QUARTERLY REPORT 1 OCTOBER DECEMBER 2006

Transcription

1 QUARTERLY REPORT 1 OCTOBER 2006 TO 31 DECEMBER 2006

2 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 PERFORMANCE OVERVIEW The financial result for the first six months to December 2006 of $21.5 million is above year to date SDP by $13.9 million, however this is expected to reverse in the next half as favourable timing variations in expenditure reverse. Current expectations are for Synergy to achieve a profit after tax of $26.2 million. Synergy will deliver an interim dividend of $10.7 million in line with agreed dividend policy. Total Sales of Electricity of $714.8 million and 5,835GWh are reported to be below SDP by 0.3% and 0.8% respectively. The below budget performance is due to increase competitive pressures in the contestable market which have been offset by a slight increase in the franchise market. The below budget performance of Electricity sales has been offset by growth in sales of gas and miscellaneous income. Miscellaneous income is above SDP by $4.2 million and was derived from higher interest received and receipts from the Independent Market Operator. Operating expenditure for the period of $35.8 million is $10.9 million below SDP, however some of this is expected to reverse in the next six months as favourable timing variations reverse. To maintain Synergy s profitability, management have in place stringent controls on operating expenditure and review expenditure to identify possible savings. DMS#: v1 Page 1

3 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 KEY PERFORMANCE INDICATORS STATEMENT OF CORPORATE INTENT Actual Target Financial Year to Date 2005/ /07 Actual Target Variance Contact Centre Effectiveness Total Number of Calls Received % of calls not answered within 30 seconds from when a customer is connected to an inquiry line Average wait time before a call is answered (seconds) Number of overload events 335,393 NA 629,319 NA NA 32% 20% 27.7% 20% (7.7%) % of calls abandoned 4.7% 5% 3.8% 5% 1.2% Business Development and Innovation Uptake of on-line billing NaturalPower as a % of total sales SmartPower sales as a % of total sales Number of dual-fuel customers 1.42% 1.3% 1.44% NA NA 0.11% 0.14% 0.18% 0.14% 0.04% 1.20% 1.21% 1.20% 1.21% (0.01%) NA NA Customer Service Number of disputes involving the Ombudsman Affordability and Access Number of customers on instalment plans Number of customers paying refundable advances , NA NA NA NA DMS#: v1 Page 2

4 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 HIGHLIGHTS OF IMPORTANT ACHIEVEMENTS Customer Information and Customer Relationship Management (CIS/CRM) replacement Synergy s primary information asset is its Customer Information and Relationship Management (CIS/CRM) computer system. The CIS/CRM systems (implemented from 1994) are the heart of Synergy operations. They are used to manage customers from the connection of the meter through to receiving cash. The existing CIS/CRM systems have provided a robust billing platform for an integrated monopoly utility. However they are inflexible, costly to support, costly to modify and consequently slow to market and an impediment to business growth in a competitive environment. During the quarter, the Synergy Board endorsed a proposal to replace the existing CIS/CRM computer system by June Synergy has commenced investigating an appropriate replacement solution, which is expected to be completed by June Metron implementation As part of the reform process Western Power was required to implement a new system for managing metering services and providing meter readings to all WA retailers. Metron implemented a system into Western Power Networks known as HUB. The HUB enables Western Power to communicate with all electricity retailers in a standard format based on the National Market Identifier (NMI), which uniquely identifies a meter. As Synergy s Customer Information System (CIS) is unable to communicate with the HUB because of the NMI, a new system Metron Retail Bridge - was implemented. The retail bridge, which stores and maintains a "map" which details the NMI for each meter in CIS and produces files and transactions in the correct market standard format with the appropriate NMI. Significant work was undertaken over many months in implementing this solution, which went live during the quarter. The implementation of Metron progressed with minimal disruption to Synergy s customers and its introduction marks another key reform in Western Australia s emerging electricity market. Competitive tenders During the quarter, Synergy progressed the tenders -one for the competitive procurement of 400MW of Capacity Credits and associated electricity in the South West Interconnected System from October 2010, and another for the competitive procurement of up to 50 MW of Capacity Credits and associated electricity from new renewable sources in the South West Interconnected System from October Synergy will receive the Renewable Energy Certificates and Green Power Rights from the execution of a tender, and this will meet the growing demand for NaturalPower from Synergy s customers. The short list of tenders to compete for the final supply contracts will be announced in the third quarter. DMS#: v1 Page 3

