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Infinite Horizons
2
Infigen Energy Annual Report 2009
Contents
3
4 Company Milestones 6 Financial and Operational Highlights 8 Chairman’s Report 10 Managing Director’s Report 14 Global Energy Market 18 Asset Summary 20 Australia 22 United States 24 Germany and France 26 Commitment to Sustainability 28 Infigen Boards 30 Infigen Management 32 Corporate Structure 33 Corporate Governance Statement 50 Directors’ Report 66 Auditor’s Independence Declaration 68 Financial Statements 72 Notes to Financial Statements 154 Directors’ Declaration 155 Independent Auditor’s Report 157 Additional Investor Information 162 Glossary 165 Corporate Directory Company Milestones
2003/2004
2005
2006
2007
June 2003
Global Wind Partners
established as a
single asset private
investment vehicle
Commences
construction of
Lake Bonney stage 1
wind farm (80.5MW)
in South Australia
august 2004
Commences
construction of the
Alinta wind farm
(89.1MW) in Western
Australia
february
Lake Bonney stage 1
wind farm (80.5MW)
in South Australia
becomes operational
october
Admitted onto the
official list of the
Australian Securities
Exchange as Babcock
& Brown Wind
Partners (ASX: BBW)
December
Acquires Class B
interests in US 03/04
portfolio (186MW)
June
Commences
construction of
Lake Bonney stage 2
wind farm (159MW)
in South Australia
December
Achieves practical
completion for the
Alinta wind farm
(89.1MW) in Western
Australia
february
Securityholders
approve the acquisition
of Class B interests
in the US06 Portfolio
(335.2MW)
april
Miles George
appointed as
permanent CEO
may
Completes €1.03 billion
refinancing of global
wind farm portfolio
october
Securityholders
approve the acquisition
of Class B interests
in the US07 Portfolio
(371MW) and 50% of
the Portuguese Enersis
Portfolio (257MW)
December
Commences
construction of Capital
wind farm (141MW)
in New South Wales
4
4
Infigen Energy Annual Report 2009
Infigen has successfully transitioned to be Australia’s
leading specialist renewable energy business
June–July
Acquisition of Australian
and NZ wind energy
project development
assets, US wind asset
management business
and minority interests
august
Commences sales process
for the US business
Provides detail of
Australian development
pipeline
Reports an FY09 statutory
net profit of $192.9 million
2008
2009
february
Announces strategic initiative
to unlock value of European
wind energy portfolio
July
Enters into renewable energy
supply agreement for Sydney
Water Desalination Plant
august
Sale of Spanish portfolio
(420.7MW) agreed
september
Lake Bonney stage 2
wind farm (159MW) in
South Australia becomes
operational
november
Sale of 50% interest in
Enersis portfolio realises total
proceeds of $998 million
Graham Kelly appointed as
Independent Chairman
December
Management agreements
and exclusive financial
advisory agreement with
B&B terminated
January
Miles George appointed
Managing Director;
management function
internalised
Financial close of Spanish
portfolio sale realises total
proceeds of $1.42 billion
Commences 39MW extension
to Lake Bonney wind farm
(stage 3)
april
Securityholders approve name
change to Infigen Energy and
Employee Equity Incentive
schemes
Board changes announced
Commences US market
testing process
June
Full physical separation from
B&B complete with relocation
of Infigen head office
Board changes complete
5
Financial and
Operational Highlights
Revenue Type1, 2
(%)
100
(%)
80
100
(%)
60
100
80
40
80
60
20
60
40
0
40
20
0
20
PPA
Fixed tariff
Market
PPA
Fixed tariff
23
Market
PPA
Fixed tariff
8
23
Market
8
23
69
8
69
69
FY08
FY08
Generation
(GWh)
Operational Performance2,3
0
4500
Price
FY08
95.1
Generation
Price
85.1
Generation
Price
85.1
2,017
85.1
2,017
FY07
2,017
3,996
95.1
95.1
3,996
3,996
FY08
FY07
FY08
n
o
i
t
a
r
e
n
e
G
n
o
i
t
a
r
e
n
n
e
o
G
i
t
a
r
e
n
e
G
4000
(GWh)
3500
4500
(GWh)
3000
4000
4500
2500
3500
4000
2000
3000
3500
1500
2500
3000
1000
2000
2500
500
1500
0
2000
1000
1500
500
1000
0
500
0
(MW)
17
12
17
12
17
71
12
71
71
FY09
FY09
FY09
95.9
4,292
95.9
4,292
95.9
4,292
FY09
FY09
FY07
Lake Bonney 1
Alinta
FY08
Lake Bonney 2
FY09
Capital
Lake Bonney 3
Lake Bonney 2
Lake Bonney 3
Lake Bonney 2
Lake Bonney 3
Alinta
Lake Bonney 1
Lake Bonney 1
Capital
Alinta
600
Australian Installed Capacity4
(MW)
500
600
(MW)
400
500
600
300
400
500
200
300
400
100
200
300
0
89.1
159.0
80.5
Capital
159.0
80.5
89.1
100
200
0
100
0
89.1
FY08
159.0
89.1
FY09
80.5
89.1
FY08
80.5
FY08
80.5
89.1
FY09
80.5
FY09
39.0
141.0
39.0
141.0
159.0
39.0
141.0
89.1
159.0
80.5
159.0
89.1
FY10
80.5
89.1
FY10
80.5
FY10
1 Calculated on a GWh basis.
2 Includes Australia, US, Germany and France; excludes Spain
and Portugal.
3 Average prices restated at FY09 FX rates. Includes PTCs and RECs.
6
Infigen Energy Annual Report 2009
254.3
20.1
254.3
20.1
164.4
254.3
20.1
164.4
69.7
FY08
164.4
69.7
FY08
69.7
FY08
315.8
39.7
315.8
39.7
202.5
315.8
39.7
202.5
73.6
202.5
FY09
73.6
FY09
73.6
FY09
79.8%
79.8%
79.8%
Germany and France
Germany and France
Germany and France
400
300
($m)
350
250
400
300
200
350
250
150
300
200
100
250
150
50
200
0
100
150
50
100
0
50
(%)
0
100
(%)
80
100
(%)
40
80
60
20
60
40
0
40
20
0
20
0
($m)
4000
($m)
3500
($m)
Actively managing contracted/
Australia
market profile has provided Infigen
with secure cash flows and greater
Australia
revenue certainty in a volatile
environment
($m)
350
400
Australia
US
Europe
US
US
Europe
Europe
53.2
4.7
12.6
53.2
35.9
4.7
FY06
12.6
53.2
35.9
4.7
12.6
FY06
35.9
FY06
127.3
14.2
127.3
68.2
14.2
44.9
127.3
68.2
FY07
14.2
44.9
68.2
FY07
44.9
FY07
)
)
h
h
W
W
M
M
/
/
$
$
A
A
(
(
)
)
h
h
e
e
W
W
c
c
i
i
r
r
M
M
P
P
/
/
$
$
)
)
A
A
h
h
(
(
W
W
e
e
M
M
c
c
i
i
r
r
/
/
$
$
P
P
A
A
(
e
c
i
r
P
(
e
c
i
r
P
4500
100
4000
90
3500
100
4500
3000
4000
80
100
90
4500
2500
3500
4000
2000
3000
70
90
80
3500
1500
2500
3000
1000
60
2000
80
70
2500
500
1500
50
2000
1000
70
0
60
1500
500
1000
50
60
0
500
50
0
Infigen maintained a high average
price across the business, whilst also
increasing generation from continuing
81.3%
operations by 7.4% in FY09
60
100
80
81.3%
81.3%
77.6%
77.6%
77.6%
Australia
(incl RECs)
Australia
(incl RECs)
US
(Incl PTCs)
US
(Incl PTCs)
Net Debt
Australia
(incl RECs)
US
Class A Tax Equity
(Incl PTCs)
3,534.3
Net Debt
Class A Tax Equity
Infigen has a proven track record in
Net Debt
the delivery of its Australian projects.
A further 180MW of operational
capacity will come on line in FY10
with the completion of Capital and
Lake Bonney stage 3
4000
3000
($m)
3500
2500
4000
3000
2000
3500
2500
1500
3000
2000
1000
2500
1500
500
2000
0
1000
1500
500
1000
0
500
0
852.3
3,534.3
Class A Tax Equity
852.3
3,534.3
2,682.0
852.3
2,682.0
FY08
2,682.0
FY08
FY08
2,139.4
896.2
2,139.4
896.2
1,243.2
2,139.4
896.2
FY09
1,243.2
1,243.2
FY09
FY09
4 Lake Bonney stage 1 operational since FY05 and Alinta operational
since FY06.
(%)
100
80
(%)
60
100
40
80
20
60
0
40
20
PPA
(%)
100
PPA
80
60
40
20
0
PPA
Fixed tariff
Market
23
Fixed tariff
8
Fixed tariff
23
69
8
23
8
69
69
FY08
FY08
Price
FY08
Market
Market
95.1
3,996
95.1
85.1
95.1
3,996
2,017
85.1
3,996
2,017
(GWh)
0
Generation
4500
4000
3500
(GWh)
Generation
85.1
Price
Generation
Price
Revenues have risen rapidly over
the last four years and reflect the
substantial growth experienced
across the business
17
12
17
71
12
17
12
71
71
FY09
FY09
FY09
95.9
4,292
95.9
95.9
4,292
4,292
4500
100
4000
90
3500
4500
Wind is a zero cost fuel and
provides high EBITDA margins
100
)
)
h
h
W
W
across the business
3000
4000
M
M
80
100
/
/
4500
2500
$
$
90
A
A
3500
(
e
c
i
r
P
(
)
)
e
h
h
c
W
W
i
r
M
M
P
/
/
$
$
)
)
A
A
h
h
W
W
(
e
M
M
c
i
/
/
r
$
$
P
A
A
(
e
c
i
r
P
(
e
c
i
r
P
(
e
c
i
r
P
4000
2000
3000
70
90
80
3500
1500
2500
3000
1000
60
2000
80
70
2500
500
1500
50
2000
1000
70
60
0
1500
500
1000
60
0
500
50
50
0
FY07
2,017
FY08
FY09
FY07
FY08
FY09
FY07
Lake Bonney 1
Alinta
FY08
Lake Bonney 2
FY09
(MW)
Lake Bonney 1
Capital
Lake Bonney 3
Alinta
Capital
Lake Bonney 2
Lake Bonney 3
39.0
Lake Bonney 1
Alinta
Lake Bonney 2
Capital
Lake Bonney 3
141.0
39.0
141.0
Infigen’s balance sheet remains
sound with significantly reduced
net debt at year end
159.0
159.0
89.1
159.0
39.0
159.0
141.0
89.1
89.1
80.5
159.0
FY09
80.5
89.1
80.5
159.0
FY10
80.5
FY09
89.1
80.5
FY09
FY10
89.1
80.5
FY10
89.1
80.5
89.1
FY08
80.5
89.1
FY08
80.5
FY08
4500
4000
3500
3000
2500
2000
1500
1000
500
0
600
500
400
300
200
100
0
n
o
i
t
a
r
e
n
e
G
n
o
i
t
a
r
e
n
e
G
(GWh)
3000
4500
2500
4000
2000
n
o
i
3500
t
1500
a
r
e
n
3000
1000
e
G
2500
500
0
2000
1500
1000
500
0
(MW)
600
500
(MW)
400
600
300
500
200
400
100
300
0
200
100
0
Revenue5
Australia
US
Europe
($m)
400
350
($m)
300
($m)
400
250
400
350
200
350
300
150
300
250
100
250
200
50
200
150
0
100
150
Australia
Australia
US
US
Europe
Europe
254.3
20.1
53.2
4.7
12.6
35.9
53.2
127.3
14.2
68.2
127.3
44.9
14.2
127.3
FY07
14.2
68.2
FY06
4.7
53.2
12.6
50
100
4.7
35.9
12.6
0
50
FY06
35.9
(%)
0
EBITDA Margins6
FY06
100
68.2
44.9
FY07
44.9
FY07
254.3
164.4
20.1
254.3
20.1
69.7
164.4
164.4
FY08
69.7
FY08
69.7
FY08
(%)
80
100
(%)
60
100
80
40
80
60
20
60
40
0
40
20
0
20
0
($m)
81.3%
77.6%
81.3%
81.3%
77.6%
77.6%
Australia
(Incl RECs)
Australia
(Incl RECs)
US
(Incl PTCs)
US
(Incl PTCs)
Net Debt
Australia
(Incl RECs)
US
Class A Tax Equity
(Incl PTCs)
3,534.3
Net Debt
Net Debt
852.3
3,534.3
852.3
3,534.3
Class A Tax Equity
Class A Tax Equity
4000
Net Debt and Tax Equity7
($m)
3500
4000
3000
($m)
3500
2500
4000
3000
2000
3500
2500
1500
2000
3000
1000
1500
2500
500
1000
2000
0
500
1500
0
1000
2,682.0
852.3
FY08
2,682.0
2,682.0
FY08
500
0
315.8
39.7
315.8
315.8
202.5
39.7
39.7
202.5
73.6
202.5
FY09
73.6
FY09
73.6
FY09
79.8%
79.8%
79.8%
Germany and France
Germany and France
Germany and France
2,139.4
2,139.4
896.2
896.2
2,139.4
1,243.2
1,243.2
896.2
FY09
FY09
1,243.2
5 Revenue from continuing operations includes operations from date of
economic interest of Infigen B Class interest in the US.
6 Before corporate costs. FY09.
7 Infigen equity ownership basis.
7
FY08
FY09
Chairman’s Report
On behalf of the Boards, it is my pleasure
to present the 2009 Annual Report,
our first as an independent business.
Dear Securityholders,
It has been a year of significant change for Infigen. Your
Boards’ focus has been twofold – firstly, to strengthen our
corporate governance framework through changes to the
composition of the Boards and better alignment of interests
between securityholders and management – and, secondly,
to re-position the business from an externally managed asset
owner to a specialist renewable energy developer, owner
and operator, focused on organic growth opportunities.
At the end of 2008, the management agreements and the
exclusive financial advisory agreement with
Babcock & Brown (B&B) were terminated.
To reflect our new independent status, we changed our
name to Infigen Energy, which is derived from the words
infinite and generation. The word ‘infinite’ reflects the
availability of renewable fuel sources such as wind, and
the word ‘generation’ relates to the core function of our
business – renewable energy generation.
Notwithstanding a period of unprecedented market
volatility and economic uncertainty, Infigen is in a strong
financial position, with no refinancing deadlines, no
unfunded commitments and significant cash balances.
This year we reported a statutory net profit of $192.9 million,
a full year profit increase of 530%. This compares to a
$30.6 million reported profit in the prior year. This reflects
the profit on sale of the Spanish and Portuguese wind assets
but after termination and transition costs associated with
the separation from B&B. In the second half of the year, the
first period since separation, Infigen recorded a profit before
significant non-recurring items of $10.3 million.
Key features of the full year result saw revenue from
continuing operations increase by 24.2% to $315.8 million
and EBITDA after corporate costs increase by 27.6% to
$199.1 million.
Corporate costs of $26.6 million were below our guidance of
$28 million for the year. Net operating cash flow
on a per security basis of 20.4 cents was in line with
guidance. Our full year distribution of 9 cents per
security continued to be paid from net operating
cash flow after debt repayment.
8
Infigen Energy Annual Report 2009
The successful sale of our Portuguese and Spanish assets
for $2.4 billion realised net cash proceeds of
$555.4 million. These sales crystallised unrecognised value
in Infigen’s portfolio and enabled a significant reduction
in debt; they also released capital for very attractive
reinvestment opportunities such as Infigen’s on-market
buy-back and a further expansion of our Lake Bonney
project in South Australia.
Following the internalisation of management completed
at the end of 2008, we undertook a series of further
defining transactions to significantly enhance the value
and future prospects of Infigen’s business.
Key amongst these was the acquisition of B&B’s Australian
and New Zealand wind energy development pipeline
of over 1000MW of prospective projects. Infigen has
established a proven delivery capability with its existing
Australian projects all having been delivered ‘in-house’.
We believe these new projects have the potential to be
delivered in the next five years, placing Infigen in a strong
position to capitalise on growth opportunities arising from
increasing demand for renewable energy generation in
the Australian market.
We also acquired B&B’s US asset management business,
subsequently renamed Bluarc Management Group, which
provides Infigen with direct on-site and centralised wind
farm management and significantly enhances the value of
our existing US wind farm business.
Finally, Infigen acquired minority interests in the Caprock
and Aragonne wind farms in the US and in its Niederrhein
wind farm projects in Germany. Collectively, these
minority interests contributed a further 20MW of installed
capacity to the portfolio.
corporate governance
Re-organising the Boards and implementing appropriate
employee equity incentive plans were major priorities
during the year.
Following the internalisation of management on
31 December 2008, Miles George was appointed Managing
Director effective 1 January 2009. Having previously been
the Chief Executive Officer and having fulfilled critical roles
in the development and financing of Infigen’s wind energy
projects in Australia and overseas since 2000, Miles is key
to the implementation of our growth strategy.
After the change in Infigen’s status and the sale of
assets, there were some changes to the Boards. Mr Peter
Hofbauer, Mr Warren Murphy and Mr Nils Andersen
resigned as Directors of the Infigen Boards.
Following these resignations, Mr Michael Hutchinson
was appointed as a further independent non-executive
Director of each of the Infigen Boards and also became
a member of the Nomination & Remuneration and the
Audit, Risk & Compliance Committees. Michael has an
extensive record of achievement as a qualified professional
engineer with 40 years experience in consultancy, public
administration, senior management and corporate
governance.
The main focus of the Nomination & Remuneration
Committee since the internalisation of management
has been the development and implementation of the
Employee Deferred Security Plan and the Performance
Rights and Options Plan. These plans are designed to
further align the interests of employees with those of
securityholders, and in particular further align the long-
term interests of senior management and securityholders
through the Performance Rights and Options Plan.
market testing program
The Boards regularly assess asset values and, as
foreshadowed at the Extraordinary General Meeting held
on 29 April 2009, completed a market testing program for
Infigen’s US business. This confirmed that a robust appetite
exists for fully operational and contracted wind assets in
the US.
Based on these findings, the Boards considered it timely
for Infigen to commence a sale process for its US business.
We also commenced a process to sell our German
and French wind farm assets which we had previously
determined as non-core to Infigen’s future. The Boards
will not, however, sell the US or European businesses
if achievable sale prices do not exceed the benefits of
holding those investments.
These potential sales would enable us to focus available
capital and management resources on accelerating
Infigen’s development opportunities in Australia.
outlook
Infigen operates in an attractive industry poised for
further significant growth with a very strong long term
regulatory outlook. The Boards are confident that Infigen
is well positioned to take advantage of these growth
opportunities. Importantly, the social and political
environment remains favourable for our product.
With the increased focus on sustainability and broader
environmental concerns, renewable energy is now an
essential and growing component of a lower emission
energy mix for the future.
Infigen commands a leading position in the Australian
renewable energy industry, coupled with a large scale
diversified pipeline of quality development opportunities.
The successful sale of our US and European assets would
enable the deployment of capital to accelerate the
development of this pipeline.
We will provide updated guidance and commentary on the
Infigen business when the sale processes are completed.
Our efforts in completing full separation from B&B, and
delivering on a number of key milestones for the year,
reflect the outstanding efforts of the Managing Director
Miles George, his executive team and all Infigen staff.
I would also like to thank my Board colleagues for their
personal support and their dedication to the interests of
our business.
Finally, I would like to thank securityholders for their
continued support during the year. The Boards are
committed to maximising value for all securityholders.
Your Directors look forward to welcoming you at
our Annual General Meeting to be held at 11am on
25 November 2009 at the Radisson Plaza Hotel, Sydney.
Yours sincerely,
graham Kelly
Chairman
9
Managing Director’s Report
2009 was a period of significant achievement
for Infigen with the transition to an internally
managed specialist renewable energy
business and the successful delivery on
key strategic initiatives.
Dear Securityholders,
The 2009 financial year was a period of significant
achievement for Infigen with the separation from
Babcock & Brown and transition of the business to
an internally managed specialist renewable energy
business with expertise in development, ownership and
management of wind energy assets. We have continued
to manage the financial position and operations of Infigen
prudently throughout the year and delivered on key
strategic milestones.
Key milestones
The transition to an internally managed operating business
was completed with the termination of the management
agreements and exclusive financial advisory agreement
with B&B at the end of the 2008. The relocation of Infigen’s
Sydney offices in June signified the completion of full
physical separation.
Securityholders approved the change of our name to
‘Infigen Energy’ and the implementation of the employee
equity incentive plan to strengthen corporate governance
frameworks and further align management’s interests with
your own.
We secured a high quality Australian development
pipeline, internalised our asset management capability
in the US, and further consolidated the portfolio with
the acquisition of minority interests in Infigen’s US and
German wind farms.
During a time of unprecedented market volatility and
economic uncertainty, the sale of our Portuguese
and Spanish assets for $2.4 billion was a significant
and timely achievement. The sale enabled Infigen to
significantly reduce net debt and pursue attractive
reinvestment opportunities such as the on-market
buy-back and expansion to the existing Lake Bonney
wind farm.
Lake Bonney stage 3 wind farm is a significant step in
further strengthening Infigen’s position as Australia’s
leading wind energy business, increasing the total capacity
of the Australian assets to just over 500MW. The wind
farm benefits from a proven wind resource and further
leverages the existing grid connection investment.
Wind energy fundamentals & regulatory Developments
Favourable long term drivers, including strengthening
renewable energy policies in our key markets and improving
cost competitiveness, continue to gather momentum.
The execution of the on-market buy-back during the
year was consistent with Infigen’s disciplined approach
to investment. At the date of this report, Infigen had
purchased approximately 74.5 million securities or 8.5% of
issued capital at an average security price of 90.1 cents.
In Australia, the legislation mandating an expanded
Renewable Energy Target (RET) has been enacted, requiring
electricity retailers and other large electricity buyers to
purchase increasing proportions of their electricity from
renewable generators, rising to 20% by 2020.
10
Infigen Energy Annual Report 2009
The expanded RET target is more than four times the size
of the previous target and will require a steady increase
in the uptake of emission-free renewable energy to reach
45,000 gigawatt hours per annum by 2020.
The RET scheme is technology neutral and encourages the
target to be fulfilled at least cost. We believe that Infigen is
well placed to benefit from the scheme as wind energy is
the most cost competitive form of utility scale renewable
energy generation technology, and it is expected to
contribute significantly to satisfying the expanded target.
We anticipate that around 600-800MW of additional
renewable energy capacity could be built each year.
In the US, several components of the 2009 economic
stimulus package offered renewable energy incentives
and financing alternatives. In addition, draft legislation
currently envisages a national renewable energy target.
These are undoubtedly positive developments for the US
wind energy industry which delivered approximately 42%
of all new-build electricity generation capacity in the US
in 20081.
fy09 Highlights
Infigen recorded a strong financial result with revenue
and EBITDA up 24.2% and 27.6% respectively compared
to 2008. The 2009 financial result clearly demonstrates
the quality of Infigen’s business, with the stability of its
revenues from continued growth in new operations and
high EBITDA margins. Corporate costs of $26.6 million
were below guidance of $28 million.
Infigen’s policy of paying distributions from net operating
cash flow after debt repayment remained unchanged. Net
operating cash flow was $169.5 million or 20.4 cents per
security for the full year and fully covered the distribution
of 9 cents per security.
The statutory net profit of $192.9 million for the full year
ended 30 June 2009 compares to $30.6 million in the prior
year. This result reflects the profit on sale of the Spanish
and Portuguese assets, offset by costs associated with the
separation from B&B.
operational performance
Generation from continuing operations was 4,292GWh for
the full year ended 30 June 2009 compared to 3,996GWh
in the prior year, an increase of 7.4%. We also achieved a
higher average price of $95.90 per megawatt hour for the
financial year ended 30 June 2009, the result of a prudent
balance between contracted revenues and managed
exposure to market prices.
We continue to implement our direct operational control
strategy for Operations and Maintenance (O&M) activities
which has delivered tangible operational performance
benefits during the year. Availability at the Cedar Creek
and Sweetwater 4 wind farms was consistently above the
availability target range of 96%–97%, exceeding availability
levels offered by traditional warranty arrangements.
1 Source: American Wind Energy Association (AWEA).
The 2009 financial result clearly
demonstrates the quality of
Infigen’s business, stability of its
revenues with continued growth
from new operations. Infigen’s
policy of paying distributions from
net operating cash flow after debt
repayment remained unchanged.
The Australian wind farms achieved an average price
of $89.70 per megawatt hour and an EBITDA margin of
81.3%. The wind farms performed at an average Capacity
Factor of 30% which was down on the prior year of 36%.
This performance reflects short term availability issues at
Lake Bonney stage 2 related to failures of wind turbine
gearboxes and underground high voltage cable joints.
The turbine manufacturer is currently working to repair
and replace the failed gearboxes. This is expected to be
completed in FY10 and we expect to be compensated for
lost production. We have repaired the failed joints and are
also building additional redundancy into the Lake Bonney
wind farm collection system as part of the construction
of Lake Bonney stage 3. This will allow us to isolate any
further failures quickly and repair them with less impact
on overall production.
The US business generated an average price of $92.40 per
megawatt hour and achieved an EBITDA margin of 77.6%.
The US wind farms achieved a Capacity Factor of 34%,
which was down slightly on the prior year of 36%. This
performance reflects lower wind speeds experienced in
May and June, as well as some availability issues at wind
farms which Infigen does not yet control directly.
Overall, the performance of the European portfolio
(French and German wind farms) was consistent with the
prior year. The portfolio achieved a Capacity Factor of 19%
and generated an average tariff of $163 per megawatt
hour, resulting in an EBITDA margin of 79.8%.
balance sheet
Infigen’s balance sheet remains sound with substantial
cash balances of $405 million at year end. Gearing was
significantly reduced following the sale of the Spanish
and Portuguese wind farms to 57.9% from 65.3%. There
are no asset impairments, off-balance sheet liabilities or
unfunded commitments.
Infigen’s corporate debt facilities are structured as
long term amortising facilities with no refinancing
requirements. Furthermore, we continue to benefit from
attractive pricing under the terms of these facilities.
11
Managing Director’s Report
Our key debt ratios as at 30 June 2009 remain sound as
illustrated by a Net Debt to EBITDA ratio of 6.2x, Debt
Service Cover Ratio (DSCR) of 1.3x and Interest Cover Ratio
of 2.3x. Infigen currently hedges approximately 90% of
its debt against interest rate movements with an average
maturity of swaps of approximately 8.5 years. The effective
interest rate on borrowings was 6.4% as at 30 June 2009.
A total of $491.8 million was applied towards capital
expenditure on continuing operations during the year.
Construction and commissioning activities at our Capital
wind farm remain on time and within budget. At 141MW,
the Capital wind farm is the largest utility scale wind farm
in New South Wales and is contracted to deliver all of
the renewable energy requirements for Sydney Water’s
desalination plant. At 30 June 2009, there remained
$89 million of capital expenditure to complete the Capital
and Lake Bonney (stage 3) wind farms. This commitment
is fully covered by existing cash balances.
We have established a solid
platform to ensure that Infigen
can secure attractive growth
opportunities in Australia.
organic growth prospects
We have established a solid platform to ensure that Infigen
can secure attractive growth opportunities in Australia
with the acquisition of a high quality Australian wind
energy development pipeline.
This pipeline is diversified across six states and comprises
12 key projects representing 1000MW and a further 650MW
of other prospects. The key projects have potential to be
delivered over the next five years and are expected to
generate opportunities for attractive investments targeting
high teens equity returns.
The prospective investment opportunities available
within this pipeline place Infigen in a very good position
to capitalise on the mandated strong growth in uptake
of renewable energy under the expanded national RET
legislation, and also from increasing voluntary uptake of
renewable energy by various government agencies and
large corporate electricity users.
We have two wind farms currently under construction
in Australia. The Capital wind farm, with a total capacity
of 141MW, is scheduled to complete commissioning and
be fully operational at the end of October 2009. The
39MW stage 3 extension to our Lake Bonney wind farm is
currently progressing through the mechanical completion
stage and is expected to be commissioned and fully
operational by April 2010. The completion of Capital
and Lake Bonney stage 3 wind farms will add 180MW of
operational capacity in FY10.
outlook
We have a clear direction and capacity to further enhance
Infigen’s position as Australia’s leading specialist renewable
energy business and we will continue to manage the
business in order to maximise risk adjusted returns for
securityholders. As renewable energy requirements
increase, the industry in which Infigen operates continues
to exhibit very strong prospects for growth. The recent
implementation of legislation expanding the national
Renewable Energy Target (RET) provides Infigen with a
significant growth opportunity in Australia.
12
Infigen Energy Annual Report 2009
It is a testament to the entire
Infigen team that the business
is in such good shape after a
year of considerable change and
uncertainty, during which we
substantially refocused corporate
governance and our strategic
direction for the benefit of our
securityholders.
As highlighted by the Chairman, our priorities remain
focused on the sale processes in the US and Europe
and the acceleration of opportunities in our Australian
development pipeline, as appropriate.
Infigen has a leading Australian wind energy business
by scale, diversity and quality of operating assets
and pipeline and we remain optimistic about the
opportunities available in this market. We have a
proven Australian development team. In executing the
Australian development pipeline, we will continue to
implement our proven strategy utilising a
build-contract-finance sequence, which has
demonstrated superior returns on investment.
We also remain focused on implementing our direct
operational control strategy for asset management
and delivering higher value products with innovative
approaches to satisfying the requirements of our
customers.
It is a testament to the entire Infigen team that
the business is in such good shape after a year of
considerable change and uncertainty, during which we
substantially refocused corporate governance and our
strategic direction for the benefit of our securityholders.
I would like to echo the comments of the Chairman
and thank securityholders for their continued support
throughout the year and I look forward to providing
you with a further update on the performance of our
business at the Annual General Meeting.
Miles George
Managing Director
13
Global Energy Market
tHe global energy marKet Is In transItIon
The global energy industry has weathered several boom-and-bust cycles over the last several decades as well as major
technology transformations, with nuclear energy’s rise in the 1970s and the combined cycle gas boom in the 1990s. But
the industry is now entering a transformation that is likely to dwarf those events, driven by rapid growth in developing
countries, continuing resource depletion, and most important of all, a new age of carbon policy.
The election of Barack Obama to the US presidency is expected to accelerate global policy consensus on the need to
monetize the environmental cost of greenhouse gas emissions. The resultant higher costs of carbon-based energy
generation will quicken a transition to renewable and clean power. While the economic crisis has slowed this trend in 2009,
it is not expected to alter the global acceleration of low-carbon energy generation growth over the longer term.
In the context of this shifting market environment, world energy demand is expected to increase by more than 50% by
2020, with electricity generation expected to account for over half of the increase in global primary energy consumption.
energy consumption Demand, 1990–2020
OECD Electricity Consumption
Non-OECD Electricity Consumption
H
W
T
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1990
2005
2015
2020
Source: IEA
To meet generation requirements through to 2020, more than 2,500GW of new energy generation capacity is expected
to be required, totaling US$4.4 trillion of capital investment excluding transmission and fuel costs. Of the total, 820GW is
needed to replace aging plant capacity that will reach the end of its economic life.
The largest share of projected investment to meet this growing demand over the next decade will be renewable energy
generation, which is forecast to see US$2 trillion in investment between 2009 and 2020, representing 46% of total energy
generation investments. As the largest growth segment of the energy market, renewables will account for 49% of total
capacity additions in 2020, up from 21% in 2008.
evolution of global energy generation capacity mix between 2008 and 2020
Renewable
Large Hydro
Nuclear
Gas
Oil
CCS (nominal value)
Coal
W
G
7000
6000
5000
4000
3000
2000
1000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Emerging Energy Research
14
Infigen Energy Annual Report 2009
Charting A New Energy Landscape
tHe sHare of reneWables In tHe global energy generatIon mIX WIll surge to oVer 12% by 2020,
up from 6% In 2008, WItH WInD anD solar to leaD tHe Way
Increasing renewable energy requirements – both to address greenhouse gas concerns and to minimize dependency
on imports of depleting fossil fuel resources – and emerging carbon regimes that directly target global warming are
expected to drive a faster shift to clean and renewable energy generation.
The growing shift from fossil-fuel energy generation to renewable energy generation will continue to be led by onshore
wind, with a growing role for solar PV. Amongst renewables, wind energy is expected to account for 64% of total
renewables capacity additions during the next decade. Solar will be the second largest renewable added, with over
150GW added by 2020.
evolution of renewable energy generation additions between 2008 and 2020
120
100
80
W
G
60
40
20
0
Small Hydro
Ocean
Geothermal
Biomass and Waste
Solar PV
Solar CSP
Offshore Wind
Onshore Wind
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Emerging Energy Research
In terms of real impact on the energy mix, renewables penetration has varied widely by country – with proactive policies
across several European countries yielding the highest contributions from wind and other renewables. Nonetheless
renewables are gaining traction globally, led by wind, as renewables penetration hovers around 6% in 2008, expected
to rise to 12% by 2020.
renewable penetration by country, 2008 and 2020
2020
2008
44
42
34 32 31
29 28 26
24 24
23
21 21 21 20
18 17
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
k
r
a
m
n
e
D
l
a
g
u
t
r
o
P
i
n
a
p
S
d
n
a
e
r
I
l
e
c
e
e
r
G
d
n
a
e
c
l
I
l
d
n
a
a
e
Z
w
e
N
y
n
a
m
r
e
G
a
i
r
t
s
u
A
n
e
d
e
w
S
s
d
n
a
l
r
e
h
t
e
N
y
l
a
t
I
5
2
-
U
E
d
n
a
n
i
F
l
Source: Emerging Energy Research
K
m U
i
u
g
e
B
l
12
9
S
U
i
a
n
h
C
a
i
l
a
r
t
s
u
A
15
Global Energy Market
As the largest market by far over the next decade for wind, solar, nuclear, and large hydro, China’s role in the global
energy generation industry will increasingly drive technology and cost improvements. With a national policy geared
to local industry advancement, China will remain a market for foreign technology and expertise that will eventually
contribute to an explosion of Chinese energy technology exports in the not-too-distant future.
In Australia, a greater urgency to reduce the country’s GHG emissions exposure, and diversify the generation mix, has
led to the implementation of the expanded national Renewable Energy Target (RET) legislation in August 2009. The RET
has raised Australia’s renewable target fourfold, to 20% of the country’s energy supply by 2020. The passage of RET will
primarily drive increased wind growth, but will also spur increased technology advancement in geothermal, wave and solar.
global fInancIal crIsIs Has DampeneD recent WInD groWtH, but a rebounD Is aHeaD as stImulus,
neW reneWable polIcIes taKe HolD
The global wind industry saw expansive growth in 2008, topping 120GW installed worldwide with an annual increase of
23%. In the long term, Emerging Energy Research anticipates this figure will rise steadily to over 600GW installed by 2020.
However, the global financial crisis has significantly impacted the wind project finance market during the past year and,
conversely, placed downward pressure on the cost of wind turbine equipment globally by driving down the price of key
commodities such as steel and copper.
global Wind capacity additions forecast
Rest of World
Asia Pacific
North America
Europe
d
e
d
d
a
W
G
70
60
50
40
30
20
10
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Emerging Energy Research
However, accelerating carbon policy momentum, new long-term renewable policy standards, and a growing focus on
renewable energy transmission development are setting the stage for a significant increase in long-term growth potential,
especially as liquidity returns to the financial sector.
In the US, the Obama administration and Congress recognised the strain of the financial crisis and designed several
components of the American Recovery and Reinvestment Act of 2009 (ARRA) economic stimulus package as a means to
offer relief to the wind market by creating several financing alternatives to the PTC – which is the primary US federal tax
incentive for wind energy.
In Australia, the expanded national Renewable Energy Target (RET) legislation has been enacted and is backed by a
meaningful shortfall penalty of A$65 per MWh for energy retailers that fail to comply with the target.
oVer tHe long term, WInD energy WIll remaIn cost-competItIVe WItH neW buIlD conVentIonal
energy optIons
In the near-term, the fall in natural gas prices during 2008 poses one of the most significant risks to new wind plants’ ability
to compete for utility energy demand in most markets.
Nevertheless, recovery in the price of natural gas will likely be linked closely to the general economic recovery. Moreover,
natural gas production-price linkages, LNG infrastructure challenges, and ongoing conflicts in the Middle East are
expected to continue contributing to price volatility through the next decade. As such, utility procurement of wind energy
as a long-term hedge against fossil fuel price volatility is expected to continue.
16
Infigen Energy Annual Report 2009
Historic natural gas fuel price Volatility
u
t
b
m
m
/
$
S
U
16
14
12
10
8
6
4
2
0
Gas Price Trend
9
9
n
a
J
0
0
r
p
A
1
0
l
u
J
2
0
t
c
O
4
0
n
a
J
5
0
r
p
A
6
0
l
u
J
7
0
t
c
O
9
0
n
a
J
0
1
r
p
A
1
1
l
u
J
2
1
t
c
O
4
1
n
a
J
5
1
r
p
A
Source: Henry Hub
While wind’s cost-of-energy competition with natural gas will likely continue for several years, over the long term the
adoption of a transparent price on carbon emissions would substantially improve wind’s position as the least-cost option
available to utilities for new energy capacity.
Assuming a levelised cost basis and factoring in a carbon cost of US$20/ton and fuel price volatility, the cost of electricity
generation from traditional natural gas and coal fuel sources is expected to rise to a band between US$55–80/MWh. For
new nuclear, supply chain bottlenecks and planning challenges are driving costs above US$100/MWh, while initial CCS
projects face total costs well over US$100/MWh. Consequently, by the middle of the next decade, wind energy is expected to
be among the lowest-cost forms of energy as carbon plays a greater role in defining the cost of energy generation globally.
In Australia, the introduction of the expanded national Renewable Energy Target (RET) legislation and the planned
introduction of the Carbon Pollution Reduction Scheme could have far-reaching implications for the long-term
competitive position of wind energy within Australia’s energy generation mix. Given the proposed design of the
legislation and the price of carbon emissions allowances, an Australian Greenhouse Gas emissions policy, together
with greater international cooperation and action is expected to result in wind energy becoming the least-cost energy
generation option available to Australian utilities for new energy generation capacity build-out.
comparative cost of Wind with conventional energy generation
Cost of Electricity (US$/MWh)
)
h
W
M
/
$
S
U
(
t
s
o
C
160
140
120
100
80
60
40
20
0
Carbon Cost (US$20/Ton)
Cost of Electricity (US$/MWh)
)
h
W
M
/
$
S
U
(
t
s
o
C
160
140
120
100
80
60
40
20
0
Coal
CCGT
(2009
Gas Price)
Onshore
Wind
CCGT
(2008
Gas Price)
Nuclear
CCS
CCGT
(2009
Gas Price)
Onshore
wind
Coal
CCGT
(2008
Gas Price)
Nuclear
CCS
Source: Emerging Energy Research
17
Asset Summary
Country
Australia
Sub Total3
Germany
France
US1
Sub Total
Sub Total – Operational
Sub Total – Under Construction
Total as at 30 September 2009
Wind Region
Western Australia
South Australia
New South Wales
Germany
France
US – South1
US – North West
US – South West
US – North East
US – Central
US – Mid West
Number of
Wind Farms
5
12
6
18
39
2
41
Capacity (MW)
Long Term Mean Energy
Production (GWh pa)
Total
89.1
278.5
140.7
508.3
128.7
52.0
829.6
41.0
88.0
111.5
300.5
186.2
1,556.7
2,066.0
179.7
Ownership1
Total
Ownership1
Capacity Factor
Energy Sale2
Number of
Turbines
89.1
278.5
140.7
508.3
128.7
52.0
509.4
20.5
88.0
98.7
200.3
172.5
1,089.4
1,598.7
179.7
2,245.7
1,778.4
54
112
67
233
78
26
607
41
63
57
274
136
1,178
1,435
80
1,515
367
809
443
1,619
276
119
2,908
120
273
331
959
513
5,104
6,557
561
7,118
367
809
443
1,619
276
119
1,779
60
273
293
640
470
3,515
4,968
561
5,529
47%
33%
36%
36%
24%
26%
40%
33%
35%
34%
36%
31%
37%
35%
36%
35%
PPA & Market
Fixed Tariff
Fixed Tariff
PPA & Market
1 Ownership is shown on the basis of active Infigen ownership as represented by the percentage of B Class Member interest,
with the exception of a 5% direct equity interest in the Aragonne Mesa wind farm.
2 ‘PPA’: Power Purchase Agreement.
