Envestra

The key responsibilities of the committee are:
•    Reviewing the annual and half-year financial reports and recommending their adoption by the Board.
•    Reviewing other financial information distributed externally.
•    Reviewing management of financial risks.
•    Recommending the appointment and remuneration of the auditors, and reviewing the terms and scope
of engagement and assessing their performance.
•    Reviewing the effectiveness of the internal control environment.
•    Approving the scope of the internal audit program.
•    Overseeing the risk management program.
•    Reviewing compliance with corporate policies, controls and delegated authorities.
•    Reviewing compliance with the requirements of energy regulatory bodies, including the approval
of regulatory accounts.
•    Considering the independence of the auditor and approving non-audit services during 2008-09 provided
by the audit firm.

PricewaterhouseCoopers (PwC) was appointed as external auditor in 1997. It is PwC policy to rotate audit engagement partners with listed companies at least every five years. The responsible audit partner for Envestra was rotated in 2004.

The board recognises the need to periodically review the services provided by its external auditor, as well as the cost of these services. In June 2009, the Audit and Risk Committee conducted a tender for the provision of external services. It was resolved to continue using the services of PricewaterhouseCoopers as the Group’s external auditor.

KPMG was appointed as internal auditor in 2002. Their audit partner was rotated, due to his retirement, in 2006.

The internal and external auditors have direct access to the Chairman of the Audit and Risk Committee and, where necessary, the Chairman of the Board. The Audit and Risk Committee meets with the external and internal auditors without management present on an as required basis, but at least once a year.

The external auditor attends the Annual General Meeting and is available to answer questions from security holders.

REMUNERATION COMMITTEE

Members of the Remuneration Committee must be non-executive Directors. The Managing Director is invited to attend meetings to discuss senior executives’ performance and remuneration.

Members of the committee are:
•    Mr J G Allpass (Chairman);
•    Mr E F Ainsworth; and
•    Mr O B O’Duill.

The Remuneration Committee advises the Board on remuneration policies and practices, and makes recommendations on remuneration packages and other terms of employment for the Managing Director and other senior executives, having regard to the need to attract, retain and develop appropriately skilled people.

Each member of the senior management team is employed under a contract covering a range of matters including their duties, rights, responsibilities and entitlements on termination.

The committee, having regard to personal and corporate performance and relevant comparative information, reviews remuneration of the senior management team annually. The remuneration of all senior managers is assessed at regular intervals by an external professional human resources consultant and the resultant report submitted to the committee for consideration as part of the review of packages.

Remuneration for senior executives comprises both fixed remuneration and incentives. The incentives are based on a combination of the Company’s results and individual performance levels. The payment of short-term incentives is dependent upon the achievement of operating and financial targets set at the beginning of each year.

The maximum short-term incentive for the Managing Director is 30% of his total employment costs. The maximum incentive for the Chief Financial Officer and Commercial Manager is 25%, and the maximum incentive for all other senior executives is 20%.

The Managing Director and Commercial Manager have the ability to earn a long-term incentive, on a rolling basis, after three years’ service. The bonus is equivalent to 50% of the short-term incentive. Payments under this incentive for the Managing Director and the Commercial Manager commenced in 2007, and 2008, respectively.

The Company does not operate an Employee Share Option Plan.

RISK ASSESSMENT AND MANAGEMENT

The Company has a risk-assessment program that is monitored by the Audit and Risk Committee. The program is designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, addressed and monitored to enable the Company to achieve its business objectives.

The Managing Director, Chief Financial Officer and Company Secretary manage the Company’s risk-management program in conjunction with the Executive Risk Management Committee.

The Board and Audit and Risk Committee have received an assurance from the Managing Director and the Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act is founded
on a sound system of risk management.

The Audit and Risk Committee receives regular reports on progress in addressing the risks. The internal auditors also carry out regular investigations into control mechanisms and report their findings, including recommendations for improvement to controls, processes and procedures, to the Audit and Risk Committee.

APA is required to operate and manage Envestra’s networks in accordance with the Operating and Management Agreements and to legal and prudential standards. Envestra’s management has the responsibility to monitor the
risks and compliance issues associated with APA’s performance and to report to the Board on these matters. As part of this process, independent engineering audits are conducted each year.

The Company has a comprehensive insurance program in place which is reviewed annually in conjunction with the Company’s insurance brokers and legal advisors.