5 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 Peak Demand Saver Program In 2004/05, Synergy (then Western Power) introduced a Peak Demand Saver program, where financial incentives were provided to customers to reduce electricity consumption at peak times, in order to maintain capacity on the few occasions where demand peaked. The Program has continued each year since and while the initial purpose was to help maintain system reliability in the state, the Peak Demand Saver Program has become a means for Synergy to meet its individual reserve capacity requirement in the Wholesale Electricity Market (WEM). During the quarter, Synergy secured approximately 109MW, to be made available during the 2006/07 summer period, if required, including 21MW on behalf of the State Government which is in addition to Synergy s commitment to the Independent Market Operator. Daylight Saving Synergy has approximately 27,000 customers where electricity is charged at varying prices based on when energy is consumed (eg peak, off-peak pricing). With the introduction of daylight saving on 3 December 2006, the State Government, after consultation with the energy industry, gazetted Regulations (Daylight Saving Regulations 2006) and amendment by-laws (Energy Operators (Electricity Retail Corporation) (Charges) Amendment By-laws 2006 providing, for the purposes of the sale of electricity, Western Standard time would continue to apply. Accordingly, the charging periods were to begin and end one hour later. As such, it was imperative Synergy communicated with its customers to advise of the impact of daylight saving, however, such communications could not occur until the daylight saving legislation was passed, and the relevant Regulations gazetted. Synergy undertook a targeted direct-mail campaign to all affected customers, however, many customers did not receive advice until after daylight saving commenced, resulting in a small number of complaints to Synergy. Post implementation analysis has indicated the impact on those affected customers is minimal. Implementation of wholesale market systems The commencement of the wholesale market in the South West Interconnected System was a milestone in the evolution of Western Australia s energy market. Synergy s ability to operate in the market was integral to the success of the market, which required sophisticated IT system developments, which were implemented by Synergy during the quarter. Since the commencement of the wholesale electricity market, there have been no system issues, and Synergy has been able to actively participate in the wholesale electricity market. Crisis management and pandemic planning Synergy is cognisant of the fact it is an integral part of essential service delivery in Western Australia. Accordingly, crisis management preparedness, including preparations for a possible pandemic, are important aspects of business continuity planning. Synergy has developed strategies for immediate implementation in the event of a crisis, including a wide scale pandemic, to limit business disruption and ensure continued service delivery. During the quarter, Synergy continued to rehearse its crisis management capabilities, participating in DMS#: v1 Page 4

6 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 a system related crisis exercise, to ensure readiness in the event of any required response to a supply related crisis. Risk Management Synergy's ongoing development of its risk identification and management processes took another step forward with a favourable result being received from its first independent audit conducted by Risk Cover, part of the State Government Insurance Commission. Regulatory Management Synergy is committed to compliance with applicable regulatory law. Ethical conduct and upholding the law are consistent with Synergy s core values, which underpin good business practices and behaviours required to ensure Synergy s success as an energy retailer. Consistent with good regulatory practice, Synergy established a regulatory compliance policy and a regulatory compliance implementation plan in December Energy Efficiency Calculator launched In the interests of keeping customers informed, Synergy has developed and launched a user-friendly interactive calculator to advise users of the running cost of appliances in their home. The calculator will estimate the approximate cost of running different appliances around and outside the home (based on the residential A1 tariff) and provide tips on how to save energy in every room. Energy Efficient Home Design Tool launched For customers building their own home, Synergy has developed and launched an Energy Efficient Home Design tool, an interactive demonstration taking home builders through the key design features required to create a comfortable, efficient and environmentally friendly home. Launch of E-bill Synergy launched E-Bill, a group billing product for customers with multiple sites. E-bill consolidates billing information from multiple sites into one invoice, which is sent electronically to customers. In addition the data text files for each individual bill account are also provided allowing customers to download the information into their accounts payable system. E-bill will provide significant time and cost savings to relevant businesses. Launch of Challenger During the quarter, Synergy launched Challenger, an online energy analysis tool to help businesses improve energy efficiency. The audit incorporates a simple but thorough survey, following which a customised report and action plan is generated to help businesses reduce their energy bill. DMS#: v1 Page 5