3 Includes assets under construction.
18
Infigen Energy Annual Report 2009
Country
Australia
Sub Total3
Germany
France
US1
Sub Total
Sub Total – Operational
Sub Total – Under Construction
Total as at 30 September 2009
Wind Region
Western Australia
South Australia
New South Wales
Germany
France
US – South1
US – North West
US – South West
US – North East
US – Central
US – Mid West
Total
89.1
278.5
140.7
508.3
128.7
52.0
829.6
41.0
88.0
111.5
300.5
186.2
1,556.7
2,066.0
179.7
89.1
278.5
140.7
508.3
128.7
52.0
509.4
20.5
88.0
98.7
200.3
172.5
1,089.4
1,598.7
179.7
2,245.7
1,778.4
5
12
6
18
39
2
41
Number of
Wind Farms
Capacity (MW)
Ownership1
Long Term Mean Energy
Production (GWh pa)
Number of
Turbines
Total
Ownership1
Capacity Factor
Energy Sale2
54
112
67
233
78
26
607
41
63
57
274
136
1,178
1,435
80
1,515
367
809
443
1,619
276
119
2,908
120
273
331
959
513
5,104
6,557
561
7,118
367
809
443
1,619
276
119
1,779
60
273
293
640
470
3,515
4,968
561
5,529
47%
33%
36%
36%
24%
26%
40%
33%
35%
34%
36%
31%
37%
35%
36%
35%
PPA & Market
Fixed Tariff
Fixed Tariff
PPA & Market
19
Australia
Year
2009
Capacity Factor
Generation (GWh)
30%
875
Number of Wind Farms
Number of Turbines
Total Capacity (MW)
5
233
508.3
Key Financials
Revenue1
EBITDA
Contribution to EBITDA2
EBITDA Margin
FY08
$69.7m
$59.5m
14.8%
85.3%
FY09
$78.4m
$63.7m
15.5%
81.3%
1 FY08 includes pre-commissioning revenue from Lake Bonney stage 2. FY09 includes banked RECs of $4.8m.
2 EBITDA before corporate costs. Includes RECs for FY09.
Australia has some of the world’s best wind resources
and is a major growth market for wind energy. At the end
of 2008 the Australian wind energy market had a total
capacity of 1,306MW and a significant amount of capacity
proposed for development or construction.
The shortfall penalty for non-surrender of Renewable
Energy Certificates is $65 per megawatt hour (MWh),
up from a previous penalty of $40/MWh, which aims to
encourage compliance and ensure the RET remains an
incentive for investment in renewable energy.
Legislation to implement the expanded national
Renewable Energy Target (RET) scheme was passed by the
Commonwealth Parliament on 20 August 2009 and is now
in place. The Government’s RET scheme is designed to
ensure that 20 per cent of Australia’s electricity comes from
renewable sources by 2020. The expanded RET increases
the current RET by over four times, from 9,500 gigawatt-
hours to 45,000 gigawatt-hours in 2020. The annual target
profile is to be maintained at 45,000 gigawatt-hours from
2020 to 2030, at which point the scheme will conclude.
The RET will absorb existing and proposed State and
Territory renewable energy schemes into a single national
scheme. As the RET scheme is technology neutral and
encourages the target to be fulfilled at least cost, it is
expected that wind, being the most competitive form of
renewable energy generation, will contribute significantly
to Australia’s future generation mix.
The proposed introduction of the Carbon Pollution
Reduction Scheme (CPRS) in 2011 will also stimulate growth
in renewable energy and after the conclusion of the RET
in 2030 will be the major driver of new renewable energy
installation. The RET and CPRS are key components of the
Government’s emissions mitigation strategy and are part of
the Government’s longer term goal of reducing Australia’s
emissions by 60% compared with 2000 levels by 2050.
Infigen is the leading wind energy generation owner
and operator in Australia, with five wind farms with a
total capacity of 508MW and a long term mean energy
production of 1,619GWh per annum. In July 2009 Infigen
acquired a high quality development pipeline across six
Australian states, comprising 1,000MW of 12 key projects
and a further 650MW of other prospects.
20
Infigen Energy Annual Report 2009
Capacity Factor and Production
Actual
Capacity Factor
36%
768
875
30%
33%
541
r
o
t
c
a
F
y
t
i
c
a
p
a
C
40%
35%
30%
25%
20%
15%
10%
5%
0%
FY07
FY08
FY09
REC Price (A$/REC) 3 – Lake Bonney 2
900
800
700
600
500
400
300
200
100
0
)
h
W
G
(
n
o
i
t
c
u
d
o
r
P
43.2
48.4
Penalty
C
E
R
/
$
A
50
40
30
20
10
0
FY08
FY09
3 Average for financial year.
Infigen has two wind farms currently under construction:
– Capital and Lake Bonney stage 3. Capital wind farm is
expected to be fully commissioned by the end of October
2009 and once fully operational will have an installed
capacity of 141MW. The turbines at Lake Bonney stage 3
are fully erected and are currently progressing
through the mechanical completion stage. Lake
Bonney stage 3 is expected to be fully operational in
April 2010 and will have an installed capacity of 39MW.
Statistics provided by Global Wind Energy Council (GWEC) (2008)
Generation at Infigen’s three operational Australian wind
farms for the 12 months ending 30 June 2009 reached
875GWh, up 14% on the prior year reflecting the first
full period contribution from Lake Bonney stage 2. The
Australian wind farms performed at an average Capacity
Factor of 30% which was down on the prior year of 36%.
This performance reflects short term availability issues at
the Lake Bonney stage 2 wind farm associated with failures
of wind turbine gearboxes and several underground high
voltage cable joints. The turbine manufacturer is currently
working to repair and replace the failed gearboxes. This is
expected to be completed in FY10 and Infigen expects that
it will be compensated for lost production.
At 30 June 2009, Infigen retained $4.8m of unsold
renewable energy certificates (RECs) on balance sheet
which were generated throughout the year. Including these
RECs the Australian business generated an average price of
$89.70/MWh and achieved an EBITDA margin of 81.3%. This
also includes a higher average price of $48.40 for renewable
energy certificates, up from $43.20 in the prior year.
21
United States
Year
2009
Capacity Factor
Generation (GWh)
34%
3,174
Number of Wind Farms
Number of Turbines
Total Capacity (MW)1
18
1,178
1,089.4
Key Financials
Revenue2
EBITDA3
Contribution to EBITDA
EBITDA Margin
FY08
$234.2m
$186.7m
46.3%
79.7%
FY09
$301.2m
$233.8m
56.7%
77.6%
1 On the basis of active ownership as represented by the percentage ownership of Class B Member interest.
2 Includes PTC revenue of $69.5m in FY08 and $98.7m in FY09.
3 EBITDA includes PTCs and is before corporate costs.
The US wind energy industry experienced substantial
growth in 2008 with a record 8,358MW of new capacity
installed during the year – enabling it to surpass Germany
as the largest wind market in the world. This growth
represents a 50% increase in new installations over 2007,
with average US industry growth over the past five years
at 32% p.a.
The primary Federal Government incentive for wind energy
development is the Production Tax Credit (PTC) system,
which provides an income tax credit of 2.1 cents/kilowatt-
hour for electricity generated with wind energy for the first
10 years of a qualifying project’s operations. In addition,
State-based incentives and targets provide further impetus
to the growth of the US wind energy market. There
are currently 34 States and one District in the US with
renewable energy usage targets, which include specific
renewable portfolio standards (RPS) policies.
In February 2009, the US Congress passed the American
Recovery and Reinvestment Act (ARRA) economic stimulus
package, which included: a three-year extension to the
PTC through December 2012; an option to elect a 30%
Investment Tax Credit (ITC) as an alternative to the PTC; a
new US$6 billion Department of Energy (DOE) renewable
energy loan guarantee program, and targeted provisions
to encourage investment in new transmission to facilitate
the expansion of renewable energy generation.
The American Clean Energy and Security Act of 2009,
also known as the Waxman-Markey Bill, was approved
by the House of Representatives on 26 June 2009 and is
currently progressing through the Senate. This Bill contains
a provision to reduce carbon dioxide emissions 17% below
2005 levels by 2020 and 83% below 2005 levels by 2050 and
includes a national renewable electricity target.
Whilst the recent regulatory changes do not impact
Infigen’s existing pre-qualified US portfolio, these are
undoubtedly positive developments for the US wind
energy industry which accounted for approximately 42% of
new build electricity generation capacity in the US in 20081.
1 Source: AWEA.
22
Infigen Energy Annual Report 2009
Actual
Capacity Factor
Capacity Factor and Production
36%
36%
40%
r
o
t
c
a
F
y
t
i
c
r
a
o
p
t
c
a
a
C
F
y
t
i
c
a
p
a
C
35%
40%
30%
35%
25%
30%
20%
25%
15%
20%
10%
15%
5%
0%
10%
5%
0%
Actual
Capacity Factor
36%
1,375
1,375
FY07
FY07
36%
3,064
3,064
FY08
FY08
US Electricity and PTC price4
PTCs
Electricity
Electricity
PTCs
81
81
94
94
h
W
M
/
$
A
h
W
M
/
$
A
100
90
80
100
70
90
60
80
50
70
40
60
30
50
20
40
10
30
0
20
10
0
FY07
FY08
4 Restated at FY09 FX Rates. Includes PTCs.
FY07
FY08
4000
3500
4000
3000
3500
2500
3000
2000
2500
1500
2000
1000
1500
500
0
1000
500
0
)
h
W
G
(
n
o
i
)
t
h
c
W
u
d
G
o
(
r
n
P
o
i
t
c
u
d
o
r
P
34%
3,174
34%
3,174
FY09
FY09
92
92
FY09
FY09
Infigen’s US business comprises 18 wind farms across six
wind regions with total installed capacity of 1,089.4MW
and a long term mean energy production of 3,515GWh per
annum2. Infigen is the sixth largest wind energy participant
in the US market and is a leading US independent
wind energy producer with a complementary asset
management business.
Infigen’s US asset management business, Bluarc
Management Group, is in the process of transitioning
to direct control of all operational and maintenance
(O&M) activities as initial O&M service agreements roll off.
Having direct control of O&M activities in these wind
farms is expected to drive operational and financial
improvements.
Statistics provided by GWEC (2008)
Generation at Infigen’s US wind farms for the 12 months
ending 30 June 2009 was 3,174GWh, up 4% on the prior year.
The US business generated an average price of $92.40 per
megawatt hour and achieved an EBITDA margin of 77.6%3.
The US wind farms achieved a Capacity Factor of 34%,
which was down from the prior year of 36%. This
performance primarily relates to the lower wind resource
experienced during May and June, as well as availability
issues, predominantly at the Allegheny Ridge and Caprock
wind farms, where Infigen does not yet have direct
operational control.
2 On the basis of active ownership as represented by the percentage
ownership of Class B Member interest.
3 Includes PTCs.
23
Germany and France
Year
2009
Capacity Factor
Generation (GWh)
19%
243
Number of Wind Farms
Number of Turbines
Total Capacity (MW)
18
104
180.7
Key Financials
Revenue1
EBITDA
Contribution to EBITDA
EBITDA Margin
1 At actual FX rates.
FY08
$19.9m
$16.2m
4.0%
81.4%
FY09
$39.7m
$31.7m
7.7%
79.8%
germany
The wind energy market in Germany is the second largest in
the world, with a cumulative installed capacity of 23,903MW
or around 20% of global cumulative installed capacity, as at
the end of 2008. It experienced moderate growth in 2008,
adding 1,665MW of new capacity during the year, compared
to 1,667MW of capacity installed during 2007.
The German market is supported by a stable regulatory
environment aimed at achieving its long-term renewable
energy goals. In 1991, Germany introduced a feed-in law
that helped develop the wind energy market. In 2000, the
Renewable Energy Sources Act (EEG) was passed, creating
new incentives for investment, innovation and growth in the
German renewable energy market. Under the EEG, electricity
produced from renewable energy sources is given priority
connection to the grid and wind farms are paid a fixed tariff
for electricity produced for a period of up to 20 years.
The EEG was most recently amended in 2008, with new
tariffs and regulations taking effect on 1 January 2009.
Infigen’s presence in Germany comprises 12 wind farms with
a total installed capacity of 128.7MW and an estimated long
term mean energy production of 276.1GWh per annum.
france
The French wind energy market experienced strong growth
in 2008, with 950MW of new capacity installed, taking total
installed capacity to 3,404MW. This places France in the top
10 markets in 2008, by annual MW installed, for the third
year in a row.
The French wind energy market is supported by stable
support mechanisms. A feed-in tariff was introduced in
2002 and then re-affirmed in a decree signed in November
2008. Under the Ministerial Order of July 2006, Electricite
de France is also obliged to buy electricity from privately
owned and operated renewable energy sources in
accordance with Power Purchase Agreements (PPAs).
In 2007 the French Syndicat des Energies Renouvelables
suggested a wind energy generation target of 25GW by
2020, including 6GW offshore. This target is expected to be
adopted by the end of 2009.
Infigen currently has six wind farms in France with a total
installed capacity of 52MW and an estimated long term
mean energy production of 118.8GWh per annum.
24
Infigen Energy Annual Report 2009
Capacity Factor and Production
Capacity Factor
Actual
25%
21%
Actual
Capacity Factor
20%
r
o
t
c
a
F
y
t
i
c
r
o
a
p
t
c
a
a
C
F
y
t
i
c
a
p
a
C
20%
25%
15%
20%
10%
15%
5%
10%
0%
5%
0%
21%
101
101
FY07
FY07
Tariff – Germany/France3
180
160
140
180
120
160
100
140
80
120
60
100
40
80
20
60
0
40
h
W
M
/
$
A
h
W
M
/
$
A
156.3
156.3
FY07
2 Restated at FY09 FX rates.
20
0
FY07
20%
164
164
FY08
FY08
138.1
138.1
FY08
FY08
250
200
250
150
200
100
150
50
100
0
50
0
)
h
W
G
(
n
o
)
i
t
h
c
W
u
d
G
o
(
r
n
P
o
i
t
c
u
d
o
r
P
243
19%
243
19%
FY09
FY09
163.0
163.0
FY09
FY09
operational performance
Generation at Infigen’s German and French wind farms for
the 12 months ending 30 June 2009 was 243GWh, up 48%
on the prior year, reflecting the first full period contribution
from wind farms previously under construction.
The French and German wind farms generated an average
tariff of $163/MWh and achieved an EBITDA margin of
79.8%. The wind farms achieved a capacity factor of
19% which was down from the prior year of 20%. This
performance was impacted by lower wind resource,
particularly across Germany. Availability in Europe has
been very good with the French turbines consistently
averaging over 97%. This was partially offset by lower
availability at Infigen’s Wachtendonk, Bocholt and Eifel
wind farms in Germany as a result of blade rectification
issues. These issues have now been finalised.
Following the sale of Infigen’s mature wind farm businesses
in Portugal and Spain, a sale process has commenced
for the German and French assets, which are non-core
to Infigen’s future business.
Statistics supplied by GWEC(2008)
25
Commitment to Sustainability
At Infigen Energy, the concept of sustainability is a
driving force and we incorporate it into all facets of our
business. Our objective of leaving a positive legacy for
future generations is paramount both in the product
we produce and in the way we operate our business.
The global pursuit of economic growth and the increasing
demand for resources is placing a significant strain on the
world’s ecosystems, economies and societies.
• Continuing to support the communities we operate
within and respecting their diverse cultures, views and
needs; and
As a consequence one of the most important and
pressing challenges that society faces today is the need to
manage these systems to ensure they are not permanently
damaged or left encumbered for future generations.
At Infigen, we are committed to:
• Providing safe and healthy work environments for all
employees, contractors and visitors at our sites.
• Minimising our impact on the environment, with the
protection of all aspects of the environment a priority.
• Continued excellence with respect to both our
environmental performance and community
participation in our activities.
Integrating sustainability
Our priority is to integrate sustainability into all initiatives,
including:
• Placing the health, safety and welfare of people first
• Ensuring that employees and contractors operate
in accordance with our sustainability policies and
management systems
• Ensuring our operating wind farms focus on leadership
and culture as a key enabler for safe working; and
managing the operations against measurable
objectives, targets and safety performance indicators
• Efficient use of natural resources such as fuels and
water, and the reduction, re-use and recycling of
wastes
• Improving the ecological footprint throughout the full
life cycle analysis of each turbine, wind farm and the
overall business
• Continuing to comply with all relevant legislation, codes
of practice, jurisdictional standards, industry standards,
guidelines and other relevant statutory obligations.
occupational Health and safety
Infigen continues to demonstrate a strong commitment
to occupational health and safety through both its
governance and reporting structure and operationally at
a country and asset level. The wind asset management
team has a goal of zero incidents and injuries.
A safety performance reporting framework has been
implemented to provide the Wind Safety Executive
Committee with visibility on the safety performance of
the assets in each country. Performance statistics are
recorded on a monthly basis to allow trend analysis and
benchmarking against industry safety standards. Asset
managers are held accountable for safety performance.
Infigen Energy’s OH&S statistics are compiled for the
calendar year and rates are calculated on the basis of
200,000 working hours.
For the period 1st of January 2009 to 31st of July 2009, the
Total Reportable Incident Rate (TRIR) and Lost Time Injury
Frequency Rate (LTIFR) for the group are as follows:
Infigen Energy Group
The above figures do not include France.
TRIR
6.1
LTIFR
2.4
26
Infigen Energy Annual Report 2009
environment
At Infigen, we are committed to operating our business in
an environmentally sustainable way.
Wind energy, by its very nature, plays a significant role in
helping to reduce carbon emissions that would otherwise
be emitted by conventional energy technologies. According
to GWEC’s1 Global Wind Energy Outlook 2008, wind energy
is on track to supply 10–12% of global electricity demand by
2020; reducing carbon emissions by 1.5 billion tonnes per
year, far more than any other energy sector technology.
Infigen is currently developing knowledge of its own
emissions and will report to the inaugural National
Greenhouse and Energy Reporting (NGER) Act, for the
FY09 financial year, in late October 2009. The NGER Act will
underpin Australia’s emissions trading scheme, the Carbon
Pollution Reduction Scheme (CPRS), providing the emissions
data on which obligations under the CPRS will be based.
Infigen has also participated in the Carbon Disclosure
Project (CDP) for the past two years. CDP is an annual
emissions and energy reporting survey backed by 475
institutional investors globally.
On an operational level, all of our wind farms undergo
comprehensive environmental assessments before being
granted development approval; they are also bound to
obligations under environmental management programs
which are approved by the relevant planning authorities.
These environmental obligations cover areas such as
control of soil erosion and sedimentation, management
of bushfire-related risks, directions on waste handling and
disposal and the minimisation of any potential impacts
our wind farms may have on flora and fauna habitat.
At Infigen we take these obligations very seriously; we
regularly monitor the impacts our wind farms are having
on the surrounding environments and assess the way in
which we address potential issues.
community
Infigen undertakes a substantial degree of consultation
with the communities in which it operates, both through
the planning and development stage and then the full
life cycle of each wind farm. We encourage this dialogue
to ensure there is a clear flow of information between
stakeholders and that concerns can be easily raised and
then addressed.
Infigen endeavours to have a positive impact within its
communities, both on a relationship level, through regular
consultation, and on an economic level, by providing
employment opportunities.
As an example, the Capital wind farm has generated
employment for over 120 people during the construction
phase, with up to 10 people remaining on-site for ongoing
operations and maintenance activities.
Infigen also actively supports local communities, schools
and sporting organisations through sponsorship and
employee participation at events.
1 GWEC – Global Wind Energy Council.
27
Infigen Boards
From left to right:
Graham Kelly, Miles George,
Anthony Battle, Michael Hutchinson
and Douglas Clemson.
graham Kelly
Non-Executive Chairman
Appointed on 20 October 2008
Graham Kelly is a professional non-executive director with
over 30 years experience in academic life, government
service, diplomatic service, private legal practice and
business management.
Graham currently holds several directorships including
serving as Non-Executive Chairman of Tishman Speyer
Office Fund, Centrebet International Limited and Oasis
Fund Management Limited. Graham is also a Governor of
the Centenary Institute for Cancer Medicine and was until
recently the Inspector of the Independent Commission
Against Corruption (NSW).
He assisted successive Governments with the development
and implementation of a wide range of policy initiatives,
including the regulation of offshore petroleum and
minerals, the enactment of national environmental
legislation and the implementation of urban and regional
development policies. Graham served as a Legal Attaché
to the Australian Embassy in Washington DC representing
Australia on several United Nations and OECD committees,
particularly in the area of international trade and
investment law and international competition policy.
Graham’s diplomatic career was followed by 15 years of legal
practice at Debevoise & Plimpton and Freehills. Graham
served as Managing Partner of the Sydney/Brisbane/
Canberra offices of Freehills from 1991–1995, and also as
National Chairman of the firm from 1993–1995.
miles george
Executive Director
Appointed on 1 January 2009
Miles George is the Managing Director of Infigen Energy,
having previously been the Chief Executive Officer and
then Managing Director of Babcock & Brown Wind Partners
(BBW). Miles joined the Infrastructure group of Babcock
& Brown in 1997 concentrating on principal investments
in the infrastructure and energy sectors, and in particular
renewable energy investments.
28
Infigen Energy Annual Report 2009
Since 2000 Miles has been involved in the development and
financing of wind energy projects in Australia and overseas,
including a key role in the development of the Lake Bonney
1 and 2 wind farm projects in South Australia.
In 2003 Miles jointly led the team that established Global
Wind Partners as a private wind energy investment vehicle –
the predecessor to BBW and Infigen Energy.
In 2005 Miles jointly led the advisory team which structured
and implemented the Initial Public Offer and listing of BBW
on the ASX, and following listing he advised BBW on a
number of wind farm acquisitions in Australia, Europe and
the US.
Prior to joining Babcock & Brown in 1997, Miles was a
Director of the Project Finance division of AIDC Limited.
Miles holds degrees of Bachelor of Engineering and Master
of Business Administration (Distinction) from the University
of Melbourne.
anthony battle
Non-Executive Director
Appointed on 9 September 2005
Anthony (Tony) Battle held executive management and
director positions in the banking and finance industry for
more than 30 years. Tony was responsible for negotiating,
evaluating and closing large and complex transactions.
These included asset based, project finance, corporate,
merger and acquisition, infrastructure, privatisation and
cross-border financings. The transactions were varied and
across many business sectors including power generation
and transmission, gas pipelines, toll roads, hospitals,
property construction and investment, aircraft, shipping,
mining, telecommunications and manufacturing. Tony
was a member of various strategic planning, credit and
management committees which included representatives of
major domestic and international banking organisations.
For more than a decade prior to the above, Tony led a
treasury department of a leading merchant bank.
Tony holds a Bachelor of Commerce degree, is a Fellow
of the Australian Institute of Company Directors and an
Associate of Chartered Secretaries Australia.
Douglas clemson
Non-Executive Director
Appointed on 9 September 2005
Doug Clemson is the former Finance Director and CFO of
Asea Brown Boveri (ABB) where he was responsible for the
corporate and project finance needs of the ABB group in
Australia and New Zealand. He was instrumental in the
establishment of the activities of ABB Financial Services and
its participation in the co-development, construction and
funding of important power generation, transportation and
infrastructure projects in this region.
Prior to joining ABB, Doug held senior line management
and finance executive positions with manufacturing groups,
ACI and Smiths Industries. He is the recent chairman of
Redbank Power and director of Powerco NZ. His previous
directorships include General and Cologne Reinsurance,
Electric Power Transmission Group, ABB Australia and New
Zealand, and Smiths Industries.
Doug is a qualified accountant and a Fellow of the Institute
of Chartered Accountants in Australia and the Australian
Institute of Company Directors.
michael Hutchinson
Non-Executive Director
Appointed on 18 June 2009
Mike Hutchinson is a qualified civil engineer, educated at
the University of Newcastle upon Tyne, United Kingdom,
and Harvard Business School. Mike was formerly an
international transport engineering consultant with
experience in the United Kingdom, France, Australia, Africa,
South East Asia and the Pacific and a senior Australian
Government official.
From 1980 to 1999 he was a senior official with the Australian
Government, mainly working in the transport and
communications sectors. Mike worked closely on reform
of the Australian Government’s state-owned enterprise
sector from 1987 to 1996 and was acting Managing Director
of the former OTC Ltd in 1989. He led the government’s
major privatisation program over the period 1996 to 1999,
including Telstra, ANL Ltd, Australian National and most of
Australia’s airports, and he worked closely on the regulation
of privatised infrastructure.
Since 2000, Mike has practised as a private consultant and
company director. He has been a trustee of the Australian
Government’s superannuation schemes and a consultant
to a global investment bank. Previous Directorships include
Pacific Hydro Ltd, OTC Ltd, the Australian Postal Corporation
and the Australian Graduate School of Management Ltd. He
was also Chairman of the HiTech Group Australia Ltd.
Mike is currently an independent non-executive director
and chair of the audit committee of Hastings Funds
Management Ltd, and an independent non-executive
director of Westpac Funds Management Ltd, The Australian
Infrastructure Fund Ltd and EPIC Energy Holdings Ltd.
He is a Member of the Institution of Engineers Australia,
Australian Institute of Company Directors, Institution of Civil
Engineers and Institution of Highways & Transportation.
29
Infigen Management
geoff Dutaillis
Chief Operating Officer
gerard Dover
Chief Financial Officer
Geoff is the Chief Operating Officer of Infigen Energy, with
responsibility for global asset management and operational
activities.
He joined B&B in early 2005 to work in infrastructure
development and specifically to focus on the expanding
field of environmental infrastructure. In this role, Geoff
worked on new investment opportunities for B&B
Environmental Investments Limited and on preparing BBW
(now Infigen Energy) for its IPO.
Previously, Geoff worked at Lend Lease for almost 19 years,
including seven years based in London with the company’s
European development business. Geoff has extensive
experience in the development and project management
of major projects, having had leadership roles on a number
of landmark developments, including Bluewater in the
United Kingdom, at that time the largest retail and leisure
complex in the UK, and more recently as Project Director
for the Rouse Hill Regional Centre, a 100 hectare mixed-use
community centre in north-west Sydney.
Geoff holds a Bachelor of Engineering (Civil) (Hons) from
the University of NSW with additional qualifications in
management (AGSM), property and finance.
From left to right:
Miles George, Geoff Dutaillis,
and Gerard Dover.
Gerard is the Chief Financial Officer of Infigen Energy. He
joined BBW in September 2006, and prior to this, between
1990 and 1996, he worked with Price Waterhouse in the UK
and Sydney. He then joined AstraZeneca in the UK, holding
a number of finance roles before working on the spin off
and IPO of Syngenta AG. As Capital Markets Manager, he
worked in Syngenta’s Head Office in Switzerland on the
arrangement of syndicated bank facilities and refinancing
of these facilities through a series of capital markets
transactions. He also had responsibility for credit ratings
and worked in Investor Relations.
More recently, Gerard was CFO and Head of IT of Syngenta
Crop Protection in Australasia. In this role he managed a
number of change projects including Sarbanes Oxley Act
compliance, business reporting and balanced score card
process as well as the implementation of SAP.
Gerard has been a member of the Institute of Chartered
Accountants in England and Wales since 1993 and a Member
of Corporate Treasurers since 2003. He holds a Bachelors
degree in Banking and Finance.
catherine gunning
General Counsel
Catherine is the General Counsel of Infigen Energy. Prior to
joining Infigen in December 2005, Catherine was a Senior
Associate in the Corporate & Commercial Department at
Allens Arthur Robinson. Catherine also worked in London for
leading private equity house NatWest Equity Partners (now
Bridgepoint Capital Limited). Catherine has a Bachelor of
Economics and a Bachelor of Laws, a Graduate Diploma in
Applied Finance and Investment and is admitted as a legal
practitioner of the Supreme Court of New South Wales.
David richardson
Company Secretary
David joined Infigen Energy as Company Secretary in 2005
and is now responsible for the company secretarial, risk
management, compliance and internal audit functions,
as well as corporate governance across the group. Prior
to joining Infigen, David was a Company Secretary within
the AMP Group including AMP Capital Investors, Financial
Services and Insurance divisions. David holds a Diploma
of Law, Bachelor of Economics and a Graduate Diploma
in Company Secretarial Practice. David is a Member of
Chartered Secretaries Australia.
Hilary george
Treasurer
Hilary joined Infigen Energy in 2007 as Treasurer. Hilary has
held Treasury roles in domestic and international companies
in the energy and infrastructure sectors, most recently as
Treasurer of AGL Energy. She has extensive experience in
corporate finance, financial risk management and capital
markets. Hilary holds a Bachelor of Economics.
30
Infigen Energy Annual Report 2009
rosalie Duff
Head of Investor Relations & Media
David barnes
CEO Bluarc Management Group LLC
Rosalie joined Infigen Energy in 2006 to head up the investor
relations, media and communications functions. Prior to
this Rosalie was an Institutional Investor Relations Manager
with AMP, specialising in strategic financial communications.
Before taking up a career in Investor Relations, Rosalie held
roles in corporate banking and funds management with
Westpac for over 12 years and had research responsibility for
Australian Equities and International Equity markets. She holds
a Bachelor of Economics and Masters of Economics from
Macquarie University.
David silcock
Group Financial Controller
David joined Infigen Energy in August 2005 as group financial
controller. Prior to joining Infigen, David worked with Ernst
& Young in the UK and then in Silicon Valley in California for
three years, before relocating to the firm’s Sydney office in
2000. David left public practice to join Woolworths Limited in
a corporate finance role in October 2002. David is a chartered
accountant and has been a member of the Institute of
Chartered Accountants in England and Wales since 1996. He
holds a Masters degree in Economics.
brad Hopwood
Tax & Corporate Finance
Brad is responsible for tax, corporate finance and corporate
structure matters and is also currently General Manager
for Infigen Europe. Brad has been working with Infigen
since April 2006 when he joined B&B to establish and lead
the tax function for the Specialised Funds platform. In the
lead up to the internalisation of Infigen’s management and
separation from B&B in late 2008, Brad relinquished all other
roles and became solely dedicated to and subsequently
employed directly by Infigen. Brad previously worked with
KPMG in Sydney and London. Brad holds Bachelor degrees in
Economics and Law and a Graduate Diploma of Legal Practice.
Brad is also admitted in New South Wales as a (non-practising)
Solicitor.
Jillian carmody
Information Management and Technology Manager
Jillian has over 20 years experience in the IT industry and
has worked in executive positions both in the private and
government sectors. Prior to joining Infigen in January
2009 she worked for HBOS Australia where she led the
development of the 10-year IT Programme to support the
Bankwest Australian east coast expansion. From 2003 to
2006, Jillian was the IT Strategy Manager at Brisbane City
Council and prior to this, she worked for the Queensland
Government for 13 years, holding a number of leadership
roles including CIO for Disability Services and Aboriginal and
Islander Affairs. Jillian holds degrees in Business Management
and Commercial Computing (Distinction) from Queensland
University of Technology.
David joined B&B’s Power Operating Partners (BBPOP) LLC
in 2005 to lead the creation of the operations and asset
management business in North America and has been
working within Infigen Energy since 2005. With Infigen
Energy’s acquisition of BBPOP in June 2009, David was
appointed CEO of the renamed US asset management
team, Bluarc Management Group LLC. David is experienced
with developing, operating, supervising and managing
wind generation projects, including acting as a project
independent engineer and compiling fully qualified project
operating teams in Spain and the US. Prior to B&B, David
held senior management positions at Garrad Hassan,
Terranova Energy, SeaWest and at several wind turbine
manufacturers. Bluarc and David are based in Dallas.
David stegehuis
General Manager Australia
David joined Infigen Energy in 2006 to manage Infigen’s
acquisitions of new wind farm assets. Last year he managed
the sales of Infigen’s European portfolios. He is now General
Manager of the Australia activities. Prior to his career with
Infigen, David held roles in originating PPP infrastructure
investments and project finance with ABN AMRO and
B&B. Before this, David worked for a financial risk advisory
practice of KPMG. David holds a Bachelor of Commerce
(Hons) from the University of Melbourne and completed
the Professional Year with the Institute of Chartered
Accountants of Australia.
perry Wright
Head of Asset Management, Australia
Perry joined Infigen Energy in December 2006 as Infigen’s
Australian Asset Manager. Together with a dedicated
team, Perry manages the operational requirements for the
Australian wind assets. Prior to joining Infigen, Perry worked
with wind turbine manufacturer Vestas as Asia-Pacific
Australian QSE Manager. He has an extensive background
in asset management and engineering derived from the
petrochemical, mining and energy industries.
Holger marg
European Asset Manager
Holger joined B&B GmbH, Munich in 2008 as Infigen’s
European Asset Manager to manage the operational
requirements for Germany and France. Following the
separation from B&B, Holger was directly employed by
Infigen and was appointed Managing Director of the newly
incorporated Infigen Energy GmbH in April 2009. Prior to
joining Infigen, Holger was a Wind Farm Portfolio Manager
at Deutsche Immobilien Leasing GmbH, a subsidiary of
Deutsche Bank AG.
31
Corporate Structure
Infigen comprises:
• Infigen Energy Limited (IEL), a public company incorporated in Australia;
• Infigen Energy Trust (IET), a managed investment scheme registered in Australia;
• Infigen Energy (Bermuda) Limited (IEBL), a company incorporated in Bermuda; and
• the subsidiary entities of IEL and IET.
One share in each of IEL and IEBL and one unit in IET have been stapled together to form a single Infigen stapled security,
tradeable on the Australian Securities Exchange.
The responsible entity of IET is Infigen Energy RE Limited (IERL).
The following diagram provides an overview of Infigen’s structure.
Infigen stapled securityholders
Iel
Iet
Iebl
Responsible
Entity
Ierl
Wind energy assets
32
Infigen Energy Annual Report 2009
Corporate Governance Statement
34
34
35
35
36
36
37
41
42
45
46
47
48
Introduction
Interaction between the roles of IEL,
IEBL and IERL
Corporate governance framework
Significant structural changes –
internalisation
Compliance with the ASX
recommendations
ASX Principal 1: Lay solid foundations
for management and oversight
ASX Principal 2: Structure the Board
to add value
ASX Principle 3: Promote ethical and
responsible decision-making
ASX Principle 4: Safeguard integrity
in financial reporting
ASX Principle 5: Make timely and
balanced disclosure
ASX Principle 6: Respect the rights
of shareholders
ASX Principle 7: Recognise and
manage risk
ASX Principle 8: Remunerate fairly
and responsibly
33
Corporate Governance Statement
IntroDuctIon
This statement reflects Infigen Energy’s corporate governance framework as at 30 September 2009. A copy of this statement
and other documents (or summaries thereof) can be accessed and downloaded from the Corporate Governance section on
our website at www.infigenenergy.com.
The Infigen Energy group (IFN) comprises the following:
• Infigen Energy Limited (IEL), ACN 105 051 616, a public company incorporated in Australia;
• Infigen Energy (Bermuda) Limited (IEBL), ARBN 116 360 715, a company incorporated in Bermuda;
• Infigen Energy Trust (IET), ARSN 116 244 118, a managed investment scheme registered in Australia, of which Infigen
Energy RE Limited (IERL), ACN 113 813 997, AFSL 290710, is the responsible entity; and
• the subsidiary entities of IEL and IET.
Any reference contained in this statement to IERL is a reference to IERL in its capacity as responsible entity of IET, unless
otherwise indicated.
Shares issued by IEL and IEBL, as well as units issued by IET, are stapled together to form IFN stapled securities
(IFN securities). These IFN securities commenced quotation on the Australian Securities Exchange (ASX) under the market
code ‘BBW’ when the group listed as Babcock & Brown Wind Partners on 28 October 2005. Following IFN internalising
management on 31 December 2008 and subsequently changing its name to Infigen Energy on 29 April 2009, the group
has been quoted on the ASX under the market code ‘IFN’ since 4 May 2009. References to ‘IFN’ throughout this Statement
includes Infigen Energy when it was known as Babcock & Brown Wind Partners (BBW) prior to 29 April 2009.
InteractIon betWeen tHe roles of Iel, Iebl anD Ierl
The Boards of IEL, IEBL and IERL (the IFN Boards), are responsible for overseeing the rights and interests of all investors
in IFN and are accountable to them for the overall governance and management of IFN.
The IEL Board, in consultation and agreement with the IEBL and IERL Boards, formulates and approves the strategic
direction, investment objectives and goals of IFN in accordance with the terms of the stapling deed (Stapling Deed). In
practice, IEL was primarily responsible for conducting the day-to-day operations of IFN during the 2009 financial year, and
will continue to consult and exchange information with and seek the agreement of IEBL and IERL when making decisions in
relation to IFN.
The Stapling Deed sets out the terms and conditions of the relationship between IEL, IEBL and IERL in respect of IFN, for so
long as the units in IET and the shares in IEL and IEBL remain stapled. In summary, the Stapling Deed provides that each of
IEL, IEBL and IERL must:
• co-operate in respect of all matters relating to IFN and consult with each other prior to causing any act to be done or
omission to be made which may materially affect the value of IFN securities (including the announcement or payment
of a dividend or distribution);
• make available to each other all information in their possession necessary or desirable to fulfil their respective obligations
under the Stapling Deed (eg. making available to each other all information and providing all assistance in relation to the
preparation of financial accounts);
• co-operate with each other to ensure that each complies with its obligations under the ASX Listing Rules (including
disclosure obligations), co-ordinate disclosure to the ASX and investors, and liaise with the ASX in relation to ASX Listing
Rule matters;
• perform their obligations under the Stapling Deed and their respective Constitutions and Bye-Laws with a view to
enhancing the market value of IFN stapled securities;
• notify each other of an intention to acquire or sell assets where the value of those assets is greater than 5% of each
entity’s net tangible assets;
• act consistently with the investment strategy of IFN as agreed between them and consult with each other on
implementation of this strategy and any changes to its implementation;
• not borrow or raise any money unless the other entities agree;
• co-operate to ensure that IEL and IEBL shareholder and IET unitholder meetings are held concurrently or, where
necessary, consecutively;
• consult with each other in relation to any reorganisation or restructure of capital or any changes to stapling
arrangements;
• co-operate on the terms and timing of all new issues, bonus and rights issues, placements, redemptions, buy-backs
and any dividend or distribution reinvestment plans; and
• co-operate with each other to ensure that the Boards of IEL, IEBL and IERL have a common sub-group of Directors.
Therefore, as indicated, it is by operation of the Stapling Deed that the Boards of IEL, IEBL and IERL (as responsible entity
of IET) are together responsible for overseeing the rights and interests of securityholders in IFN and accountable to
securityholders for the overall corporate governance and management of IFN.
34
Infigen Energy Annual Report 2009
corporate goVernance frameWorK
The establishment of a sound framework of corporate governance and the implementation of the corresponding
governance culture and processes throughout IFN is one of the primary responsibilities of the IFN Boards. The IFN Boards
recognise that they are accountable to securityholders for the performance of IFN and, to that end, are responsible
for instituting and ensuring IFN maintains a system of corporate governance that operates in the best interests of
securityholders whilst also addressing the interests of other key stakeholders. A comprehensive corporate governance
framework and good governance policies and procedures can add to the performance of IFN, the creation of securityholder
value and engender the confidence of the investment community.
The ASX Limited’s Corporate Governance Council issued a revised set of guidelines entitled Corporate Governance Principles
and Recommendations in August 2007. These guidelines articulate 8 core principles (ASX Principles) that the Council believes
underlie good corporate governance, together with 27 recommendations (ASX Recommendations) for implementing
effective corporate governance.
The ASX Listing Rules require listed entities such as IFN to include a statement in their annual report disclosing the extent
to which they have followed the 8 ASX Principles and 27 ASX Recommendations during the reporting period, identifying
any ASX Recommendations that have not been followed and giving reasons for that variance. IFN’s Corporate Governance
Statement is structured with reference to the ASX Recommendations. Areas not fully complied with are disclosed under
the relevant principle.
sIgnIfIcant structural cHanges – InternalIsatIon
1 July 2008 – 31 December 2008
Prior to 31 December 2008, each of the IFN Boards was assisted in its management of the affairs of IFN by a wholly owned
subsidiary of the Babcock & Brown group, Babcock & Brown Wind Partners Management Pty Ltd (the Previous Manager). In
accordance with the respective Management Agreements with each of IEL, IEBL and IERL, the Previous Manager provided
comprehensive management services to each of the entities comprising IFN. These services included identifying and
recommending investment opportunities for IFN, managing IFN’s investments and advising in respect of any exit from those
investments. In addition to those strategic services, the Previous Manager had specific operational management duties
and carried out management services for IFN on a day-to-day basis. The Previous Manager’s appointment by each of IEL,
IEBL and IERL was exclusive and was originally for a term of 25 years from its appointment in 2005. That arrangement is
commonly referred to as an ‘externally managed’ fund.
Under the Management Agreements, the Previous Manager had established a dedicated management team comprising
individuals performing the following functions: chief executive officer; chief financial officer and other accounting, tax
and treasury personnel; chief operating officer and other operations management personnel; corporate counsel and
company secretary; investor relations; and risk and compliance personnel. The chief executive officer led the management
team which reported to the Board of the Previous Manager. As an externally managed entity, the management team also
effectively acted in the same capacity for IFN as in their appointed functional role for the Previous Manager.
The Management Agreements contained provisions which required the Previous Manager, as a primary obligation, to give
priority to the interests of IFN and, consequently, the IFN securityholders. In accordance with the terms of the Management
Agreements, the IFN Boards were required to consider any recommendations put to them by the Previous Manager and
determine whether the recommended action was in the best interests of IFN securityholders.
