Delta E,lectricity

Statement of Corporate Intent 2016-17

Statement of Corporate Intent 2016-17 1

Delta Table of Contents electr icit y

Slide

Shareholder Agreement . l 3

Objectives 4

Financial Performance Targets .i 5

Non Financial Performance Targets 6

Reporting Obligations ·' 7 .,

Share Dividend Scheme 8 - ·- .. --- -·- . .... ~ d-- ;

Policy Compliance 9

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Delta electr ici t y

Shareholder Agreement

Delta Electricity New South Wales

Government Trading Enterprises

Statement of Corporate Intent

Commencing 1 July 2016

This statement of Corporate Intent has been agreed between:

0 Chair

---­=--------

Dr Helen Garnett Delta Electricity

On behalf of the Board

~~ Interim Chief Executive

Raymond Madden

Delta Electricity

~ Voting Shareholder

The Honourable Gladys Berejiklian MP Treasurer, Minister for Industrial Relations

The Honourable Dominic Perrottet MP

Minister for Finance, Services and Property

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Delta electricity

Objectives

Business Objectives

• to complete the sale of its Brown Mountain power station;

• to project manage the safe demolition of Munmorah power station within the strict guidelines of the approved project budget;

• to promote the use of sustainable practices;

• to protect the environment by conducting its operations in compliance with NSW environment laws;

• to keep informed key stakeholders and the general public on the progress of the demolition of the Munmorah power station; and

• management of the lands surrounding the Munmorah power station.

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Delta electrici l y

Main Undertaking

Main Undertaking

• to supervise the demolition of the Munmorah Power Station and maintain the lands around Munmorah Power Station.

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Delta Financial Performance Targets elect r icit y

Delta Electricity is forecast to report an EBIT loss of $746K across the three year term to FY19. This is due to interest revenue from its cash investments offsetting the costs of the Munmorah demolition and its corporate arrangements.

The demolition of Delta's Munmorah power station is the principal activity throughout the FY17- FY19 period.

The SCI and Business Plan have been prepared on a business as usual basis with its primary objective being the demolition of the Munmorah power station and management of the surrounding land holdings.

Consistent with its reduced operation, Delta has significantly reduced its controllable expenditure budgets following the sale of its Vales Point power station in December 2015.

Statement of Corporate Intent 2016-17

3,000.0 ]

2,000.0

$k 1,000.0

Delta Electricity- Key Performance Indicators 2016/17 to 2018/19

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(1,000.0) Revenue EBITDA EBIT NPBT NPAT

• 2016/17 • 2017/18 • 2018/19

6

Delta elect r·ici ty

Non-Financial Performance Targets

At the commencement of the FY17 SCI, Delta has 2.6 full time equivalent employees. Description

Safety

Target

No lost tim e injtJries Delta's operation has been curtailed to the project management of the demolition of its Munmorah power station and completing the final stages of the sale of its Brown Mountain power station.

Environment No Category 1 Licence breaches1

Consequently the non financial performance measures. relate principally to safety and the environment.

Delta continues to maintain its focus on sustainability despite its reduced operating footprint.

1 A Category 1 Licence breach is where material harm to the environmental is caused or threatened .

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Delta electricity

Reporting Obligations

In accordance with the State Owned Corporations Act 1989, Delta Electricity will submit annual and half yearly reports to the Shareholders. These reports will include:

• a special purpose financial report including the key consolidated financial statements i.e. Statement of Comprehensive Income, Statement of Financial Position and Statement of Cash Flows (or equivalents); and

• commentary on performance against targets included in the Statement of Corporate Intent.

The annual and half yearly report will be submitted in accordance with prescribed timetables following approval by the Delta Electricity Board.

Quarterly report data will also be submitted to NSW Treasury for the September, December, March and June quarters in accordance with NSW Treasury requirements. These reports will include prescribed financial · information (including information on major capital projects) and commentary on issues affecting current and future performance of the organisation.