7 QUARTERLY REPORT, 1 OCTOBER 2006 TO 31 DECEMBER 2006 Synergy "Summer SmartWays" Television Campaign Synergy launched a Summer SmartWays campaign during December, the purpose of which was to educate the community about smarter use of energy, by directing them to Synergy s website and energy efficiency calculator. The campaign also complemented Synergy s NaturalPower campaign. While the campaign was low impact, increased hits on Synergy s website indicates the call to action was effective. Lowering of the Gas Moratorium to 0.18 TJ/a Synergy is able to compete for gas customers consuming greater than one terajoule per annum. Following representations from Synergy, the Government announced in August 2006 the threshold applying to Synergy would be lowered to 0.18 terajoules per annum, from 1 July During the quarter, Synergy developed and confirmed a positive business case for entry in this market and Synergy has commenced development of market strategies for entry into the 0.18TJ to one terajoule per annum market, further increasing competition in Western Australia s energy market. In addition, applications for regulatory approvals necessary to enter that market (trading licence, standard form contract and Gas Industry Ombudsman) are well advanced. DMS#: v1 Page 6

8 ELECTRICITY RETAIL CORPORATION TRADING AS SYNERGY (ABN ) FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006

9 Financial Statements For The Period Ended 31 December 2006 Contents 1 Income statement 1 2 Balance sheet 2 3 Cash flow statement 3 4 Statement of changes in equity 4 5 Summary of significant accounting policies 5 6 Notes to the financial statements 10

10 INCOME STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006 NOTES 31/12/06 Revenue 2 740,038 Other Income 3 4,810 Less: Cost of Goods Sold 4 678,201 Employee Benefits 5 13,400 Borrowing Costs 5 14 Materials & Services 5 17,860 Depreciation & Amortisation Other expenses 5 3,510 Profit from Ordinary Activities Before Income Tax Equivalent Expense 30,874 Less: Income Tax Equivalent Expense 6 9,422 Profit from Ordinary Activities After Income Tax Equivalent Expense 21,452 The above Income Statement should be read in conjunction with the accompanying notes. 1

11 BALANCE SHEET AS AT 31 DECEMBER /12/06 30/06/06 NOTES CURRENT ASSETS Cash & Cash Equivalents 7 67, ,425 Trade and Other Receivables 8 213, ,397 Intangible Assets 9 10,958 5,039 Financial Assets 10 47,263 3,450 Other Assets 11 1, Total Current Assets 339, ,164 NON-CURRENT ASSETS Plant and Equipment 12 1,094 1,178 Intangible Assets 13 5,010 3,636 Financial Asset 14 11, Deferred Tax Assets 15 5,568 5,835 Total Non-Current Assets 23,640 10,694 Total Assets 363, ,858 CURRENT LIABILITIES Trade and Other Payables , ,521 Tax Liabilities 15 9,503 6,402 Provisions 17 16,277 11,288 Total Current Liabilities 204, ,211 NON-CURRENT LIABILITIES Deferred Tax Liabilities ,195 Provisions 17 4,828 4,765 Total Non-Current Liabilities 5,732 5,960 Total Liabilities 209, ,171 NET ASSETS 153, ,687 EQUITY Contributed Equity , ,832 Retained Profits 18 17,581 6,855 TOTAL EQUITY 153, ,687 The above Balance Sheet should be read in conjunction with the accompanying notes. 2