The Previous Manager was a member of the Babcock & Brown group, which recognised that effective and transparent
governance practices within the funds which it manages was essential to the preservation of securityholders’ and
stakeholders’ interests and the continued success of those funds. To that end, Babcock & Brown established a robust
corporate governance framework for the management of relevant externally managed funds, with a view to protecting
the interests of each fund’s securityholders and other stakeholders. During the time the Previous Manager was responsible
for managing IFN, it had close regard to that framework in assisting the IFN Boards to formulate their respective corporate
governance practices. During this period, the Previous Manager assisted with amendments to the Management Agreements
to strengthen the alignment between the Previous Manager and IFN securityholders, including:
• the move to an Independent Chairman on each of the IFN Boards;
• the proposed appointment of the Chief Executive Officer of the Previous Manager to each of the IFN Boards;
• the reduction of the total base fees payable to the Previous Manager in accordance with the Management Agreements;
• waiver of the Babcock & Brown group’s right to provide exclusive financial advisory and investment banking services to
IFN in respect of any related party transactions, such that IFN could engage an independent financial advisor; and
• in the event that the Management Agreements are terminated and management is internalised within IFN, the waiver
of notice periods and restraint of trade periods in the employment contracts of staff employed by the Previous Manager.
35
Corporate Governance Statement
1 January 2009 – 30 June 2009
Following negotiations between the IFN Independent Directors and Babcock & Brown, on 31 December 2008 each of the IEL,
IEBL and IERL Boards terminated their respective Management Agreements with the Previous Manager. In association with
the termination of the Management Agreements:
• IFN internalised the management team which were employed by the Previous Manager such that the management team
transferred to become direct employees of IFN; and
• IFN acquired the responsible entity of the Infigen Energy Trust, IERL, from the Babcock & Brown group.
Since termination of the Management Agreements, IFN has completed a program to transition to an internally managed
operating business, including acquiring a US asset management business and joint venture interests in Australian and
New Zealand wind energy development assets. IFN has made significant steps to transform its business from an asset
owner to a specialist renewable energy business which is focused on growth opportunities as a renewable energy developer,
owner and operator.
complIance WItH tHe asX recommenDatIons
As at the date of this Corporate Governance Statement, each of the Boards of IFN advise that their corporate governance
practices are in compliance with the ASX Recommendations.
asX prIncIple 1: lay solID founDatIons for management anD oVersIgHt
Companies should establish and disclose the respective roles and responsibilities of Board and management.
role of the Ifn boards and management
ASX Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to senior
executives and disclose those functions.
The IFN Boards have each adopted a formal Board Charter which details the functions and responsibilities of the
relevant Board and distinguishes such functions and responsibilities from those which have been delegated to
management. A summary of the Board Charters is available in the Corporate Governance section on IFN’s website at
www.infigenenergy.com.
As outlined in the respective Board Charters, the IFN Boards are together responsible for the management of the affairs
of IFN. In acquitting their responsibilities, the Boards, amongst other things:
• contribute to and approve IFN’s corporate strategy;
• evaluate and approve capital expenditure, acquisitions, divestitures and other material corporate transactions of IFN;
• determine IFN’s distribution policy and the amount and timing of all distributions paid to IFN’s securityholders;
• approve material IFN policies, including IFN’s Code of Conduct, Securities Trading Policy, Continuous Disclosure Policy
and other compliance-related policies;
• approve all accounting policies, financial reports and material reporting by or on behalf of IFN;
• approve the appointment or removal of the Chief Executive Officer (CEO);
• develop a succession plan for the CEO, and approve succession plans for other senior management positions in the
management team;
• monitor the performance of the CEO and the other key management personnel in the management team;
• consider recommendations of Board Committees (eg. Audit, Risk & Compliance Committees and the IEL Nomination &
Remuneration Committee), including the remuneration strategy/policies and the total level of remuneration for the CEO
and other key management personnel in the management team;
• approve the appointment and terms of appointment of the external auditor;
• consider, approve and monitor the effectiveness of IFN’s overall risk management and control framework, through,
among other steps, regular reports to the Board through the Audit, Risk & Compliance Committees from the Risk
Manager and regular updates (as required) from management on significant risk issues;
• review the performance and effectiveness of IFN’s corporate governance policies and procedures and consider any
amendments to those policies and procedures;
• monitor IFN’s compliance with ASX continuous disclosure requirements;
• subject to the constituent document of the relevant IFN entity, approve the appointment of Directors to the relevant
Board and to Committees established by the Board; and
• at least annually, review and evaluate the performance and effectiveness of the Boards, each Board Committee and each
individual Director against the relevant charters, corporate governance policies and agreed goals and objectives of IFN.
36
Infigen Energy Annual Report 2009
The Board has delegated a number of these responsibilities to its Committees. The responsibilities of these Committees are
detailed in Principle 2 below.
The Board Charters also set out the specific powers and responsibilities of the Chairman and the CEO (refer Principle 2
below).
Each of the three IFN Boards acts independently of each other and where there is a joint responsibility between IEL, IEBL
and IERL over aspects of IFN’s operations, the IFN Boards will only have responsibility to the extent of their own specific
involvement in those operations. However, the IFN Boards will co-operate to the extent required under the Stapling Deed
in meeting those joint responsibilities to ensure that the interests of IFN securityholders are met.
The Board Charters also include an outline of the responsibilities of each Director. To assist Directors to understand IFN’s
expectations of them, all Non-Executive Directors have entered into formal letters of appointment and been provided with
copies of relevant Board Charters and policies. The Managing Director has a formal letter of employment governing his
rights and responsibilities as an executive within the IFN group.
ASX Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives
The Nomination & Remuneration Committee of the IEL Board has responsibilities relating to the review and monitoring
of the performance of the IFN Boards, the Chairman and other individual members of the IFN Boards, and for establishing
key performance indicators against which the performance of the CEO and other key management personnel in the
management team are evaluated.
During the 2009 financial year, the CEO and other key management personnel in the management team had established
individual key performance indicators against which their performance would be evaluated. At the conclusion of the
relevant period, the review of the performance of these key executives is undertaken by the CEO in conjunction with the
Nomination & Remuneration Committee.
The Remuneration Report within the Directors’ Report contains details of IFN’s remuneration philosophy and policies,
including other key performance conditions that are assessed in determining the total remuneration of the CEO and
other key management personnel in the management team. The Remuneration Report also contains details of their total
remuneration, including short and long term incentive structures.
asX prIncIple 2: structure tHe boarD to aDD Value
Companies should have a Board of an effective composition, size and commitment to adequately discharge its responsibilities
and duties.
structure of the board
ASX Recommendation 2.1: A majority of the board should be Independent Directors.
The size and composition of each of the IFN Boards is determined in accordance with the Constitution of the relevant entity
and the governance framework in force from time to time. It is intended that each of the IFN Boards will comprise Directors
with a broad range of skills, expertise and experience from a diverse range of backgrounds.
The IFN Boards have each determined the independent status of each Director utilising the criteria set out in
Recommendation 2.1. The IERL Board comprised a majority of Independent Directors throughout the 2009 financial
year. The IEL and IEBL Boards did not comply with Recommendation 2.1 for part of the 2009 financial year (1 July 2008 to
7 October 2008) due to these Boards being comprised of an equal number of Independent and Non-Independent Directors
during that period.
Following a review, there were a number of changes to the IFN Boards during the financial year, including the appointment
of an Independent Chairman, as well as other resignations and appointments. Currently, there are 4 Independent Directors
and one Non-Independent Director (the Managing Director) on each of the IFN Boards. The IFN Boards recognise the
importance of Independent Directors, particularly the external perspective and advice that these Directors can provide.
37
Corporate Governance Statement
Table 1
The Directors appointed to the respective IFN Boards, along with their respective appointment and resignation dates, are set
out below:
Current Directors
Position
Appointed
Resigned
Appointed
Resigned
Appointed
Resigned
IEL Board
IEBL Board
IERL Board
Independent Chairman
20/10/08
G Kelly
A Battle
Independent Director
D Clemson
Independent Director
M Hutchinson
Independent Director
M George
Managing Director
9/9/05
9/9/05
18/6/09
1/1/09
–
–
–
–
–
20/10/08
14/9/05
14/9/05
18/6/09
1/1/09
–
–
–
–
–
20/10/08
9/9/05
9/9/05
18/6/09
1/1/09
–
–
–
–
–
Former Directors
Position
Appointed
Resigned
Appointed
Resigned
Appointed
Resigned
P Hofbauer1
W Murphy1
N Andersen
Non-Executive Director
11/6/03
18/6/09
14/9/05
18/6/09
14/4/05
18/6/09
Non-Executive Director
24/11/03
29/4/09
14/9/05
29/4/09
14/4/05
29/4/09
Independent Director
8/10/08
18/6/09
8/10/08
18/6/09
9/9/05
18/6/09
1 Formerly senior executives within the Babcock & Brown group.
Details of the Directors’ skills, experience and expertise relevant to their position are set out in the Infigen Boards section
of the Annual Report. Details regarding the Directors’ attendance at Board and Committee meetings are provided in the
Directors’ Report.
Overall, the IFN Boards continue to comprise Directors with a broad range of skills, expertise and experience from a diverse
range of backgrounds. The IFN Boards consider that collectively, the Directors have the range of skills, experience and
expertise necessary to appropriately govern IFN.
The continued tenure of each individual Director is subject to re-election from time to time in accordance with the ASX
Listing Rules and the respective Constitutions and Bye-Laws of the IEL, IERL and IEBL.
board committees and membership
The IFN Boards have established Committees to support an effective governance framework and to advise and support the
IFN Boards in carrying out their respective duties. The Chairman of each Committee reports on any matters of substance
at the next Board meeting. The Committees in existence at the date of this report are as follows:
• IEL, IEBL and IERL Audit, Risk & Compliance Committees; and
• IEL Nomination & Remuneration Committee.
Each Committee has its own Charter setting out the authority under which each Committee operates and the
responsibilities as delegated by the IFN Boards. Charters are reviewed annually and membership criteria are based on
a Director’s skills and experience as well as their ability to add value to the Committee. The CEO attends all Committee
meetings by invitation and Directors may attend any meeting of a Committee.
38
Infigen Energy Annual Report 2009
Table 2
The Board Committees and their membership as at 30 September 2009 are set out below:
Current Committee Member
G Kelly1
A Battle
D Clemson
M Hutchinson2
M George
Former Committee Members
N Andersen3
P Hofbauer4
W Murphy5
Audit, Risk &
Compliance
Committees
Nomination &
Remuneration
Committee
N
Y
Chair
Y
N
N
N
N
Y
Chair
Y
Y
N
N
N
N
1 G Kelly was appointed a member of the Nomination & Remuneration Committee (N&RC) from 29 October 2008.
2 M Hutchinson was appointed a member of the N&RC from 18 June 2009 and a member of the Audit, Risk & Compliance Committee (ARCC) from
29 July 2009.
3 N Andersen was a member of the N&RC up to 18 June 2009.
4 P Hofbauer was a member of the N&RC up to 16 December 2008 and a member of the ARCC up to 18 June 2009.
5 W Murphy was a member of the N&RC up to 16 December 2008.
In addition, due predominantly to the Internalisation project, a number of Independent Director Committee meetings
were held throughout the year, as well as independent legal and financial advisory services being engaged by the
Independent Directors.
ASX Recommendation 2.2: The chairperson should be an independent Director.
The current Chairman, Mr Graham Kelly, is an Independent Director. However, the IFN Boards did not comply with
Recommendation 2.2 for part of the 2009 financial year (1 July 2008 to 26 November 2008) whilst Mr Peter Hofbauer,
a Non-Independent Director, was Chairman of each of the IFN Boards during that period.
On 26 August 2008, Mr Hofbauer advised each of the IFN Boards of his intention to step down as Chairman upon a
new Independent Chairman being appointed to those Boards. On 20 October 2008, Mr Kelly was appointed as a new
Independent Director on each of the IFN Boards, and following his election as a Director by securityholders on 26 November
2008, Mr Kelly was appointed Independent Chairman of each of the IFN Boards.
Whilst Mr Hofbauer was the Chairman of each of the IFN Boards, the Directors of the IFN Boards had considered it
appropriate under the management arrangements for the Chairman of the IFN Boards to be a senior executive from the
Babcock & Brown group. Mr Hofbauer was not an executive of IFN or the Previous Manager. As a senior executive of the
Babcock & Brown group, he therefore performed the role of Chairman of each of the IFN Boards as a Non-Executive Director.
Whilst Mr Hofbauer was Chairman, each of the IFN Boards had appointed a Lead Independent Director, Mr Tony Battle,
as contemplated by the ASX Principles. The Lead Independent Director:
• had authority to call Board meetings or meetings of Independent Directors, as appropriate;
• chaired any meetings of the Independent Directors;
• was the primary spokesman for the Independent Directors at any General Meeting of IFN securityholders;
• represented the views of the Independent Directors to the IFN Boards, the CEO and the Previous Manager; and
• was the primary channel of communication and point of contact between Independent Directors and the IFN Boards,
the CEO and the Previous Manager.
To ensure that there was an appropriate balance in the manner in which the Directors discharged their responsibilities and
an independent review of the performance of management, the IFN Boards:
• established Audit, Risk & Compliance Committees and the IEL Nomination & Remuneration Committee, ensuring these
Committees comprised a majority of Independent Directors at all times;
• established protocols for dealing with conflicts of interest, in particular, the IFN Boards put in place a range of internal
policies designed to ensure that the interests of securityholders are at all times preferred to those of Directors and that
any actual or potential conflicts of interest are promptly disclosed and dealt with by the Directors. These policies include
the Board Charters, the Code of Conduct and the Securities Trading Policy; and
• any Director is entitled to seek independent professional advice (including, but not limited to, legal, accounting and
financial advice) at IFN’s expense on any matter connected with the discharge of his or her responsibilities, in accordance
with the procedures set out in the Board Charters.
39
Corporate Governance Statement
ASX Recommendation 2.3: The roles of chair and chief executive officer should not be exercised by the same individual.
The roles of Chairman and CEO are not exercised by the same individual for IFN. The Board Charters provide that the roles
of the Chairman and CEO must not be exercised by the same person. The Chairman is not a former CEO of IFN or any related
party of IFN. The respective roles and responsibilities of the Chairman and the CEO are described in the Board Charters.
ASX Recommendation 2.4: The Board should establish a nomination committee.
The IEL Board established a Nomination & Remuneration Committee in February 2007 which is responsible for advising the
IFN Boards on the composition of the Boards and their Committees, and reviewing the performance of the Boards, their
Committees and individual Directors.
The Committee currently comprises four members, all of whom are Independent Directors. The Committee is chaired by an
Independent Director who is not Chairman of the IFN Boards or any other Board Committee. The Committee met nine times
throughout the 2009 financial year and the attendance of the Committee members at Committee Meetings is outlined in
the Directors’ Report.
Consistent with the intent and philosophy that underpins the terms of the Stapling Deed that exists between IEL, IEBL and
IERL (as the Responsible Entity of IET), the IEL Nomination & Remuneration Committee will, at the request of the Boards
of IEBL and IERL, from time to time carry out on behalf of IEBL and IERL, similar activities as the Committee is authorised
to carry out for IEL. Accordingly, the IEL Nomination & Remuneration Committee will provide to the Boards of IEBL and
IERL, advices and recommendations in relation to general nomination and remuneration matters. It is the intent that the
Boards of IEBL and IERL may rely on those activities, advices and recommendations as if the IEL Nomination & Remuneration
Committee was a committee of the IEBL and IERL Boards.
In making recommendations to the IFN Boards regarding the appointment of Directors, the Nomination & Remuneration
Committee periodically assesses the appropriate mix of skills, experience and expertise required on the relevant Board
and assesses the extent to which those skills and experience are represented. As IFN further executes its strategy to be
a specialist renewable energy business which is focused on growth opportunities as a renewable energy developer, owner
and operator, the Nomination & Remuneration Committee will review the composition of the IFN Boards to ensure they
remain appropriate.
The Nomination & Remuneration Committee has adopted a Charter, a summary of which is available on IFN’s website.
The responsibilities of the Committee pursuant to its Charter include:
• whilst the Management Agreements were in place, monitoring and reviewing the performance of the Previous Manager
under the Management Agreements;
• establishing Key Performance Indicators for the key management personnel, and providing input and advice regarding
their remuneration;
• approving IFN’s remuneration disclosures;
• making recommendations to the IFN Boards in relation to the level of remuneration to be paid to Non-Executive Directors;
• periodically assessing the skills required of Directors to competently discharge the duties and obligations of the IFN
Boards, and making recommendations to the Chairman about how those skill levels could be enhanced;
• reviewing potential candidates for appointment to the IFN Boards and making recommendations in respect of them;
• having oversight of the IFN Boards’ annual performance evaluation process; and
• confirming which Directors will retire annually by rotation in accordance with the ASX Listing Rules and the Constitution
and Bye-Laws of IEL and IEBL, respectively.
ASX Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board,
its Committees and individual Directors.
On an ongoing basis, the Nomination & Remuneration Committee reviews the membership and performance of the
IFN Boards, their respective Committees and individual Directors, and makes recommendations to the IFN Boards in that
regard. A member of the Committee will not participate in the review of their own performance, nor participate in any
vote regarding his or her election, re-election or removal.
In relation to Director(s) to be nominated for re-election at the Annual General Meeting, the Nomination & Remuneration
Committee firstly informs the IEL and IEBL Boards of the names of the Director(s) who are retiring in accordance with the
ASX Listing Rules and the Constitution and Bye-Laws of each of those entities, and secondly, provides recommendations
to the IEL and IEBL Boards as to whether it should support the re-nomination of such retiring Director(s). In order to make
such recommendations, the Committee reviews the retiring Director’s performance during the period in which the Director
has been a member of the IEL and/or IEBL Boards.
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Infigen Energy Annual Report 2009
There were significant structural changes within the Infigen Energy group during the 2009 financial year, including
termination of the Management Agreements, internalisation of management and structural separation from the Babcock
& Brown group. In conjunction with these structural changes, a renewal process occurred within each of the IFN Boards
resulting in a number of resignations and appointments of Directors throughout the year (as outlined in Table 1 above). Due
to these structural changes within the business and at Board level, it was not practical for the Nomination & Remuneration
Committee to undertake a performance evaluation of the IFN Boards as it had done in previous periods. Notwithstanding,
each of the IFN Boards and the Nomination & Remuneration Committee remain committed to undertaking a full
performance evaluation process during the 2010 financial year after a sufficient period of time following the renewal process.
The Nomination & Remuneration Committee is also responsible for establishing and facilitating an induction program
for new Directors and making available to them sufficient information and advice to allow them to participate fully and
actively in Board decision-making at the earliest opportunity. This induction program was undertaken during the period
and included provision of relevant corporate policy documentation, financial and operational presentations and a site visit
to a wind farm.
asX prIncIple 3: promote etHIcal anD responsIble DecIsIon-maKIng
Companies should actively promote ethical and responsible decision-making.
code of conduct
ASX Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code.
The IFN Boards are committed to delivering strong returns and securityholder value whilst also promoting securityholder
and general market confidence in IFN and to fostering an ethical and transparent culture within IFN.
To this end, each IFN Board has adopted a formal Code of Conduct which is designed to ensure that:
• high standards of corporate and individual behaviour are observed by all Directors and employees in relation to all of
IFN’s activities; and
• employees are aware of their responsibilities to IFN under their contract of employment and always act in an ethical
and professional manner and in the best interests of IFN securityholders.
A review of the Code of Conduct was undertaken during the year which resulted in amendments to ensure the Code
remained applicable following the internalisation of management and other structural changes which had been
implemented.
The Code of Conduct requires Directors and employees, among other things, to:
• avoid conflicts of interest between their personal interests and those of IFN and its securityholders;
• not take advantage of opportunities arising from their position for personal gain or in competition with IFN; and
• comply with IFN’s Securities Trading Policy and other policies.
The Code of Conduct requires Directors and employees, to report any actual or potential breach of the law, the Code of
Conduct or other IFN policies. IFN promotes and encourages ethical behaviour and provides protection for those who report
violations. A summary of the Code of Conduct is available on IFN’s website.
In addition to the Code of Conduct, the Board Charters require that all Directors conduct their duties with the highest level
of honesty and integrity, observe the rule and spirit of the law, comply with any relevant ethical and technical standards,
not make improper use of any confidential information, and set a high standard of fairness, diligence and competency in
their position as a Director.
IFN recognises that it has a number of legal and other obligations to its non-securityholder stakeholders, including
employees, financiers, suppliers and the broader community.
One of the objectives of the Code of Conduct is to assure Directors, employees, securityholders, competitors and other
stakeholders that IFN will conduct its affairs in accordance with ethical values and practices. Directors and employees are
required to comply with both the spirit as well as the letter of the ASX Listing Rules and all laws which govern the operations
of IFN. The Code of Conduct specifically requires Directors and employees to always deal with securityholders, customers,
suppliers, competitors and other employees in a manner that is lawful, diligent, fair and with honesty, integrity and respect.
In accordance with the Code of Conduct, IFN aims to provide a work environment in which all employees can excel
regardless of race, religion, age, disability, gender, sexual preference or marital status. In this regard, IFN maintains various
policies relating to workplace practices, including in relation to occupational health and safety matters. The principles of
fairness, honesty and propriety are essential elements of the various policies which have been adopted by IFN.
41
Corporate Governance Statement
securities trading policy
ASX Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors,
senior executives and employees, and disclose the policy or a summary of that policy.
The IFN Boards have adopted a formal Securities Trading Policy which regulates the manner in which Directors and
employees can buy or sell IFN securities, and requires that they conduct their personal investment activities in a manner
that is lawful and avoids conflicts between their own interests and those of IFN.
The policy is specifically designed to raise awareness and minimise any potential for breach of regulations relating to insider
trading contained in the Corporations Act. The policy is also designed to minimise the chance that misunderstandings or
perceptions arise regarding employees trading while in possession of non-public price-sensitive information.
The policy specifies trading windows as the periods during which trading in IFN stapled securities can occur. These trading
windows will generally be:
• an eight week period following the release of IFN’s full year or half year financial results;
• a period commencing on the second trading day following lodgement of IFN’s Annual Report with the ASX and
continuing for up to one month after the holding of IFN’s Annual General Meeting; and
• the offer period under any prospectus or similar offer document.
Trading is prohibited despite a window being open if the relevant person is in possession of non-public price-sensitive
information regarding IFN. The IFN Boards may authorise the opening of trading windows at other times. The CEO and
other key management personnel are required to notify the Company Secretary (who in turn notifies the Chairman) of
any proposed trading by them in securities issued by IFN and the details of any completed trades.
A summary of IFN’s Securities Trading Policy is available on IFN’s website.
asX prIncIple 4: safeguarD IntegrIty In fInancIal reportIng
Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.
audit, risk & compliance committees
ASX Recommendation 4.1: The board should establish an audit committee.
The IFN Boards are committed to the basic principle that IFN’s financial reports are true and fair and comply with the
relevant accounting standards. To assist the IFN Boards with this commitment, they have each established an Audit, Risk
& Compliance Committee which are each responsible for advising their respective IFN Board on internal controls and
appropriate standards for the financial management of IFN. It is the responsibility of the IFN Boards to ensure that an
effective internal control system is in place across IFN. This includes internal controls to deal with both the effectiveness
and the efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting
records and the reliability of financial information. The IFN Boards have delegated the responsibility for overseeing the
establishment and maintenance of IFN’s system of internal control to the Audit, Risk & Compliance Committees.
Each Committee oversees the financial reporting process, the systems of internal control and risk management, the audit
process and IFN’s processes for monitoring compliance with laws and regulations.
The Audit, Risk & Compliance Committees provide advice to the IFN Boards and report on the status of the business risks to
IFN through its risk management processes aimed at ensuring risks are identified, assessed and properly managed.
Each Committee works on behalf of the IFN Boards with the external auditor and reviews any non-audit services provided
by the external auditor to confirm that they are consistent with maintaining external audit independence.
ASX Recommendation 4.2: The audit committee should be structured so that it:
• consists only of non-executive directors;
• consists of a majority of independent directors;
• is chaired by an independent chair, who is not the chair of the board; and
• has at least three members.
Each Audit, Risk & Compliance Committee was comprised of Non-Executive Directors throughout the period and a majority
of these were Independent Directors. All Committee members possessed the requisite financial expertise. The attendance
of Committee members at Committee Meetings throughout the year is outlined in the Directors’ Report.
Mr Clemson, an Independent Director who is not Chairman of the IFN Boards, was Chairman of each Audit, Risk &
Compliance Committee throughout the year.
For the last 12 days of the 2009 financial year, each Audit, Risk & Compliance Committee only had two Committee members
following the resignation of Mr Hofbauer on 18 June 2009. To remedy this situation, Mr Hutchinson was appointed to each
Audit, Risk & Compliance Committee in July 2009 (refer Table 2).
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Infigen Energy Annual Report 2009
ASX Recommendation 4.3: The audit committee should have a formal charter.
The Audit, Risk & Compliance Committees have each adopted a Charter. The responsibilities of the Committees pursuant
to their Charters include:
Financial reports for the half year and full year
• review and consider the financial reports for the half year and full year;
• consider in connection with the half year and full year financial reports the CEO and CFO letter of representation to the
IFN Boards;
• review the financial sections of the annual report and related regulatory filings before release;
• review with management and the external auditors the results of the financial audit;
Internal control
• review the effectiveness of IFN’s internal controls regarding all matters affecting IFN’s financial performance and financial
reporting, including information technology security and control;
• review the scope of internal and external auditors’ review of internal control, review reports on significant findings and
recommendations, together with management’s responses, and recommend changes from time to time as appropriate;
Internal audit
• review the internal auditor, the Charter, plans and activities of the internal audit function;
• meet with the internal auditor to review reports and monitor management responses;
• meet separately with the internal auditor, when necessary, to discuss any matters that the Committees or internal audit
believes should be discussed privately;
• review the effectiveness of the internal audit function;
• ensure there are no unjustified restrictions or limitations on the internal auditor, and review and concur in the
appointment, replacement or dismissal of the internal auditor;
External audit
• review the external auditors’ proposed audit scope and approach;
• meet with the external auditors to review reports, and meet separately, at least once a year, to discuss any matters that
the Committees or auditors believe should be discussed privately;
• establish policies as appropriate regarding independence of the external auditors;
• review and confirm the independence of the external auditors;
• review the performance of the external auditors, and consider the re-appointment and proposed fees of the external
auditor and, if appropriate, conduct a tender of the audit. Any subsequent recommendation following the tender for
the appointment of an external auditor is to be put to the IFN Boards;
Compliance
• obtain regular updates from the Compliance Manager and management regarding compliance matters;
• review the effectiveness of the system for monitoring compliance with laws and regulations affecting IFN and the results
of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance;
• in relation to IET, monitor compliance with its Compliance Plan;
• review the findings of any examinations by regulatory authorities;
Risk management
• oversee the development of risk management policies and review IFN’s overall risk management framework, including
its effectiveness in meeting sound corporate governance principles, and keep the IFN Boards informed of all significant
business risks;
• review the system for identifying, managing and monitoring the key risks of IFN;
• review with management the operation of business continuity and disaster recovery plans;
• obtain reports from management regarding the status of any key risk exposures or incidents;
• review the scope, status and cost of insurance coverage for IFN;
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Corporate Governance Statement
Reporting responsibilities
• regularly report to the IFN Boards about Committee activities, issues and related recommendations;
• provide an open avenue of communication between internal audit, the external auditors and the IFN Boards. For the
purpose of supporting the independence of their function, the external auditors and the internal auditor have a direct
line of reporting access to the Committees;
• report annually to securityholders on matters relating to Committee responsibilities as required by law or the ASX
Listing Rules; and
• review any other reports IFN issues that relate to Committee responsibilities.
A summary of the Audit, Risk & Compliance Committee Charters is available in the Corporate Governance section on
IFN’s website.
The Committees meet at least four times a year and report to the full IFN Boards following each meeting, including in
respect of recommendations of the Committees that require IFN Board approval or action.
Internal audit
The IFN Boards have overall responsibility for IFN’s systems of internal control, supported by the Audit, Risk & Compliance
Committees and management. The IFN Boards are assisted in discharging this responsibility by IFN’s internal audit function
which operates under a written Charter approved by the Audit, Risk & Compliance Committees. Throughout the 2009
financial year, the IFN Boards outsourced the internal audit function to KPMG who acted as the IFN internal auditor.
Subsequent to period end, IFN have established an internalised internal audit function following the employment of an
Internal Audit Manager.
During the year, the IFN internal auditor reported jointly to the Chairman of the Audit, Risk & Compliance Committees and
the Chief Financial Officer. The IFN internal auditor discussed significant issues from Internal Audit Reports at meetings
of the Audit, Risk & Compliance Committees and distributed Internal Audit Reports to Committee members and senior
management of IFN. During the year, the internal audit programme reviewed a number of IFN’s internal controls with a
view to ensuring that they are operating effectively and efficiently in accordance with financial reporting requirements, good
operational and governance practices and in compliance with regulations, to assist IFN in achieving business objectives.
Under the guidance of the Risk Manager, IFN continued to enhance the IFN risk management framework during the year
with the various underlying businesses of IFN further developing risk management plans so as to strengthen the control
framework (refer Principle 7 below).
To assist the IFN Boards and the Audit, Risk & Compliance Committees discharge their respective responsibilities, the
CEO and the Chief Financial Officer are required to provide the IFN Boards with a letter of representation in connection
with the full year financial statements of IFN. Such letter of representation confirms to the IFN Boards that IFN’s financial
reports present a true and fair view, in all material respects, of IFN’s financial condition and operational results and are
in accordance with relevant accounting standards. In respect of the 12 months ended 30 June 2009, the CEO and Chief
Financial Officer provided such a letter to the IFN Boards.
Audit governance
IFN’s external auditor is PricewaterhouseCoopers who were appointed by securityholders at the 2006 Annual General
Meeting in accordance with the provisions of the Corporations Act 2001. The IFN Boards have a policy whereby the
responsibilities of each of the lead audit engagement partner and review audit partner cannot be performed by the same
people for a period in excess of five consecutive years. The present PricewaterhouseCoopers lead audit engagement partner
is Andrew Wilson and the current audit review partner is Pat Murray.
The external auditor is invited to attend all Audit, Risk & Compliance Committee meetings. Periodically, the Committees meet
with the external auditor without management being present, and the Committees also meet with management without the
external auditor being present. Committee members are able to contact the external auditor directly at any time.
Certification and discussions with the external auditor on independence
The Audit, Risk & Compliance Committees require that the external auditor confirm each half year that they have maintained
their independence and have complied with applicable independence standards established by regulators and professional
bodies. The Audit, Risk & Compliance Committees annually review the independence of the external auditor and have
confirmed this assessment with the IFN Boards. A copy of the external auditor’s annual certification of independence is set
out in the 2009 Annual Report.
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Infigen Energy Annual Report 2009
Restrictions on non-audit services by the external auditor
To avoid possible independence or conflict issues, the external auditor is not permitted to carry out certain types of
non-audit services for IFN, including:
• bookkeeping or other services relating to the accounting records or financial statements;
• appraisal or valuation services;
• secondments to management positions;
• internal audit of financial controls;
• internal control design or implementation;
• implementation or design of financial information systems or other information technology systems;
• legal or litigation support services; and
• strategic or structural tax planning.
Further, PricewaterhouseCoopers will not provide unsolicited tax ‘products’ or tax ‘solutions’ for implementation in respect
of the IFN corporate group. If any taxation advisory services are to be provided by PricewaterhouseCoopers, those services
will generally be limited to providing independent taxation advice regarding transactions proposed by IFN. During the 2009
financial year, PricewaterhouseCoopers did not provide any taxation services in respect of the IFN corporate group.
For all other non-audit services, use of the external audit firm must be assessed in accordance with IFN’s pre-approval policy,
which requires that all non-audit services be pre-approved by the Audit, Risk & Compliance Committees, or by delegated
authority to a sub-committee consisting of one or more members of the Committee, where appropriate.
The breakdown of the aggregate fees billed by the external auditor in respect of each of the two most recent financial years
for audit, audit-related, tax and other services is provided in the Notes accompanying the Financial Statements in the 2009
Annual Financial Report.
asX prIncIple 5: maKe tImely anD balanceD DIsclosure
Companies should promote timely and balanced disclosure of all material matters concerning the company.
continuous Disclosure policy
ASX Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose
those policies or a summary of those policies.
IFN is committed to complying with its continuous disclosure obligations pursuant to the Corporations Act and the ASX
Listing Rules. IFN has a written Continuous Disclosure Policy which is designed to ensure that all investors have equal and
timely access to material information concerning IFN.
The policy is designed to ensure that material price sensitive information arising from any part of IFN is immediately notified
to the ASX in a complete, balanced and timely manner, unless it falls within the scope of the limited exemptions contained
in Listing Rule 3.1A.
A Disclosure Committee comprised of various Directors and senior executives operates pursuant to the Continuous
Disclosure Policy. In addition, the IFN Boards are actively and regularly involved in discussing disclosure obligations in
respect of all major matters that come before it.
The Company Secretary is primarily responsible for communications with the ASX and for overseeing and maintaining the
Continuous Disclosure Policy. The Policy sets out the respective responsibilities for reviewing information which is or may
be material, making disclosures to the ASX and issuing media releases and other written public statements on behalf of IFN.
As evidence of IFN’s efforts to ensure the market is continually updated, IFN released approximately 140 announcements to
the market via the ASX during the 2009 financial year.
A summary of the Continuous Disclosure Policy is available in the Corporate Governance section on IFN’s website.
45
Corporate Governance Statement
continuous Disclosure processes
The specific processes adopted by IFN in relation to its continuous disclosure responsibilities are as follows:
• website: information released to the ASX is posted on the Investor Information section of IFN’s website as soon
as practicable;
• authorised spokespersons: communication with the media, share analysts and the market generally in relation to IFN
activities will normally be undertaken only by the Chairman, the CEO, the Chief Financial Officer, the Chief Operations
Officer or Investor Relations Manager;
• media releases: no media release of a material nature is to be issued unless it has first been sent to the ASX;
• trading halts: on occasions, it may be necessary for IFN to request a trading halt from the ASX. The Disclosure Committee
makes decisions in relation to a trading halt;
• close periods: IFN observes a number of ‘close’ periods during the year to protect against the inadvertent disclosure of
price sensitive information. During these close periods, IFN will not make any comment regarding:
– analysts’ earnings estimates, other than to acknowledge the range and average estimates in the market; and
– the financial performance of IFN unless the information has already been released to the market.
The close periods operate in the periods 45 days before the preliminary announcement of IFN’s half year and full year
results; and
• analyst and investor briefings: IFN recognises the importance of the relationship between IFN, investors and analysts.
From time to time IFN conducts analyst and investor briefings and in these situations the following protocols apply:
– no price sensitive information will be disclosed at these briefings unless it has been previously, or is simultaneously,
released to the market;
– questions at these briefings that relate to price sensitive information not previously disclosed will not be answered;
and
– if any price sensitive information is inadvertently disclosed, it will immediately be released to the ASX and placed
on IFN’s website.
asX prIncIple 6: respect tHe rIgHts of sHareHolDers
Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.
communications with shareholders
ASX Recommendation 6.1: Companies should design a communications policy for promoting effective communication
with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of
that policy.
Consistent with the Continuous Disclosure Policy, IFN is committed to communicating with its securityholders in an effective
and timely manner to provide them with ready access to information relating to IFN. In this regard, IFN maintains a website
(www.infigenenergy.com) which provides access to the following information of interest to IFN securityholders:
• detailed information regarding the Board, executive management and the business groups and activities of IFN;
• IFN announcements and media releases, which are posted to the website promptly following release;
• copies of full year and half year financial reports;
• summaries of Board and Committee Charters and relevant corporate governance policies;
• copies of IFN’s Annual Reports;
• copies of disclosure documents relating to any capital raisings; and
• a link to the website of IFN’s security registry, Link Market Services Limited.
IFN encourages securityholders to utilise its website as their primary tool to access securityholder information and
disclosures. In addition, the Annual Report facilitates the provision to securityholders by IFN on a yearly basis of detailed
information in respect of the major achievements, financial results and strategic direction of IFN.
IFN has a practice that information to be given by IFN at analyst briefings is first released to the ASX to ensure that the
market operates on a fully informed and equal basis.
Securityholders are strongly encouraged to attend and participate in general meetings of IFN, especially the Annual General
Meeting. IFN provides securityholders with details of any proposed meetings well in advance of the relevant dates.
IFN’s external auditor is always requested to attend the Annual General Meeting and be available to answer securityholder
questions regarding the conduct of the external audit and the preparation and content of the auditor’s report. This allows
securityholders an opportunity to ask questions of the auditor and reinforces the auditor’s accountability to securityholders.
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Infigen Energy Annual Report 2009
asX prIncIple 7: recognIse anD manage rIsK
Companies should establish a sound system of risk oversight and management and internal control.
risk management policy
ASX Recommendation 7.1: Companies should establish policies for the oversight and management of material business
risks and disclose a summary of those policies.
Management of risk, particularly the preservation of capital, continues to be a primary objective of IFN in all its business
activities. IFN is committed to ensuring that its system of risk oversight, management and internal control complies with
the ASX Principles and that its culture, processes and structures facilitate realisation of IFN’s business objectives, including
potential opportunities, while managing adverse effects and preserving capital.
The IFN Boards are ultimately responsible for overseeing and managing the material risks of IFN. The Audit, Risk &
Compliance Committees assist the Boards in this role. In accordance with their Charters, the role of the Audit, Risk &
Compliance Committees include reviewing and managing the system for identifying, managing and monitoring the key risks
of IFN and obtaining reports from management regarding the status of any key risk exposures or incidents. In undertaking
these responsibilities, the Committees principally rely on the resources and expertise of management to implement and
report upon the risk management systems and procedures implemented, such that the Committees are able to keep the
IFN Boards informed of all material business risks.
IFN undertakes regular reviews of its risk management framework and has adopted a Risk Management Policy consistent
with Australia/New Zealand Standard 4360, which clearly defines responsibilities for managing risk under IFN’s risk
management process. The material risks of IFN’s business, including operational, financial, market and regulatory
compliance risks have been identified and are required to be regularly managed, monitored and reported. Methods for
treating and mitigating risks include transferring, reducing, accepting or passing on risk following assessment using a variety
of methods. A summary of the Risk Management Policy is available on IFN’s website.
The Audit, Risk & Compliance Committees include amongst their responsibilities:
• consideration of the overall risk management framework of IFN and the review of its effectiveness in meeting sound
corporate governance principles;
• keeping the IFN Boards informed of all significant business risks;
• reviewing in conjunction with management the system for identifying, managing and monitoring the key risks of IFN;
and
• obtaining reports from management regarding the status of any key risk exposures or incidents.
One of the cornerstones of IFN’s risk management approach is a well defined system with respect to the commitment of
capital and an investment approval process which brings rigour to the selection, assessment and approval of investment
risks assumed under IFN’s principal investment activities. Matters such as legal, accounting, financial, tax and general risk
assessment issues are considered in each case.
The Audit, Risk & Compliance Committees have also implemented a robust ongoing internal audit program. The internal
auditor reports directly to the Audit, Risk & Compliance Committees at each meeting of the Committees.
ASX Recommendation 7.2: The board should require management to design and implement the risk management and
internal control system to manage the company’s material business risks and report to it on whether those risks are
being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the
company’s management of its material business risks.
IFN’s Risk Management function plays a key role in developing and building an approach to assist IFN and its Boards in
identifying, monitoring and treating risk and in reporting material risks to the Audit, Risk & Compliance Committees. Under
the direction of IFN’s Risk Manager, IFN has continued to enhance its risk management framework which articulates the
standards and responsibilities for risk management across and at all levels of the IFN business. The standards include the
requirement for all business units, businesses, projects, regions and assets to report risks quarterly as an input to the IFN Risk
Manager’s consolidated quarterly reporting to the Audit, Risk & Compliance Committees, and to maintain risk registers and
risk treatment plans for all identified ‘top risks’.
IFN’s Compliance function promotes a compliance conscious culture while ensuring IFN complies with regulatory
requirements across its businesses, functions and group entities.
To facilitate monitoring and evaluation of the effectiveness of internal controls, IFN has established accounting policies,
reporting, risk management and compliance systems to ensure the Audit, Risk & Compliance Committees are informed
of strategic, reputational, financial and operational risks facing the IFN corporate group. Quarterly management reporting
confirms that appropriate internal controls are in place and that the IFN Risk Management Policy and other key guidelines
and procedures are being observed.
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Corporate Governance Statement
IFN’s internal audit function, operating under a written Charter from the Audit, Risk & Compliance Committees, provides
independent reporting to the Audit, Risk & Compliance Committees with respect to the management of risk and also
provides comment on the effectiveness of the design and operation of controls across the IFN corporate group.
ASX Recommendation 7.3: The board should disclose whether it has received assurance from the chief executive officer
(or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system
is operating effectively in all material respects in relation to financial reporting risks.
As outlined above, and in accordance with Recommendation 7.3, the CEO and Chief Financial Officer have stated to the IFN
Boards in writing that internal compliance and control systems applicable to the IFN corporate group’s business lines and
functional groups were operating efficiently and effectively in all material respects during the period to 30 June 2009.
asX prIncIple 8: remunerate faIrly anD responsIbly
Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its
relationship to performance is clear.
remuneration policy
The remuneration policies of IFN have been structured to be competitive in the industry and global marketplace and to
ensure that IFN can attract and retain the talent needed to achieve both short and long-term success, while maintaining
a strong focus on team work, individual performance and the interests of securityholders.
