Envestra

The Company continued to produce strong cash flows from which distributions to shareholders were paid, and the cost of replacement capital expenditure was met.

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REVENUE

$389.1 million in 2008-09 ($346.0 million in 2007-08).

Envestra’s revenue and income, which is generated mainly from the delivery of natural gas for retailers, was $389.1 million, up $43.1 million on the previous year. The improvement in revenue was due mainly to cooler weather than the prior year in Victoria and South Australia, the increase in distribution tariffs across all three major States (South Australia, Victoria and Queensland), as well as revenue from the 23,000 new consumers added to the Company’s networks. Land sale proceeds and increased revenue from mains alterations works carried out during the year were further contributors to the higher revenue and income in 2008-09.

CASH FLOWS

$122.3 million in 2008-09 ($94.8 million in 2007-08).

The Company generated cash flows from operating activities of $122.3 million, up $27.5 million on the previous year due mainly to increased haulage revenue and the timing of an interest payment in 2007-08.

Distributions to shareholders amounted to $75.8 million, down $5.9 million on the prior year, due to the reduction in the amount paid per security. The remaining $46.5 million of operating cash flows was available to fund the $112.5 million capex program. The balance of the capex program was financed by a combination of equity raised during the year, and debt drawdowns. Cash flow cover of distributions, after financing costs and stay-in-business capital expenditure, was137%.

EARNINGS BEFORE INTEREST AND TAX (EBIT)

$213.0 million in 2008-09 ($175.1 million in 2007-08).

The significant EBIT improvement occurred despite operating expenses of $113.1 million being up $1.9 million as a result of higher leak repair costs (up $3.4 million) and system use gas costs (up $0.7 million). The strong revenue result noted above underpinned the EBIT result.

BORROWING COSTS

$158.3 million in 2008-09 ($144.8 million in 2007-08).

Borrowing costs (excluding loan note interest paid to shareholders) were $158.3 million, up $13.5 million on the previous period. The increase largely reflects higher interest rates on hedges put in place in late 2007 and higher indexation costs on the Company’s Capital Indexed Bonds (which is non-cash). These increases are largely recoverable through higher tariffs under the regulatory regime over the next four years, as tariffs are adjusted to reflect the historical CPI outcomes.

The average interest rate at 30 June 2009 was around 8.1%, compared to 7.1% in 2007-08.