12 CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER /12/06 NOTES CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 772,672 Interest Received 3,822 Other operating receipts 29,245 Energy Purchases and Network Access Costs (675,381) Payments to Employees and Suppliers (113,299) Interest and other costs of financing (14) Lease Expenses (1,148) Income Tax Equivalent Payments (6,477) Goods and Services Tax Paid (1,212) NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 19 8,208 CASH FLOWS FROM INVESTING ACTIVITIES Payment for Investments (45,000) Payment for Plant and Equipment (263) Payment for Intangible Assets (7,949) NET CASH FLOWS USED IN INVESTING ACTIVITIES (53,212) CASH FLOWS FROM FINANCING ACTIVITIES Dividends Paid (6,856) Customer and Contractor Deposits (17) NET CASH FLOWS USED IN FINANCING ACTIVITIES (6,873) NET INCREASE IN CASH AND AND CASH EQUIVALENTS (51,877) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 119,425 CASH AND CASH EQUIVALENTS AT END OF PERIOD 19 67,548 The above Cash Flow Statement should be read in conjunction with the accompanying notes. 3

13 STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER 2006 NOTES 31/12/06 Net Income Recognised Directly in Equity Net Profit after Tax Expense 18 21,452 Less Dividends Provided For 18 10,726 Retained Profits 18 6,855 17,581 Contributed Equity at beginning of period ,832 Adjustment to Contributed Equity during period 18 3,201 EQUITY AT END OF THE REPORTING PERIOD 153,614 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 4

14 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Corporate Information The principal function of Synergy is to sell electricity to consumers in the South West Interconnected System (SWIS), which is located in the south west of the state, extending between Kalbarri, Albany and Kalgoorlie. (a) Basis of Preparation The financial statements have been prepared as a general purpose financial report in accordance with the Australian Accounting Standards, the Framework and other authorative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the disclosure requirements of Schedule 4 of the Electricity Corporations Act The financial statements have been prepared on an accrual basis and are based on historical cost basis except for financial instruments, which are measured at fair value. The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($ 000) unless otherwise stated. (b) Statement of Compliance The financial statements comply with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). (c) Reporting Period The report period is for the six months ended 31 December (d) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to Synergy and the revenue can be reliably measured. It is valued at the fair value of the consideration received, or to be received net of the amount of goods and services tax. i. Sales of Energy Sales of energy comprise revenue earned from the provision of electricity, gas and products and services to entities outside the economic entity and is recognised when the energy is provided. Revenue recognised represents the sum of invoices raised and the movement in the estimated unread energy consumption. Unread energy consumption represents the estimated value of metered electricity and gas provided to customers but not invoiced. ii. Other Income Other income comprises revenue earned from the provision of activities incidental to the core activities of Synergy. Other income may include: Gain on Sale of Non-Current Assets and Interest (e) Community Service Obligations Community Service Obligations (CSOs) are obligations to perform functions, on behalf of the State Government, that are not in the commercial interests of Synergy. Where the Government agrees to reimburse Synergy for the cost of CSOs, the entitlement to reimbursement is recognised in the income statement on a basis consistent with the associated CSO expenses. Supply charge rebates Caravan park rebates and Air conditioning subsidy for seniors. 5