As outlined previously, following negotiations between the IFN Independent Directors and the Babcock & Brown group,
on 31 December 2008 each of the IEL, IEBL and IERL Boards terminated their respective Management Agreements with the
Previous Manager. In association with the termination of the Management Agreements, IFN internalised the management
team which were employed by the Previous Manager such that the management team transferred to become direct
employees of IFN.
Externally Managed Fund
Prior to termination of the Management Agreements, the employees of the Previous Manager were remunerated by and in
accordance with the remuneration framework of the Babcock & Brown group. Total remuneration of the employees of the
Previous Manager was delivered through a combination of base salary, an annual performance bonus and, for some senior
executives, through an equity incentive plan of Babcock & Brown Limited.
The IFN Boards recognised that prior to the internalisation of management, there was scope for potential conflicts of
interest to arise, both in terms of the Babcock & Brown group’s dealings with IFN and in terms of the dual roles of the
Non-Independent Directors and certain staff. In such cases, the IFN Boards implemented steps to ensure that such
conflicts of interest were declared, managed and, where practicable, removed. Such steps included ensuring that
Non-Independent Directors declared an interest in circumstances where there were dealings between the Babcock &
Brown group and IFN and that, in those cases, Non-Independent Directors abstained from voting on all such matters.
Other steps included seeking independent third party advice and having matters considered by a Committee of the Board
comprising solely the Independent Directors. These measures were designed to ensure that, in the event of a conflict of
interest, the interests of IFN securityholders were given priority over the interests of the Babcock & Brown group and the
Non-Independent Directors.
Further information regarding the remuneration framework in place prior to the internalisation of management on
31 December 2008 is included in the Remuneration Report.
Internalisation
Following the termination of the Management Agreements on 31 December 2008, IFN has completed a program to
transition to an internally managed business, including in consultation with independent remuneration experts, the
development and implementation of a remuneration framework for the internalised management team. IFN’s remuneration
policy aims to ensure remuneration is:
• commensurate with an individual’s position and responsibilities;
• competitive with market standards;
• linked with IFN’s strategic goals and performance; and
• aligned with the interests of securityholders.
The IFN remuneration framework consists of:
• a fixed component (base pay and benefits, including superannuation);
• a short-term performance related component or short-term incentive which for the senior executive and management
level employees may include the mandatory deferral of a portion of their annual short-term incentive in the form of
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Infigen Energy Annual Report 2009
Restricted Securities under the Employee Deferred Security Plan. For the majority of employees, participation in the
short-term incentive will be on the basis of meeting defined Key Performance Indicators which reflect the key financial,
strategic and operational targets for each financial year; and
• a long-term incentive by way of participation in the Performance Rights and Options Plan (PR&O Plan) for nominated
senior executives. The IFN Boards believe that participation in the PR&O Plan is an appropriate ‘at risk’ equity based
incentive given the responsibilities and commitment of the senior executives. The IFN Boards’ believe that participation
in the PR&O Plan provides alignment between the potential incentive and reward outcomes for participants, as well
as providing an important retention tool and reinforces the goal of creating sustainable value in the interests of
IFN securityholders.
Depending on the seniority of the employee, a combination of the above components is used to form an employee’s
total remuneration.
Further information regarding the policies and principles which are applied to determine the nature and amount of
remuneration paid to the Directors and management of IFN are set out in detail in the Remuneration Report.
remuneration committee
ASX Recommendation 8.1: The Board should establish a remuneration committee.
As noted above in relation to ASX Recommendation 2.4, in order to assist the IFN Boards in achieving fairness and
transparency in relation to remuneration issues and overseeing the remuneration and human resource policies and
practices of IFN, the IEL Board has established a Nomination & Remuneration Committee.
The IEL Nomination & Remuneration Committee has adopted a Charter, a summary of which is available on IFN’s website.
The responsibilities of the Committee pursuant to the Charter in relation to remuneration include:
• making recommendations to the relevant Board for determining the level of remuneration to be applied to
Non-Executive Directors of IFN. The Committee may engage external advisors to provide information to the Boards
to be considered in their deliberations for the purpose of recommending an appropriate level of remuneration for
Non-Executive Directors. All fees paid to Non-Executive Directors are disclosed in IFN’s annual financial statements to
the extent required by law; and
• in order to discharge its duties and responsibilities to securityholders in respect of matters relevant to remuneration of
key management personnel, the Committee will:
– provide input and advice regarding key performance indicators and remuneration of key management personnel
and any other relevant senior managers;
– approve the Remuneration Report to be disclosed in the Directors’ Report;
– consider for approval the formulation of any long-term incentive plans involving the potential issue of IFN securities; and
– monitor and review any long-term incentive plans for compliance with changes to legislation, regulation and market
expectations or practices.
Also as noted above in relation to ASX Recommendation 2.4, consistent with the intent and philosophy that underpins the
terms of the Stapling Deed that exists between IEL, IEBL and IERL, the IEL Nomination & Remuneration Committee provides
advices and recommendations to the Boards of IEBL and IERL in relation to general remuneration matters. It is the intent
that the Boards of IEBL and IERL may rely on those activities, advices and recommendations as if the IEL Nomination &
Remuneration Committee was a committee of the IEBL and IERL Boards.
As shown in Table 2 above, throughout the financial year the IEL Nomination & Remuneration Committee comprised a
majority of Independent Directors, and currently comprises four Independent Directors. During the 2009 financial year, the
Committee held 9 meetings, and the attendance record of members of the Committee are disclosed in the Directors’ Report.
non-executive Director remuneration
ASX Recommendation 8.2: Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration
from that of Executive Directors and senior executives.
The total remuneration paid to the Non-Executive Directors to 30 June 2009 and other relevant remuneration structures for
Non-Executive Directors, Executive Directors and senior executives are set out in detail in the Remuneration Report.
Non-Executive Directors are paid an annual fee according to which IFN Boards and Committees they are members of.
Non-Executive Directors’ fees for IEL and IEBL are determined within a Non-Executive Director’s aggregate fee pool limit
which has been approved by securityholders. The maximum aggregate sum for IEL and IEBL has been set at $1,000,000
per annum.
Non-Executive Directors are not provided with retirement benefits other than statutory superannuation and did not receive
options or other equity incentives, or bonus payments.
49
Directors’ Report
In respect of the year ended 30 June 2009, the Directors submit the following report for the Infigen Energy group (IFN).
DIrectors
The following persons were Directors of Infigen Energy Limited (IEL), Infigen Energy (Bermuda) Limited (IEBL) and Infigen
Energy RE Limited (IERL) in its capacity as responsible entity of the Infigen Energy Trust (IET), collectively ‘IFN’, during the
whole of the financial year and up to the date of this report:
• Anthony Battle
• Douglas Clemson
The following persons were appointed as Directors of IEL, IEBL and IERL during the financial year and continue in office
at the date of this report:
• Graham Kelly (appointed 20 October 2008)
• Miles George (appointed 1 January 2009)
• Michael Hutchinson (appointed 18 June 2009)
The following persons were a Director or Alternate Director of IEL, IEBL and IERL from the beginning of the financial year
until their resignation:
• Antonino Lo Bianco (resigned as an Alternate Director on 8 December 2008)
• Warren Murphy (resigned as a Director on 29 April 2009)
• Peter Hofbauer (resigned as a Director on 18 June 2009)
• Nils Andersen (resigned as a Director on 18 June 2009)1
• Michael Garland (resigned as an Alternate Director on 18 June 2009)
1 Appointed as a Director of IERL on 9 September 2005. Appointed as a Director of IEL and IEBL on 8 October 2008. Resigned as a Director of IEL, IEBL
and IERL on 18 June 2009.
Further particulars in relation to the background and experience of Directors of IFN at or since the end of the financial year
are provided in the IFN Boards section of the Annual Report.
DIrectors’ Interests In Ifn stapleD securItIes
One share in each of Infigen Energy Limited (IEL) and Infigen Energy (Bermuda) Limited (IEBL) and one unit in the Infigen
Energy Trust (IET) have been stapled together to form a single stapled security, tradable on the Australian Securities
Exchange under the ‘IFN’ code (IFN stapled securities). Infigen Energy RE Limited (IERL) is the Responsible Entity of IET.
The table below lists the Directors of IFN during the financial year as well as showing the relevant interests of Directors in
IFN stapled securities during the financial year.
Current Directors
Role
G Kelly2
A Battle
Independent Chairman
Independent Non-Executive Director
D Clemson
Independent Non-Executive Director
M Hutchinson3
Independent Non-Executive Director
M George4
Executive Director
Former Directors
Role
N Andersen5
Independent Non-Executive Director
P Hofbauer6
Non-Executive Director
W Murphy7
M Garland8
Non-Executive Director
Alternate Non-Executive Director
A Lo Bianco9
Alternate Non-Executive Director
IFN Stapled Securities Held1
Balance Acquired during
the year
1 July 2008
Sold during
the year
Balance
30 June 2009
n/a
37,634
140,000
n/a
500,000
11,694
3,569,253
2,406,241
2,142,000
2,142,000
0
5,000
0
0
0
0
0
0
0
0
0
0
0
500,000
150,351
2,406,241
0
0
1,513,475
0
10,000
42,634
140,000
0
500,000
n/a
n/a
n/a
n/a
n/a
1 If the person was not a Director for the whole year, movements in securities held relates to the period whilst the person was a Director.
2 Appointed as a Non-Executive Director of IEL, IEBL and IERL on 20 October 2008 and subsequently elected as Chairman of each entity on 26 November 2008.
3 Appointed as a Director of IEL, IEBL and IERL on 18 June 2009.
4 Appointed as a Director of IEL, IEBL and IERL on 1 January 2009.
5 Appointed as a Director of IERL on 9 September 2005. Appointed as a Director of IEL and IEBL on 8 October 2008. Resigned as a Director of IEL, IEBL
and IERL on 18 June 2009.
6 Resigned as a Director of IEL, IEBL and IERL on 18 June 2009.
7 Resigned as a Director of IEL, IEBL and IERL on 29 April 2009.
8 Resigned as an Alternate Director of IEL, IEBL and IERL on 18 June 2009.
9 Resigned as an Alternate Director of IEL, IEBL and IERL on 8 December 2008.
50
Infigen Energy Annual Report 2009
DIrectors’ meetIngs
The number of IFN Board meetings and meetings of standing Committees established by the IFN Boards held during the
year ended 30 June 2009, and the number of meetings attended by each Director, are set out below.
Current Directors
G Kelly1
A Battle
D Clemson
M Hutchinson2
M George3
Former Directors
W Murphy4
N Andersen5
P Hofbauer6
Board Meetings
Committee Meetings
IEL
IEBL
IERL
Audit, Risk
& Compliance
Nomination &
Remuneration
A
11
22
22
1
8
20
12
18
B
12
22
22
1
8
22
14
22
A
11
22
22
1
8
20
12
18
B
12
22
22
1
8
22
14
22
A
12
23
23
1
8
19
19
17
B
13
23
23
1
8
22
23
23
A
B
n/a
n/a
8
7
n/a
n/a
n/a
n/a
7
8
8
n/a
n/a
n/a
n/a
8
A
6
9
9
0
B
7
9
9
0
n/a
n/a
3
6
2
3
9
3
A = Number of meetings attended.
B = Number of meetings held during the time the Director held office or was a member of the committee during the year.
1 Appointed as a Non-Executive Director of Infigen Energy Limited (IEL), Infigen Energy (Bermuda) Limited (IEBL) and Infigen Energy RE Limited (IERL),
as responsible entity of the Infigen Energy Trust, on 20 October 2008.
2 Appointed as a Director of IEL, IEBL and IERL, as well as a member of the IEL Nomination & Remuneration Committee, on 18 June 2009. Following
appointment, no meetings of the Nomination & Remuneration Committee were held during the remainder of FY09.
3 Appointed as a Director of IEL, IEBL and IERL on 1 January 2009.
4 Resigned as a Director of IEL, IEBL and IERL on 29 April 2009.
5 Appointed as a Director of IERL on 9 September 2005. Appointed as a Director of IEL and IEBL on 8 October 2008. Resigned as a Director of IEL, IEBL
and IERL on 18 June 2009.
6 Resigned as a Director of IEL, IEBL and IERL on 18 June 2009.
Additional meetings of committees of Directors were held during the year which are not included in the above table, for
example where the Boards delegated authority to a committee of Directors to approve specific matters or documentation
on behalf of the Boards.
company secretarIes
David Richardson was appointed Company Secretary of IEL, IEBL and IERL on 26 October 2005 and remained Company
Secretary of these entities during the whole of the financial year and up to the date of this report.
Catherine Gunning was appointed Company Secretary of IEL, IEBL and IERL on 18 June 2009 and remained Company
Secretary of these entities up to the date of this report.
Further particulars in relation to the background and experience of the Company Secretaries of IFN are provided in the
IFN Management Team section of the Annual Report.
cHanges In state of affaIrs
In November 2008 and January 2009, IFN disposed of its wind farm assets in Portugal and Spain, respectively, achieving
a collective net gain on sale of $267.7 million for these assets.
On 31 December 2008, IFN terminated the management agreements with Babcock & Brown for $40 million plus associated
costs. In association with the termination of management agreements, IFN also internalised management and acquired
the responsible entity of the Infigen Energy Trust from Babcock & Brown.
Since termination of the management agreements, IFN has completed a program to transition to an internally managed
operating business, including acquiring a US asset management business and joint venture interests in Australian and
New Zealand wind energy development assets. IFN has made significant steps to transform its business from an asset owner
to a specialist renewable energy business which is focused on growth opportunities as a renewable energy developer, owner
and operator.
Other changes in the state of affairs of the consolidated entity are referred to in the Financial Statements and
accompanying Notes.
51
Directors’ Report
prIncIpal actIVItIes
Following termination of the management agreements with Babcock & Brown and the internalisation of management on
31 December 2008, IFN has transformed its business from an asset owner to a renewable energy developer, owner and
operator which is focused on organic growth opportunities.
The business also continued to implement its direct operational control strategy for Operations & Maintenance activities
delivering tangible operational performance benefits during the year. In parallel with the continued focus on operational
efficiencies, the business will focus on executing the growth opportunities within its Australian development pipeline as well
as progressing the asset sales processes (refer Subsequent Events section below) to grow securityholder wealth.
DIstrIbutIons
In respect of the half year period to 31 December 2008, the Board declared and paid an FY09 interim distribution of 4.5 cents
per stapled security on 18 March 2009.
In respect of the half year period to 30 June 2009, the Board has declared an FY09 final distribution of 4.5 cents per stapled
security which is expected to be paid on 17 September 2009.
IFN has confirmed that the combined FY09 interim and final distributions of 9 cents per stapled security will be fully tax
deferred. Further details regarding the distributions paid by IFN are set out in Note 27 to the Financial Statements.
reVIeW of operatIons
During the year ended 30 June 2009, IFN disposed of its wind farm assets in Spain and Portugal. The FY09 financial results
are classified into continuing and discontinued operations. IFN’s disposed Spanish and Portuguese assets are classified in the
Financial Statements as discontinued operations, with all remaining assets classified as continuing operations.
During FY09, IFN recorded revenues from continuing operations of $337.0 million compared to $216.4 million in FY08,
representing an increase of 56% and resulting from a full year’s contribution from wind farms that were purchased in FY08.
Net profit for the year was $192.9 million. This included a loss of $66.1 million from continuing operations and a profit of
$259.1 million from discontinued operations. The loss from continuing operations includes significant non-recurring costs
relating to the termination of the management agreements and transition-related expenses of $62.4 million. The profit from
discontinued operations includes the net gain on sale of IFN’s Spanish and Portuguese assets.
The following table provides a first and second half analysis of the financial result for FY09. It shows higher revenue as well
as a net profit from continuing operations in the second half. In addition, the second half benefited from a significant profit
from the sale of the Spanish assets.
Revenue
Income from institutional equity partnerships
Other income
Operating expenses
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional equity partnerships
Other finance costs
Sub-total
Significant non-recurring items
Net (loss)/profit before income tax expense
Income tax benefit/(expense)
(Loss)/profit from continuing operations
Profit/(loss) from discontinued operations
Net profit/(loss) for the year
H1 09
($’000)
150,970
38,378
11,204
(54,668)
(73,746)
(47,106)
(46,429)
(28,468)
(49,865)
(49,318)
(99,183)
18,394
(80,789)
H2 09
($’000)
FY09
($’000)
185,989
336,959
48,440
11,744
(63,218)
(84,227)
(60,189)
(58,158)
29,959
10,340
(13,036)
86,818
22,948
(117,886)
(157,973)
(107,295)
(104,587)
1,491
(39,525)
(62,354)
(2,696)
(101,879)
17,373
14,677
35,767
(66,112)
(7,613)
266,665
259,052
(88,402)
281,342
192,940
A further review of the operations of IFN and the results of those operations for the year ended 30 June 2009 is included in
the attached Financial Statements and accompanying Notes.
52
Infigen Energy Annual Report 2009
subsequent eVents
purchase of australian & new Zealand Development assets and minority Interest in caprock
IFN reached financial close on the acquisition of Australian and New Zealand wind energy project development assets
in July 2009 and on the purchase of 20% Class B interests in the Caprock wind farm (IFN already held 80% of the Class B
interests) in August 2009. The Australian and New Zealand wind energy development assets are primarily 50% interests in
development opportunities comprising more than 1,000MW in six Australian states and in New Zealand, with a number of
the projects located close to IFN’s existing Australian wind farms. The development opportunities have the potential to be
delivered in the next five years.
Prior to period end, IFN agreed to purchase a group of assets from Babcock & Brown for a total consideration of $23,400,000.
The above assets (development assets and Caprock minority interest) form components of these group of assets. Other
components of the group of assets acquired from Babcock & Brown include the US asset management business and other
wind farm minority interests.
commencement of asset sale processes
United States
Following a market testing review, IFN initiated a sale process of its US business in August 2009. A potential sale will only
take place to the extent that achievable sale prices exceed the benefits of holding the US business.
Europe
IFN has determined that its European assets are ‘non-core’. In August 2009, IFN commenced a sales process of its remaining
European assets in France and Germany. A potential sale will only take place to the extent that achievable sale prices exceed
the benefits of holding these assets.
future DeVelopments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial
years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity.
Accordingly, this information has not been disclosed in this report.
enVIronmental regulatIons
To the best of Directors’ knowledge, IFN has complied with all significant environmental regulations applicable to its operations.
53
Directors’ Report
remuneratIon report
On 31 December 2008, Infigen Energy (known as Babcock & Brown Wind Partners (BBW) at the time) terminated the
Management Agreements with the Babcock & Brown group (B&B) and internalised management such that the management
team became direct employees of Infigen Energy. Thus different remuneration frameworks existed pre and post the
internalisation of management on 31 December 2008.
bbW remuneration framework 1 July 2008 – 31 December 2008
Prior to the termination of the BBW Management Agreements on 31 December 2008, B&B managed BBW through a wholly
owned subsidiary company (the Manager) in return for a management fee. Under the terms of the BBW Management
Agreements, the Manager provided management services and a management team to BBW which comprised B&B
employees who were seconded to manage BBW (Management). Those employees were remunerated in accordance with
B&B’s remuneration policies for the period 1 July 2008 to 31 December 2008.
As outlined in prior year Remuneration Reports, the B&B Board set the remuneration framework for all B&B employees,
including Management of BBW. The B&B Board determined that remuneration would be assessed under a total annual
remuneration model consisting of fixed remuneration and incentive remuneration (Short Term Incentives (STI) and Long
Term Incentives (LTI)). The amount of incentive remuneration was to be determined after B&B’s year-end (December) and
was calculated as total annual remuneration approved by the B&B Board less fixed remuneration. Incentive remuneration
was then allocated between the STI and LTI components in accordance with relevant criteria.
The general process for determining the total annual remuneration allocation for Management of BBW was as follows:
Step 1:
Step 2:
Step 3:
Step 4:
Early in the relevant period, Key Performance Indicators were set to establish criteria for assessing performance
of Management in determining their final total annual remuneration amount.
Independent Directors who were members of the BBW Nomination & Remuneration Committee provided input
to B&B on the performance of Management to assist in determining the preliminary total annual remuneration
allocation amount.
The B&B Corporate Management Committee established individual allocations from the total incentive
remuneration allocation amount and made recommendations to the B&B Remuneration Committee.
Independent members of the B&B Remuneration Committee established recommendations to the B&B Board
for the total annual remuneration allocation amount and total annual remuneration recommendations for
Management.
As agreed with B&B at the time of terminating the BBW Management Agreements, Infigen Energy undertook to assume
the existing employee entitlements of Management, including certain amounts relating to previous employment with B&B.
These amounts were subsequently paid to the internalised management team of Infigen Energy in March 2009.
Infigen energy remuneration framework from 1 January 2009
IFN Remuneration Policy – Objectives
Infigen Energy’s remuneration policy aims to ensure remuneration is:
• commensurate with an individual’s position and responsibilities;
• competitive with market standards;
• linked with IFN’s strategic goals and performance; and
• aligned with the interests of securityholders.
role of the Iel nomination & remuneration committee
On behalf of the Infigen Energy group, the Board of Infigen Energy Limited (IEL) established a Nomination & Remuneration
Committee to assist the IFN Boards. In addition to nomination and succession matters, the Committee is responsible
for reviewing and monitoring the remuneration framework across the group, including specifically the performance
and remuneration of Directors and management. Prior to the termination of the BBW Management Agreements,
the Nomination & Remuneration Committee also provided input to B&B regarding the performance measures of the
Management of BBW and the overall performance of those executives to assist in determining their annual remuneration.
As at period end and currently, the members of the Nomination & Remuneration Committee are A Battle (Committee
Chairman), G Kelly, D Clemson and M Hutchinson.
A main focus of the Nomination & Remuneration Committee since the internalisation of management has been the
development of the following IFN employee remuneration schemes to further align the interest of employees with those
of IFN securityholders:
• Employee Deferred Security Plan; and
• Performance Rights and Options Plan.
54
Infigen Energy Annual Report 2009
The Nomination & Remuneration Committee received considerable advice during development of these Plans from
independent remuneration consultants, with both Plans being approved at a General Meeting of securityholders held on
29 April 2009. However, proposed changes to employee share schemes first announced by the Federal Government in
the May 2009 Federal Budget have created uncertainty in relation to the future operation of the Plans. Revised proposals
subsequently announced by the Federal Government provided sufficient certainty for performance rights and options to
be issued under the Performance Rights and Options Plan prior to 30 June 2009, however no securities have been awarded
under the Employee Deferred Security Plan.
a. remuneratIon of non-eXecutIVe DIrectors
Fees to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Following
receipt of advice from the Nomination & Remuneration Committee, the individual Non-Executive Director fees and
committee membership fees are determined by the IFN Boards within the aggregate amount approved by securityholders.
At the 2006 Annual General Meetings of Infigen Energy Limited (IEL) and Infigen Energy (Bermuda) Limited (IEBL),
securityholders approved the current maximum aggregate amount which may be paid to all Non-Executive Directors as
$500,000 per annum for IEL and $500,000 per annum for IEBL, which includes committee membership fees. Infigen Energy
RE Limited (IERL) is a subsidiary entity of the IFN group and no maximum aggregate amount of fees for Non-Executive
Directors has been set.
Non-Executive Directors receive a cash fee for service which is inclusive of statutory superannuation. Non-Executive
Directors do not receive any performance-based remuneration (such as performance rights or options) or any retirement
benefits. Non-Executive Director fees are reviewed annually.
board/committee fees
Fees payable to Non-Executive Directors during the year ended 30 June 2009 are set out below.
Board/Committee
IEL Board
IEBL Board
IERL Board
IEL/IEBL/IERL Boards
IEL Audit, Risk & Compliance Committee
IEBL Audit, Risk & Compliance Committee
IERL Audit, Risk & Compliance Committee
IEL Nomination & Remuneration Committee
Role
Chairman
Non-Executive Director
Chairman
Non-Executive Director
Chairman
Non-Executive Director
Lead Independent Director1
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
1 The appointment of a Director as Lead Independent Director was no longer required following the election of an Independent Chairman on
26 November 2008.
Fee (pa)
$85,000
$54,000
$25,000
$17,000
$85,000
$54,000
$10,000
$4,333
$2,167
$4,333
$2,167
$4,333
$2,167
$8,000
$4,000
55
Directors’ Report
remuneration of non-executive Directors for the years ended 30 June 2008 and 2009
Details of the nature and amount of each element of the emoluments of each Non-Executive Director of IFN for the years
ended 30 June 2008 and 2009 are set out in the table below.
Non-Executive Directors
G Kelly1
A Battle
D Clemson
M Hutchinson2
N Andersen3
P Hofbauer4
W Murphy5
Total Remuneration
Year
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
Short-term Post-employment
benefits
benefits
Fees
$
Superannuation
$
Total
$
121,070
10,896
131,966
–
132,569
124,313
130,275
119,268
4,214
–
118,349
107,341
129,028
123,500
103,766
117,000
739,271
591,422
–
11,931
11,188
11,725
10,732
379
–
10,651
9,659
–
–
–
–
45,582
31,579
–
144,500
135,501
142,000
130,000
4,593
–
129,000
117,000
129,028
123,500
103,766
117,000
784,853
623,001
1 Appointed as a Non-Executive Director of Infigen Energy Limited (IEL), Infigen Energy (Bermuda) Limited (IEBL) and Infigen Energy RE Limited (IERL) on
20 October 2008 and subsequently elected as Chairman of each entity on 26 November 2008.
2 Appointed as a Director of IEL, IEBL and IERL on 18 June 2009.
3 Appointed as a Director of IERL on 9 September 2005. Appointed as a Director of IEL and IEBL on 8 October 2008. Resigned as a Director of IEL, IEBL and
IERL on 18 June 2009.
4 Resigned as a Director of IEL, IEBL and IERL on 18 June 2009. Part of this fee is a notional amount and was not received by Mr Hofbauer because for the
period up to 11 November 2008 whilst Mr Hofbauer was an employee of the Babcock & Brown group, he did not directly receive any remuneration from
IFN for undertaking the role of Director, however part of the management fee payable by IFN to B&B during that period was designated as consideration
for these services.
5 Resigned as a Director of IEL, IEBL and IERL on 29 April 2009. Part of this fee is a notional amount and was not received by Mr Murphy because for the
period up to the termination of the Management Agreements with B&B on 31 December 2008, Mr Murphy did not directly receive any remuneration from
IFN for undertaking the role of Director, however part of the management fee payable by IFN was designated as consideration for these services.
b. remuneratIon of employees
Following extensive advice from remuneration consultants, the Nomination & Remuneration Committee developed and
implemented a remuneration framework for the internalised management team. The remuneration framework consists of:
• a fixed component (base pay and benefits, including superannuation);
• a short-term performance related component or short-term incentive which for the senior executive and management
level employees (senior executives) may include the mandatory deferral of a portion of their annual short-term
incentive in the form of Restricted Securities under the Employee Deferred Security Plan. For the majority of employees,
participation in the short-term incentive will be on the basis of meeting defined Key Performance Indicators (KPIs) which
reflect the key financial, strategic and operational targets for each financial year; and
• a long-term incentive by way of participation in the Performance Rights and Options Plan (PR&O Plan) for nominated
senior executives. The Board believes that participation in the PR&O Plan is an appropriate ‘at risk’ equity based incentive
given the responsibilities and commitment of the senior executives. In the Board’s opinion, participation in the PR&O
Plan provides alignment between the potential incentive and reward outcomes for participants, as well as providing an
important retention tool and reinforces the goal of creating sustainable value in the interests of securityholders.
Depending on the seniority of the employee, a combination of the above components is used to form an employee’s total
remuneration. There are no guaranteed base pay increases included in any employment contracts.
56
Infigen Energy Annual Report 2009
employee Deferred security plan
The Employee Deferred Security Plan (EDS Plan) is designed to allow employees an opportunity to acquire stapled securities
in IFN, and in doing so, further align the interests of employees with those of securityholders by providing a platform for the
broader delivery of equity ownership to IFN employees.
The objectives of the EDS Plan are to:
• provide an incentive for the creation of, and focus on, securityholder wealth;
• further align the interests of employees with those of securityholders;
• ensure the remuneration packages of employees are consistent with market practice and provide competitive
compensation;
• provide short to medium-term incentives for the retention of employees; and
• support the culture of employee stapled security ownership.
Under the EDS Plan, employees would have the ability to express a preference to receive IFN stapled securities instead of a
portion of their potential future short-term incentive remuneration on a pre-tax basis in the form of restricted IFN stapled
securities (Restricted Securities). In addition, IFN would be able to make awards of Restricted Securities to employees as a
performance incentive or reward for exceptional performance, on terms and conditions as determined by the Board of IEL.
The Board of IEL is responsible for administering the EDS Plan in accordance with the EDS Plan Rules and the terms and
conditions of specific grants of Restricted Securities to participants in the EDS Plan. An award of Restricted Securities under
the EDS Plan is subject to both the EDS Plan Rules and the terms of the specific award. Restricted Securities allocated under
the EDS Plan may be existing securities or newly issued securities. Any IFN stapled securities that are issued or transferred to
employees under the EDS Plan will rank equally with those traded on the ASX at the time of issue. A participant is entitled to:
• receive distributions/dividends;
• participate in bonus and rights issues; and
• vote at general meetings of IFN,
in respect of the Restricted Securities that they hold under the EDS Plan (whether or not the Restricted Securities are subject
to disposal restrictions or performance conditions).
Under the EDS Plan, the Board has the discretion to determine which employees will be offered the opportunity to
participate in the EDS Plan. At the time of the General Meeting of securityholders, the Board indicated an intention to offer
voluntary participation in the EDS Plan to a wide range of employees who may express a preference to sacrifice part of their
salary or cash based incentives. The Restricted Securities would be purchased on-market or issued and would be held by
employees subject to a holding lock for 10 years. However, the Board, in its absolute discretion, may approve the removal of
the holding lock, but not before the terms and conditions set out under the relevant award have been satisfied.
Also at the time of the General Meeting of securityholders, the Board indicated an intention that senior executives
would receive a mandatory proportion of any annual short-term incentive in the form of Restricted Securities under the
EDS Plan. Securities awarded as a mandatory allocation may be purchased on-market or issued and would be held by
executives subject to a specified holding lock period. The holding lock would expire on the 10th anniversary from the date
of allocation, however the Board, in its absolute discretion, may approve the removal of the holding lock, but not until
one year has passed in relation to 50% of the Restricted Securities and two years have passed in relation to the remaining
Restricted Securities.
EDS Plan Arrangements for Financial Year 2009
The Board indicated at the General Meeting of securityholders on 29 April 2009 that, given recent market volatility and
the significant change associated with the separation from Babcock & Brown and internalisation of Management, the
most appropriate form of incentive arrangement for the senior executives in the FY09 period is a long-term incentive
arrangement. This was designed to ensure retention of key executives and to align the interests of participating executives
with the interests of securityholders. As such, it was envisaged that the senior executives of IFN would not participate in the
short-term incentive arrangements or the EDS Plan in FY09 and instead, would participate in a ‘one-off’ long-term incentive
award as described further below.
Due to the uncertainty associated with the proposed changes to employee share schemes first announced by the Federal
Government in the May 2009 Federal Budget, no Restricted Securities have been awarded to employees of IFN under the
EDS Plan at the time of this report.
57
Directors’ Report
performance rights and options plan
The Performance Rights and Options Plan (PR&O Plan) is designed to deliver to executives an appropriate long-term equity
participation interest in IFN, and in doing so, align the longer term interests of executives with those of securityholders.
Any performance rights and options awarded to executives under the PR&O Plan are ‘at risk’ and will only vest if the terms
and conditions set out under the relevant award are satisfied.
The Board of IEL may in its absolute discretion determine which eligible persons will be offered the opportunity to
participate in the PR&O Plan. The PR&O Plan will allow the grant of performance rights and options to participants, with
the PR&O Plan Rules setting out the general terms of the PR&O Plan. A grant of performance rights or options under the
PR&O Plan is subject to both the PR&O Plan Rules and the terms of the specific grant. Other features of the PR&O Plan are
as follows:
• the Board of IEL may impose performance conditions on any grants under the PR&O Plan to reflect IFN’s business plans,
targets, budgets and its performance objectives. Further information is provided below in relation to performance
conditions.
• performance rights and options will not attract dividends, distributions or voting rights until they vest (and in the case
of options, are exercised) and stapled securities are allocated (whether or not the stapled securities are subject to
non-disposal restrictions).
• upon the performance conditions being satisfied in respect of a performance right and/or option:
– the performance right automatically vests and IEL must procure the issue or transfer of an IFN stapled security to the
participant; and
– the option vests but the participant must determine whether to ‘exercise’ the option. Upon the exercise of the option
and payment of relevant exercise price by the participant, IEL must procure the issue or transfer of an IFN stapled
security to the participant.
• the Board of IEL may, in its discretion, accelerate the vesting of all or part of any unvested performance rights or options,
including in circumstances such as death, total and permanent disablement, a change of control, a compromise or
arrangement under Part 5.1 of the Corporations Act, winding up or delisting.
• the PR&O Plan provides for the acquisition by issue or transfer of fully paid stapled securities by the plan entity appointed
by IEL. Stapled securities may then be transferred from the plan entity to a participant upon the relevant performance
conditions being satisfied. Any stapled securities issued under the PR&O Plan will rank equally with those traded on the
ASX at the time of issue.
• in the event of any capital reorganisation of IFN (including any bonus issues and rights issues), the participant’s options
or performance rights will be adjusted, as set out in the PR&O Plan Rules and otherwise in accordance with the Listing
Rules. In general, it is intended that the participant will not receive any advantage or disadvantage from such adjustment
relative to IFN securityholders.
PR&O Plan Arrangements for Financial Year 2009
The Board determined that the most appropriate form of incentive arrangement for the FY09 period for the senior
executives is a long-term incentive arrangement. Following the internalisation of management, the Board determined that
on a ‘one-off’ basis for FY09 senior executives will be eligible to receive a long-term incentive award under the PR&O Plan
that encompassed:
• the senior executive’s short-term incentive opportunity for FY09;
• the senior executive’s long-term incentive award for FY09; and
• the senior executive’s long-term incentive award for FY10.
Senior executives participating in this opportunity will not receive any cash payments or short-term incentives which may
otherwise have been awarded under the short-term incentive plan at the completion of FY09. Instead, the short-term
incentive opportunity was redirected to the FY09 allocation under the PR&O Plan which will be ‘at risk’ and subject to both
defined performance hurdles/conditions and a minimum three year performance period (refer below).
For senior executives participating in the ‘one-off’ PR&O opportunity, the Board accelerated participation in the PR&O Plan
by bringing forward the FY10 PR&O allocation. The ‘one-off’ opportunity in FY09 enhances the alignment of the potential
executive reward outcomes with the interests of securityholders, though for any benefit to vest the performance thresholds
as defined below must be met. The FY09 opportunity also enhances the retention capacity of IFN’s reward framework.
For senior executives who received an award under the PR&O Plan for FY09, the Board does not intend to make any further
awards under the PR&O Plan to those executives in respect of FY10.
58
Infigen Energy Annual Report 2009
Performance Conditions of Awards Granted Under the PR&O Plan in Respect of FY09
1. Participants received 50% of their award in the form of performance rights and 50% in the form of options. Performance
rights and options were awarded to participants in two tranches of equal value (Tranche 1 and Tranche 2).
2. The measures used to determine performance and the subsequent vesting of performance rights and options are Total
Shareholder Return (TSR) and a financial performance test. The vesting of Tranche 1 of the performance rights and
Tranche 1 of the options is subject to the TSR condition, while Tranche 2 of the performance rights and Tranche 2 of the
options is subject to an Operational Performance condition. The Operational Performance condition is determined by
an earnings before interest, taxes, depreciation and amortisation (EBITDA) test.
Tranche 1
Tranche 2
Performance Rights
Options
TSR condition
TSR condition
Operational Performance condition
Operational Performance condition
3. The Tranche 1 TSR condition is measured over a 3 year period from 1 January 2009 to 31 December 2011.
4. The Tranche 2 Operational Performance condition is measured over a 3 year period from 1 July 2008 to 30 June 2011.
5. TSR condition (applicable to Tranche 1 performance rights and Tranche 1 options): TSR measures the growth in the price
of securities plus cash distributions notionally reinvested in securities. In order for the Tranche 1 performance rights and
the Tranche 1 options to vest, the TSR of IFN will be compared to companies in the S&P/ASX 200 (excluding financial
services and the materials/resources sector). The performance period commences on 1 January 2009 and ends on
31 December 2011. For the purpose of calculating the TSR measurement, the security prices of each company in the
S&P/ASX 200 (as modified above) and of IFN will be averaged over the 30 trading days preceding the start and end date
of the performance period.
The percentage of the Tranche 1 performance rights and Tranche 1 options that vest are as follows:
IFN’s TSR performance compared to the relevant
peer group
Percentage of Tranche 1 performance rights and Tranche
1 options to vest
0 to 49th percentile
50th to 74th percentile
Nil
50% – 98%
(ie. for every percentile increase between 50% and 74%
an additional 2% of the TSR grant will vest)
75th to 100th percentile
100%
6. Operational Performance condition (applicable to Tranche 2 performance rights and Tranche 2 options): the vesting
of the Tranche 2 performance rights and Tranche 2 options is subject to an Operational Performance condition.
In the context of the market volatility and the changing circumstances of IFN moving to an operational business,
this Operational Performance condition is to be established annually by the Board. At the completion of the 3 year
performance period, the Operational Performance conditions which have been set will provide a cumulative hurdle
which must be achieved in order for the Operational Performance condition to be satisfied.
The Operational Performance condition will test the multiple of EBITDA to Capital Base, with the annual target being
a specified percentage increase in the multiple over the year. The Capital Base will be measured as equity (net assets)
plus net debt. Both the EBITDA and Capital Base will be measured on a proportionately consolidated basis to reflect
IFN’s economic interest in all investments.
For the initial awards granted under the PR&O Plan, the annual target for FY09 was set to reflect the performance
expectations of IFN’s business and prevailing market conditions at the time. Going forward, the annual Operational
Performance target for each financial year will be established by the Board no later than the time of the release of
IFN’s annual financial results for the preceding financial year.
The annual Operational Performance targets are confidential to IFN, however each year’s target, and the performance
against that target, will be disclosed in IFN’s Annual Report for that year.1
1 See page 157 for the FY09 operational performance target.
59
Directors’ Report
7. Any performance rights or options that do not vest following the measurement of performance against the TSR and
Operational Performance conditions described above will be subject to a single retest 4 years after the commencement
of the relevant performance period (ie. 31 December 2012 in regards to the Tranche 1 TSR performance condition and
30 June 2012 in regards to the Tranche 2 Operational Performance condition). Any performance rights or options that
do not vest in year 4 will then lapse.
8. The Board of IEL will accelerate the vesting of any performance rights or options awarded in FY09 in the event of a
change in control of IFN.
link between remuneration policy and the performance of Infigen energy
As previously mentioned, the main focus of the Nomination & Remuneration Committee since the internalisation of
management has been the development of the Employee Deferred Security Plan and the Performance Rights & Options
Plan. These plans are designed to further align the interests of employees with those of IFN securityholders, and in particular
further aligning the long-term interests of senior management and securityholders via senior management participation in
the Performance Rights & Options Plan.
Since listing on the Australian Securities Exchange in October 2005 (under the group’s former name of Babcock & Brown
Wind Partners at the time), Infigen Energy has:
• generated total shareholder returns in excess of 11.6%, compared with the S&P/ASX200 Accumulation Index of 4.9% over
the same period1; and
• declared a total of 46.2 cents per security in distributions.
The graph below displays Infigen Energy’s Total Shareholder Return (TSR) performance compared to the S&P/ASX200
Accumulation Index since listing to 30 June 2009.
TSR performance against S&P/ASX200 Accumulation Index1
)
%
(
R
S
T
14%
12%
10%
8%
6%
4%
2%
0%
Index
IFN
1 Source: Bloomberg & Iress (period 28 October 2005 to 30 June 2009).
60
Infigen Energy Annual Report 2009
Other relevant metrics for the financial year periods since listing are included in the table below.
Closing security price
Revenue1 (m)
EBITDA from operations1 (m)
Net Operating Cash Flow (m)
Distributions (cents per security)
Net assets per security
Total securities on issue
30 June 2006
30 June 2007
30 June 2008
30 June 2009
$1.51
$85.6
$64.6
$34.2
10.2
$1.16
$1.95
$171.9
$126.5
$87.8
12.5
$1.10
$1.645
$254.3
$193.0
$188.8
14.5
$1.30
$1.15
$315.8
$225.7
$169.5
9.0
$1.14
575,301,766
673,070,882
868,600,694
808,176,9242
1 Revenue and EBITDA from operations figures exclude the results of discontinued operations for the years ended 30 June 2008 and 30 June 2009. The
Portuguese and Spanish asset portfolios were sold by Infigen Energy on 21 November 2008 and 9 January 2009, respectively. These asset sales achieved
a collective net gain on sale of $267.7 million and a significant deleveraging of the business.
