committee that is convened by neMMCo and has representation from all jurisdictions of the neM

isG information systems Group. The group within TransGrid who are responsible for information Technology systems and projects

Jurisdictional planning Body (JpB) The organisation nominated by a relevant minister as having electricity transmission system planning responsibility in a jurisdiction of the neM

kV operating voltage of electricity transmission equipment. one kilovolt is equal to one thousand volts

load The amount of electrical power that is drawn from the network

local Generation a generation or cogeneration facility that is located on the load side of a transmission constraint

lTi lost time injury

MCe Ministerial Council on energy

MreT Mandatory renewable energy Target

MVar a unit of reactive power. one “Mega-Var” is equal to 1,000,000 Var

MWh a unit of energy consumption. one Megawatt hour is the amount of energy consumed in one hour at a rate of one Megawatt

national electricity law Common laws across the states which comprise the neM, which make the ner enforceable

88 gLOSSARy > TransGrid annual reporT 2008

gLOSSARy continued

national electricity rules (ner or “the rules”) The rules that govern the operation of the neM

neM The national electricity Market

neMMCo national electricity Market Management Company. The company that administers and operates the national electricity Market

nTFp national Transmission Flow path

network augmentation an expansion of the existing electricity transmission network

new small Transmission network asset (nsTna)

an augmentation of the electricity transmission network that is expected to cost between $1 Million and $10 Million

new large Transmission network asset (nlTna)

an augmentation of the transmission network that is expected to cost more than $10 Million

non-network solutions alternatives to network augmentation which address a potential shortage in electricity supply in a region

outage an outage is when part of the network loses power. This can be either planned (i.e. when work needs to be done on the line) or unplanned

registered participant a person registered with neMMCo as an ner participant

regulatory Test a test promulgated by the aer that is required by the ner to be applied when determining the relative economic merits of options for the relief of transmission constraints

rFp request for proposal

sCada system Control and data acquisition. This system allows for the remote control of the network from any of TransGrid’s control rooms

sndp strategic network development plan

statement of opportunities (soo) a document produced by neMMCo that focuses on supply demand balance in the neM

sVC static Var Compensator. a device that provides for control of reactive power

switchbay a site containing high voltage switchgear, used to connect or disconnect a section of the network

the Minister The new south Wales Minister for energy

Tnsp Transmission network service provider. a body that owns, controls and operates an electricity transmission system in the neM

Transmission line a high-voltage power line running at 500kV, 330kV or 132kV

WaCC Weighted average Cost of Capital

TransGrid annual reporT 2008

TRANsGRId CONTACT dETAILsSydney201 elizabeth street po Box a1000 sydney south nsW 1235

Telephone 02 9284 3000 Telephone 61 2 9284 3000 Facsimile 02 9248 3456 Facsimile 61 2 9284 3456

Business Hours 8:00am – 6:00pm

Metropolitan Telephone 02 9620 0777

OrangeTelephone 02 6360 8711

NewcastleTelephone 02 4967 8678

TamworthTelephone 02 6765 1666

WaggaTelephone 02 6922 0222

YassTelephone 02 6226 9666

TransGrid aBn: 19 622 755 774

This report is available on TransGrid’s website.

www.transgrid.com.au

ACKNOWLEdGEMENTs Published by TransGrid Corporate Business unit

Designed and produced by equation Corporate design pty ltd

Photographs by:John MarmarasKarl Hofmanneil BillingtonJon novakovic

CONTENTs > TransGrid annual reporT 2008

contentscontentsCONTENTs2 CHAIRMAN + MANAGING dIRECTOR’s REVIEW

4 OuR BOARd Of dIRECTORs

6 ABOuT TRANsGRId

14 ACHIEVEMENTs

18 TRANsGRId ANd THE ExTERNAL OpERATING ENVIRONMENT

Facing new Challenges

24 CusTOMERs, sTAKEHOLdERs, COMMuNITy striving for excellence

28 INNOVATION new Ways of doing Business

32 pEOpLE The Key to our success

38 NETWORK sTRATEGy invest and Build for the Future

44 fINANCE ANd dIRECTORs’ REpORT

83 AppENdIx

87 GLOssARy

The Hon. Eric Roozendaal MLC The Hon. Joe Tripodi Mp Treasurer Minister for Finance Parliament House Minister for Infrastructure Macquarie Street Minister for Regulatory Reform SYDNEY NSW 2000 Minister for Ports and Waterways Parliament House Macquarie Street SYDNEY NSW 2000

31 October 2008

Dear Shareholders,

We have pleasure in submitting to you the TransGrid Annual Report 2008 for presentation to Parliament. The Annual Report includes the Income Statement for the year ended 30 June 2008 and the Balance Sheet as at that date certified by the Auditor-General of New South Wales.

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

Yours sincerely

Mr Bruce foy Kevin Murray Acting Chairman Managing Director

HIGH VOLTAGE NETWORK

500kV > 330kV

330kV > 220kV

220kV > 132kV

132kV> 66kV

MovingEnErgyMovingEnErgy

MOVINGENERGy

TransGrid annual reporT 2008

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