15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Cost of Goods Sold Costs of sales are those costs directly attributable to the acquisition and sale of energy. (g) Current Assets and Current Liabilities Current assets and current liabilities are recognised on the basis of assets expected to be realised or consumed, and liabilities expected to be settled within twelve months from the reporting date. (h) Cash and Cash Equivalents Cash and cash equivalents in the balance sheet comprise cash at bank, deposits held at call with financial institutions and other short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as mentioned above. (i) Trade and Other Receivables Trade receivables, which generally have 30-day terms, are recognised at fair value and subsequently measured at amortised cost, less a provision for any irrecoverable amounts. This provision is raised when collection of the full amount is no longer probable. Collectability of trade and other receivables are reviewed on an ongoing basis. Bad debts are written off when identified. (j) Intangible Assets i. Software Research and Development Costs Research costs are recognised in the income statement when incurred. Development expenditure incurred on an individual software project is capitalised when its future recoverability can reasonably be regarded as assured. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting period indicating that the carrying value may not be recoverable. Amortisation Following the initial recognition of development expenditure the cost model is applied whereby the asset is stated at cost less accumulated amortisation. The useful lives of Synergy s software is calculated using the straight-line method as follows: Software months Work-In-Progress Work-in-progress is not amortised until the expense is capitalised. ii. Renewable Energy Certificates The Renewable Energy (Electricity) Act that took effect on 1 April 2001 requires electricity wholesale purchasers to source specified amounts of electricity from Renewable Energy (RE) sources. The Act imposes an annual liability, on a calendar year basis, by applying the specified Renewable Power Percentage to relevant wholesale acquisitions. The RE liability is extinguished by annual surrender of an equivalent number of Renewable Energy Certificates (RECs) with a penalty applying for any shortfall. Synergy s liability is recognised at the average market price of REC purchased for the period. The liability is expensed in the income statement. Synergy extinguishes its REC liability by the surrender of RECs that are purchased in the open market. RECs purchased from external sources are recognised as current intangible asset at their purchase price. 6

16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Disposal of Assets An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from the derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in the income statement when the asset is derecognised. (k) Prepayments Current and non-current prepayments include Insurance, IT Support and Other Costs. Prepaid expenses are recognised in the income statement in the reporting period in which the associated benefit is consumed. (l) Plant and Equipment Plant and equipment is carried at cost less accumulated depreciation and accumulated impairment as at 30 September i. Acquisition of Assets Synergy is a statutory Corporation subject to the requirements of the Electricity Corporations Act 2005 and came into existence on 1 April The assets of Western Power Corporation that were transferred to Synergy on this date were brought to account at their book value in accordance with the Transfer Order. The cost method of accounting is used for all acquisitions of assets. Cost is determined as the fair value of the asset given at the date of acquisition plus costs incidental to the acquisition. ii. Depreciation Plant and equipment is depreciated using the straight-line method over their remaining useful lives. The useful lives of Synergy s major plant and equipment classes are as follows: Plant and Equipment months Depreciation rates are reviewed annually, and if necessary adjusted to reflect the most recent assessment of the useful lives of the assets. Disposal of Assets An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from the derecognition of an asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in the income statement when the asset is derecognised. (m) Impairment of Assets At each reporting date the Corporation assesses whether there is any indication that an asset may be impaired, that is events or changes in circumstances indicate the carrying value may not be recoverable. Where an indicator of impairment exists, the Corporation makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. Reversals of Impairment Impairment losses in respect of receivables is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. Impairment losses in respect of other assets other than those assets held for trading are reversed if there has been a change in the estimates used to determine the recoverable amount. (n) Trade and Other Payables These amounts represent liabilities for goods and services provided to Synergy prior to the end of the reporting period that are unpaid. The amounts are unsecured and are settled within prescribed periods. 7

17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (o) Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Synergy s operating lease payments are representative of the pattern of benefits derived from the leased assets and accordingly are recognised in the income statement in the reporting periods in which they are incurred. (p) National Taxation Equivalent Regime Synergy operates under the National Taxation Equivalent Regime (NTER) environment. Under this regime, tax equivalent payments are remitted to the State Treasury, however Synergy s tax is subject to Australian Taxation Office (ATO) administration. The calculation of the liability in respect of these taxes is governed by the Income Tax Administration Acts and the NTER guidelines as agreed by the State Government Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantially enacted at the reporting date. Deferred tax assets or liabilities are recognised only to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. Deferred tax assets or liabilities are reduced to the extent that it is no longer probable that the related tax effects will be realised. (q) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and service tax (GST) except where the GST incurred on a purchase of goods and services is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a net basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the ATO, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the ATO. (r) Provisions Provisions are recognised when Synergy: Has a present obligation (legal or constructive) as a result of a past event, It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and A reliable estimate can be made of the amount of the obligation. i. Dividends A provision for dividends payable is recognised in the reporting period in which the dividends are appropriately authorised by the Board. ii. Employee Benefits Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. 8