2 The reduction in securities on issue is a result of the on-market security buy-back program.
IFN Security Buy-back Program
On 16 September 2008, the IFN Boards agreed to establish an on-market security buy-back program. The Boards believed
the security price at the time did not reflect the underlying quality or value of Infigen Energy’s global wind energy business.
The initial securities were acquired under the buy-back program on 17 November 2008 and a total of 68,821,782 securities
were acquired up to 30 June 2009 at an average price of approximately 88.5 cents per security. The continuing operation of
the buy-back program is subject to an ongoing analysis of the return achievable at a given security price versus the return
achievable from other investment opportunities.
Infigen energy – executives
The following persons were key management personnel (Executives) of the Infigen Energy group during the financial year:
M George
G Dutaillis
G Dover
D Richardson
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Company Secretary
Prior to the termination of the Management Agreements with the Babcock & Brown group and internalisation of
management on 31 December 2008, the Executives were employees of Babcock & Brown. From 1 January 2009, the
Executives were employees of Infigen Energy.
Options, bonus deferral rights and share awards that were held by the Executives over Babcock & Brown ordinary shares
prior to the termination of the Management Agreements were forfeited or expired on 31 December 2008. In some instances,
this has resulted in a net negative value for share based payments presented in Table 1 below due to the expense that
was previously recognised in relation to these options, bonus deferral rights and share awards being reversed in FY09. No
additional options, bonus deferral rights and share awards were granted to Executives over Babcock & Brown ordinary
shares during FY09.
61
Directors’ Report
table 1: remuneratIon of Ifn eXecutIVes for tHe years enDeD 30 June 2008 anD 2009
Details of the nature and amount of each element of the emoluments of each IFN Executive for the years ended
30 June 2008 and 2009 are set out in the table below.
Short-term employee benefits
STI relating
Non-
to current monetary
period3 benefits
$
$
Total of
short-term
employee
benefits
$
Year
Salary
$
Post-
employment
benefits
Other
long-term
employee
benefits
Super-
annuation
$
Long
Service
Leave
$
Share-based payments1, 2
Equity
settled
$
Cash
settled
$
Total
$
Executive
M George
2009 662,499
512,077
2008 316,250
446,600
G Dutaillis
2009 407,500
270,096
2008 311,000
350,000
G Dover
2009 407,500
270,096
2008 311,000
350,000
D Richardson
2009 228,000
131,000
2008
170,600
157,800
–
–
–
–
–
–
–
–
1,174,576
13,744
10,432
(158,755)
(42,576)
997,421
762,850
677,596
661,000
677,596
661,000
359,000
328,400
13,129
13,744
13,129
13,744
13,129
13,744
13,129
5,271
1,010,026
28,470
1,819,746
6,591
(19,471)
(8,777)
669,683
5,183
245,755
5,869
930,936
6,591
107,176
(8,777)
796,330
5,183
174,839
5,869
860,020
3,832
2,843
21,730
15,529
–
–
398,306
359,901
Total Remuneration 2009 1,705,499
1,183,269
– 2,888,768
54,976
27,446
(49,320)
(60,130) 2,861,740
2008 1,108,850 1,304,400
– 2,413,250
52,516
18,480
1,446,149
40,208 3,970,603
1 For the period up to 31 December 2008, Equity settled share-based payments includes LTI Plan options, B&B Bonus Deferral Rights and Share Awards
relating to Babcock & Brown ordinary shares. Cash settled share-based payments over this period refers to the Fund Bonus Deferral Rights which have
been cash-settled. For the period 1 January 2009 to 30 June 2009, share-based payments includes Performance Rights and Options relating to IFN
stapled securities.
2 Options, bonus deferral rights and share awards that were held by the Executives relating to Babcock & Brown ordinary shares prior to the termination of
the Management Agreements were forfeited or expired on 31 December 2008. In some instances, this has resulted in a net negative value for share based
payments presented in the table due to the expense that was previously recognised in relation to these options, bonus deferral rights and share awards
being reversed in FY09.
3 Short Term Incentives refers to the STI paid in relation to employment with the Babcock & Brown group.
table 2: remuneratIon components as a proportIon of total remuneratIon
The relative proportion of fixed remuneration to performance-based remuneration for FY09 is set out below.
Executive
M George
G Dutaillis
G Dover
D Richardson
Performance-based remuneration
Fixed
remuneration1
(%)
Cash STI2
(%)
Share-based
payments3
(%)
45.2
49.5
49.5
58.4
33.7
31.2
31.2
31.2
21.1
19.3
19.3
10.4
Total
(%)
100
100
100
100
1 Fixed Remuneration consists of salary, non-monetary benefits, superannuation and long service leave.
2 Cash STI relates to employment with Babcock & Brown.
3 Share-based payments refers to the value of performance rights and options relating to IFN securities.
Infigen Energy’s current remuneration strategy is to provide a balanced compensation mix by rewarding superior
performance in achieving financial performance objectives as well as providing ongoing incentives to continue to achieve
strong security price performance.
62
Infigen Energy Annual Report 2009
Ifn performance rights and options
No performance rights or options were granted in relation to IFN stapled securities to Executives prior to the internalisation
of management on 31 December 2008. Subsequent to the internalisation of management, performance rights and options
over IFN stapled securities were granted to Executives in FY09 under the Performance Rights and Options Plan.
No performance rights or options in relation to IFN securities vested or became exercisable in FY09. No IFN securities were
acquired by Executives upon the exercise of options during FY09.
table 3: Value of remuneratIon tHat Vests In future years
Remuneration amounts disclosed in Table 3 below refer to the maximum value of performance rights and options relating
to IFN securities. These amounts have been determined at grant date by using an appropriate pricing model and amortised
in accordance with AASB 2 ‘Share Based Payment’. The minimum value of remuneration that may vest is nil.
Executive
M George
G Dutaillis
G Dover
D Richardson
Maximum value of remuneration
which is subject to vesting
FY10
($)
647,215
336,552
336,552
88,539
FY11
($)
647,215
336,552
336,552
88,539
FY12
($)
138,797
72,174
72,174
18,987
outstanding performance rights
Performance rights relating to IFN securities have been granted in two tranches to participants in the Performance Rights
and Options Plan and have a 3 year performance measurement period. Vesting of Tranche 1 is subject to a Total Shareholder
Return (TSR) condition and Tranche 2 is subject to an Operating Performance condition. Upon relevant performance
conditions being met, the performance rights granted automatically vest and the holder will receive one fully paid ordinary
IFN stapled security per performance right vested. The performance rights do not attract dividends, distributions or voting
rights until they vest and stapled securities are allocated. No exercise price is payable in relation to the performance
rights and no amounts have been paid or are payable by the recipient for the granting of these performance rights. No
performance rights vested, were exercised or lapsed during the year and all performance rights held as at 30 June 2009 are
unvested and unexercisable.
Any performance rights which do not vest following the measurement of performance against the relevant conditions will
be subject to a single retest 4 years after the commencement of the relevant performance period (ie. 31 December 2012 in
regards to the Tranche 1 and 30 June 2012 in regards to the Tranche 2). Any performance rights which do not vest after each
single retest period will then lapse.
table 4: terms anD conDItIons of outstanDIng performance rIgHts
The table below provides the terms and conditions of outstanding performance rights relating to IFN securities which have
been granted to the Executives. The performance rights are valued as at the deemed grant date.
Executive
M George
G Dutaillis
G Dover
D Richardson
Granted
number
1,112,925
578,721
578,721
152,248
Grant
date
27/3/09
27/3/09
27/3/09
27/3/09
Value per
performance
right
($)
Total value of
performance
rights granted
($)
Estimated vesting date1
Tranche 1
Tranche 2
0.626
0.626
0.626
0.626
696,844
362,359
362,359
95,328
31/12/11
31/12/11
31/12/11
31/12/11
30/6/11
30/6/11
30/6/11
30/6/11
1 Any performance rights which do not vest after the 3 year performance measurement period are subject to a single retest period for a further year
respectively.
63
Directors’ Report
outstanding options
Options relating to IFN securities have been granted in two tranches to participants in the Performance Rights & Options
Plan and have a 3 year performance measurement period. Vesting of Tranche 1 is subject to a TSR condition and Tranche
2 is subject to an Operating Performance condition. Upon vesting, each option entitles the holder to subscribe for one
fully paid ordinary IFN stapled security upon payment of the relevant exercise price per security. The options do not attract
dividends, distributions or voting rights until they vest and stapled securities are allocated. These Options were issued at no
cost and no amounts have been paid, or are payable, by the recipient for the granting of these options. No options relating
to IFN securities vested, were exercised or lapsed during the year and all options held at 30 June 2009 are unvested and
unexercisable.
Any options which do not vest following the measurement of performance against the relevant conditions will be subject
to a single retest 4 years after the commencement of the relevant performance period (ie. 31 December 2012 in regards to
the Tranche 1 and 30 June 2012 in regards to the Tranche 2). Any options which do not vest after that single retest period
will then lapse.
table 5: terms anD conDItIons of outstanDIng optIons
The table below provides the terms and conditions of outstanding performance rights relating to IFN securities which have
been granted to the Executives. The options are valued as at the deemed grant date.
Executive
M George
G Dutaillis
G Dover
Value per
option
($)
Total value
of options
granted
($)
Exercise
price per
option
($)
Estimated vesting date1
Tranche 1
Tranche 2
Expiry
date of
vested
options
Granted number
Grant date
5,053,908
27/3/09
0.209
1,057,331
0.897
31/12/11
30/6/11
31/12/13
2,628,032
27/3/09
0.209
549,812
0.897
31/12/11
30/6/11
31/12/13
2,628,032
27/3/09
0.209
549,812
0.897
31/12/11
30/6/11
31/12/13
D Richardson
691,375
27/3/09
0.209
144,643
0.897
31/12/11
30/6/11
31/12/13
1 Any options which do not vest after the 3 year performance measurement period are subject to a single retest period for a further year respectively.
executive employment contracts
The base salaries for Executives as at 30 June 2009, in accordance with their employment contract, are set out below.
Executive
M George
G Dutaillis
G Dover
D Richardson
Base remuneration
per employment contract
($)
550,000
370,000
370,000
228,000
Employment contracts relating to the Executives contain the following conditions:
Duration of contract
Open-ended.
Notice period to terminate the contract
For M George, G Dutaillis and G Dover their employment is able
to be terminated by either party on 6 months’ written notice. For
D Richardson, his employment is able to be terminated by either
party on 3 months’ written notice. IFN may elect to pay an amount
in lieu of completing the notice period, calculated on the base salary
as at the termination date.
Termination payments provided under the contract Upon termination, any accrued but untaken leave entitlements,
in accordance with applicable legislation, are payable. If made
redundant, a severance payment equivalent to 4 weeks base salary
for each year of service (or part thereof), up to a maximum of
36 weeks.
64
Infigen Energy Annual Report 2009
InDemnIfIcatIon anD Insurance of offIcers
IFN has agreed to indemnify all Directors and Officers against losses incurred in their role as Director, Alternate Director,
Secretary, Executive or other employee of IFN or its subsidiaries, subject to certain exclusions, including to the extent that
such indemnity is prohibited by the Corporations Act 2001 or any other applicable law. The agreement stipulates that IFN will
meet the full amount of any such liabilities costs and expenses (including legal fees). IFN has not been advised of any claims
under any of the above indemnities.
During the financial year IFN paid insurance premiums for a Directors’ and Officers’ liability insurance contract, that provides
cover for the current and former Directors, Alternate Directors, Secretaries and Executive Officers of IFN and its subsidiaries.
The Directors have not included details of the nature of the liabilities covered in this contract or the amount of the premium
paid, as disclosure is prohibited under the terms of the contract.
proceeDIngs on beHalf of Ifn
No person has applied for leave of the Court to bring proceedings on behalf of IFN, or to intervene in any proceedings to
which IFN is a party, for the purpose of taking responsibility on behalf of IFN for all or part of these proceedings. IFN was
not a party to any such proceedings during the year.
former partners of tHe auDIt fIrm
No current Directors or Officers of IFN have been Partners of PricewaterhouseCoopers at a time when that firm has been
the auditor of IFN.
non-auDIt serVIces
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. Details of amounts paid or payable to the auditor for non-audit services provided during the year
by the auditor are outlined in Note 8 to the Financial Statements.
auDItor’s InDepenDence DeclaratIon
IFN’s auditor has provided a written declaration under section 307C of the Corporations Act 2001 that to the best of its
knowledge and belief, there have been no contraventions of:
• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• the applicable Australian code of professional conduct in relation to the audit.
The auditor’s independence declaration is attached to this Directors’ Report.
rounDIng
IEL is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class
Order, amounts in the Directors’ Report and the Financial Report are rounded off to the nearest thousand dollars, unless
otherwise indicated.
This report is made in accordance with a resolution of the Directors pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors of IEL:
Douglas Clemson
Director
Sydney, 7 September 2009
Miles George
Director
65
Auditor’s Independence Declaration
66
Infigen Energy Annual Report 2009
Financial Statements
for the year ended 30 June 2009
68
69
70
71
Income statements
Balance Sheets
Statements of Changes in Equity
Cash Flow Statements
Notes To The Financial Statements
72
88
88
89
90
93
96
99
99
100
100
101
101
102
103
105
107
107
108
109
110
112
112
114
115
116
117
Note 1 – Summary of accounting
policies
Note 2 – Revenue
Note 3 – Other income
Note 4 – Expenses
Note 5 – Discontinued operations
Note 6 – Income taxes and deferred
taxes
Note 7 – Key management personnel
remuneration
Note 8 – Remuneration of auditors
Note 9 – Trade and other receivables
Note 10 – Prepayments
Note 11 – Other current assets
Note 12 – Financial assets
Note 13 – Derivative financial
instruments – assets
Note 14 – Property, plant and
equipment
Note 15 – Goodwill
Note 16 – Intangible assets
Note 17 – Trade and other payables
Note 18 – Provisions
Note 19 – Borrowings
Note 20 – Derivative financial
instruments – liabilities
Note 21 – Institutional equity
partnerships classified as liabilities
Note 22 – Capitalised borrowing costs
Note 23 – Contributed equity
Note 24 – Reserves
Note 25 – Retained earnings
Note 26 – Earnings per security/share
Note 27 – Distributions paid
117
120
120
121
122
125
134
136
138
139
140
153
Note 28 – Share-based payments
Note 29 – Commitments for expenditure
Note 30 – Contingent liabilities and
contingent assets
Note 31 – Leases
Note 32 – Subsidiaries
Note 33 – Acquisition of businesses
Note 34 – Segment information
Note 35 – Related party disclosures
Note 36 – Subsequent events
Note 37 – Notes to the cash flow
statement
Note 38 – Financial risk management
Note 39 – Interests in joint ventures
67
Income Statements
for the year ended 30 June 2009
Revenue from continuing operations
Net gain on revaluation of financial assets
Income from institutional equity partnerships
Other income
Operating expenses
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional equity partnerships
Other finance costs
Significant non-recurring items
Net (loss)/profit before income tax expense
Income tax benefit/(expense)
(Loss)/profit from continuing operations
Profit/(loss) from discontinued operations
Net profit/(loss) for the year
Attributable to stapled security holders as:
Equity holders of the parent
Note
2
12
3
3
4
4
4
4
4
6
5
Equity holders of the other stapled entities (minority interests)
Minority interest
Earnings per share of the parent based on earnings
from continuing operations attributable to the equity
holders of the parent:
Basic (cents per security)
Diluted (cents per security)
Earnings per share of the parent based on earnings
attributable to the equity holders of the parent:
Basic (cents per security)
Diluted (cents per security)
1 Refer to Note 1(a) for further information regarding the restatement.
26
26
26
26
Consolidated
Parent Entity
2009
$’000
2008
$’000
(Restated)1
2009
$’000
2008
$’000
336,959
216,361
6,195
18,763
–
86,818
49,651
(117,886)
(157,973)
(107,295)
(104,587)
(25,212)
(62,354)
(101,879)
35,767
(66,112)
259,052
192,940
191,653
(2,159)
189,494
3,446
192,940
(7.9)
(7.9)
22.6
22.6
24,246
40,167
28,457
(89,110)
(84,137)
(68,591)
(48,911)
(11,155)
–
7,327
(790)
6,537
23,987
30,524
17,221
699
17,920
12,604
–
–
–
–
33,400
23,811
(32,654)
(34,594)
(281)
(2,656)
–
(297)
(43,764)
(40,057)
17,288
(22,769)
(12,596)
(35,365)
(1,367)
(6,716)
–
(2,821)
–
(2,924)
(3,487)
(6,411)
–
(6,411)
(35,365)
(6,411)
–
–
(35,365)
(6,411)
–
–
30,524
(35,365)
(6,411)
(0.8)
(0.8)
2.1
2.1
The above income statements should be read in conjunction with the accompanying Notes to the Financial Statements.
68
Infigen Energy Annual Report 2009
Balance Sheets
as at 30 June 2009
current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Other current assets
Derivative financial instruments
Total current assets
non-current assets
Receivables
Prepayments
Investment in associates
Derivative financial instruments
Property, plant and equipment
Deferred tax assets
Goodwill
Intangible assets
Shares in controlled entities
Total non-current assets
Total assets
current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax payables
Provisions
Total current liabilities
non-current liabilities
Payables
Borrowings
Derivative financial instruments
Provisions
Deferred tax liabilities
Total non-current liabilities
Institutional equity partnerships classified as liabilities
Total liabilities
Net assets/(liabilities)
equity holders of the parent
Contributed equity
Reserves
Retained earnings
equity holders of the other stapled
entities (minority interests)
Contributed equity
Reserves
Retained earnings
Other minority interests
Total equity
Note
37
9
10
11
13
9
10
13
14
6
15
16
32
17
19
20
6
18
17
19
20
18
6
21
23
24
25
23
24
25
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
409,334
48,412
14,509
6,186
5,105
483,546
–
6,803
–
3,717
3,396,213
88,342
27,455
401,705
–
3,924,235
2008
$’000
(Restated)1
208,505
194,213
29,792
927
33,372
466,809
38,651
15,158
271
92,068
4,887,995
72,272
48,291
964,777
–
6,119,483
270,263
3,722
–
–
5,105
279,090
699,348
–
–
3,717
–
54,558
–
–
35,404
793,027
4,407,781
6,586,292
1,072,117
83,910
80,703
59,331
2,043
2,885
228,872
246
1,567,636
73,584
193
50,012
1,691,671
1,567,062
3,487,605
296,392
177,921
9,074
6,346
–
489,733
17,196
3,342,304
15,293
–
289,022
3,663,815
1,306,319
5,459,867
12,942
1,108,766
2,549
–
–
1,124,257
–
–
2,023
–
2,890
4,913
–
1,129,170
47,294
38,573
1,458
–
6,650
93,975
1,012,434
4,404
–
3,177
–
23,261
–
281
41,474
1,085,031
1,179,006
19,630
1,177,253
78
–
–
1,196,961
–
–
75
–
–
75
–
1,197,036
920,176
1,126,425
(57,053)
(18,030)
4,496
(128,264)
177,867
54,099
4,501
(42,287)
(1,066)
(38,852)
4,496
2,266
(63,815)
(57,053)
4,501
5,919
(28,450)
(18,030)
857,617
(20,564)
21,221
858,274
7,803
1,009,909
(21,635)
10,660
998,934
166,343
–
–
–
–
–
–
–
–
–
–
920,176
1,126,425
(57,053)
(18,030)
1 Refer to Note 1(a) for further information regarding the restatement.
The above balance sheets should be read in conjunction with the accompanying Notes to the Financial Statements.
69
Statements of Changes in Equity
for the year ended 30 June 2009
Total equity at the beginning of the year
Note
2009
$’000
1,126,425
Movement in fair value of cash flow hedge, net of tax
24
(150,671)
2008
$’000
(Restated)1
747,056
16,129
2009
$’000
2008
$’000
(18,030)
(3,653)
(13,864)
2,214
Consolidated
Parent Entity
Exchange differences on translation of foreign
operations and movement in fair value of net
investment hedges
24
68,724
(16,996)
–
Net (expense)/income recognised directly in equity
(81,947)
(867)
(3,653)
Net profit/(loss) for the year
Total recognised income and expense for the year
192,940
110,993
30,524
29,657
(35,365)
(39,018)
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of transaction costs
Purchase of securities – on market buyback
Minority interest on acquisition of subsidiary
Disposal of minority interest on sale of subsidiary
Recognition of share-based payments under
Securities issued as consideration for purchase
of subsidiaries
Distributions paid
Distribution to minority interest
Acquisition of minority interests of subsidiaries
23
23
28
23
27
24
9,745
283,157
(60,898)
–
–
146,636
(161,986)
1,071
–
–
–
24,480
(101,144)
(103,552)
–
(1,009)
(4,030)
–
1
(6)
–
–
–
–
–
–
–
–
2,214
(6,411)
(4,197)
31
–
–
–
–
–
–
–
Total equity at the end of the year
920,176
1,126,425
(57,053)
(18,030)
Total recognised income and expenses for the year
is attributable to:
Equity holders of the parent
Equity holders of the other stapled entities
Other minority interests
109,706
(2,159)
3,446
16,354
699
12,604
(39,018)
(4,197)
–
–
–
–
110,993
29,657
(39,018)
(4,197)
1 Refer to Note 1(a) for further information regarding the restatement.
The above statement of changes in equity should be read in conjunction with the accompanying Notes to the
Financial Statements.
70
Infigen Energy Annual Report 2009
Cash Flow Statements
for the year ended 30 June 2009
cash flows from operating activities
Profit/(loss) for the period
Adjustments for:
Distributions paid to minority interests
Interests in institutional equity partnerships
(Gain)/loss on revaluation for fair value through profit or
loss financial assets – financial instruments
(Gain)/loss on revaluation for fair value through profit or
loss financial assets – financial asset investments
(Gain)/loss on sale of investment
Distributions received from financial asset investments
Depreciation and amortisation of non-current assets
Foreign exchange (gain)/loss
Amortisation of share based expense
Amortisation of borrowing costs capitalised
Increase/(decrease) in current tax liability
(Increase)/decrease in deferred tax balances
Changes in operating assets and liabilities, net of effects
from acquisition and disposal of businesses:
(Increase)/decrease in assets:
Current receivables and other current assets
Increase/(decrease) in liabilities:
Current payables
Net cash provided by/(used in) operating activities
cash flows from investing activities
Proceeds on sale of investment
Payment for property, plant and equipment
Payment for intangible assets
Payment for investments in controlled and jointly
controlled entities
Payment for investments in associates
Payment for investments in financial assets
Refund of investment prepayment
Loans advanced
Loans to related parties
Repayment of loans by related parties
Consolidated
Parent Entity
Note
2009
$’000
2008
$’000
(Restated)1
2009
$’000
2008
$’000
192,940
30,524
(35,365)
(6,411)
(24,388)
17,770
(11,954)
9,051
21,960
(2,728)
–
(256,677)
–
200,833
(24,430)
1,071
7,265
(4,303)
(10,988)
(24,246)
–
17,706
144,736
(2,196)
–
5,817
(1,393)
14,493
–
–
–
–
34,490
–
281
(15,719)
–
–
–
(17,047)
–
–
2,417
–
–
–
1,367
(6,037)
–
–
–
3,487
17,334
(54,740)
17,911
14,320
37(b)
30,200
168,587
61,743
186,813
1,768,179
(474,561)
(20,276)
(28,656)
–
–
2,684
(84,240)
1
–
–
(250,377)
(535)
(352,967)
(253)
(540,929)
4,672
(38,090)
(776,000)
776,000
(10,847)
(26,296)
509,637
–
–
996
–
–
2,684
2,395
(901,670)
869,903
483,945
–
(6)
–
–
625,031
(856,506)
–
(231,481)
226,168
47,294
2,934
12,077
–
–
–
(486)
–
–
4,672
–
(1,370,216)
1,150,967
(215,063)
28
–
–
233,243
(7,471)
–
225,800
22,814
23,265
1,215
47,294
Net cash provided by/(used in) investing activities
1,163,131
(1,178,479)
23
cash flows from financing activities
Proceeds from issues of equity securities, net of costs
Payment for securities buy back
Proceeds from borrowings
Repayment of borrowings
Loans from related parties
Repayment of borrowings to related parties
Distributions paid to security holders
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on the balance of cash
held in foreign currencies
27
–
(60,889)
407,617
(1,442,105)
13,440
–
(91,399)
(1,173,336)
158,382
208,505
253,969
–
1,099,242
(483,973)
17,407
(57,095)
(74,490)
755,060
(236,606)
442,969
Cash and cash equivalents at the end of the financial year 37(a)
409,334
208,505
270,263
1 Refer to Note 1(a) for further information regarding the restatement.
The above cash flow statements should be read in conjunction with the accompanying Notes to the Financial Statements.
71
42,447
2,142
(3,199)
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate
financial statements for Infigen Energy Limited as an individual entity and the Group consisting of Infigen Energy Limited
and its subsidiaries.
Change of Name
At the extraordinary general meeting held on 29 April 2009, security holders approved a change to the name of the group
from Babcock & Brown Wind Partners to Infigen Energy. The names of each of the stapled entities were changed as follows:
• Babcock & Brown Wind Partners Limited became Infigen Energy Limited (‘IEL’ or the ‘Company’);
• Babcock & Brown Wind Partners Trust became Infigen Energy Trust (‘IET’ or the ‘Trust’); and
• Babcock & Brown Wind Partners (Bermuda) Limited became Infigen Energy (Bermuda) Limited (‘IEBL’).
Stapled security
The shares of IEL and IEBL and the units of IET are combined and issued as stapled securities in Infigen Energy Group
(‘Infigen’ or the ‘Group’). The shares of IEL and IEBL and the units of IET cannot be traded separately and can only be traded
as stapled securities.
This financial report consists of separate financial statements for IEL as an individual entity and the consolidated financial
statements of IEL, which comprises IEL and its controlled entities, IET and its controlled entities and IEBL, together acting
as Infigen.
The separate financial statements for IEL as an individual entity present a net liability position. IEL is one component of
a stapled entity that is in a net asset position.
(a) basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and
the Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS).
Compliance with AIFRS ensures that the consolidated and parent entity financial report of IEL complies with International
Financial Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative instruments) at fair value through profit or loss.
Restatement of comparative information
Discontinued Operations
The group disposed of its assets in Portugal in November 2008 and of its assets in Spain in January 2009. As a consequence
of these disposals, the related results for the period during the year ended 30 June 2009 through to disposal date are
classified as discontinued operations.
Furthermore, under AASB 5, Non-current Assets Held for Sale and Discontinued Operations, the comparative information
relating to the results of these operations is also required to be presented as discontinued.
Purchase Price Allocation
Under AASB 3, Business Combinations, an entity that applies the purchase method of accounting is required to allocate the
acquisition price across identifiable assets and liabilities. An entity has a period of twelve months subsequent to the business
combination to complete this allocation.
Prior to the allocation exercise, the Group had recorded provisional net asset values in its year ended 30 June 2008
financial statements as permitted under AASB 3. Following the allocation of the purchase price, these provisional values
have been restated.
The following tables provide the effect of this restatement on the comparative income statement for the year ended, and
balance sheet as at, 30 June 2008.
72
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
effect of restatements: Income statement for the year ended 30 June 2008
30 June 2008
$’000
Discontinued
Operations
$’000
Purchase price
allocation
$’000
30 June 2008
$’000
(Restated)
Revenue
Net gain on revaluation of financial assets
Income from institutional equity partnerships
Other income
Operating expenses
Depreciation and amortisation expense
Interest expense
Finance costs relating to institutional equity partnerships
Other finance costs
Net profit/(loss) before income tax expense
Income tax benefit/(expense)
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
Net profit/(loss) for the period
Attributable to stapled security holders as:
Equity holders of the parent
Equity holders of the other stapled entities (minority interests)
Other minority interests
Earnings per share of the parent based on earnings attributable
to the equity holders of the parent:
Basic (cents per security)
Diluted (cents per security)
414,481
24,246
40,167
33,176
(125,170)
(134,275)
(135,285)
(49,218)
(12,378)
55,744
(15,916)
39,828
–
39,828
26,525
699
27,224
12,604
39,828
3.2
3.2
(198,120)
–
–
(4,719)
36,060
59,443
66,694
–
1,223
(39,419)
14,622
(24,797)
24,797
–
–
–
–
–
–
–
–
There was no impact on the parent entity’s financial statements.
Income tax benefit/(expense) is attributable to:
Income tax (expense)/benefit from continuing operations
Income tax (expense)/benefit from discontinued operations
Income tax (expense)/benefit
(15,916)
–
(15,916)
14,622
(14,622)
–
–
–
–
–
–
(9,305)
–
307
(8,998)
504
(8,494)
(810)
(9,304)
(9,304)
–
(9,304)
–
(9,304)
(1.1)
(1.1)
504
346
850
216,361
24,246
40,167
28,457
(89,110)
(84,137)
(68,591)
(48,911)
(11,155)
7,327
(790)
6,537
23,987
30,524
17,221
699
17,920
12,604
30,524
2.1
2.1
(790)
(14,276)
(15,066)
73
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
Effect of Restatements: Balance Sheet as at 30 June 2008
current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Other current assets
Derivative financial instruments
Total current assets
non-current assets
Receivables
Prepayments
Investment in associates
Derivative financial instruments
Property, plant and equipment
Deferred tax assets
Goodwill (refer to Note 15)
Intangible assets (refer to Note 16)
Total non-current assets
Total assets
current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax payables
Total current liabilities
non-current liabilities
Payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Total non-current liabilities
Institutional equity partnerships classified as liabilities
Total liabilities
Net assets
equity holders of the parent
Contributed equity
Reserves
Retained earnings
equity holders of the other stapled entities (minority interests)
Contributed equity
Reserves
Retained earnings
Other minority interests
Total equity
74
Infigen Energy Annual Report 2009
30 June 2008
$’000
Purchase price
allocation
$’000
30 June 2008
$’000
(Restated)
208,505
194,213
29,792
927
33,372
466,809
38,651
15,158
271
92,068
4,887,995
72,272
752,681
249,525
6,108,621
6,575,430
296,392
177,921
9,074
6,346
489,733
17,196
3,342,304
15,293
269,078
3,643,871
1,306,604
5,440,208
1,135,222
4,501
(42,794)
8,238
(30,055)
1,009,909
(21,635)
10,660
998,934
166,343
–
–
–
–
–
–
–
–
–
–
–
–
(704,390)
715,252
10,862
10,862
–
–
–
–
–
–
–
–
19,944
19,944
(285)
19,659
(8,797)
–
507
(9,304)
(8,797)
–
–
–
–
–
208,505
194,213
29,792
927
33,372
466,809
38,651
15,158
271
92,068
4,887,995
72,272
48,291
964,777
6,119,483
6,586,292
296,392
177,921
9,074
6,346
489,733
17,196
3,342,304
15,293
289,022
3,663,815
1,306,319
5,459,867
1,126,425
4,501
(42,287)
(1,066)
(38,852)
1,009,909
(21,635)
10,660
998,934
166,343
1,135,222
(8,797)
1,126,425
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(b) consolidated accounts
UIG 1013: Consolidated Financial Reports in relation to Pre-Date-of-Transition Stapling Arrangements requires one of
the stapled entities of an existing stapled structure to be identified as the parent entity for the purpose of preparing
consolidated financial reports. In accordance with this requirement, IEL has been identified as the parent of the consolidated
group comprising IEL and its controlled entities, IET and its controlled entities and IEBL.
In accordance with UIG 1013, consolidated financial statements have been prepared by IEL as the identified parent of Infigen.
The financial statements of Infigen should be read in conjunction with the separate financial statements of IET for the period
ended 30 June 2009.
AASB Interpretation 1002 Post-Date-of-Transition Stapling Arrangements applies to stapling arrangements occurring during
annual reporting periods ending on or after 31 December 2005 where the identified parent does not obtain an ownership
interest in the entity whose securities have been stapled. As a consequence of the stapling arrangement involving no
acquisition consideration and no ownership interest being acquired by the combining entities, no goodwill is recognised
in relation to the stapling arrangement and the interests of the equity holders in the stapled securities are treated as
minority interests.
Whilst stapled arrangements occurring prior to the application of AASB Interpretation 1002 are grandfathered and can
continue to be accounted for in accordance with the principles established in UIG 1013, for disclosure purposes and the fact
that Infigen has entered into stapling arrangements both pre and post transition to AIFRS, the interests of the equity holders
in all stapled securities (regardless of whether the stapling occurred pre or post transition to AIFRS) has been treated as
minority interest under the principles established in AASB Interpretation 1002.
(c) principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of IEL as at 30 June 2009 and
the results of all subsidiaries for the year then ended. IEL and its subsidiaries together are referred to in this financial report
as the Group or the consolidated entity.
Subsidiaries are all those entities (including certain institutional equity partnerships and other special purpose entities) over
which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding
of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer Note 1(f)).
The Group applies a policy of treating transactions with minority interests as transactions with a shareholder. Purchases
from minority interests result in an acquisition reserve being the difference between any consideration paid and the
relevant share acquired of the carrying value of identifiable net assets of the subsidiary.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement
and balance sheets respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of IEL.
(ii) Jointly controlled entities
Jointly controlled entities, consolidated under the proportionate consolidation method, are entities over whose activities
the Group has joint control, under a contractual agreement, together with the other owners of the entity. They include
certain institutional equity partnerships. The consolidated financial statements include the Group’s proportionate share
of the joint venture’s assets and liabilities, revenues and expenses, from the date the joint control begins until it ceases.
75
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(d) Investment in financial assets
Financial assets comprised institutional equity partnerships where the Group did not have the power to govern the financial
and operating policies of the entity. Financial assets have previously been recognised at fair value each reporting period
through profit or loss.
Revaluations of financial assets were determined using a discounted cash flow analysis. The methodology applied continues to
be a generally accepted methodology for valuing wind farms and a basis in which market participants price new acquisitions.
During the year ended 30 June 2008 the Directors determined that the Group had obtained the power to govern the
financial and operating policies of these partnerships and hence it controls or jointly controls these partnerships.
Revaluations of financial assets during the year ended 30 June 2008, up until the date of control, were determined
using a discounted cash flow analysis.
(e) trade and other payables
Trade payables and other accounts payable are recognised when the Group becomes obliged to make future payments
resulting from the purchase of goods and services. The amounts are unsecured and are usually paid within 30 days
of recognition.
(f) business combinations
The purchase method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date
of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the
fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it
can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other
evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of
equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the
cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill
(refer Note 1(p)). If the cost of acquisition is less than the Group’s share of the fair value of the identifiable net assets of the
subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the
identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
(g) borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment
of loan facilities, which are not an incremental cost relating to the actual draw-down on the facility, are recognised as
prepayments and amortised on a straight-line basis over the term of the facility.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised
in other income or other expenses.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting date.
76
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(h) borrowing costs
Borrowing costs directly attributable to the construction of qualifying assets are capitalised as part of the cost of those
assets. Other borrowing costs are expensed.
(i) assets under construction
Costs incurred in relation to assets under construction are deferred to future periods.
Deferred costs are transferred to plant and equipment from the time the asset is held ready for use on a commercial basis.
(j) property, plant and equipment
Wind Turbines and Associated Plant
Wind turbines and associated plant, including equipment under finance lease, are stated at historical cost less accumulated
depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the item.
Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases
of property, plant and equipment. In the event that settlement of all or part of the purchase consideration is deferred, cost
is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is recognised. All other repairs and maintenance are charged
to the income statement during the reporting period in which they are incurred.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Depreciation is provided on wind turbines and associated plant. Depreciation is calculated on a straight line basis so as to
write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting
period. The following estimated useful lives are used in the calculation of depreciation:
Wind turbines and associated plant
25 years
Other
Costs incurred in relation to fixtures and fittings have been expensed as incurred.
(k) Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign
exchange rate risk, including forward foreign exchange contracts and interest rate swaps and cross currency swaps.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured to their fair value at each reporting date. The resulting gain or loss is recognised in the income statement
immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the
recognition in the income statement depends on the nature of the hedge relationship.
The Group designates certain derivatives as either hedges of the cashflows of highly probable forecast transactions
(cash flow hedges) or hedges of net investments in foreign operations (net investment hedge).
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used
in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows
of hedged items.
(i) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately
in the income statement within other income or other expenses.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit
or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion
of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ‘finance costs’. The
gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in
the income statement within ‘sales’. However, when the forecast transaction that is hedged results in the recognition of
a non-financial asset (for example, fixed assets) the gains and losses previously deferred in equity are transferred from equity
and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit
or loss as depreciation in the case of fixed assets.
77
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative gain or loss deferred in equity at that time remains in equity
and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately
in the income statement.
(ii) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the foreign currency
translation reserve; the gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Gains and losses deferred in the foreign currency translation reserve are recognised immediately in the income statement
when the foreign operation is partially disposed of or sold.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments
that do not qualify for hedge accounting are recognised immediately in the income statement.
(l) goods and services tax (gst)
Revenues, expenses and assets are recognised net of the amount of associated GST unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST component of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(m) segment reporting
A geographical segment is engaged in providing products or services within a particular economic environment and is
subject to risks and returns that are different from those of segments operating in other economic environments. The Group
operates in one business segment, the generation of electricity from wind energy.
(n) foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is the Group’s presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement, except when they are deferred in equity as qualifying net investment hedges or are attributable
to part of the net investment in a foreign operation.
Translation differences on non-monetary financial assets and liabilities carried at fair value are reported as part of the fair
value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss.
78
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are taken to shareholders’ equity.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share
of such exchange differences are recognised in the income statement, as part of the gain or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entities and translated at the closing rate.
(o) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit
or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by
the reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is
unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are realised to the
extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or
unused tax losses and tax offsets can be realised. However, deferred tax assets and liabilities are not realised if the temporary
differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business
combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not realised
in relation to taxable temporary differences arising from goodwill.
Deferred tax liabilities are realised for taxable temporary differences arising on investments in subsidiaries and associates
except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences
associated with these investments and interests are only realised to the extent that it is probable that there will be sufficient
taxable profits against which to realise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and
the company/Group intends to settle its current tax assets and liabilities on a net basis.
79
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises
from the initial accounting for a business combination, in which case it is taken into account in the determination of
goodwill or excess.
Under current Bermudian law, IEBL will not be subject to any income, withholding or capital gains taxes in Bermuda.
Current and deferred tax is determined in reference to the tax jurisdiction in which the relevant entity resides.
Tax consolidation
IEL and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, IEL, and the controlled entities in the tax-consolidated group continue to account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to
be a stand alone taxpayer in its own right.
In addition to its own current and deferred amounts, IEL also recognises the current tax liabilities (or assets) and the deferred
tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the group. Details about the tax funding agreement are disclosed in Note 6.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
(p) Intangible assets
(i) Project-Related Agreements and Licences
Project-related agreements and licences include the following items:
• Licences, permits and approvals to develop and operate a wind farm, including governmental authorisations, land rights
and environmental consents;
• Interconnection rights, and
• Power purchase agreements.
Project-related agreements and licences are carried at cost less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives,
which are based on the lease term of the related wind farm.
(ii) Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the net identifiable
assets, liabilities and contingent liabilities acquired at the date of acquisition. Goodwill on acquisition is separately disclosed
in the balance sheet. Goodwill acquired in business combinations is not amortised, but tested for impairment annually
and whenever there is an indication that the goodwill may be impaired. Any impairment is amortised immediately in the
income statement and is not subsequently reversed. Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units
represents the Group’s investment in each country of operation by each primary reporting segment.
(iii) Framework Agreements
Costs incurred with respect to entering into framework agreements, which provide a pre-emptive right to acquire assets
(subject to certain conditions being met), have been amortised. To the extent that an agreement relates to a specific asset(s),
the related costs are amortised as an ancillary cost of acquisition. Where an agreement does not relate to a specific asset,
the costs are amortised over the period of the agreements, which vary from 15 months to 3 years.
80
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(q) leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
(i) Group as lessee
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they
are directly attributable to qualifying assets, in which case they are recognised in accordance with the Group’s general policy
on borrowing costs.
Finance leased assets are amortised on a straight line basis over the shorter of the lease term and estimated useful life of
the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.
(ii) Group as lessor
Refer to Note 1(v) for the accounting policy in respect of lease income from operating leases.
(r) Impairment of assets
At each reporting date, the consolidated group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill
is not subsequently reversed.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets or groups of assets (cash generating unit). If the
recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the
income statement immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating
unit) in prior years. A reversal of an impairment loss is recognised in the income statement immediately, unless the relevant
asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.
(s) cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents comprise cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, net of
outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
81
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(t) provisions
Provisions are recognised when the consolidated group has a present legal or constructive obligation as a result of past
events, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of
the receivable can be measured reliably.
(u) Distributions and dividends
Provision is made for the amount of any distribution or dividend declared being appropriately authorised and no longer
at the discretion of the entity, on or before the end of the financial year, but not distributed at balance date.
(v) revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognised revenue when the amount of revenue can be reliably measured, it is probable that future economic
benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below.
