Envestra

A major focus of Envestra is sustainability – doing the things that we believe will enable us to meet the long-term expectations of our shareholders and the community.

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We do this by protecting the environment in which we operate, delivering high quality services to the consumers supplied with energy via our networks, providing a safe working environment for our employees, encouraging their development and rewarding success. Allied to this is the support we provide to local communities and organisations with which we interact. By continually improving our performance in these areas we create a stronger future for Envestra.

Australia’s natural gas reserves are expected to last at least 100 years and over the next two decades, its use will grow to around 25% of the nation’s primary energy needs. Envestra’s ever expanding gas distribution networks will play a pivotal role in delivering this environment friendly fuel.

HEALTH AND SAFETY OF OUR PEOPLE

Management of occupational health and safety associated with the Company’s operations continued to receive close attention.

We have the responsibility to ensure that our major contractor, APA, adopts a sound approach to this important business activity. APA has more than 1,100 employees and contractors working for Envestra. During the year
nine lost-time injuries were sustained by APA employees, and seven among contractors. These compare with five and two in the previous year, respectively.

APA’s focus is on the frequency of lost-time and moderate injuries, defined as the Serious Injuries Frequency Rate (SIFR) and a range of activities aimed at preventing injuries. A SIFR of 10.3 for employees and contractors
was recorded in 2008-09. Although this is slightly above the target set for the year, it is a sound performance considering the nature of many of the operational activities undertaken.

During the year, four environmental audits and eight environmental emergency response exercises were conducted on our networks. These activities did not identify any major issues.

Envestra closely monitors the performance of its operator, APA, to ensure compliance with all requirements of the environmental licences and permits held by the Company. There were no material incidents during the year.

RISK MANAGEMENT

The Company, through its Executive Risk Management Committee, undertakes a comprehensive risk management assessment at least twice each year that aims to identify key business risks and ensure appropriate control mechanisms or other actions are in place to minimise exposures. This assessment, and the control mechanisms, is regularly reviewed by the committee throughout the year. The outcomes are monitored by the Audit and Risk Committee at regular intervals.

Our internal audit program is conducted by KPMG and focuses on controls associated with major risk areas.

During 2008-09 KPMG undertook reviews of Envestra’s compliance with its Treasury Policy, shared services cost allocations by APA under the Operating and Management Agreements, and APA’s compliance with environmental and employee policies.

ENVIRONMENTAL BENEFITS OF NATURAL GAS

As one of Australia’s largest distributors of natural gas, we take pride in our role in the distribution of this environment-friendly fuel.

In South Australia, Queensland and Victoria, the governments have introduced energy policies that prevent standard electric hot water services being installed in new dwellings. Only high efficiency natural gas units, gas-boosted solar systems and electric heat pumps qualify for installation under the new regulations. As from 1 July 2008, in South Australia, the Government also prohibited the replacement of standard electric hot water units in established dwellings when existing water heaters reach the end of their operational life.

The Victorian Government, in addition to its five-star energy rating system for new dwellings, requires the installation of a rainwater tank or solar hot water system in all new dwellings. Where solar hot water is the selected compliance option, units must be natural-gas-boosted wherever natural gas is available.

These initiatives are a clear recognition of the environmental importance of using natural gas as part of the climate change solution.

Envestra has in the past played a key role in promoting the use of natural gas through advertising and network development programs, particularly through direct promotional activities with land and property developers and builders, as well as gas connection and appliance installation incentives to consumers and key market partners. These activities help us maintain a penetration rate for natural gas, in new subdivisions, in excess of 95% in South Australia and Victoria. However, with increased government support in promoting natural gas, the funds for these promotional activities have been redirected to other areas.

WORKING WITH THE COMMUNITY

Envestra, through APA Asset Management (APA), undertakes strategic partnerships to promote the benefits of natural gas, to build and maintain business relationships, source market intelligence and generate new
growth opportunities.

Partnerships undertaken in 2008-09 with a range of key market participants included the:
•    Housing Industry Association
•    Master Builders’ Association
•    Plumbing Industry Association
•    Urban Development Institute of Australia
•    Property Council of Australia
•    Australian Land Development Engineers
•    Hotel and Restaurant Industry Associations.

As part of these activities we supported the training of apprentice chefs and other hospitality trainees through Hospitality Group Training and donated around 950 natural gas cookers to more than 130 schools.

Gas distribution is an essential community service and we believe our involvement with, and contribution to, these organisations reflects our corporate values and social responsibility and serves to promote the position of natural gas in the marketplace.

SUSTAINABILITY INDEX

The Australian Sustainability Index (AuSSI) tracks the performance of around 70 Australian companies that lead their industry in terms of economic, environmental and social criteria. Envestra’s performance in relation to sustainability has been recognised by its inclusion in the index.

CORPORATE GOVERNANCE

Envestra’s practices are consistent in almost all respects with the Corporate Governance Principles issued by the Australian Securities Exchange. The main areas of non-conformance are not having a majority of independent Directors and not having a Nomination Committee.