18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (s) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government securities, which have terms to maturity approximating the terms of the related liability. iii. Retirement Benefit Obligations All employees of Synergy are entitled to benefits upon retirement, disablement or death from one of many superannuation plans, which may include a defined contribution section, a defined benefit section, or both. The defined benefit Scheme is closed to new members. Defined Contribution Superannuation Plans Obligations for contributions to defined contribution plans are recognised in the income statement as incurred. Defined Benefit Superannuation Plans A provision in respect of the defined benefit superannuation plans is recognised in the balance sheet and is measured at the present value of the defined benefit obligations. This is based on services provided up to the reporting date, plus/less unrecognised actuarial gains/losses less the fair value of the superannuation plans assets at that date and any unrecognised past service cost. The present value of the defined benefit obligations is based upon expected future payments and is calculated using discounted cash flows consistent with the Projected Unit Credit method. Consideration is given to the expected future wages and salaries level, experience of employee departures and periods of service. Expected future payments are discounted using the market yield, as at the reporting date, on selected Commonwealth government securities with terms to maturity approximating the terms of the related liability. The defined benefits of the Pension Scheme and Gold State Scheme are wholly unfunded. The Corporation meets the costs of these benefits when the employee leaves the service of the Corporation. Actuarial gains and losses arising from experience adjustments and changes in actuarial adjustments are recognised immediately in the income statement. Future taxes are not met by the Corporation (the benefit paid is an untaxed amount to the employee) and so no allowance has been made for future taxes in measuring the net liability. A review will be conducted by an independent actuary annually. Derivatives Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value. The fair value of the derivative is calculated by reference to forward price of Silicon obtained from the respective counter party, as forward price data for such derivatives is not widely available. The movement in the fair value of the Derivative is recognised in the income statement. (t) Investments Investments are short-term and held to maturity. Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that Synergy's management has the positive intention and ability to hold to maturity. (u) Critical Accounting Estimates Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. 9

19 Financial Statements for the Period ended 30 December 2006 NOTES TO THE FINANCIAL STATEMENTS 2. REVENUE 31/12/06 Sales of Energy 730,735 Account Fees 5,874 Product & Services 3, ,038 3 OTHER INCOME Interest 4,041 Other 769 4,810 4 COST OF GOODS SOLD Energy Purchases 444,400 Network Access Costs 229,258 Renewable Energy Certificates 4, ,201 10

20 Financial Statements for the Period ended 30 December 2006 NOTES TO THE FINANCIAL STATEMENTS 5. EXPENSES 31/12/06 Profit before Income Tax Equivalent Expense includes the following specific items: Employee Benefits - Wages and Salaries and Other Related Benefits 12,139 - Superannuation Costs 1,261 13,400 Borrowing Costs - Government Loan Guarantee Charge - - Interest on Short Term Borrowings Materials & Services - Administration 8,842 - Communications 1,576 - Support Services 4,226 - Other 3,216 17,860 Depreciation & Amortisation - Plant and Equipment Intangible Assets Other Expenses Provision for Doubtful Debts Written Back 1,203 Derivative - Fair Value Adjustment 1,186 Other 214 Operating Lease Rentals 790 Audit Services - Audit Services Office of Auditor General 117 Total Other Expenses 3,510 11