The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been
resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Electricity sales
Product sales are generated from the sale of electricity generated from the Group’s wind farms. Revenues from product
sales are recognised on an accruals basis. Product sales revenue is only recognised when the significant risks and rewards
of ownership of the products has passed to the buyer and the Group attains the right to be compensated.
(ii) Lease income
In accordance with UIG 4 Determining whether an Asset Contains a Lease, revenue that is generated under certain power
purchase agreements, where the Group sells substantially all of the related electricity to one customer, is classified as
lease income.
Lease income from operating leases is recognised in income on an accruals basis. Lease income is only recognised when
the significant risks and rewards of ownership of the products have passed to the buyer and the Group attains the right
to be compensated.
(iii) Production Tax Credits (PTCs)
PTCs are recognised as revenue when generated by the underlying wind farm assets and utilised to settle the obligation
to Class A institutional investors.
(iv) Accelerated tax depreciation credits and operating tax gains/(losses)
The accelerated tax depreciation credits on wind farm assets are utilised to settle the obligation to Class A institutional
investors when received. The associated revenue is recognised over the 25 year life of the wind farm to which they relate.
(v) Revaluation of financial assets
Income from investments in financial assets at fair value through profit or loss constitutes changes in the fair value of
investments in unlisted securities. Income in prior periods related to institutional equity partnerships that were fair valued
through profit or loss.
(vi) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the income statement over the period necessary
to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred
income and are credited to the income statement on a straight-line basis over the expected lives of the related assets.
82
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(vii) Renewable Energy Certificates (RECs)
RECs are recorded as an asset at their fair value when they are registered. Revenue is deferred until the RECs are sold.
(viii) Other income
Interest income is recognised using the effective interest method.
Dividend income is recognised when the right to receive payment is established.
Revenue from rendering of services is recognised when services are provided.
(w) loans and receivables
Trade receivables, loans and other receivables are recorded at amortised cost less impairment. Trade receivables are
generally due for settlement within 30 days.
A provision for impairment of loans and receivables is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of loans and receivables. The amount of the provision
is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at
the effective interest rate. The amount of the impairment loss is recognised in the income statement within other expenses.
Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.
(x) contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a
business are not included in the cost of the acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example, as the result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the
consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
(y) earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
(z) fair value estimation
The fair value of the financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for
financial assets held by the Group is the current bid price; the appropriate quoted market prices for financial liabilities is
the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for
long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments. The fair value of interest-rate swaps is calculated as the present value of the
estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market
rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair
values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
83
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(aa) non-current assets (or disposal groups) held-for-sale and discontinued operations
Non-current assets (or disposal groups) are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial
assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are
specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they
are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as
held-for-sale continue to be recognised.
Non-current assets classified as held-for-sale and the assets of a disposal group classified as held-for-sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held-for-sale are
presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held-for-sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to
dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately on the face of the income statement.
(ab) employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months
of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are
measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
(iii) Share-based payments
Share-based compensation benefits are provided to the executives via the Performance Rights and Options Plan
(PR&O Plan). Information relating to the PR&O Plan is set out in Note 28.
The fair value of performance rights and options granted under the PR&O Plan is recognised as an employee benefit
expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period
during which the executives become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Monte-Carlo simulation model that takes into account
the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The Monte-
Carlo simulation model incorporates the performance hurdles that must be met before the share-based payments vests
in the holder.
The fair value of the options that have been granted is adjusted to reflect market vesting conditions, but excludes the
impact of any non-market vesting conditions including the Total Shareholder Return and Operational Performance
hurdles. Non-market vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to
become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.
The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding
adjustment to equity.
84
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(iv) Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into
consideration the profit attributable to the company’s shareholders after certain adjustments. The Group recognises
a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(v) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value.
(ac) Institutional equity partnerships classified as liabilities
(i) Class A members
Initial contributions by Class A members into US partnerships are recognised at cost using the effective interest method.
Class A carrying amounts are adjusted when actual cash flow differs from estimated cash flow. The adjustment is calculated
by computing the present value of the actual difference using the original effective interest rate. The adjustment is
recognised through income or expense in profit or loss.
This difference represents the change in residual interest due to the Class A institutional investors.
(ii) Class B members
On consolidation of the US partnerships the Group’s Class B membership interest and associated finance charge for the year
is eliminated and any external Class B member balances remaining represents net assets of US partnerships attributable
to minority interests. Refer Note 1(c) for further details of the Group’s accounting policy for consolidation.
(ad) trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
(ae) rounding of amounts
The Group is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the financial report. Amounts in the financial report have been rounded off
in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(af) new accounting standards and uIg interpretations
Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2009
reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8
AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will
result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to
reporting on the financial performance. The information being reported will be based on what the key decision-makers use
internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Group
will apply the revised standard from 1 July 2009. Application of AASB 8 may result in different segments, segment results
and different type of information being reported in the segment note of the financial report. Management is currently
working through the impacts of this new standard.
(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from
AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]
The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed
the option to expense all borrowing costs and – when adopted – will require the capitalisation of all borrowing costs directly
attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial
report of the Group, as the Group already capitalises borrowing costs relating to assets under construction.
85
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting
Standards arising from AASB 101
The revised AASB 101 that was issued in September 2007 is applicable for annual reporting periods beginning on or after
1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement
of changes in equity but will not affect any of the amounts recognised in the financial statements. If an entity has made a
prior period adjustment or a reclassification of items in the financial statements, it will also need to disclose a third balance
sheet (statement of financial position), this one being as at the beginning of the comparative period. The Group intends
to apply the revised standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting Standard – Share‑based Payments: Vesting Conditions
and Cancellations
The standard is applicable to annual reporting periods beginning on or after 1 January 2009. AASB 2008-1 clarifies that
vesting conditions are service conditions and performance conditions only and that other features of a share-based
payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should
receive the same accounting treatment. The Group will apply the revised standard from 1 July 2009, but it is not expected
to affect the accounting for the Group’s share-based payments.
(v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3
Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127
Revised accounting standards for business combinations and consolidated financial statements were issued in March 2008
and are operative for annual reporting periods beginning on or after 1 July 2009. The revised AASB 3 continues to apply the
acquisition method to business combinations, but with some significant changes. Their impact will therefore depend on
whether the Group will enter into any business combinations or other transactions that affect the level of ownership held
in the controlled entities in the year of initial application. For example, under the new rules:
• all payments (including contingent consideration) to purchase a business are to be recorded at fair value at the
acquisition date, with contingent payments subsequently remeasured at fair value through income
• all transaction cost will be expensed
• the Group will need to decide whether to continue calculating goodwill based only on the parent’s share of net assets
or whether to recognise goodwill also in relation to the non-controlling (minority) interest, and
• when control is lost, any continuing ownership interest in the entity will be remeasured to fair value and a gain or loss
recognised in profit or loss.
The Group will apply the revised standards prospectively to all business combinations and transactions with non-controlling
interests from 1 July 2009.
(vi) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International
Financial Reporting Standards are part of the IASB’s annual improvements project published in May 2008 and are applicable
to annual reporting periods beginning on or after 1 July 2009. They clarify that all of a subsidiary’s assets and liabilities are
classified as held-for-sale if a partial disposal sale plan results in loss of control. Relevant disclosures should be made for this
subsidiary if the definition of a discontinued operation is met. The Group will apply the amendments prospectively to all
partial disposals of subsidiaries from 1 July 2009.
(vii) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate
In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards
and AABS 127 Consolidated and Separate Financial Statements. The new rules will apply to financial reporting periods
commencing on or after 1 January 2009. The Group will apply the revised rules prospectively from 1 July 2009. After that
date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised
as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment
as a result of the dividend payment. Furthermore, when a new intermediate parent entity is created in internal
reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary
rather than the subsidiary’s fair value.
86
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. summary of accountIng polIcIes (contInueD)
(viii) AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation
AASB-I 16 was issued in August 2008 and applies to reporting periods commencing on or after 1 October 2008. The
interpretation clarifies which foreign currency risks qualify as hedged risk in the hedge of a net investment in a foreign
operation and that hedging instruments may be held by any entity or entities within the group. It also provides guidance
on how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging
instrument and the hedged item. The Group will apply the interpretation prospectively from 1 July 2009.
(ix) AASB 2008-8 Amendment to IAS 39 Amendment to Australian Accounting Standards ‑ Eligible Hedged Items
AASB 2008-8 applies to reporting periods beginning on or after 1 July 2009 and amends AASB 139 Financial Instruments:
Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors. The amendment makes two significant changes. It prohibits designating
inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged
risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. It is not expected
to have a material impact on the Group’s financial statements.
(x) AASB Interpretation 17 Distribution of Non‑cash Assets to Owners and AASB 2008-13 Amendments to Australian
Accounting Standards arising from AASB Interpretation 17
AASB-I 17 applies to situations where an entity pays dividends by distributing non-cash assets to its shareholders. The
standard is applicable to annual reporting periods commencing on or after 1 July 2009. These distributions will need
to be measured at fair value and the entity will need to recognise the difference between the fair value and the carrying
amount of the distributed assets in the income statement on distribution. This is different to the Group’s current policy
which is to measure distributions of non-cash assets at their carrying amounts. The interpretation further clarifies
when a liability for the dividend must be recognised and that it is also measured at fair value. The Group will apply
the interpretation prospectively from 1 July 2009.
(ag) critical accounting estimates and judgements
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are:
(i) Estimated useful economic life of wind turbines and associated plant
As disclosed in Note 1(j) the Group depreciates property, plant and equipment over 25 years. This period of depreciation
is utilised for wind turbines and associated plant that have useful economic lives in excess of 25 years as no determination
has been made to extend the life of the project beyond this period.
(ii) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in Note 1(r). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions. Refer to Note 15 for details of these assumptions and the potential impact
of changes to the assumptions.
(iii) Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgment is
required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain.
(iv) Forecast cash flows and discount rates
As disclosed in Note 1(d), financial assets comprise institutional equity partnerships where the Group does not have
the power to govern the financial and operating policies of the entity. Financial assets are recognised at fair value each
reporting period through profit and loss using a discounted cash flow methodology.
This methodology requires assumptions to be made in respect of forecast cash flows and discount rates. These assumptions
are subject to variation from period to period.
87
Notes to the Financial Statements
for the year ended 30 June 2009
2. reVenue
Consolidated
Parent Entity
from continuing operations
Revenue from the sale of energy and products
Revenue from lease of plant and equipment1
Compensation for revenues lost as a result of O&M providers
not meeting contracted turbine availability targets
Revenue from the rendering of services
from discontinued operations (note 5)
Revenue from the sale of energy and products
Compensation for revenues lost as a result of O&M providers
not meeting contracted turbine availability targets
2009
$’000
101,020
232,688
3,251
–
2008
$’000
(Restated)
78,378
137,964
19
–
336,959
216,361
133,372
192,189
2,906
5,931
136,278
198,120
2009
$’000
2008
$’000
–
–
–
–
–
–
6,195
6,195
18,763
18,763
–
–
–
–
–
–
1 In accordance with UIG 4 Determining whether an Asset Contains a Lease, revenue that is generated under certain power purchase agreements, where the
Group sells substantially all of the related electricity to one customer, is classified as lease income. Refer Note 1(v) for further information.
3. otHer Income
from continuing operations
Income from institutional equity partnerships
Value of benefits provided – production tax credits (Class A)2
Value of benefits provided – tax losses (Class A)2
Benefits deferred during the period2
Other
Interest income
Foreign exchange gains
Fair value gains on financial instruments
Other income
2 Refer Note 21 for further details.
Consolidated
Parent Entity
2009
$’000
2008
$’000
(Restated)
2009
$’000
2008
$’000
111,217
134,333
52,824
75,571
(158,732)
(88,228)
86,818
40,167
16,439
26,703
–
6,509
49,651
14,571
10,173
2,625
1,088
28,457
–
–
–
–
8,824
18,007
–
6,569
33,400
–
–
–
–
8,141
14,837
–
833
23,811
88
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
4. eXpenses
from continuing operations:
Profit/(loss) before income tax has been arrived
at after charging the following expenses:
Wind farm operations and maintenance costs
Administration, consulting and legal fees
Management expenses
Management charges – base fees1
Depreciation of property, plant & equipment
Amortisation of intangible assets
finance costs relating to institutional equity partnerships
Allocation of return on outstanding balance (Class A)2
Movement in residual interest (Class A)2
Minority interest (Class B)2
other finance costs
Fair value losses on financial instruments
Bank fees and loan amortisation costs
significant non-recurring items
Termination of management agreements (refer below)
Transition-related expenses (refer below)
Management charges – base fees1
Consolidated
Parent Entity
2009
$’000
2008
$’000
(Restated)
2009
$’000
2008
$’000
–
27,104
5,550
–
–
11,081
8,725
14,788
32,654
34,594
96,122
16,214
5,550
–
117,886
141,845
16,128
157,973
82,298
16,094
6,195
104,587
12,258
12,954
25,212
41,272
16,262
4,820
62,354
46,765
13,133
8,725
20,487
89,110
72,525
11,612
84,137
39,522
5,108
4,281
48,911
2,984
8,171
11,155
–
281
281
–
–
–
–
–
297
297
–
–
–
–
36,982
2,450
4,332
43,764
–
1,367
1,367
–
–
–
–
2,417
404
2,821
–
–
–
–
1 Following the termination of related management agreements, base fees have been classified as a significant non-recurring item during the year ended
30 June 2009. In the comparative period, they are classified as Management Charges. Refer Note 35 for further details.
2 Refer Note 21 for further details.
termination of management agreements
The Group had previously entered into management agreements and an exclusive financial advisory agreement with
Babcock & Brown. During the year ended 30 June 2009, the Group terminated these agreements for $40,000,000 before
associated costs.
Of the $40,000,000, a payment of $35,000,000 was made on 31 December 2008 with the remainder, $5,000,000, paid
on 30 June 2009.
transition-related expenses
As a consequence of terminating the management agreements, Infigen Energy has undertaken a program to secure
its independence. During FY09, the Group incurred $16,262,000 in relation to this program.
89
Notes to the Financial Statements
for the year ended 30 June 2009
5. DIscontInueD operatIons
(a) Details of disposed operations
Sale of Portuguese Portfolio
During the year ended 30 June 2009, Infigen agreed to sell its jointly-owned portfolio of wind farms in Portugal. The sale
and settlement occurred simultaneously in November 2008.
Sale of Spanish Portfolio
In August 2008, Infigen agreed to sell its portfolio of operating Spanish wind energy assets. The sale was subject to local
authority consents and financial close occurred in January 2009.
(b) financial performance of disposed operations
The results of the discontinued operations for the year ended 30 June 2009 through to disposal and the year ended
30 June 2008 are presented below:
Revenue (Note 2)
Other income
Expenses
Profit/(loss) before income tax
Income tax expense
30 June 2009
30 June 2008
Portugal
$’000
Spain
$’000
Total
$’000
Portugal
$’000
Spain
$’000
Total
$’000
66,413
69,865
136,278
123,363
74,757
198,120
2,885
1,300
4,185
661
4,058
4,719
(60,260)
(72,996)
(133,256)
(92,379)
(72,197)
(164,576)
9,038
(1,831)
7,207
31,645
6,618
38,263
(2,246)
(10,145)
(12,391)
(9,145)
(5,131)
(14,276)
Profit/(loss) after income tax of discontinued operations
6,792
(11,976)
(5,184)
22,500
1,487
23,987
Profit/(loss) on sale of subsidiary before income tax
(3,631)
274,763
271,132
Income tax expense
(3,450)
–
(3,450)
Profit/(loss) on sale of subsidiary after income tax
(7,081)
274,763
267,682
Profit/(loss) from discontinued operations before
minority interest
(289)
262,787
262,498
Disposal of minority interest on sale of subsidiary
(3,446)
–
(3,446)
Profit/(loss) from discontinued operations after
minority interest
(3,735)
262,787
259,052
90
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
5. DIscontInueD operatIons (contInueD)
(c) assets and liabilities and cash flow information of the portuguese disposed entity
The major classes of assets and liabilities of the Portuguese assets as at the date of sale (14 November 2008) are as follows:
Cash
Receivables
Property, plant and equipment
Intangibles
Other assets
Total assets
Trade creditors
Borrowings
Other liabilities
Total liabilities
Net assets
Infigen’s share of net assets attributable to discontinued operations
The net cash flows of the Portuguese assets are as follows:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Net cash inflow/(outflow)
(d) Details of the sale of the portuguese entity
Consideration received:
Cash received from sale
Total disposal consideration
Infigen’s share of net assets attributable to discontinued operations
Loss on sale before income tax
Income tax expense
Loss on sale after income tax
Net cash inflow on disposal:
Cash and cash equivalents consideration
Less: cash and cash equivalents balance disposed of
Proceeds on sale of subsidiary, net of cash disposed
As at
14 Nov 2008
$’000
16,027
126,376
1,838,108
368,211
23,984
2,372,706
151,063
1,509,445
241,152
1,901,660
471,046
295,525
30 Jun 2009
$’000
30 Jun 2008
$’000
41,093
(81,874)
9,070
(31,711)
77,336
(21,929)
(26,561)
28,846
14 Nov 2008
$’000
291,894
291,894
(295,525)
(3,631)
(3,450)
(7,081)
291,894
(16,027)
275,867
91
Notes to the Financial Statements
for the year ended 30 June 2009
5. DIscontInueD operatIons (contInueD)
(e) assets and liabilities and cash flow information of the spanish disposed entity
The major classes of assets and liabilities of the Spanish assets as at the date of sale (8 January 2009) are as follows:
Cash
Receivables
Prepayments
Investment in associate
Property, plant and equipment
Other tax assets
Goodwill
Intangibles
Total assets
Trade creditors
Current tax payables
Borrowings
Derivative financial instruments
Other tax liabilities
Total liabilities
Net assets attributable to discontinued operations
(f) cash flow information – spanish disposed entity
The net cash flows of the Spanish assets are as follows:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Net cash outflow
(g) Details of the sale of the spanish entity
Consideration received:
Cash received from sale
Repayment of borrowings and settlement of derivatives
Total disposal consideration
Net assets
Profit on sale before income tax
Income tax expense
Profit on sale after income tax
Net cash inflow on disposal:
Cash and cash equivalents consideration
Less: cash and cash equivalents balance disposed of
Proceeds on sale of subsidiary, net of cash disposed of
92
Infigen Energy Annual Report 2009
As at
8 Jan 2009
$’000
19,767
39,227
4,039
316
789,734
9,196
34,150
407,915
1,304,344
6,250
5,353
1,214,378
23,213
49,336
1,298,530
5,814
30 Jun 2009
$’000
30 Jun 2008
$’000
58,243
10,465
(40,749)
(206,644)
(19,454)
191,370
(1,960)
(4,809)
8 Jan 2009
$’000
1,518,168
(1,237,591)
280,577
(5,814)
274,763
–
274,763
1,518,168
(19,767)
1,498,401
Notes to the Financial Statements
for the year ended 30 June 2009
6. Income taXes anD DeferreD taXes
(a) Income tax expense
Income tax expense/(benefit) comprises:
Current tax
Deferred tax
Under/(over) provided in prior years
Income tax expense/(benefit) is attributable to:
Profit from continuing operations
Profit from discontinued operations (Note 5)
Aggregate income tax expense
Deferred income tax (benefit)/expense included
in income tax (benefit)/expense comprises:
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Consolidated
Parent Entity
2009
$’000
2008
$’000
(Restated)
2009
$’000
2008
$’000
10,452
(30,428)
50
3,586
11,480
–
(19,926)
15,066
(35,767)
15,841
(19,926)
(38,790)
8,362
(30,428)
790
14,276
15,066
235
11,245
11,480
–
(17,044)
(244)
(17,288)
(17,288)
–
(17,288)
(17,904)
860
(17,044)
2,927
560
–
3,487
3,487
–
3,487
(298)
858
560
Tax losses that are derived in the current year are recorded as deferred tax expense.
(b) numerical reconciliation of income tax expense/(benefit) to prima facie tax payable:
7,327
Profit/(loss) from continuing operations before income tax expense
(101,879)
Profit/(loss) from discontinued operations before income
tax expense (Note 5)
Income tax expense/(benefit) calculated at 30% (2008: 30%)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Non-deductible expenses
Non-assessable income
Non-deductible expenses for trade tax purposes
Amortisation of framework agreements
Non-deductible interest expense
Unrealised foreign exchange movement
Sundry items
Difference in overseas tax rates
Previously unrecognised tax losses
Income tax (expense)/benefit
274,893
173,014
51,904
22,845
(91,022)
–
342
3,326
(4,643)
(2,744)
66
–
38,263
45,590
13,677
4,519
(15,855)
12
410
14,007
(81)
368
(102)
(1,889)
(40,057)
(2,924)
(12,596)
(52,653)
(15,796)
–
(2,924)
(877)
–
(842)
–
–
3,159
(3,565)
(244)
–
–
1,316
–
–
410
2,638
–
–
–
–
(19,926)
15,066
(17,288)
3,487
93
Notes to the Financial Statements
for the year ended 30 June 2009
6. Income taXes anD DeferreD taXes (contInueD)
(c) amounts recognised directly in equity
The following deferred amounts were not recognised in net
profit or loss but charged directly to equity during the period:
Deferred tax asset
Deferred tax liabilities
Net deferred tax
(d) tax losses
Unused tax losses for which no deferred tax asset
has been recognised
Potential tax benefit @ 30%
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
7,695
3,423
11,118
(7,601)
3,071
(4,530)
–
972
972
–
948
948
(203,677)
(101,513)
(80,031)
(61,103)
(30,454)
(24,009)
(31,343)
(9,403)
(e) tax consolidation
IEL and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2003 and
are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is IEL. The members
of the tax-consolidated group are identified in Note 27.
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement
with the head entity. Under the terms of the tax funding arrangement, IEL and each of the entities in the tax-consolidated
group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current
tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-
consolidated group.
The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination
of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations.
No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts
under the tax sharing agreement is considered remote.
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(f) current tax liabilities
Current tax payables:
Income tax payable attributable to:
Australian entities in the group
Overseas entities in the group
1,597
446
2,043
580
5,766
6,346
–
–
–
–
–
–
94
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
6. Income taXes anD DeferreD (contInueD)
Taxable and deductible temporary differences arise from the following:
Opening
balance
(Restated)
$’000
Charged to
income
Consolidated
Charged to
Equity
Acquisitions/
disposals
Closing
balance
$’000
$’000
$’000
$’000
2009
Gross deferred tax assets:
Unused revenue tax losses – corporate & trade
32,693
32,564
Deductible Goodwill
Deductible equity raising costs
Effect of hedge movements
Unrealised foreign exchange loss
Other
Gross deferred tax liabilities:
Depreciation
Effect of hedge movements
Unrealised foreign exchange gains
Other
7,921
80
8,406
20,778
2,394
72,272
–
88
610
1,646
3,881
–
–
–
21,086
(28,781)
–
(6,476)
(7,921)
–
(6,982)
8,234
(1,880)
58,782
–
168
23,120
1,877
4,395
38,790
(7,695)
(15,025)
88,342
(261,079)
(25,031)
2,803
(5,715)
(6,044)
(503)
(2002)
187
–
(3,423)
–
–
221,931
26,310
(3,034)
5,588
(45,192)
(2,647)
(2,233)
60
(289,022)
(8,362)
(3,423)
250,795
(50,012)
Opening
balance
Charged to
income
Consolidated
Charged to
Equity
Acquisitions/
disposals
$’000
$’000
$’000
$’000
Closing
balance
(Restated)
$’000
2008
Gross deferred tax assets:
Unused revenue tax losses – corporate
25,202
(1,851)
Deductible Goodwill
Deductible equity raising costs
Effect of hedge movements
Unrealised foreign exchange loss
Other
Gross deferred tax liabilities:
Depreciation
Effect of hedge movements
Unrealised foreign exchange gains
Other
–
80
2,943
15,078
1,121
44,424
(45,351)
(12,363)
–
(1,088)
–
–
(2,138)
5,700
(1,946)
(235)
(6,815)
2,064
(6,531)
37
–
–
–
7,601
–
–
7,601
9,342
7,921
–
–
–
3,219
20,482
32,693
7,921
80
8,406
20,778
2,394
72,272
–
(208,912)
(261,078)
(12,405)
9,334
(2,327)
(25,031)
–
(4,665)
–
2,803
(5,716)
(58,802)
(11,245)
(3,071)
(215,904)
(289,022)
95
Notes to the Financial Statements
for the year ended 30 June 2009
6. Income taXes anD DeferreD (contInueD)
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Deferred tax liabilities to be settled within 12 months
Deferred tax liabilities to be settled after more than 12 months
Consolidated
Parent Entity
2009
$’000
–
88,342
88,342
–
50,012
50,012
2008
$’000
–
72,272
72,272
–
289,022
289,022
2009
$’000
–
54,558
54,558
–
2,890
2,890
2008
$’000
–
23,261
23,261
–
–
–
7. Key management personnel remuneratIon
Details of key management personnel
The following directors were Key Management Personnel (KMP) of Infigen during the whole of the financial year:
• Anthony Battle
• Douglas Clemson
The following persons were appointed as directors during the financial year:
• Graham Kelly (appointed 20 October 2008)
• Miles George (appointed 1 January 2009)
• Michael Hutchinson (appointed 18 June 2009)
The following persons were a director or alternate director of IEL from the beginning of the financial year until their resignation:
• Antonino Lo Bianco (resigned as an alternate director on 8 December 2008)
• Warren Murphy (resigned as a director on 29 April 2009)
• Peter Hofbauer (resigned as a director on 18 June 2009)
• Nils Andersen (resigned as a director on 18 June 2009)1
• Michael Garland (resigned as an alternate director on 18 June 2009)
1 Appointed as a Director of Infigen Energy RE Limited (‘IERL’), the responsible entity for the Trust, on 9 September 2005. Appointed as a director of IEL
and IEBL on 8 October 2008. Resigned as a director of IEL, IEBL and IERL on 18 June 2009.
Other KMP of Infigen during the year were:
Name
M George
G Dutaillis
G Dover
D Richardson
Role
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Company Secretary
Key management personnel remuneration
The aggregate remuneration of KMPs of Infigen over FY08 and FY09 is set out below:
Short-term employee benefits
Post-employment benefits (superannuation)
Other Long-term benefits/Share based payments
Total
2009
$
2008
$
3,628,039
3,004,672
100,558
84,095
(82,006)
1,504,837
3,646,591
4,593,604
96
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
7. Key management personnel remuneratIon (contInueD)
rights, options and awards held over Infigen securities
Consistent with the termination of management agreements that were in place between Infigen and Babcock & Brown,
KMPs that had been previously employed by Babcock & Brown became employees of Infigen on 1 January 2009.
Options, fund bonus deferral rights, and share awards that were held by KMPs over Babcock & Brown securities prior to the
termination of management agreements were forfeited or expired on 31 December 2009. This has resulted in the negative
value for share based payments presented above as the expense that was previously recognised in relation to these options,
fund bonus deferral rights and share awards was reversed in the current period. No additional options, bonus deferral rights
and share awards were granted over Babcock & Brown securities to KMPs during FY08 and FY09.
No options were granted over Infigen securities to KMPs in FY08 or prior to the internalisation of management in FY09.
Subsequent to the termination of management agreements that were in place between Infigen and Babcock & Brown,
performance rights and options over Infigen securities were granted to KMPs in FY09 under the Performance Rights &
Options (PR&O) Plan.
No performance rights or options over Infigen securities vested or became exercisable in FY09. No Infigen securities were
acquired by KMPs upon the exercise of options during FY08 and FY09.
Performance rights and options held by KMPs over Infigen securities over the period 1 July 2008 to 30 June 2009 are set out
below. The expense recognised in relation to the performance rights and options under the PR&O Plan is recorded within
administration, consulting and legal fees.
Set out below are summaries of performance rights granted:
Grant
date
Expiry
date
Exercise
price
Balance
at start of
the year
Granted
during
the year
Balance
at end of
the year
M George
G Dutaillis
G Dover
27 Mar 2009
27 Mar 2009
27 Mar 2009
D Richardson
27 Mar 2009
–
–
–
–
Set out below are summaries of options granted:
M George
G Dutaillis
G Dover
Grant
date
Expiry
date
27 Mar 2009
31 Dec 2013
27 Mar 2009
31 Dec 2013
27 Mar 2009
31 Dec 2013
D Richardson
27 Mar 2009
31 Dec 2013
N/A
N/A
N/A
N/A
Exercise
price
$0.897
$0.897
$0.897
$0.897
–
–
–
–
1,112,925
1,112,925
578,721
578,721
152,248
578,721
578,721
152,248
Balance
at start of
the year
Granted
during
the year
Balance
at end of
the year
–
–
–
–
5,053,908
5,053,908
2,628,032
2,628,032
2,628,032
2,628,032
691,375
691,375
No performance rights or options were exercised or forfeited during the year ended 30 June 2009.
Vested and
exercisable
at end of
the year
–
–
–
–
Vested and
exercisable
at end of
the year
–
–
–
–
97
Notes to the Financial Statements
for the year ended 30 June 2009
7. Key management personnel remuneratIon (contInueD)
security holdings in Infigen
No Infigen securities were granted as remuneration to KMPs during FY08 and FY09. Security holdings of KMPs, including
their personally related parties, in Infigen securities over the period 1 July 2008 to 30 June 2009 are set out below.
G Kelly
A Battle
D Clemson
M Hutchinson
N Andersen
P Hofbauer
W Murphy
M Garland
A Lo Bianco
M George
G Dutaillis
G Dover
D Richardson
Balance
1 July 2008
Acquired
during the year
Sold
during the year
Balance
30 June 2009
N/A
37,634
140,000
N/A
11,694
3,569,253
2,406,241
2,142,000
2,142,000
500,000
607,820
10,000
8,530
N/A
5,000
–
N/A
–
–
N/A
–
–
N/A
–
500,000
150,351
2,406,241
–
–
–
34,000
–
534
1,513,475
–
–
–
–
–
10,000
42,634
140,000
–
N/A
N/A
N/A
N/A
N/A
500,000
641,820
10,000
9,064
Security holdings of KMPs, including their personally related parties, in Infigen securities over the period 1 July 2007 to
30 June 2008 are set out below.
Balance
1 July 2007
Acquired
during the year
Sold
during the year
Balance
30 June 2008
A Battle
D Clemson
N Andersen
P Hofbauer
W Murphy
M Garland
A Lo Bianco
M George
G Dutaillis
G Dover
D Richardson
32,316
140,000
11,109
3,421,874
2,033,708
2,142,000
2,142,000
500,000
565,000
10,000
5,000
5,318
–
585
147,379
372,533
–
–
–
42,820
–
3,530
–
–
–
–
–
–
–
–
–
–
–
37,634
140,000
11,694
3,569,253
2,406,241
2,142,000
2,142,000
500,000
607,820
10,000
8,530
loans to key personnel and their personally related entities from Infigen
No loans have been made by Infigen to KMPs or their personally related parties during FY08 and FY09.
There are no other transactions with KMPs.
98
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
8. remuneratIon of auDItors
pricewaterhousecoopers: audit services
Audit and review of the financial report
Total remuneration for audit services
pricewaterhousecoopers: non-audit services
Other assurance related services
Due diligence services
Total remuneration for non-audit services
9. traDe anD otHer receIVables
current
Trade receivables and accrued income
Interest receivable
Amounts due from related parties (Note 35)
Goods & Services Tax and other tax receivables
Other receivables
non-current
Other receivables
Amounts due from related parties (Note 35)
Consolidated
Parent Entity
2009
$
2008
$
2009
$
1,676,198
1,601,561
1,676,198
1,601,561
56,022
56,022
2008
$
52,631
52,631
487,212
487,212
373,400
416,640
373,400
416,640
–
–
Consolidated
Parent Entity
2009
$’000
35,504
27
1,616
8,909
2,356
2008
$’000
70,414
63
10,532
78,891
34,313
2009
$’000
–
872
2,848
2
–
2008
$’000
–
1,221
37,352
–
–
48,412
194,213
3,722
38,573
–
–
–
38,651
–
–
–
699,348
1,012,434
38,651
699,348
1,012,434
99
Notes to the Financial Statements
for the year ended 30 June 2009
9. traDe anD otHer receIVables (contInueD)
(a) Impairment of trade receivables
There were no impaired trade receivables for the Group or the parent entity in 2009 or 2008.
(b) past due but not impaired
As of 30 June 2009, trade receivables of $229,000 (2008: $2,337,000) were past due but not impaired. Refer to Note 38 for
more information. These relate to a number of independent customers for whom there is no recent history of default.
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the
credit history of these other classes, it is expected that these amounts will be received when due. The Group does not hold
any collateral in relation to these receivables, other than $625,000 (EUR 360,000) (2008: $40,000,000 (EUR 26,430,000)) for bank
guarantees issued to the constructor of the Plambeck wind farms in Germany.
(c) other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group.
(d) foreign exchange and interest rate risk
Information about the Group’s and the parent entity’s exposure to foreign currency risk and interest rate risk in relation
to trade and other receivables is provided in Note 38.
(e) fair value and credit risk
Due to the nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum
exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer
to Note 38 for more information on the risk management policy of the Group and the credit quality of the entity’s
trade receivables.
10. prepayments
current
Prepaid operations expenses
Other prepayments
non-current
Prepaid operations expenses
Prepaid investment costs
11. otHer current assets
Inventory – Renewable Energy Certificates
Other
Consolidated
Parent Entity
2009
$’000
14,254
255
14,509
6,540
263
6,803
2008
$’000
23,367
6,425
29,792
10,754
4,404
15,158
2009
$’000
–
–
–
–
–
2008
$’000
–
1,458
1,458
–
4,404
4,404
Consolidated
Parent Entity
2009
$’000
4,801
1,385
6,186
2008
$’000
566
361
927
2009
$’000
–
–
–
2008
$’000
–
–
–
100
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
12. fInancIal assets
Financial assets comprise institutional equity partnerships in the United States where the Group did not have the power
to govern the financial and operating policies of the entity.
During the year ended 30 June 2008 the Directors determined that the Group had obtained the power to govern the
financial and operating policies of these partnerships and hence controls or jointly controls these partnerships. Revaluations
of financial assets up until the date of control were determined using a discounted cash flow analysis.
Refer to Note 21 for a summary of institutional equity partnerships that are recorded as liabilities.
Consolidated
Parent Entity
Balance at 1 July
Additions/disposals
Distributions received from investments1
Net revaluation
Foreign exchange gain/(loss)
Reclassification upon obtaining control2
Reclassification upon obtaining joint control2
Balance at 30 June
2009
$’000
–
–
–
–
–
–
–
–
2008
$’000
488,292
360,261
(17,854)
24,246
(14,244)
(642,363)
(198,338)
–
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Includes distributions paid to minority interests.
2 The transfer to cost of acquisition was $642,363,000 for consolidated entities and $198,338,000 for jointly controlled entities.
Refer to Note 21 for further information in relation to the accounting treatment and Note 33 for fair values of net assets/
liabilities acquired.
13. DerIVatIVe fInancIal Instruments – assets
current
At fair value:
Foreign currency forward contracts – cash flow hedges
Interest rate swaps – cash flow hedges
non-current
At fair value:
Foreign currency forward contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Refer to Note 38 for further information.
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
5,105
–
5,105
3,717
–
3,717
6,650
26,722
33,372
3,177
88,891
92,068
5,105
–
5,105
3,717
–
3,717
6,650
–
6,650
3,177
–
3,177
101
Notes to the Financial Statements
for the year ended 30 June 2009
14. property, plant anD equIpment
At 1 July 2007 (Restated)
Cost or fair value
Accumulated depreciation
Net book value
Year ended 30 June 2008 (Restated)
Opening net book value
Additions
Transfers
Acquisitions through business combinations
Depreciation expense
Net foreign currency exchange differences
Closing net book value
At 30 June 2008 (Restated)
Cost or fair value
Accumulated depreciation
Net book value
Year ended 30 June 2009
Opening net book value
Additions
Transfers
Acquisitions through business combinations
Disposals
Depreciation expense
Net foreign currency exchange differences
Closing net book value
At 30 June 2009
Cost or fair value
Accumulated depreciation
Net book value
Consolidated
Plant &
Equipment
at cost
$’000
Assets under
construction
$’000
Total
$’000
238,860
1,012,197
1,251,057
–
(53,761)
(53,761)
238,860
958,436
1,197,296
238,860
259,441
(111,341)
958,436
443,122
111,341
1,197,296
702,563
–
173,223
3,139,836
3,313,059
–
(124,975)
(124,975)
(879)
(199,069)
(199,948)
559,304
4,328,691
4,887,995
559,304
4,503,824
5,063,128
–
(175,133)
(175,133)
559,304
4,328,691
4,887,995
559,304
4,328,691
4,887,995
331,135
(313,079)
–
29,441
313,079
134,143
360,576
–
134,143
(256,831)
(2,370,712)
(2,627,842)
–
(180,804)
(180,804)
39,251
782,595
822,145
359,780
3,036,433
3,396,213
359,780
3,286,428
3,646,208
–
(249,995)
(249,995)
359,780
3,036,433
3,396,213
The Group has certain assets with net book value of $56,336,000 which are accounted for under finance leases
(2008: $55,583,000). Refer Note 19 and Note 31.
Assets under construction are deemed to be qualifying assets. Borrowing costs that are directly attributable to the
construction of a qualifying asset are capitalised as part of the cost of that asset.
The parent entity does not have property, plant and equipment.
102
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
15. gooDWIll
gross carrying amount
Balance at beginning of financial year
Additional amounts recognised from business
combinations occurring during the period (Note 33)
Disposals
Net foreign currency exchange differences
Balance at end of financial year
Consolidated
Parent Entity
2009
$’000
2008
$’000
(Restated)
2009
$’000
2008
$’000
48,291
32,637
6,469
(34,150)
6,845
27,455
16,458
–
(804)
48,291
–
–
–
–
–
–
–
–
–
–
(a) provisional allocation of goodwill to cash-generating units
In accordance with AASB 3 Business Combinations an exercise to confirm the allocation of the purchase price paid for each
of the acquisitions of Langwedel, Leddin, Calau, Seehausen and BBPOP will take place within a 12 month period from
acquisition. This could result in a revision to the amount of goodwill and intangible assets recorded. As a result, at reporting
date goodwill has not yet been allocated to a cash generating unit.
(b) amounts reclassified following a purchase price reallocation exercise
Goodwill was provisionally recognised in relation to acquisitions during the year ended 30 June 2008 and has been
reclassified as follows:
Acquisition
Valdeconejos
Enersis portfolio
Almeria portfolio
Capital
Hiddestorf
US Wind Farms
Apfelbaum portfolio
Goodwill
$’000
(43,904)
(290,813)
(117,416)
(50,151)
(590)
Intangible
asset
$’000
43,904
290,813
117,416
50,151
590
(139,987)
139,987
Deferred
tax liability
$’000
Resulting
Goodwill
$’000
–
–
–
–
–
–
(15,045)
15,045
(177)
–
177
–
1,236
16,458
(4,119)
4,119
(1,236)
(646,980)
646,980
(16,458)
The balance at the beginning of 2008 of $32,637,000 has been restated by $47,885,000 to reflect the reclassification of
goodwill to intangible assets following the change in accounting treatment of US assets during the year ended 30 June 2008
and the subsequent purchase price allocation exercise.
Additionally, certain joint ventures during the year ended 30 June 2008, gave rise to goodwill. The provisional amount of
goodwill, $49,023,000, has been reclassified to intangible assets.
Furthermore, as a result of a purchase price allocation exercise, an additional $8,387,000 was reclassified from goodwill to
intangible assets.
103
Notes to the Financial Statements
for the year ended 30 June 2009
15. gooDWIll (contInueD)
(c) Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to country of operation.
A segment-level summary of the goodwill allocation is presented below.
Australia
Germany
United States
Spain
Consolidated
2009
$’000
15,136
7,927
4,392
–
27,455
2008
$’000
15,045
5,750
–
27,496
48,291
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections based on financial budgets approved by management covering the life of the wind farm. A high proportion of
the Group’s revenues are contracted at fixed prices under power purchase agreements.
(d) Key assumptions for value-in-use calculations
The Group makes assumptions in calculating the value-in-use of its CGUs including assumptions around expected
wind speeds. In performing these calculations for each CGU, the Group has applied pre-tax discount rates in the range
of 8% – 10% (2008: 9% – 10%).The discount rates used reflect specific risks relating to the relevant countries in which
they operate.
In determining future cash flows, the Group has used Long-term Mean Energy Production estimates (‘P50’) to reflect the
expected performance of the assets throughout the budget period. The Long-term Mean Energy Production is estimated
by independent technical consultants on behalf of the Group for each wind farm.
For wind farms with power purchase agreements, future growth rates are based on CPI in the relevant jurisdiction. For wind
farms subject to market prices, future growth rates are based on long term industry price expectations.