Forecast financial information will be submitted in accordance with NSW Treasury guidelines and capital expenditure, information will be entered into the Treasury On-Line Entry System {TOES and CAPTOES) in · accordance with NSW Government requirements.

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Delta Share Dividend Scheme electric i ty

NSW Treasury's Financial Distribution Policy for Government Businesses (TPP 14-04) specifies that a dividend payout ratio of?O per cent is to be used as the initial reference point in dividend policy negotiations for companies not having a specific Government dividend policy.

For 201'6-17, agreement of the final dividend payout ratio for Delta Electricity is subject to negotiation between NSW Treasury on behalf of the Shareholders and Delta Electricity.

Statement of Corporate Intent 2016-17 9

Delta elect r icit y

Policy Compliance

The Board of Delta Electricity confirms the following.

• The performance targets within the 2016-17 SCI are based on and supported by the Corporation's Business Plan and Budgets.

• The Corporation has asset management plans which are, as far as practicable, consistent with the principles of the NSW Government's · Total Asset Management (TAM) Requirements for Updating the NSW State Infrastructure Strategy (SIS) (TPP 08-02) and the NSW Government Procurement Policy (TPP 04-1) . Asset management policies and processes are adequate and appropriate to manage and control risks associated with physical assets.

• The requirements of NSW Treasury's Guidelines for Financial Appraisal (TPP 07-4) will be complied with for capital expenditure projects proposed to commence in 2016/17.

• All known 'key risks' and 'major emerging contingent liabilities' which could materially affect the current and future results of the Corporation for the forthcoming year have been disclosed.

• As a State Owned Corporation (SOC) , Delta Electricity will comply with relevant NSW Treasury circulars on accounting policy matters.

• The Corporation is aware of the internal audit and risk management policy outlined in Internal Audit and Risk Management Policy (NSW TC 09/08) and the associated Internal Audit and Risk Management Policy for the NSWPublic Sector (TPP 09-5). The Corporation has demonstrated its own practices are consistent with standards recommended for Australian Securities Exchange (ASX) listed companies and, where appropriate, has applied any additional requirements that are set out in NSWTC 09/08.

• The requirements of NSW Treasury's Policy Paper Guidelines for Boards of Government Businesses (TPP 09-2) have been complied with and related party intere·sts'which may represent a possible confl ict of interest for Delta Electricity's Directors have been disclosed.

• The Corporation has agreed to self-regulate and apply the principles of Premier's Memoranda M2012-04 Application of NSWPublic Sector Wages Policy 201Z

• The Corporation will comply With the requirements of Premier's Memoranda No. 2010-07 Working Together: Public Sector Workplace Health and Safety and Injury Management Strategy.

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Delta electnci ly

Policy Compliance

• The Corporation will comply with the requirements of the NSW Government Procurement: Small and Medium Enterprises Policy Framework.

• The Corporation will use its best endeavours to comply with the requirements of Premier's Memoranda No. 2010-03 Strengthening Aboriginal Employment Opportunities and Community Partnerships.

• The Board agrees to provide the Voting Shareholders with financial and other information, including information on major capital expenditure projects, on a quarterly basis to assess the performance against commitments in this SCI and to assess the value of the Shareholders' investment in the Corporation.

• The Board agrees to comply with Section 3.4 (Continuous Disclosure) of NSW Treasury's Reporting and Monitoring Policy for Government Businesses (TPP 05-2).

• The Corporation will comply with the requirements of Premier's Memoranda No. 2012-08 Use of Biofuels, where it is practicable, available and cost effective.

• The Corporatio·n will comply with the requirements of the Financial Distribution Policy for Government Businesses (TPP14-04) from and including the year ending 30 June 2016.

• The Corporation will comply with the requirements where applicable of Premier's Memoranda No. 2013-04 Implementation guidelines for procurement of publicly funded construction services.

• The Corporation will comply with the requirements where applicable of Treasury Circular 13/04 Financial Accounting Arrangements for the Crown Entity.

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