21 Financial Statements for the Period ended 30 December 2006 NOTES TO THE FINANCIAL STATEMENTS 6 INCOME TAX EQUIVALENT EXPENSE 31/12/06 Income Statement The Prima Facie Tax on Profit is Reconciled to Income Tax Provided in the Accounts as follows: Profit Before Income Tax Expense 30,874 Income Tax Calculated at 30% 9,262 Tax Effect of Non Assessable Differences - Other 16 Total Tax Effect of Non Assessable Differences 16 Income Tax Attributable to Operating Profit 9,278 Prior Year Adjustment 144 Income Tax Expense 9,422 Income Statement Current Income Tax - Current Income Tax Expense 9,302 - Under/(Over) Income Tax Provided in Prior Years 144 Deferred Income Tax - Relating to Origination & Reversal of Temporary Differences (24) 9,422 Deferred Income Tax Included in Income Tax Expense is as follows: - Decrease in Deferred Tax Assets Decrease in Deferred Tax Liabilities (291) (24) Decrease/(Increase) in Deferred Tax Assets relate to the following: - Provisions (354) - Provision for Doubtful Debts (62) - CSO Rebates Other (90) 267 Increase/(Decrease) in Deferred Tax Liabilities relate to the following: - Embedded Derivative (356) - CSO Rebates - - Provision for Interest Receivable 65 (291) 12

22 NOTES TO THE FINANCIAL STATEMENTS CURRENT ASSETS 31/12/06 30/06/06 7 CASH AND CASH EQUIVALENTS Bank Overdraft (3,680) 15,013 Money Market Deposits 20,000 74,700 Bank Bills 18,728 19,712 Fixed Rate Short Term Investment 32,500 10,000 67, ,425 8 TRADE AND OTHER RECEIVABLES Trade Receivables 90,843 96,894 Estimated Value of Unbilled Energy 123, ,992 Less: Provision for Doubtful Debts 2,858 2, , ,239 Other Receivables 1,402 1, , ,397 9 INTANGIBLE ASSETS Renewable Energy Certificates 10,917 4,984 Emission Reduction Units ,958 5,039 Reconciliation Reconciliations of the carrying amounts for each class of current intangible assets are set out below: Renewable Energy Certificates Opening Balance 4,984 4,339 Purchased 5, ,917 4,984 Emission Reduction Units Opening Balance Applied (14) (7) FINANCIAL ASSETS Embedded Derivative * 2,263 3,450 Fixed Rate Short Term Investment 45,000 47,263 3,450 * The fair value of the embedded derivative has been calculated by discounting the expected future cash flows at prevailing interest rates. 11 OTHER ASSETS Prepayments Inventory ,

23 NOTES TO THE FINANCIAL STATEMENTS NON CURRENT ASSETS 31/12/06 30/06/06 12 PLANT AND EQUIPMENT Plant and Equipment Plant and Equipment - at Cost 1,275 1,251 Less: Accumulated Depreciation ,094 1,178 Reconciliation Reconciliations of the carrying amounts for plant and equipment are set out below: Plant and Equipment Opening Balance 1, Additions Reclassification (239) Depreciation (108) (73) 1,094 1, INTANGIBLE ASSETS Computer Software 6,168 3,913 Less: Accumulated Amortisation 1, ,010 3,636 Reconciliation Reconciliations of the carrying amount for non-current intangible assets is set out below: Computer Software Opening Balance 1, Additions 2,340 1,102 Reclassification 239 Amortisation (881) (277) 3,449 1,751 Work-in-Progress 1,561 1,885 5,010 3, FINANCIAL ASSET Security Deposit 11, ,

24 NOTES TO THE FINANCIAL STATEMENTS TAXATION 31/12/06 30/06/06 15 TAX LIABILITIES / ASSETS Current Income Tax Payable 9,302 6,334 Other ,503 6,402 Non-Current Deferred Tax Assets 5,568 5,835 Less: Deferred Tax Liabilities 904 1,195 Net Deferred Tax Assets 4,664 4,640 Deferred Tax Assets Deferred Tax Assets relate to the following: Provisions 3,114 2,759 CSO Rebates 1,257 2,030 Provision for Doubtful Debts Other ,568 5,835 Deferred Tax Liabilities Deferred Tax Liabilities relate to the following: Embedded Derivative 679 1,035 CSO Rebates - - Provision for Interest Receivable ,195 15