104
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
16. IntangIble assets
At 1 July 2007 (Restated)
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2008 (Restated)
Opening net book value
Additions
Adjustments due to purchase price allocation exercise
Amortisation expense (i)
Net foreign currency exchange differences
Closing net book value
At 30 June 2008 (Restated)
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2009
Opening net book value
Additions
Acquisitions through business combinations (ii)
Disposals
Amortisation expense (i)
Net foreign currency exchange differences
Closing net book value
At 30 June 2009
Cost
Accumulated amortisation and impairment
Net book value
Consolidated
Project-related
agreements
and licences
$’000
Framework
agreement
$’000
Total
$’000
4,800
(3,152)
1,648
254,818
259,618
(5,763)
(8,915)
249,055
250,703
1,648
249,055
250,703
–
–
(1,367)
–
281
535
725,185
(18,394)
8,115
535
725,185
(19,761)
8,115
964,496
964,777
4,800
(4,519)
988,316
(23,820)
993,116
(28,339)
281
964,496
964,777
281
964,496
964,777
–
–
–
22,484
31,891
22,484
31,891
(776,126)
(776,126)
(281)
(19,748)
–
–
178,708
401,705
(20,029)
178,708
401,705
4,800
(4,800)
427,331
(25,626)
432,131
(30,426)
–
401,705
401,705
105
Notes to the Financial Statements
for the year ended 30 June 2009
16. IntangIble assets (contInueD)
At 1 July 2007 (Restated)
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2008 (Restated)
Opening net book value
Amortisation expense (i)
Closing net book value
At 30 June 2008 (Restated)
Cost
Accumulated amortisation and impairment
Net book value
Year ended 30 June 2009
Opening net book value
Amortisation expense (i)
Closing net book value
At 30 June 2009
Cost
Accumulated amortisation and impairment
Net book value
Parent Entity
Project-related
agreements
and licences
$’000
Framework
agreement
$’000
4,800
(3,152)
1,648
1,648
(1,367)
281
4,800
(4,519)
281
281
(281)
–
4,800
(4,800)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
4,800
(3,152)
1,648
1,648
(1,367)
281
4,800
(4,519)
281
281
(281)
–
4,800
(4,800)
–
Project-Related Agreements and Licences
Project-related agreements and licences include the following items:
• Licences, permits and approvals to develop and operate a wind farm, including governmental authorisations, land rights
and environmental consents;
• Interconnection rights, and
• Power purchase agreements.
Project-related agreements and licences are carried at cost less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives,
which are based on the lease term of the related wind farm.
Framework Agreements
Costs incurred with respect to entering into framework agreements, which provide a pre-emptive right to acquire assets
(subject to certain conditions being met), have been amortised. To the extent that an agreement relates to a specific asset(s),
the related costs are amortised as an ancillary cost of acquisition. Where an agreement does not relate to a specific asset,
the costs are amortised over the period of the agreements, which vary from 15 months to 3 years.
(i) Amortisation expense is included in the line item Depreciation and Amortisation Expense in the income statement.
(ii) Includes $24,671,000 relating to uplift on minority interest (refer Note 21).
106
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
17. traDe anD otHer payables
current
Trade payables
Amounts due to related parties (Note 35)
Interest payable
Goods and services tax payable
Deferred income
Other taxes
Other (i)
non-current
Amounts due to related parties (Note 35)
Consolidated
Parent Entity
2009
$’000
2008
$’000
66,322
978
72
1,474
7,299
6,405
1,360
246,078
34,965
3,356
2,006
3,357
4,673
1,957
2009
$’000
8,960
124
3,858
–
–
–
–
2008
$’000
15,883
–
1,193
2,083
–
–
471
83,910
296,392
12,942
19,630
246
246
17,196
17,196
–
–
–
–
(i) Includes an accrual for annual leave. The entire obligation for annual leave is presented as current, since the Group does
not have an unconditional right to defer settlement.
Risk exposure
Information about the Group’s and the parent entity’s exposure to foreign exchange risk is provided in Note 38.
18. proVIsIons
current
Employee benefits
non-current
Employee benefits – long-service leave
Consolidated
Parent Entity
2009
$’000
2,885
2,885
193
193
2008
$’000
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
–
–
–
–
107
Notes to the Financial Statements
for the year ended 30 June 2009
19. borroWIngs
current
Secured
At amortised cost:
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Loans from related parties (refer Note 35)
Global Facility (i)
Portugal Enersis Facility
–
77,806
–
–
1,108,766
1,177,253
–
–
–
–
–
–
–
–
114,576
60,772
2,573
77,806
175,348
2,897
80,703
177,921
1,108,766
1,177,253
Finance lease liabilities (ii)
non-current
Secured
At amortised cost:
Global Facility (i)
Portugal Enersis Facility
Capitalised loan costs
Finance lease liabilities (ii)
1,538,262
2,173,472
–
1,150,808
(18,791)
(30,147)
1,519,471
3,294,133
48,165
48,171
1,567,636
3,342,304
–
–
–
–
–
–
–
–
–
–
–
–
(i) Debt facilities at 30 June 2009
The Group reduced its debt facilities significantly during the year ended 2009 following the sale of its Spanish and
Portuguese wind farms.
The Group’s debt facility (the Global Facility) has no asset level security, however each borrower under the Global Facility is a
guarantor of the facilities. In addition, lenders have first ranking security over the issued share capital of, or other ownership
interest in:
• the borrowers other than IEL, and
• the direct subsidiaries of the borrowers, which are holding entities of each wind farm in Infigen’s portfolio.
Drawings under the Global Facility are in multiple currencies to match the underlying currencies of Infigen’s investments and
provide a natural foreign currency hedge in relation to the debt servicing of amounts drawn under the Global Facility. The
base currency of the Global Facility is the Euro.
The Global Facility has a 15 year term and has been provided by Banco Espirito Santo de Investimento, S.A. (Espírito Santo
Investment), Millennium investment banking (Banco Millennium BCP Investimento, S.A.), Bank of Scotland (HBOS), Dexia
Credit Local, KFW IPEX Bank GmbH, The Governor and Company of the Bank of Ireland, Cooperative Centrale Raiffeisen
Boerenleenbank B.A.(RABO Bank), DEPFA Bank PLC, KBC Bank N.V., Natixis Bank, The Royal Bank of Scotland, Commonwealth
Bank of Australia, IKB Deutsche Industriebank AG, Westpac Banking Corporation, Societe Generale Bank, Banco Santander
S.A., Hypovereinsbank Unicredit Group.
108
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
19. borroWIngs (contInueD)
The total value of funds that have been drawn down by currency, exchanged at the year end rate, are presented in the
following table:
Australian Dollars
Euro – Debt
Euro – Finance Lease
US Dollars
Gross Debt
Less Capitalised Loan Costs
Total Debt
Current Balance Current Balance
(AUD ’000)
(Local curr ‘000)
637,929
197,740
29,192
515,808
637,929
343,532
51,062
634,607
1,667,130
(18,791)
1,648,339
The Group pays interest each six months based on Euribor (Euro drawings), BBSY (Australian Dollar) or LIBOR (other
currencies), plus a margin. The current average margin the Group pays on its borrowings is 92 basis points. It is the Group’s
policy to use financial instruments to fix the interest rate for a portion of the loan. Repayments under the facilities are due
each six months until the end of the term. From 31 December 2010, these repayments comprise net cash flows from those
group companies that remain in the Global Facility. From 1 July 2010 the facility terms provide that these net cash flows be
applied to repay amounts outstanding under the Global Facility.
(ii) finance lease liabilities
Refer Note 31.
20. DerIVatIVe fInancIal Instruments – lIabIlItIes
current
At fair value:
Foreign currency forward contracts – cash flow hedges
Interest rate swaps – cash flow hedges
non-current
At fair value:
Foreign currency forward contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Refer to Note 38 for further information.
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
2,550
56,781
59,331
2,023
71,561
73,584
78
8,996
9,074
75
15,218
15,293
2,549
–
2,549
2,023
–
2,023
78
–
78
75
–
75
109
Notes to the Financial Statements
for the year ended 30 June 2009
21. InstItutIonal equIty partnersHIps classIfIeD as lIabIlItIes
nature of institutional equity partnerships
The Group’s relationship with the non-managing members and managing members (Class A and Class B institutional
investors, respectively) is established through a limited liability company operating agreement that allocates the cash
flows generated by the wind farms between the Class B institutional investors (the Group’s ownership of these varies from
50%-100%) and allocates the tax benefits, which include Production Tax Credits (PTC) and accelerated depreciation, largely
to the Class A institutional investors.
The Class A institutional investors purchase their partnership interests for an upfront cash payment. This payment is fixed
so that the investors, as of the date that they purchase their interest, anticipate earning an agreed targeted internal rate of
return by the end of the ten year period over which PTCs are generated. This anticipated return is computed based on the
total anticipated benefit that the institutional investors will receive and includes the value of PTCs, allocated taxable income
or loss and cash distributions receivable.
Under these structures, all operating cash flow is allocated to the Class B institutional investors until the earlier of a fixed
date, or when the Class B institutional investors recover the amount of invested capital. This is expected to occur between
five to ten years from the initial closing date. Thereafter, all operating cash flow is allocated to the Class A institutional
investors until they receive the targeted internal rate of return (the ‘Reallocation Date’).
Prior to the Reallocation Date, a significant part of the tax income and benefits generated by the partnerships are allocated
to the Class A institutional investors, with any remaining benefits allocated to the Class B institutional investors.
After the Reallocation Date, the Class A institutional investors retain a small minority interest for the duration of its
membership in the structure. The Group also has an option to purchase the Class A institutional investors’ residual interests
at fair market value on the Reallocation Date.
recognition of institutional equity partnerships
The Group either controls or jointly controls the strategic and operating decisions of institutional equity partnerships. Notes
32 and 39 provide further details of controlled and jointly controlled partnerships.
classification of institutional equity partnerships
Class B and Class A members’ investments in institutional equity partnership structures are classified as liabilities in the
financial statements as the partnerships have limited lives and the allocation of income earned is governed by contractual
agreements over the life of the investment. Whilst classified as liabilities it is important to note:
• Should future operational revenues from the US wind farm investments be insufficient, there is no contractual obligation
on the Group to repay the liabilities.
• Institutional balances outstanding (Class A and Class B minority interests) do not impact the Group’s lending covenants
or interest cover ratios.
• There is no exit mechanism for institutional investors consequently there is no re-financing risk.
110
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
21. InstItutIonal equIty partnersHIps classIfIeD as lIabIlItIes (contInueD)
The following table includes the components of institutional equity partnerships classified as liabilities: Class A member
liabilities; minority interests relating to Class B members and deferred revenue.
Class A members
Class B members
Total
2009
$’000
2008
$’000
2009
$’000
2008
$’000
2009
$’000
2008
$’000
969,402
149,901
71,155
–
1,040,557
149,901
class a and class b liabilities:
At 1 July
Institutional liabilities acquired
on consolidation of US wind
farm investments
Distributions
(3,125)
–
(20,175)
–
1,003,486
–
84,351
(10,032)
–
1,087,837
(23,300)
(10,032)
Value of benefits provided –
production tax credits (Class A)
Value of benefits provided –
tax losses (Class A)1
Allocation of return on
outstanding balance (Class A)
Movement in residual interest
(Class A)
Minority interest (Class B)
Uplift on minority interest (Class B)
resulting from purchase price allocation
(111,217)
(52,824)
(134,333)
(75,571)
82,298
39,522
16,094
5,108
–
–
–
–
Foreign exchange (gain)/loss
196,923
(100,220)
At 30 June
1,016,042
969,402
–
–
–
–
–
–
–
–
6,195
4,303
24,971
13,894
96,040
–
(7,467)
(111,217)
(52,824)
(134,333)
(75,571)
82,298
39,522
16,094
6,195
24,971
210,817
5,108
4,303
–
(107,687)
Deferred revenue:
At 1 July
Resulting from business combinations
during the period
Benefits deferred during the period
Foreign exchange (gain)/loss
At 30 June
1 This comprises the following:
Total Taxable Income/Loss before
accelerated tax depreciation
Accelerated tax depreciation
2009
$’000
61,842
(196,175)
2008
$’000
29,496
(105,067)
Tax loss
(134,333)
(75,571)
71,155
1,112,082
1,040,557
265,762
55,628
–
158,732
30,486
454,980
147,565
88,228
(25,659)
265,762
1,567,062
1,306,319
111
Notes to the Financial Statements
for the year ended 30 June 2009
22. capItalIseD borroWIng costs
Borrowing costs capitalised during the financial year
Weighted average capitalisation rate on funds borrowed generally
Consolidated
Parent Entity
2009
$’000
12,441
6.2%
2008
$’000
22,844
7.1%
2009
$’000
–
–
2008
$’000
–
–
Where borrowing costs are directly attributable to the construction of a qualifying asset, they are capitalised as part of the
cost of that asset.
23. contrIbuteD equIty
fully paid stapled securities/shares
Balance as at 1 July 2007
Capital distribution
Distribution reinvestment plan (i)
Alinta scheme of arrangement (ii)
Security purchase plan (iii)
Institutional placement (iv)
Capital Wind Farm acquisition (v)
Transaction costs arising on security issue
Balance as at 30 June 2008
attributable to:
Equity holders of the parent
Equity holders of the other stapled securities (minority interests)
Consolidated
Parent Entity
2009
No’000
2008
$’000
2009
No’000
2008
$’000
673,071
810,325
673,071
4,470
–
(103,552)
20,042
130,148
26,935
4,350
14,055
–
29,062
211,057
46,281
7,830
24,480
(11,073)
–
20,042
130,148
26,935
4,350
14,055
–
868,601
1,014,410
868,601
4,501
1,009,909
1,014,410
–
3
21
5
1
2
(1)
4,501
4,501
–
4,501
4,501
–
1
(6)
Balance as at 1 July 2008
Capital distribution
Distribution reinvestment plan (i)
868,601
1,014,410
868,601
–
(101,144)
8,398
9,745
–
8,398
Securities bought back on market and cancelled (vi)
(68,822)
(60,898)
(68,822)
Balance as at 30 June 2009
attributable to:
Equity holders of the parent
Equity holders of the other stapled securities (minority interests)
808,177
862,113
808,177
4,496
4,496
857,617
862,113
4,496
–
4,496
Stapled securities entitle the holder to participate in dividends from IEL and IEBL and in distributions from IET. The holder is
entitled to participate in the proceeds on winding up of the company in proportion to the number of and amounts paid on
the securities held.
112
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
23. contrIbuteD equIty (contInueD)
(i) Distribution reinvestment plan
Infigen operates a distribution reinvestment plan (DRP) under which holders of stapled securities may elect to have all or
part of their distribution entitlements satisfied by the issue of new stapled securities rather than by being paid in cash. To
date, securities have been issued under the plan at a 2.5% discount to the weighted average price of Infigen securities on the
ASX over the 10 trading days ending on the trading day which is 3 trading days before the date the stapled securities are due
to be allotted. On 17 December 2008, Infigen confirmed that the DRP had been suspended until further notice.
On 18 September 2008, Infigen issued 8,398,000 stapled securities at a price of $1.16 per security in relation to the payment of
the final distribution for the year ended 30 June 2008.
(ii) alinta scheme of arrangement
On 30 March 2007, Infigen announced that it was a member of the consortium bidding for the whole of the issued capital of
Alinta Limited via a scheme of arrangement.
On 31 August 2007, under the scheme of arrangement, Infigen issued 128,755,000 stapled securities at a price of $1.62 net of
transaction costs of $9.5 million to Alinta shareholders.
On 4 September 2007 a further 1,393,000 stapled securities were issued at a price of $1.65 per security to fund Infigen’s share
of payments to option holders in Alinta Limited as foreshadowed in the Scheme Booklet resulting in a total of $211 million
gross proceeds from both stapled security issuances during the year.
(iii) security purchase plan
On 18 September 2007, Infigen announced a Security Purchase Plan enabling existing shareholders to acquire up to $5,000 in
value of additional Infigen securities at a discount to the market price. Pursuant to this plan, Infigen issued 26,935,000 stapled
securities on 24 October 2007 at a price of $1.72 per security.
(iv) Institutional placement
On 4 May 2007, Infigen issued 87,100,000 stapled securities pursuant to an institutional placement. Each stapled security was
priced at $1.80 and total proceeds amounted to $156,780,000 before costs of $3,187,000.
In addition to the institutional placement, Babcock & Brown Limited (B&B) agreed that it would subscribe for 4,350,000
stapled securities at the same price as the institutional placement conditional upon the approval of Infigen securityholders
at the Annual General Meeting held on 9 November 2007.
Securityholders approved the issue and on 14 November 2007 Infigen issued 4,350,000 stapled securities to B&B at a price of
$1.80 per stapled security.
(v) capital wind farm acquisition
On 20 December 2007, Infigen issued 7,295,000 stapled securities at a price of $1.78 per security as part consideration for the
acquisition of the Capital wind farm. Pursuant to the Sale and Purchase Agreement a further 6,760,000 stapled securities
were issued on 3 January 2008 at a price of $1.70 per security.
(vi) on market security buy-back
On 16 September 2008, Infigen announced its intention to undertake a buy-back of up to 10% of its securities over the
following 12 months. On 26 November 2008, securityholders approved a resolution at the Annual General Meeting for an
on-market security buyback of up to 30% of securities on issue.
As at 30 June 2009, Infigen had purchased and cancelled 68,822,000 stapled securities at an average price of $0.88 per security.
113
Notes to the Financial Statements
for the year ended 30 June 2009
24. reserVes
Foreign currency translation
Hedging
Acquisition
Share-based payment
attributable to:
Equity holders of the parent
Equity holders of the other stapled securities
(minority interests)
foreign currency translation reserve
Balance at beginning of financial year
Movement increasing/(decreasing) recognised:
Translation of foreign operations
Forward exchange contracts
Deferred tax reversal
Balance at end of financial year
Consolidated
Parent Entity
2009
$’000
25,718
(122,145)
(53,472)
1,071
2008
$’000
(43,006)
28,526
(49,442)
–
2009
$’000
–
2,266
–
–
2008
$’000
–
5,919
–
–
(148,828)
(63,922)
2,266
5,919
(128,264)
(42,287)
2,266
(20,564)
(21,635)
–
(148,828)
(63,922)
2,266
(43,006)
(26,009)
99,174
(5,369)
(25,081)
(29,491)
3,160
9,334
25,718
(43,006)
–
–
–
–
–
5,919
–
5,919
–
–
–
–
–
Exchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation
reserve, as described in Note 1(n). The reserve is recognised in profit and loss when the net investment is disposed of.
Hedging reserve
Balance at beginning of financial year
Movement increasing/(decreasing) recognised:
Forward exchange contracts
Interest rate swaps
Deferred tax arising on hedges
Balance at end of financial year
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
28,526
12,396
5,919
3,705
–
(183,792)
33,121
1,106
22,155
(7,131)
(2,680)
–
(973)
(122,145)
28,526
2,266
4,902
–
(2,688)
5,919
The hedging reserve is used to record movements on a hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in Note 1(k). Amounts are recognised in profit and loss when the associated hedged
transaction settles.
114
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
24. reserVes (contInueD)
acquisition reserve
Balance at beginning of financial year (i)
Acquisition of minority interest of subsidiary (ii)
Balance at end of financial year
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(49,442)
(49,442)
(4,030)
–
(53,472)
(49,442)
–
–
–
–
–
–
(i) Prior to the acquisition of the remaining 25% of Walkaway Wind Power Pty Limited (‘WWP’), IEL owned 75% of the share
capital of WWP and consolidated accordingly. Therefore, the acquisition of the remaining 25% did not result in a change
of control but was an acquisition of the minority shareholders.
(ii) In May and June 2009, Infigen Energy acquired various minority interests relating to entities over which Infigen Energy
already exerted control. Therefore, the acquisition of these minority interests did not result in a change of control but was
an acquisition of the minority shareholders.
These transactions are treated as transactions between owners of the Group. Additional goodwill is recognised only to
the extent that it represents goodwill that was attributable to the minority interest at the acquisition date but is now
attributable to the parent entity. No such goodwill was recognised in relation to WWP and the other minority interest
acquisitions. The difference between the purchase consideration and the amount, by which the minority interest is
adjusted, has been recognised in the acquisition reserve. In relation to the various minority interests that have been
purchased during the year ended 30 June 2009, $4,030,000 has been recognised in the acquisition reserve.
These minority interests form part of a group of assets that Infigen Energy has agreed to acquire from the Babcock &
Brown group for $23,400,000. As of 30 June 2009, the Group has paid $3,224,000 in relation to these minority interests.
A further amount of $6,019,000 has been paid in relation to other assets (refer Note 33).
share-based payment reserve
Balance at beginning of financial year
Share-based payments expense1
Balance at end of financial year
Consolidated
Parent Entity
2009
$’000
–
1,071
1,071
2008
$’000
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
–
1 The share-based payments reserve is used to recognise the fair value of performance rights and options issued to employees but not exercised. Refer
Note 28 for further detail.
25. retaIneD earnIngs
Balance at beginning of financial year
Net profit/(loss) attributable to stapled security holders
Balance at end of financial year
Attributable to:
Equity holders of the parent
Equity holders of the other stapled securities
(minority interests)
Consolidated
Parent Entity
2009
$’000
9,594
189,494
199,088
2008
$’000
(8,326)
17,920
9,594
2009
$’000
(28,450)
(35,365)
2008
$’000
(22,039)
(6,411)
(63,815)
(28,450)
177,867
(1,066)
(63,815)
(28,450)
21,221
199,088
10,660
9,594
–
–
(63,815)
(28,450)
115
Notes to the Financial Statements
for the year ended 30 June 2009
26. earnIngs per securIty/sHare
basic and diluted earnings per stapled security/parent entity share:
Parent entity share
From continuing operations attributable to the parent entity share holders
From discontinued operations
Total basic and diluted earnings per share attributable to the parent entity share holders
Stapled security
From continuing operations attributable to the stapled security holders
From discontinued operations
Total basic and diluted earnings per share attributable to the stapled security holders
Consolidated
2009
Cents per
security
2008
Cents per
security
(7.9)
30.5
22.6
(8.2)
30.5
22.3
(0.8)
2.9
2.1
(0.7)
2.9
2.2
The earnings and weighted average number of securities/shares used in the calculation of basic and diluted earnings per
security/share are as follows:
Earnings attributable to the parent entity share holders
From continuing operations
From discontinued operations
Total earnings attributable to the parent entity share holders
Earnings attributable to the stapled security holders
From continuing operations
From discontinued operations
Total earnings attributable to the stapled securityholders
2009
$’000
2008
$’000
(67,399)
259,052
191,653
(69,558)
259,052
189,494
2009
No’000
(6,766)
23,987
17,221
(6,067)
23,987
17,920
2008
No’000
Weighted average number of securities/shares for the purposes of basic
and diluted earnings per security/share
849,877
818,301
116
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
27. DIstrIbutIons paID
recognised amounts
Ordinary securities
Final distribution in respect of 2008 year of 7.25 cents
per stapled security (2007: 6.25 cents) paid in September 2008
(2007: September 2007), 100% tax deferred (2007: 100% tax deferred)
Interim distribution in respect of 2009 year of 4.50 cents
(2008: 7.25 cents) per stapled security paid in March 2009
(2008: March 2008), 100% tax deferred (2008: 100% tax deferred)
Distributions paid in cash or satisfied by the issue of new
stapled securities under the Distribution Reinvestment Plan
during the year ended 30 June 2009 and the year ended
30 June 2008 were as follows:
Paid in cash
Satisfied by the issue of stapled securities
2009
2008
Cents per
security
Total
$’000
Cents per
security
Total
$’000
7.25
62,974
6.25
42,067
4.50
38,170
101,144
7.25
61,485
103,552
91,399
9,745
101,144
74,490
29,062
103,552
On 27 August 2009, the Directors of Infigen declared a final distribution in respect of the year ended 30 June 2009 of
4.50 cents per stapled security (2008: 7.25 cents), 100% tax deferred. The amount that will be paid in September 2009
(2008: September 2008) will be $36,368,000 (2008: $62,974,000). As the distribution was declared subsequent to 30 June 2009
no provision has been included as at 30 June 2009.
No franking credits have been generated by the parent entity.
28. sHare-baseD payments
(a) employee option plan
The establishment of the Performance Rights and Options Plan (‘PR&O’) was approved by shareholders at the April 2009
Extraordinary General Meeting. The PR&O Plan is designed to deliver to executives an appropriate long-term equity
participation in Infigen, and in doing so, align the longer term interest of executives with those of securityholders.
Any performance rights and options awarded to executives under the PR&O Plan are ‘at risk’ and will only vest if the terms
and conditions set out under the relevant award are satisfied. Participation in the plan is at the Board’s discretion and no
individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
The main difference between an option and a performance right is that an exercise price as determined by the Board is
required to be paid by the executive to exercise a vested option, whereas a performance right has a nil exercise price and
vests once conditions have been met.
117
Notes to the Financial Statements
for the year ended 30 June 2009
28. sHare-baseD payments (contInueD)
Executives receive 50% of an award in the form of performance rights and 50% in the form of options. Performance rights
and options are awarded in two tranches of equal value. The measures used to determine performance and the subsequent
vesting of performance rights and options are Total Shareholder Return (TSR) (Tranche 1) and an Operational Performance
condition (Tranche 2).
The TSR condition measures the growth in the price of securities plus cash distributions notionally reinvested in securities.
The Operational Performance condition will be determined by an earnings before interest, taxes, depreciation and
amortisation (EBITDA) test.
In order for the Tranche 1 performance rights and options to vest, the TSR of Infigen will be compared to companies in the
S&P/ASX 200 (excluding financial services and the materials/resources sector).
The Operational Performance condition will test the ratio of EBITDA to Capital Base, with the annual target being a specified
percentage increase in the ratio over the year. The Capital Base will be measured as equity (net assets) plus net debt. Both
the EBITDA and Capital Base will be measured on a proportionally consolidated basis to reflect Infigen’s economic interest
in all investments. The annual Operational Performance target for each financial year will be established by the Board.
The Tranche 1 TSR performance condition will be measured over a 3 year period from 1 January 2009 to 31 December 2011.
The Tranche 2 Operational Performance condition will be measured over a 3 year period from 1 July 2008 to 30 June 2011.
Any performance rights or options that do not vest following the measurement of performance against the TSR and
Operational Performance conditions will be subject to a single retest 4 years after the commencement of the relevant
performance period (i.e. 31 December 2012 in regards to the Tranche 1 TSR performance condition and 30 June 2012 in
regards to the Tranche 2 Operational Performance condition). Any performance rights or options that do not vest based
on the retest after 4 years will then lapse. Once vested, the options remain exercisable until 31 December 2013. Performance
rights and options are granted under the PR&O Plan for no consideration.
Each vested performance right and each vested option that is exercised will translate into one Stapled Security. Any Stapled
Securities issued under the PR&O Plan will rank equally with those traded on the ASX at the time of issue.
Performance rights and options do not attract dividends, distributions or voting rights until they vest (and in the case
of options, are exercised) and Stapled Securities are allocated.
The exercise price of options is based on the weighted average price at which the company’s shares are traded on the
Australian Securities Exchange during the week up to and including the date of the grant.
Set out below are summaries of performance rights and options that have been granted under the plan:
consolidated and parent entity – 2009
Deemed
Grant Date
performance rights
27 Mar 2009
Total
Weighted average exercise price
options
27 Mar 2009
Total
Weighted average exercise price
31 Dec 2013
$0.897
Expiry
date
Exercise
price
Balance at
start of
the year
Granted
during
the year
Balance at end
of the year
Vested and
exercisable at
end of the year
N/A
N/A
–
–
–
–
–
–
3,714,720
3,714,720
3,714,720
3,714,720
–
–
16,868,935
16,868,935
16,868,935
16,868,935
$0.897
$0.897
–
–
–
–
–
Performance rights and options were awarded in two tranches of equal value (Tranche 1 and Tranche 2). None were
exercised or forfeited during the year ended 30 June 2009.
During the periods covered by the above tables, no performance rights or options expired and no performance rights
or options vested or became exercisable.
118
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
28. sHare-baseD payments (contInueD)
Fair value of performance rights and options granted
The assessed fair values at grant date of performance rights granted in Tranche 1 and Tranche 2 during the year ended
30 June 2009 were $0.543 and $0.708, respectively. The assessed fair values at grant date of options granted in Tranche 1 and
Tranche 2 during the year ended 30 June 2009 were $0.207 and $0.211, respectively. The first grant date for the performance
rights and options under the PR&O Plan was deemed to be 27 March 2009. There are no comparative values for the year
ended 30 June 2008.
The fair values of performance rights and options at grant date are independently determined using a Monte-Carlo
simulation model that takes into account the exercise price, the term of the performance right or option, the impact of
dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and
the risk free interest rate for the term of the performance right or option.
The model inputs for performance rights and options granted during the year ended 30 June 2009 included:
(a) Performance rights and options are granted for no consideration and vest in accordance with the TSR condition and the
Operational Performance condition outlined above for Tranche 1 and Tranche 2, respectively. Performance rights have
a nil exercise price and vest automatically. Vested options are exercisable until 31 December 2013.
(b) Exercise price for options: $0.897 (2008 – n/a)
(c) Grant date: 27 March 2009 (2008 – n/a)
(d) Expiry date of options: 31 December 2013 (2008 – n/a)
(e) Share price at grant date: $0.86 (2008 – n/a)
(f) Expected price volatility of the company’s shares: 49.00% (2008 – n/a)
(g) Expected dividend yield: 8.60% (2008 – n/a)
(h) Risk-free interest rate: 3.96% (2008 – n/a)
The expected price volatility is based on the actual volatility of Infigen’s daily closing share price for the periods from
29 March 2006 to 27 March 2009, from 29 March 2007 to 27 March 2009, and from 31 March 2008 to 27 March 2009.
Where performance rights and options are issued to employees of subsidiaries within the Group, the expense in relation
to these performance rights and options is recognised by the relevant entity with the corresponding increase in stapled
securities.
(b) expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as follows:
Performance rights and options issues under the PR&O Plan
Consolidated
Parent Entity
2009
$’000
1,071
1,071
2008
$’000
–
–
2009
$’000
–
–
2008
$’000
–
–
119
Notes to the Financial Statements
for the year ended 30 June 2009
29. commItments for eXpenDIture
(a) capital expenditure commitments
Not later than 1 year
Later than 1 year and not later than 5 years
Consolidated
Parent Entity
2009
$’000
89,162
–
89,162
2008
$’000
2009
$’000
2008
$’000
509,186
8,400
517,586
–
–
–
–
–
–
Capital expenditure commitments relate to the construction of wind farms.
(b) lease commitments
Finance lease liabilities and non-cancellable operating lease commitments are disclosed in Note 31 to the financial statements.
(c) other expenditure commitments
Other
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
5,823
24,526
63,254
93,603
3,556
14,250
45,852
63,658
–
–
–
–
–
–
–
–
Other expenditure commitments include commitments relating to operations and maintenance arrangements and
connection agreements.
30. contIngent lIabIlItIes anD contIngent assets
contingent liabilities
Letters of credit
Guarantees
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
28,538
48,863
77,401
45,140
84,505
129,645
–
–
–
–
–
–
Guarantees generally relate to wind farm construction, operations and decommissioning and represent the maximum
exposure. No liability was recognised by the parent entity of the Group in relation to these guarantees, as their combined
fair value is immaterial.
framework agreements
The Group had previously entered into two framework agreements in relation to assets in Spain and Germany. In its prior
period financial statements the Group disclosed that it was obliged to acquire assets under these framework agreements
only in circumstances where certain contractual conditions were satisfied.
As at 30 June 2009, in accordance with a specific review of these arrangements and subsequent changes and amendments,
the Group is no longer under an obligation to acquire assets under the Gamesa Framework Agreement. Further, as a result
of changes and amendments associated with the arrangements under the Plambeck Framework Agreement, this agreement
terminated on 30 June 2009.
120
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
31. leases
finance leases
Leasing arrangements
Finance leases relate to wind turbine generators at the Eifel wind farm and have a term of 14 years with an option to
purchase at the end of the term.
Finance lease liabilities
commitments in relation to finance leases
are payable as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than five years
Minimum future lease payments1
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as:
Current borrowings (Note 19)
Non-current borrowings (Note 19)
Minimum future lease payments
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
5,961
23,579
28,068
57,608
(6,546)
51,062
2,897
48,165
51,062
5,549
22,198
32,028
59,775
(9,031)
50,744
2,573
48,171
50,744
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual.
operating leases
The Group leases land for its wind farms under non-cancellable operating leases expiring within 20 to 55 years. The leases
have varying terms, escalation clauses and renewal rights.
commitments for minimum lease payments
in relation to non-cancellable operating leases
are payable as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
9,148
36,910
9,024
40,038
175,408
260,028
221,467
309,090
–
–
–
–
–
–
–
–
121
Notes to the Financial Statements
for the year ended 30 June 2009
32. subsIDIarIes
Name of entity
parent entity
Infigen Energy Limited*
other stapled entities
Infigen Energy (Bermuda) Limited
Infigen Energy Trust
subsidiaries of Infigen
Allegheny Ridge Wind Farm LLC
Aragonne Wind LLC
Babcock & Brown Cedar Creek LLC
Bluarc Management Group LLC
B&B Blue Canyon LLC
B&B Caprock LLC
B&B Combine Hills LLC
B&B Kumeyaay LLC
B&B Sweetwater 1 LLC
B&B Sweetwater 2 LLC
B&B Sweetwater 3 LLC
B&B Wind Park Jersey LLC
BBWP Europe Pty Limited*
BBWP Europe 2 Pty Limited*
BBWP Europe 3 Pty Limited*
BBWP Europe 4 Pty Limited*
BBWP Europe 5 Pty Limited*
BBWP Europe Holdings 2 SARL
BBWP Europe Holdings Malta II Limited
BBWP Europe Holdings Lux SARL
BBWP Germany Holdings SARL
BBWP Gesa Holdings SARL
BBWP Nor Holdings SARL
BBWP Europe KG Holdings II Lux SARL
BBWP Spain Holdings Lux SARL
BBWP Germany Holdings Pty Limited*
BBWP Germany Holdings 2 Pty Limited*
BBWP Germany Holdings 3 Pty Limited*
BBWP Holdings (Bermuda) Limited
BBWP (US) Pty Limited*
BBWP (US) 2 Pty Limited*
Babcock & Brown Riva Holdings SARL
Babcock & Brown Wind Partners (Spain) S.L.
B & B Wind Portfolio I LLC
Babcock & Brown Wind Portfolio Holdings I LLC
Bluarc Personnel LLC
Buena Vista Energy LLC
122
Infigen Energy Annual Report 2009
Ownership interest**
Country of
incorporation
2009
%
2008
%
Australia
Bermuda
Australia
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Australia
Australia
Australia
Australia
Australia
Luxembourg
Malta
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Australia
Australia
Australia
Bermuda
Australia
Australia
Luxembourg
Spain
USA
USA
USA
USA
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%4
–2
100%
100%
100%
100%
–2
100%
100%
100%
100%
100%
100%
–
–5
100%
100%1
100%
100%
100%
95%
100%
–
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%1
–
100%
Notes to the Financial Statements
for the year ended 30 June 2009
32. subsIDIarIes (contInueD)
Name of entity
Capital Wind Farm Holdings Pty Limited*
Capital Wind Farm (BB) Trust*
Caprock Wind LLC
CCWE Holdings LLC
Crescent Ridge Holdings LLC
Crescent Ridge LLC
CS CWF Trust*
CS Walkaway Pty Limited*
CS Walkaway Trust
Infigen Energy US Asset Management LLC
Infigen Energy Verwaltungs GmbH
Infigen Energy (Niederrhein) Limited
Infigen Energy (Eifel) Ltd
Infigen Energy GmbH
Infigen Energy France SAS
Infigen Energy US LLC
Infigen Energy T Services Pty Limited*
Infigen Energy Custodian Services Pty Limited*
Infigen Energy Development Holdings Pty Ltd*
Infigen Energy Development Pty Ltd*
Infigen Energy Services Holdings Pty Limited*
Infigen Energy Services Pty Limited*
Infigen Energy RE Limited*
Infigen Energy Investments Pty Limited*
Infigen Energy US Partnership*
Infigen Energy US Corporation
Infigen Energy Finance (Australia) Pty Limited*
Infigen Energy Finance (Germany) Pty Limited*
Infigen Energy Finance (Lux) SARL
Infigen Energy (Malta) Limited
Global Wind Partners UK Ltd
GWP Europe Pty Limited*
GWP Europe 2 Pty Limited*
GWP Walkaway Pty Limited*
GSG LLC
Kumeyaay Holdings LLC
Kumeyaay Wind LLC
Lake Bonney Wind Power Pty Limited*
Lake Bonney 2 Holdings Pty Limited*
Lake Bonney Wind Power 2 Pty Limited*
Lake Bonney Wind Power 3 Pty Limited*
Lake Bonney Holdings Pty Limited*
Mendota Hills LLC
Country of
incorporation
Australia
Australia
USA
USA
USA
USA
Australia
Australia
Australia
USA
Germany
UK
UK
Germany
France
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
Australia
Australia
Luxembourg
Malta
UK
Australia
Australia
Australia
USA
USA
USA
Australia
Australia
Australia
Australia
Australia
USA
Ownership interest**
2009
%
100%
100%
100%1
67%1
75%1
75%1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–2
100%
100%
100%
100%
100%1
100%1
100%
100%
100%
100%
100%
100%
2008
%
100%
100%
100%1
67%1
75%1
75%1
100%
100%
100%
–
–
100%
100%
–
100%
100%
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%1
100%1
100%
100%
100%
100%
100%
100%
123
Notes to the Financial Statements
for the year ended 30 June 2009
32. subsIDIarIes (contInueD)
Name of entity
NPP LB2 LLC*
NPP Projects I LLC*
NPP Projects V LLC*
NPP Walkaway Pty Limited*
NPP Walkaway Trust*
Olivento S.L.
Pebble Consultoria e Investimento Sociedade Unipessoal Lda
Renewable Power Ventures Pty Limited*
RPV Investment Trust
Sistemas Energeticos El Carrascal S.A.
Sistemas Energeticos El Chaparral S.A.
Sistemas Energeticos El Cerradilla S.A.
Sistemas Energeticos Lamata S.A.
Sistemas Energeticos Montes de Conjuro S.A.U.
Sistemas Energeticos Abadia S.A.U.
Windfarm Seehausen GmbH
Societe d’Exploitation du Parc Eolien de Fond Du Moulin SARL
Societe d’Exploitation du Parc Eolien de Mont Felix SARL
Societe d’Exploitation du Parc Eolien Le Marquay SARL
Societe d’Exploitation du Parc Eolien Le Chemin Vert SARL
Societe d’Exploitation du Parc Eolien Les Trentes SARL
Societe d’Exploitation du Parc Eolien Sole de Bellevue SARL
Sonnenberg Windpark GmbH & Co KG
Windpark Sonnenberg GmbH & Co KG
Walkaway Wind Power Pty Limited
Walkaway (BB) Pty Limited
Walkaway (BB) Trust
Windpark Eifel GmbH & Co KG
Windpark Hiddestorf GmbH & Co KG
Windpark Kaarst GmbH & Co KG
Windpark Niederrhein GmbH & Co KG
Windpark Calau GmbH & Co. KG
Windpark Langwedel GmbH & Co. KG
Windpark Leddin GmbH & Co. KG
Windfarm Coswig GmbH
Windfarm Eschweiler GmbH
* Denotes a member of the IEL tax consolidated group.
** The proportion of ownership interest is equal to the proportion of voting power held.
1 Class B Member interest
2 Disposed of 8 January 2009
3 Disposed of 14 November 2008
4 Entity is in the process of liquidation
5 Entity was liquidated effective December 2008
6 Entity was merged into Windpark Sonnenberg GmbH & Co KG effective December 2008.
Shares in subsidiaries are carried at cost.
124
Infigen Energy Annual Report 2009
Country of
incorporation
USA
USA
USA
Australia
Australia
Spain
Portugal
Australia
Australia
Spain
Spain
Spain
Spain
Spain
Spain
Germany
France
France
France
France
France
France
Germany
Germany
Australia
Australia
Australia
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Ownership interest**
2009
%
100%
100%
100%
100%
100%
–2
–3
100%
100%
–2
–2
–2
–2
–2
–2
100%
100%
100%
100%
100%
100%
100%
100%
–6
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2008
%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
–
–
–
100%
100%
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses
year ended 30 June 2009
(i) seehausen
In September 2008, BBWP Gesa Holdings GmbH & Co KG, a subsidiary of IEL, purchased 100% of the share capital of
Seehausen GmbH which operates the Seehausen wind farm in Germany.
The purchase price was approximately $970,000, including associated costs.
The fair value of net assets acquired, $559,000, are provided in the table below.
The acquired business contributed revenues of $1,444,000 and net profit of $450,000 to the Group for the period from
acquisition to 30 June 2009. If the acquisition had occurred on 1 July 2008, revenue of $1,444,000 and net profit of $450,000
would have been contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Plant and equipment
Intangibles
Payables
Interest bearing liabilities
Other liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
516
17,123
–
(120)
(17,919)
–
(400)
970
516
17,123
1,370
(120)
(17,919)
(411)
559
411
(ii) plambeck portfolio
In May 2009, BBWP Europe KG Holdings 2 Lux Sarl, a subsidiary of IEL, purchased 100% of the share capital of each of
Windpark Calau GmbH & Co. KG, Windpark Langwedel GmbH & Co. KG Windpark Leddin GmbH & Co. KG.
