Envestra

Our business strategy is to own and reliably operate natural gas networks, pipelines and related services that generate attractive returns to our shareholders.

DOWNLOAD THE BUSINESS STRATEGY (PDF 69KB)

Following is a summary of how we have performed over the past 12 months against the activities that will enable
us to deliver on our strategy:

•    Achieving long-term (pre-tax) annual returns to our shareholders (including distributions and capital gains)
of at least 10%.

Total shareholder returns for 2008-09 were 0.3%. The result was impacted by the ongoing global financial crisis, and the reduction in distributions.

While returns to shareholders were disappointing, the Group’s underlying profit after tax was up $24.3 million to $35.6 million and our distribution coverage ratio improved to 1.4 times.

We completed important capital management initiatives including raising equity, consolidating our previously separate debt packages and refinancing maturing debt, all of which served to enhance our credit rating and
provide a better platform for achieving improved shareholder returns in the future.

•    Operating our networks safely and efficiently, complying with all laws and relevant industry standards, and enhancing their value by adding connections and augmenting capacity.

There were no significant incidents involving interruption to supply, or breaches of laws or gas industry standards. During the year, more than 23,000 new consumers were connected to the networks and $112.5 million was
spent on improving and extending gas supplies.

•    Promoting the use of natural gas, the most environment friendly fossil fuel and a cost competitive, convenient energy source for most consumers.

Although significant funding constraints were applied to our marketing activities in 2008-09, we maintained, through our contractor, APA Asset Management, a close association with property developers and builders.
Our funding cuts have been made in recognition of the fact that governments appreciate the environmental benefits of natural gas and have over the past few years implemented energy polices that promote the use of gas and in some cases mandate the use of the fuel. However, we anticipate an increased need in the medium term to support the promotion of natural gas as a fuel of choice, as it must now compete increasingly with green energy.

•    Positively changing the regulatory environment so that investment is encouraged, reasonable economic rewards are available to network owners and the long-term interests of gas consumers (including supply reliability and environmental benefits) are protected.

During the year, the Australian Energy Regulator undertook a review of the rate of return (commonly known as WACC, or Weighted Average Cost of Capital) that will apply to the electricity industry for the next five years.

We participated in an industry campaign conducted by participants in the energy infrastructure sector, aimed at ensuring the Regulator understood the challenges currently being faced by these businesses.

•    Profitably growing our business through network expansion, building new transmission pipelines, adding related gas infrastructure and making appropriate acquisitions.

Almost 300 kilometres of new mains were laid in 2008-09 at a cost of $25 million, bringing the total to 20,436 kilometres. Today the Company delivers gas to around 1,037,000 consumers. There was no activity in relation to new transmission pipelines and acquisitions. With regard to acquisitions, it was a combination of a lack of attractive opportunities and the current economic climate that drove this outcome.

•    Delivering natural gas to our consumers in a manner that has minimal effect on the environment.

There were no major incidents involving gas leaks, and our contractor continued to perform its role in repairing gas mains and the associated equipment, and installing new mains in a manner sympathetic to the environment. There were no contraventions of environmental codes or guidelines.