25 NOTES TO THE FINANCIAL STATEMENTS CURRENT LIABILITIES 31/12/06 30/06/06 16 TRADE AND OTHER PAYABLES Trade Payables 173, ,145 Other Payables 5,224 12, , , PROVISIONS Provision for: Dividend 10,726 6,856 Employee Benefits 5,250 4,171 Other ,277 11,288 Reconciliation Reconciliations of the carrying amounts for each class of provision is set out below: Dividends Opening Balance 6,856 - Provision for Interim dividend 10,726 6,856 Payments (6,856) 10,726 6,856 Employee Benefits Opening Balance 4,171 3,649 Provisions 2, Payments (1,431) (225) Closing Balance 5,250 4,171 Other Opening Balance Provisions Closing Balance

26 NOTES TO THE FINANCIAL STATEMENTS NON-CURRENT LIABILITIES 31/12/06 30/06/06 17 PROVISIONS Provision for: Employee Benefits 739 1,002 Retirement Benefit Obligations 4,040 3,697 Other ,828 4,765 Reconciliation Reconciliations of the carrying amounts for each class of provision is set out below: Employee Benefits Opening Balance 1,002 1,052 Provisions (263) (50) Closing Balance 739 1,002 Reconciliation of Movement in the Present Value of the Unfunded Obligations Recognised in the balance sheet Opening Balance 3,697 3,580 Current Service Cost 1, Benefits paid (956) (380) Closing Balance 4,040 3,697 Other Opening Balance Provisions (17) (10) Closing Balance

27 NOTES TO THE FINANCIAL STATEMENTS 18 EQUITY 31/12/06 31/12/06 Contributed Equity Contributions Received- Beginning of the Period 132, ,832 Adjustments to Contributions * 3,201 - Contributed Equity-End of the Reporting Period 136, ,832 * This amount represents a prior period adjustment relating to Western Power Corporation, that was posted directly to Equity. Retained Profits Retained Profits-Beginning of the Period 6,855 - Net Profit After Income Tax Expense 21,452 13,711 Less: Dividends Provided for 10,726 6,856 Retained Profits-End of the Reporting Period 17,581 6,855 TOTAL EQUITY 153, ,687 18

28 NOTES TO THE FINANCIAL STATEMENTS 31/12/06 19 RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Profit 21,452 Add/(less) non-cash items: Depreciation 108 Amortisation - Intangible Assets 881 Fair Value Adjustment - Embedded Derivative 1,186 Equity Adjustment 3,201 Change in assets and liabilities: Increase in Receivables (6,112) Decrease in Prepayments 42 Decrease in Trade Payables (4,343) Increase in Security Deposits (11,923) Increase in Employee Provisions 1,157 Decrease in Inventories (191) Increase in Other Provisions 23 Decrease in Accrued Interest Receivable (218) Decrease in Accrued Interest Payable - Increase in Income Taxes Payable 2,945 Net Cash Provided by Operating Activities 8,208 Reconciliation of Cash and Cash Equivalents at End of the Reporting Period Bank Overdraft (3,680) Money Market Deposits 20,000 Bank Bills 18,728 Fixed Rate Short Term Investment 32,500 Cash and Cash Equivalents at End of the Reporting Period 67,548 Credit Standby Facilities The Corporation has a master lending agreement in place with the Western Australian Treasury Corporation. This agreement gives Synergy access to a number of debt facilities with a total limit of $300 million and a short term US facility with a limit of $25 USD million. As at 31 December 2006 all debt facilities were undrawn. The planned usage of the facilities is governed by the Corporation's Strategic Development Plan agreed with the Minister of Energy. 19