The purchase price was approximately $3,480,000, including associated costs.
The fair value of net assets acquired, $1,814,000, are provided in the table below.
The acquired businesses contributed revenues of $6,034,000 and net loss of $416,000 to the Group for the period from
acquisition to 30 June 2009. If the acquisition had occurred on 1 July 2008, revenue of $11,255,000 and net loss of $725,000
would have been contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Interest bearing liabilities
Other liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
3,480
3,676
8,165
3,676
8,165
116,396
116,396
933
–
(7,082)
933
5,550
(7,082)
(124,070)
(124,070)
(89)
(2,071)
(1,754)
1,814
1,666
125
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(iii) babcock & brown power operating partners llc (bbpop)
In June 2009, Infigen Energy US Asset Management LLC, a subsidiary of IEL, purchased 100% of the share capital of BBPOP.
BBPOP forms part of a group of assets that IEL, or subsidiaries of IEL, have agreed to acquire from Babcock & Brown Limited.
The total purchase price for this group of assets, which includes certain minority interests relating to entities that IEL already
controls and a pipeline of development projects in Australia and New Zealand, is $23,400,000.
As of 30 June 2009, the Group had purchased certain minority interests and BBPOP. Of the $23,400,000 total purchase price,
$9,244,000 (including $2,011,000 held in escrow) had been paid as of 30 June 2009. Of this, $3,224,000 has been allocated
to the minority interest acquisitions (refer Note 24) and the remainder, $4,008,000, to BBPOP. Future payments will also be
allocated to these acquisitions, hence the table below contains provisional amounts.
The fair value of net assets acquired to date, $1,627,000, is provided in the table below.
The acquired business contributed revenues of $152,000 and net loss of $1,697,000 to the Group for the period from
acquisition to 30 June 2009. If the acquisition had occurred on 1 July 2008, revenue of $8,740,000 and net loss of $2,667,000
would have been contributed to the Group.
purchase consideration
Cash, including funds held in escrow and associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Other liabilities
Goodwill (provisional)
Carrying value
$’000
Fair value
$’000
1,414
515
624
194
(1,120)
1,627
6,019
1,414
515
624
194
(1,120)
1,627
4,392
126
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
year ended 30 June 2008
(i) Valdeconejos
In August 2007, Olivento S.L., a former subsidiary of IEL, purchased approximately 97% of the share capital of Sistemas
Energeticos Abadia SA that operates the Valdeconejos wind farm.
The purchase price was approximately $58,166,000, including associated costs.
The fair values of net assets acquired, $58,673,000, are provided in the table below.
The acquired business contributed revenues of $9,199,000 and net profit of $1,712,000 to the Group for the period from
acquisition to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $9,768,000 and net profit of $1,970,000
would have been contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Interest bearing liabilities
Minority interest
Goodwill
Carrying value
$’000
Fair value
$’000
58,166
164
3,767
46,858
267
43,904
(2,030)
164
3,767
46,858
267
–
(2,030)
(34,257)
(34,257)
14,769
58,673
(507)
58,166
–
Following the allocation of the purchase price, $43,904,000 of provisional goodwill has been transferred to intangible assets.
These intangible assets have been amortised and a prior period adjustment has been recorded (refer Note 1).
127
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(ii) enersis portfolio
In December 2007, BBWP Holdings (Bermuda) Limited, a former subsidiary of IEL, purchased 50% of the share capital
of Babcock & Brown Riva Holdings SARL that operates the Enersis wind farm portfolio.
The purchase price was approximately $239,155,000, including associated costs.
The fair values of net assets acquired, $385,142,000, are provided in the table above.
The acquired businesses contributed revenues of $123,363,000 and net profit of $22,512,000 to the Group for the period
from acquisition to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $192,940,000 and net profit
of $25,741,000 would have been contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Interest bearing liabilities
Other liabilities
Minority interest
Goodwill
Carrying value
$’000
Fair value
$’000
239,155
39,397
83,576
39,397
83,576
1,490,989
1,490,989
18,146
–
18,146
290,813
(74,406)
(74,406)
(1,257,172)
(1,257,172)
(206,201)
(206,201)
94,329
385,142
(145,987)
(145,987)
(51,658)
239,155
–
Following the allocation of the purchase price, $290,813,000 of provisional goodwill has been transferred to intangible assets.
Prior to the sale of the Enersis Portfolio, these intangible assets have been amortised and a prior period adjustment has
been recorded (refer Note 1).
128
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(iii) almeria portfolio
In December 2007, Olivento S.L., a former subsidiary of IEL, purchased 100% of the share capital of the following four entities
that comprise the Almeria Portfolio of wind farms:
– Sistemas Energeticos La Cerradilla SA
– Sistemas Energeticos El Carrascal SA
– Sistemas Energeticos La Mata SA
– Sistemas Energeticos El Chaparral SA
The purchase price was approximately $117,713,000 including associated costs.
The fair value of net assets acquired, $117,713,000 are provided in the table below.
The acquired businesses contributed revenues of $nil and net loss of $512,000 to the Group for the period from acquisition
to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $nil and net loss of $528,000 would have been
contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Interest bearing liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
117,713
–
34,573
236,621
142
117,416
(106)
–
34,573
236,621
142
–
(106)
(270,933)
(270,933)
297
117,713
–
Following the allocation of the purchase price, $117,416,000 of provisional goodwill has been transferred to intangible assets.
These intangible assets have been amortised and a prior period adjustment has been recorded (refer Note 1).
129
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(iv) capital Wind farm
In December 2007, BBWP CWF Pty Limited, a subsidiary of IEL, purchased CS CWF Trust, Babcock & Brown Renewable Power
Investments Trust, Babcock & Brown Renewable Power Investments Pty Limited and Renewable Power Ventures Pty Limited,
which is constructing the Capital wind farm.
The purchase price was approximately $46,081,000, including associated costs. The purchase price was partly settled by
issuing approximately 14,055,000 stapled securities.
The fair value of net assets acquired, $31,036,000, are provided in the table below.
The acquired business contributed revenues of $nil and net loss of $220,000 to the Group for the period from acquisition
to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $nil and net loss of $1,851,000 would have been
contributed to the Group.
purchase consideration
Cash, including associated costs
Stapled securities issued as consideration
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Intangibles
Interest bearing liabilities
Other liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
21,601
24,480
46,081
737
3,528
42,348
50,151
(50,683)
(15,045)
31,036
15,045
737
3,528
42,348
–
(50,683)
–
(4,070)
Following the allocation of the purchase price, $50,151,000 of provisional goodwill has been transferred to intangible assets
($50,151,000) and deferred tax liabilities ($15,045,000), resulting in a goodwill balance of $15,045,000. These intangible assets
are amortised and a prior period adjustment has been recorded (refer Note 1).
130
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(v) Hiddestorf
In December 2007, BBWP Germany Holdings Pty Limited, a subsidiary of IEL, purchased 100% of the share capital of
Hiddestorf GmbH & Co KG that operates the Hiddestorf wind farm.
The purchase price was approximately $363,000 including associated costs.
The fair value of net assets acquired, $186,000, are provided in the table below.
The acquired business contributed revenues of $397,000 and net loss of $179,000 to the Group for the period from acquisition
to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $713,000 and net loss of $379,000 would have been
contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Interest bearing liabilities
Other liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
252
1,279
6,031
50
–
(611)
(7,228)
–
(227)
363
252
1,279
6,031
50
590
(611)
(7,228)
(177)
186
177
Following the allocation of the purchase price, $590,000 of provisional goodwill has been transferred to intangible assets
($590,000) and deferred tax liabilities ($177,000), resulting in a goodwill balance of $177,000. These intangible assets are
amortised and a prior period adjustment has been recorded (refer Note 1).
131
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(vi) us Wind farms
As of 1 January 2008, the Group has determined that it has the ability to control certain wind farm entities. For these
situations, the Group has consolidated from 1 January 2008 onwards. The information provided below relates to the
following entities:
– Babcock & Brown Wind Portfolio Holdings I LLC
– Caprock Wind LLC
– CCWE Holdings LLC
– Crescent Ridge Holdings LLC
– Kumeyaay Holdings LLC
Consideration comprises the value of the investments at 1 January 2008, $642,363,000.
The fair value of net assets acquired, $642,363,000 are provided in the table below.
The acquired businesses contributed revenues of $88,829,000 and net profit of $28,080,000 to the Group for the period from
acquisition to 30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $133,994,000 and net loss of $24,015,000
would have been contributed to the Group. Furthermore, EBITDA of $96,598,000 would have been contributed to the Group
had the acquisition taken place on 1 July 2007.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Payables
Institutional equity partnerships classified as liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
642,363
33,936
17,782
33,936
17,782
1,469,507
1,469,507
2,776
–
2,776
162,397
(30,101)
(30,101)
(991,524)
(1,013,934)
502,376
642,363
–
Following the allocation of the purchase price, $139,987,000 of provisional goodwill has been transferred to intangible
assets ($162,397,000) and to institutional equity partnerships classified as liabilities ($22,410,000). These intangible assets are
amortised and a prior period adjustment has been recorded (refer Note 1).
132
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
33. acquIsItIon of busInesses (contInueD)
(vii) apfelbaum portfolio
In June 2008, BBWP Gesa Holding GmbH & Co. KG, a subsidiary of IEL, purchased 100% of the share capital of the following
three entities that comprise the Apfelbaum Portfolio of wind farms:
– Sonnenberg GmbH & Co KG
– Eschweiler GmbH
– Coswig GmbH
The purchase price was approximately $3,147,000, including associated costs.
The fair value of net assets acquired, $1,911,000, are provided in the table below.
The acquired businesses contributed revenues of $nil and net profit of $nil to the Group for the period from acquisition to
30 June 2008. If the acquisition had occurred on 1 July 2007, revenue of $2,422,000 and net profit of $427,000 would have
been contributed to the Group.
purchase consideration
Cash, including associated costs
net assets/(liabilities) acquired
Receivables
Plant and equipment
Intangibles
Payables
Interest bearing liabilities
Other liabilities
Goodwill
Carrying value
$’000
Fair value
$’000
437
20,705
–
(366)
(21,748)
–
(972)
3,147
437
20,705
4,119
(366)
(21,748)
(1,236)
1,911
1,236
Following the allocation of the purchase price, $4,119,000 of provisional goodwill has been transferred to intangible assets.
These intangible assets are amortised and a prior period adjustment has been recorded (refer Note 1).
133
Notes to the Financial Statements
for the year ended 30 June 2009
34. segment InformatIon
Pending the adoption of AASB 8, Operating Segments, and AASB 2007-3, Amendments to Australian Accounting Standards
arising from AASB 8 (refer Note 1(ae)), the Group operates in one business segment, the generation of electricity from
wind energy.
The wind farms that generate this electricity are located in Australia, Germany, France and the United States. Wind farms
in Portugal and Spain represent discontinued operations as they were disposed of in FY 2009. Infigen reports its primary
segment information on a geographical basis.
segment revenues
30 June 2009
Portugal
Spain
Australia
Germany
US
France
30 June 2008 (Restated)
Portugal
Spain
Australia
Germany
US
France
Revenue from
the sale of
energy and
products
$’000
–
–
27,114
19,788
42,093
12,025
Revenue from
lease of plant
and equipment
$’000
Compensation
revenue
$’000
Revenue from
continuing
operations
$’000
Revenue from
discontinued
operations
$’000
–
–
46,203
–
186,485
–
–
–
320
2,931
–
–
–
–
66,413
69,865
73,637
22,719
228,578
12,025
–
–
–
–
101,020
232,688
3,251
336,959
136,278
Revenue from
the sale of
energy and
products
$’000
–
–
24,483
14,323
34,105
5,467
78,378
Revenue from
lease of plant
and equipment
$’000
Compensation
revenue
$’000
Revenue from
continuing
operations
$’000
Revenue from
discontinued
operations
$’000
–
–
45,252
–
92,712
–
137,964
–
–
–
19
–
–
19
–
–
123,363
74,757
69,735
14,342
126,817
5,467
–
–
–
–
216,361
198,120
Total
revenue
$’000
66,413
69,865
73,637
22,719
228,578
12,025
473,237
Total
revenue
$’000
123,363
74,757
69,735
14,342
126,817
5,467
414,481
134
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
34. segment InformatIon (contInueD)
segment results
30 June 2009
Unallocated2
Australia
$’000
US
$’000
Germany
$’000
France
$’000
Total
$’000
5,344
(27,385)1
(5,372)
(2,939)
(30,352)
Profit from continuing operations before income tax benefit
Income tax benefit from continuing operations
Profit for the period from continuing operations after income tax benefit
Profit for the period from discontinued operations (Note 5) before income tax expense
Income tax expense from discontinued operations
Profit for the period from discontinued operations after income tax expense
Net profit for the period
1 Includes the net loss relating to institutional equity partnerships of $17,769,000.
2 Includes costs associated with the termination of management agreements. Refer Note 4.
30 June 2008 (Restated)
Revaluation of US wind farm investments
Unallocated
Australia
$’000
3,692
US
$’000
Germany
$’000
(2,305)
(700)
France
$’000
(239)
Profit from continuing operations before income tax expense
Income tax expense from continuing operations
Profit for the period from continuing operations after income tax expense
Profit for the period from discontinued operations (Note 5) before income tax expense
Income tax expense from discontinued operations
Profit for the period from discontinued operations after income tax expense
(71,527)
(101,879)
35,767
(66,112)
274,893
(15,841)
259,052
192,940
Total
$’000
449
24,246
(17,368)
7,327
(790)
6,537
38,263
(14,276)
23,987
30,524
Net profit for the period
segment assets and liabilities
Australia
Germany
France
USA
Assets
Liabilities
2009
$’000
1,382,508
329,473
153,680
2008
$’000
946,541
208,544
128,753
2009
$’000
724,030
331,081
113,809
2008
$’000
819,148
145,065
89,600
2,513,094
2,166,844
2,279,030
1,875,689
Total of all continuing segments
4,378,755
3,450,682
3,447,950
2,929,502
Unallocated
Eliminations
Discontinued operations
Consolidated
29,026
79,673
39,655
24,740
–
–
–
3,055,937
–
–
–
2,505,625
4,407,781
6,586,292
3,487,605
5,459,867
135
Notes to the Financial Statements
for the year ended 30 June 2009
34. segment InformatIon (contInueD)
other segment information
Acquisition of segment assets:
Property, plant & equipment
Depreciation and amortisation
of segment assets
Australia
Germany
France
US Operations Operations Unallocated Consolidated
2009
$’000
2009
$’000
2009
$’000
2009
$’000
2009
$’000
2009
$’000
2009
$’000
2009
$’000
Total
Continuing Discontinued
247,328
936
14,292
1,995
264,551
96,025
–
360,576
(26,344)
(8,913)
(4,734)
(117,701)
(157,692)
(42,860)
(281)
(200,833)
Total
Continuing Discontinued
Australia
Germany
France
US Operations Operations Unallocated Consolidated
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
2009
$’000
(Restated)
Acquisition of segment assets:
Property, plant & equipment
Depreciation and amortisation
of segment assets
135,228
3,709
68,516
391,770
599,223
103,340
–
702,563
(18,804)
(6,096)
(1,914)
(55,957)
(82,771)
(60,598)
(1,367)
(144,736)
35. relateD party DIsclosures
(a) equity interests in related parties
Equity interests in subsidiaries
Details of the percentage ownership held in subsidiaries are disclosed in Note 32 to the financial statements.
(b) Key management personnel disclosures
Details of key management personnel remuneration are disclosed in Note 7 to the financial statements.
(c) other related party transactions
Parent Entity transactions with members of the consolidated group
During the financial year, various subsidiaries received management services from IEL. The total value of the services
received was $6,195,000 (2008: $18,763,000).
IEL has entered into tax sharing and tax funding agreements. Refer to Note 6.
IEL has receivables from various subsidiaries of $702,196,000 (2008: $1,012,434,000). Refer Note 9.
IEL has payables to various related parties of $124,000 (2008: nil). Refer Note 17.
IEL has borrowings from various subsidiaries of $1,108,766 (2008: $1,177,253,000). Refer Note 19.
IEL recorded interest income of $53,000 (2008: $6,614,000) on the interest bearing portion of its receivables from subsidiaries.
IEL recorded interest expense of $2,637,207 (2008: $6,716,000) on the interest bearing portion of its borrowings from subsidiaries.
Termination of Management Agreements
The Group had previously entered into management agreements and an exclusive financial advisory agreement with
subsidiaries of Babcock & Brown.
On 31 December 2008, the Group terminated these agreements for a total settlement of $40,000,000 before associated costs.
As this event occurred part way through the financial year, Babcock & Brown has been treated as a related party for whole
of the year ended 30 June 2009 for the purposes of this Note.
Transactions involving other related parties
Receivables from related parties are disclosed in Note 9. Payables to related parties are disclosed in Note 17. Transactions
were made on normal commercial terms and conditions and under normal market rates.
136
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
35. relateD party DIsclosures (contInueD)
Custodian, Responsible Entity and Manager fees and costs
During the year ended 30 June 2009, the Group terminated the Custodian Agreement that had previously been in place
with Babcock & Brown Asset Holdings Pty Limited (‘BBAH’), which is a subsidiary of Babcock & Brown Limited.
Under the terms of the Custodian Agreement, 0.0125% of the gross asset value of IET was payable. During the year ended
30 June 2009, fees paid to BBAH by the Group were $119,000 (2008: $132,000).
During the year ended 30 June 2009, the Group acquired the Responsible Entity from the Babcock & Brown group.
Under IET’s constitution, the Responsible Entity (‘RE’) is entitled to a management fee of 2% per annum of the value of the
gross assets of the Group. The RE had previously exercised its right under the constitution to waive the fee referred to above
such that it is paid remuneration of $500,000 per annum, increased by CPI annually. During the year ended 30 June 2009,
prior to the acquisition of the Responsible Entity, IET incurred Responsible Entity fees of $303,000 (2008: $542,000).
As noted earlier, the Group has terminated the management agreement that it had previously entered into with Babcock
& Brown Wind Partners Management Pty Limited (‘BBWPM’), which is a subsidiary of the Babcock & Brown group.
Under these management agreements, a base fee of 1.4% per annum of the net investment value (‘NIV’) of the Group had
been payable at the end of each quarter. During the year ended 30 June 2009, prior to the termination of management
agreements, base management fees of $4,820,000 (2008: $20,487,000) were paid. Of this amount, IEL incurred $4,331,000
(2008: $14,788,000), IET incurred $59,000 (2008: $2,468,000) and IEBL incurred $430,000 (2008: $3,231,000).
Under the management agreement between IEL and BBWPM, BBWPM had been entitled to an amount per annum in
respect of expenses. During the year ended 30 June 2009, prior to the termination of the management agreements, IEL
incurred $5,550,000 (2008: $8,725,000), representing management expenses incurred by BBWPM in the performance of
its duties.
Under a management agreement between Olivento S.L. and each of Babcock & Brown Limited and Babcock & Brown S.L.,
approximately $895,000 (2008: $834,000) was paid during the year ended 30 June 2009 for the management of the Spanish
Wind farms.
Related party operational payments
The Group paid $720,000 (2008: $507,000) to Renerco A.G. under Technical Management Agreements during the year ended
30 June 2009 for the operational management of German wind farms
The Group paid approximately $5,747,000 (2008: $2,033,000) to a subsidiary of Babcock & Brown Limited under certain project
and fiscal administration agreements during the year ended 30 June 2009 in relation to the US wind farms in which the
Group has an interest. During the year ended 30 June 2009, the Group acquired the subsidiary of Babcock & Brown Limited
that provides the project and fiscal administration services to these US wind farms.
Transactions with related parties
During the year ended 30 June 2009, the Group entered into arrangements to purchase certain assets from
Babcock & Brown. These included the US asset management business, as well as Babcock & Brown’s Australian and
New Zealand development pipeline of wind farm projects and various minority interests relating to wind farm entities in
which the Group already had a controlling interest. The combined purchase price for this group of assets was $23,400,000.
During the year ended 30 June 2009, the Group purchased the US asset management business and certain minority
interests. Subsequent to 30 June 2009, the Group acquired the remaining minority interests and the Australian and
New Zealand development pipeline of wind farm projects (refer Note 36).
In respect of this group of assets, an amount of $7,232,000 was paid to Babcock & Brown during the year ended
30 June 2009.
During the year ended 30 June 2009 Infigen received $13,355,000 from Babcock & Brown in relation to a rebate of framework
incentive fees that had been previously charged.
During the year ended 30 June 2009 Infigen paid a subsidiary of Babcock & Brown Limited a total of $14,831,000 in
development premiums relating to the development of wind farms in Australia.
137
Notes to the Financial Statements
for the year ended 30 June 2009
35. relateD party DIsclosures (contInueD)
Share holdings of related parties
During the year, the Babcock & Brown Group disposed of its holdings of the Group’s stapled securities. The Group paid
distributions of $11,365,228 (2008: $11,862,000) to the Babcock & Brown Group.
Related party balances
At the year end the Group owed an amount of $1,251,000 to various related parties.
(d) parent entities
The parent entity in the Group is IEL.
The ultimate Australian parent entity is IEL.
The ultimate parent entity is IEL.
36. subsequent eVents
purchase of australian & new Zealand Development assets and minority Interest in caprock
Infigen reached financial close on the acquisition of Australian and New Zealand wind energy project development assets
in July 2009 and on the purchase of 20% Class B interests in the Caprock wind farm (Infigen already held 80% of the Class B
interests) in August 2009.
The Australian and New Zealand wind energy development assets are primarily 50% interests in development opportunities
comprising more than 1,000MW in six Australian states and in New Zealand, with a number of the projects located close
to Infigen’s existing Australian wind farms. The development opportunities have the potential to be delivered in the next
five years.
Prior to period end, IFN agreed to purchase a group of assets from Babcock & Brown for a total consideration of $23,400,000.
The above assets (development assets and Caprock minority interest) form components of this group of assets. Other
components of the group of assets acquired from Babcock & Brown include the US asset management business and other
wind farm minority interests.
commencement of sale processes
United States
Following a market testing review, Infigen initiated a sale process of its US business in August 2009. A potential sale will only
take place to the extent that achievable sale prices exceed the benefits of holding the US business.
Europe
Infigen has determined that its European portfolio of assets are ‘non-core’. In August 2009, the Group commenced a sales
process of its remaining European assets in France and Germany. A potential sale will only take place to the extent that
achievable sale prices exceed the benefits of holding these assets.
138
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
37. notes to tHe casH floW statement
(a) reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents includes cash on hand and in banks, net of
outstanding bank overdrafts. Cash and cash equivalents at
the end of the financial year as shown in the cash flow
statement is reconciled to the related items in the balance
sheet as follows:
Cash and cash equivalents
(b) businesses acquired
During the financial year, 8 businesses (2007: 4) were
acquired. Details of the acquisitions are as follows:
Consideration
Cash and cash equivalents paid
Value of investments in institutional equity partnerships
Consideration settled through the issue of stapled securities
Cash and cash equivalents deferred until a future period
Fair value of net assets acquired
Cash
Receivables and other current assets
Property, plant and equipment
Intangibles
Other assets
Payables
Interest bearing liabilities
Institutional equity partnerships classified as liabilities
Other liabilities
Net assets/(liabilities) acquired
Minority interest
Goodwill
Net cash outflow on acquisition
Total consideration
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
409,334
208,505
409,334
208,505
270,263
270,263
47,294
47,294
10,469
–
–
–
421,582
642,363
24,480
18,563
10,469
1,106,988
5,606
8,680
74,486
144,942
134,143
3,313,059
6,920
1,127
669,390
21,381
(7,202)
(107,620)
(141,989)
(1,642,021)
–
(1,013,934)
(3,285)
(222,659)
4,000
1,237,024
–
(146,494)
4,000
1,090,530
6,469
16,458
10,469
1,106,988
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(996)
(996)
486
–
–
–
486
–
–
–
–
–
–
–
–
–
–
–
–
486
486
–
–
–
–
–
–
–
486
139
Less: value of investments in institutional equity partnerships
–
(642,363)
Less: cash and cash equivalent balances acquired
(5,606)
Less: consideration still to be paid
Less: consideration settled through issue of stapled securities
Less: cash balances received on recognition of joint controlled entities
Add: payment for minority interests (Note 24)
Add: prior year and future acquisition costs paid
Cash paid for investments in controlled entities
–
–
–
3,224
20,569
28,656
(74,486)
(18,563)
(24,480)
(8,746)
–
14,617
352,967
Notes to the Financial Statements
for the year ended 30 June 2009
37. notes to tHe casH floW statement (contInueD)
Consolidated
Parent Entity
(c) non-cash financing and investing activities
Distribution reinvestment plan (Note 27)
Acquisition of Capital Wind Farm (Note 23)
Institutional equity partnerships in the US over which
control/joint control gained1
2009
$’000
9,745
–
–
29,062
24,480
840,701
1 Refer to Note 21 for more information relating to institutional equity partnerships.
9,745
894,243
2008
$’000
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
(d) restricted cash balances
As at balance date, $17,226,000 (2008: $13,435,000) of cash is held in escrow in relation to payments retained by the Group
under turbine supply and wind farm construction contracts, as well as the decommissioning of certain sites.
38. fInancIal rIsK management
The Group is exposed to a variety of financial risks: market risk (including currency risk, interest rate risk and electricity price
risk), credit risk and liquidity risk.
The principal financial instruments that give rise to this risk comprise cash, receivables, payables and interest bearing debt.
Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Boards
of Directors. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating
units. The Board provides written principles for overall risk management, as well as policies covering specific areas, such
as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial
instruments, and investment of excess liquidity.
The Group’s treasury policy provides a framework for managing the financial risks of the Group. The key philosophy of the
Group Treasury policy is risk mitigation. The Group Treasury policy specifically does not authorise any form of speculation.
The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such
as foreign exchange contracts and interest rate swaps to hedge certain risk exposures. In line with the Group Treasury policy
derivatives are exclusively used for hedging purposes, not as trading or other speculative instruments.
The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other price risks, and aging analysis for credit risk.
There have been no changes to the type or class of financial risks the Group is exposed to since the prior year.
(a) market risks
(i) Interest rate risks
The Group’s income and operating cash flows are exposed to interest rate risk as it borrows funds at floating interest rates.
The risk is managed by fixing a portion of the floating rate borrowings, by use of interest rate swap contracts. During 2009
and 2008, the Group’s borrowings at variable rates were denominated in Australian Dollars, US Dollars and Euros.
A high percentage of the face value of debt in each of the relevant currencies is hedged using interest rate swaps. The table
below shows a breakdown of the Group’s interest rate debt and swap positions.
In undertaking this strategy the Group is willing to forgo a percentage of the potential economic benefit that would arise
in a falling interest rate environment, to protect itself from downside risks of increasing interest rates and to secure a greater
level of predictability for cash flows.
140
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
Interest rate swap contracts – designated as cash flow hedges
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. The fair value of interest rate swaps are based on market
values of equivalent instruments at the reporting date and are disclosed below. The average interest rate is based on the
outstanding balances at the start of the financial year.
The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding
as at reporting date:
Outstanding pay fixed Interest rate swaps
Fixed swap – Australia Dollar
Fixed swap – Euro
Fixed swap – US Dollar
Average contracted
fixed interest rate
2009
%
6.74
4.81
5.28
2008
%
6.70
4.32
5.28
Notional principal
amount
2009
$’000
2008
$’000
621,829
557,531
295,671
2,046,392
541,339
456,858
2009
$’000
(35,166)
(28,179)
(64,997)
1,458,839
3,060,781
(128,342)
Fair value
2008
$’000
24,757
90,748
(24,105)
91,400
bank debt as at balance date
The table below details the total amount of debt the Group holds as at 30 June 2009.
The debt is denominated in AUD, USD and EUR.
The debt is re-priced every 6 months.
AUD debt is priced using the 6 month BBSW rate plus the defined facility margin.
EUR debt is priced using the 6 month Euribor rate plus the defined facility margin.
USD debt is priced using the 6 month Libor rate plus the defined facility margin.
The table below shows the total debt and breakdown of fixed and floating debt
The average 6 month fixed and floating rate debt detailed in the table below is not inclusive of the facility margin.
The current average facility margin is 92 points.
Floating Debt
Debt principal amount
Floating rate debt
AUD debt
EUR debt
USD debt
Fixed rate debt
AUD debt
EUR debt
USD debt
Total Debt
2009
%
3.73
2.87
1.95
2009
%
6.74
4.81
5.28
2008
%
8.01
5.12
3.13
2009
$’000
16,100
47,862
93,268
157,230
2008
$’000
11,292
295,342
132,213
438,847
Fixed Debt
Debt principal amount
% of Debt Hedged
2008
%
6.70
4.32
5.28
2009
$’000
2008
$’000
621,829
557,531
295,671
2,046,392
541,339
456,858
1,458,839
3,060,781
2009
$’000
97%
86%
86%
2008
$’000
98%
87%
78%
5.48
4.86
1,616,069
3,499,628
90%
88%
141
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
The table below shows the maturity profile of the interest rate swaps as of 30 June 2009 and 30 June 2008.
2009
AUD swaps
EUR swaps
USD swaps
2008
AUD swaps
EUR swaps
USD swaps
Fair value
AUD$’000
(35,166)
(28,179)
(64,997)
Undiscounted
fair value
AUD$’000
Up to
12 months
AUD$’000
1 to 5 years
AUD$’000
After 5 years
AUD$’000
(40,491)
(30,820)
(72,671)
(20,162)
(10,310)
(23,019)
(15,314)
(17,181)
(35,561)
(5,015)
(3,329)
(14,091)
(128,342)
(143,982)
Fair value
AUD$’000
24,757
90,748
Undiscounted
fair value
AUD$’000
31,036
131,366
Up to
12 months
AUD$’000
7,458
20,506
(24,105)
(29,386)
(9,414)
(16,116)
91,400
133,016
1 to 5 years
AUD$’000
After 5 years
AUD$’000
18,281
45,444
5,297
65,416
(3,856)
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to
the extent that the hedge is effective, and reclassified into profit and loss when the hedged interest expense is recognised.
The ineffective portion is recognised in the income statement immediately. In the year ended 30 June 2009, a net loss of
$12,258,000 was recorded (2008: $2,803,000 profit) and included in finance cost.
sensitivity
The sensitivity to interest rate movement of net profit before tax and equity have been determined based on the exposure
to interest rates at the reporting date. A sensitivity of 100 basis points has been selected across the 3 currencies to which the
Group is exposed to floating rate debt: AUD, EUR, and USD. The 100 basis points sensitivity is deemed to be flat across the
yield curve and is a reasonable estimate of movement based on current long term and short term interest rates.
142
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
consolidated
2009
AUD $’000
AUD
+100 bps
Impact on income statement
AUD
–100 bps
EUR
+100 bps
EUR
–100 bps
USD
+100 bps
USD
–100 bps
Cash
AUD
312,679
3,126
(3,126)
EUR
USD
35,052
61,603
409,334
–
–
–
–
Borrowings
AUD
637,929
(161)
161
Finance Lease
Cap Loan Cost
EUR
343,533
USD
634,607
EUR
AUD
51,062
(18,791)
1,648,339
–
–
–
–
–
–
–
–
Derivatives – interest rate swaps
AUD
621,829
4,624
(4,624)
EUR
USD
295,671
541,339
1,458,839
–
–
–
–
–
351
–
–
(479)
–
–
–
–
–
–
–
(351)
–
–
479
–
–
–
–
–
–
–
–
616
–
–
(616)
–
–
(936)
936
–
–
–
–
–
–
–
–
–
–
Total income statement
7,589
(7,589)
(128)
128
(320)
320
Impact on hedge reserve
Derivatives – interest rate swaps
AUD
621,829
33,397
(33,397)
EUR
USD
295,671
541,339
–
–
–
–
Total hedge reserve
1,458,839
33,397
(33,397)
–
21,171
–
21,171
–
(21,171)
–
(21,171)
–
–
39,148
39,148
–
–
(39,148)
(39,148)
Total impact on equity
40,986
(40,986)
21,043
(21,043)
38,828
(38,828)
143
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
consolidated
2008
AUD $’000
AUD
+100 bps
Impact on income statement
AUD
–100 bps
EUR
+100 bps
EUR
–100 bps
USD
+100 bps
USD
–100 bps
Cash
AUD
42,293
423
(423)
EUR
USD
119,917
46,295
208,505
–
–
–
–
Borrowings
AUD
568,823
(113)
113
EUR 2,341,734
USD
EUR
589,071
50,744
Finance Lease
Cap Loan cost
AUD
(30,147)
3,520,225
Derivatives – interest rate swaps
–
–
–
–
–
–
–
–
AUD
557,531
4,745
(4,745)
EUR 2,046,392
USD
456,858
3,060,781
–
–
–
–
–
1,199
–
–
–
(1,199)
–
–
(2,953)
2,953
–
–
–
–
7,486
–
–
–
–
–
(7,486)
–
–
–
463
–
–
(463)
–
–
(1,302)
1,302
–
–
–
–
–
–
–
–
–
–
Total income statement
5,055
(5,055)
5,732
(5,732)
(839)
839
Impact on hedge reserve
Derivatives – interest rate swaps
AUD
557,531
33,382
(33,382)
–
–
EUR 2,046,392
USD
456,858
–
–
–
–
135,825
(135,825)
–
–
Total hedge reserve
3,060,781
33,382
(33,382)
135,825
(135,825)
–
–
34,323
34,323
–
–
(34,323)
(34,323)
Total impact on equity
38,437
(38,437)
141,557
(141,557)
33,484
(33,484)
144
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
The impact on net profit is largely due to the Group’s exposure to interest rates on its non-hedged variable rate borrowings.
The impact on hedge reserve is due to the effective portion of the change in fair value of derivatives that are designated as
cash flow hedges.
parent entity
2009
AUD $’000
Impact on income statement
AUD
+100 bps
AUD
–100 bps
EUR
+100 bps
EUR
–100 bps
USD
+100 bps
USD
–100 bps
Cash
AUD
266,269
2,663
(2,663)
EUR
USD
400
3,594
270,263
4
(4)
36
(36)
2008
AUD $’000
AUD
+100 bps
AUD
–100 bps
EUR
+100 bps
EUR
–100 bps
USD
+100 bps
USD
–100 bps
Impact on income statement
Cash
AUD
EUR
USD
16,087
15,324
15,883
47,294
161
(161)
(ii) Foreign currency risks
The Group has wind farm operations in Australia, USA and Europe.
153
(153)
159
(159)
The Group generates AUD, USD & EUR revenue from these operations. The Group and the parent entity are exposed to
a decline in value of EUR and USD versus the AUD, decreasing the value of AUD equivalent revenue from its European
and US wind farm operations.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in
a currency that is not the entity’s functional currency and net investments in foreign operations. The risk is measured
using sensitivity analysis and cash flow forecasting.
The Group aims to ensure that the majority of the its expenses are denominated in the same currency as the associated
revenues. For example, under the Group’s Global Facility the matching principle is used by drawing down debt in the
currency of the cash flows that the underlying operation generates. Consequently, only the net cash flows of an operation
are exposed to currency fluctuations.
Consistent with the Group’s treasury guidelines regarding preservation of capital the Group utilises forward foreign exchange
contracts to hedge the returns of net investment from its European and US operations.
145
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
Forward foreign exchange contracts
The Group and the Parent entered into contracts to hedge its exposures relating to its net investments in overseas entities
to reduce the potential for exchange rate movements to impact on investment returns for periods of up to 3 years.
The following table details the forward foreign currency contracts outstanding as at the reporting date:
Outstanding contracts
Sell EUR buy AUD
Sell USD buy AUD
Average exchange rate
Foreign currency
Contract value
Fair value
2009
2008
2009
FC’000
2008
FC’000
2009
$’000
2008
$’000
–
0.5765
–
105,600
–
183,172
0.7463
0.8377
76,500
80,750
102,509
96,396
102,509
279,568
2009
$’000
–
4,249
4,249
2008
$’000
3,094
6,580
9,674
As at the reporting date the aggregate amount of unrealised gains under forward foreign exchange contracts relating
to anticipated future transactions is $4,249,000 (2008: $9,674,000 ). All amounts relating to the forward foreign exchange
contracts were recognised in the income statement.
The cash flows are expected to occur at various dates between one month and 3 years. At balance date, the details of
outstanding contracts are:
Buy AUD
0-1 year
1-2 years
2-3 years
Buy AUD
0-1 year
1-2 years
2-3 years
Sold Euro
Average exchange rate
2008
89,677
61,804
31,691
183,172
2009
–
–
–
2008
0.5843
0.5695
0.5680
Sold USD
Average exchange rate
2008
43,870
36,455
16,071
2009
0.7570
0.8711
0.6331
2008
0.8263
0.8366
0.8711
2009
–
–
–
–
2009
62,744
16,071
23,694
102,509
96,396
146
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
The Group’s balance sheet exposure to foreign currency risk at the reporting date was as follows.
The below table represents the EUR and USD assets and liabilities the group holds in AUD functional currency entities.
consolidated
Foreign Currency ’000
Cash
Trade receivable
Prepaid Investment
2009
2008
EUR
425
1,512
–
USD
2,998
4
–
EUR
37,427
2,275
849
USD
15,328
–
295
Net investment in foreign operations
172,475
271,467
408,136
246,045
Trade payables
Bank loans
Forward exchange contracts
– sell foreign currency (cash flow hedges)
(943)
–
(2,949)
(8)
(144,885)
(57,900)
(161,928)
(58,271)
–
(76,500)
(105,591)
(80,750)
Total Exposure Foreign Currency ’000
28,584
140,069
178,219
122,639
parent entity
Foreign Currency ’000
Cash
Trade receivable
Prepaid Investment
2009
2008
EUR
230
114
–
USD
2,921
–
–
EUR
9,349
1,469
361
USD
15,297
–
(13)
Net investment in foreign operations
(71,894)
(79,423)
231,018
(79,907)
Trade payables
Bank loans
Forward exchange contracts
– sell foreign currency (cash flow hedges)
(270)
–
–
–
–
(2,001)
–
(8)
–
(76,500)
(105,591)
(80,750)
Total Exposure Foreign Currency ’000
(71,820)
(153,002)
134,605
(145,381)
147
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
Sensitivity
The following table details the Groups’ pre-tax sensitivity to a 10% change in the AUD against the USD and the EUR, with all
other variables held constant, as at the reporting date, for its unhedged foreign exchange exposure.
A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the
volatility observed on an historic basis and market expectations for future movement.
consolidated
AUD $’000
2009
Income statement
FCTR (Foreign currency translation reserve)
2008
Income statement
FCTR (Foreign currency translation reserve)
parent entity
AUD $’000
2009
Income statement
FCTR (Foreign currency translation reserve)
2008
Income statement
FCTR (Foreign currency translation reserve)
AUD/EUR
+ 10%
AUD/EUR
-10%
AUD/USD
+ 10%
AUD/USD
-10%
24,998
(29,964)
(24,998)
29,964
6,754
(23,987)
20,378
(49,589)
(20,378)
49,589
4,429
(17,163)
(6,754)
23,987
(4,429)
17,163
AUD/EUR
+ 10%
AUD/EUR
-10%
AUD/USD
+ 10%
AUD/USD
-10%
(7)
7,189
7
(7,189)
(292)
15,592
292
(15,592)
(1,504)
(20,558)
1,504
20,558
(1,586)
16,681
1,586
(16,681)
(iii) Electricity and Renewable Energy Certificate (REC) price risks
The Group has wind farm operations in Australia, USA and Europe and sells electricity and RECs to utility companies in each
of the regions it operates.
The financial risk to the Group is that a decrease in the electricity or REC price reduces revenue earned.
To mitigate the financial risks of electricity and REC prices falling, the Group has entered into power purchase agreements
and fixed tariff agreements to fix the sale price of the electricity and RECs it produces. As of 30 June 2009 the Group is
exposed to market electricity prices for 159MW of Australian Lake Bonney 2 wind production, and 177MW of US wind
production. It is also exposed to REC price movements in Australia and US.
In undertaking this strategy of fixing a percentage of its wind electricity sales, the Group is willing to forgo a percentage
of the potential economic benefit that would arise in an increasing electricity price environment, to protect itself from
downside risks of decreasing electricity prices and secure a greater level of predictability of cash flows.
148
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
Sensitivity
The following table details the Group’s pre-tax sensitivity to a 10% change in the electricity and REC price, with all other
variables held constant as at the reporting date, for its unhedged exposure to the electricity market.
A sensitivity of 10% has been selected as this is considered, reasonable given the current level of electricity and REC prices
and the volatility observed on an historic basis and market expectations for future movement.
consolidated
AUD $’000
2009
Income statement
2008
Income statement
Electricity /REC
Price
+10%
Electricity/REC
Price
+10%
5,383
(5,383)
8,043
(8,043)
Changes in electricity and REC prices would have no effect on net profit of the parent entity.
(b) credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the
Group. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks, as well
as credit exposures to customer. The Group exposure is continuously monitored and the aggregate value of transactions
are spread amongst creditworthy counterparties.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. Infigen as a wind generator sells electricity to large utility companies that operate in the
regions it has wind farms. The utility companies are situated in Australia, France, Germany, and in many different states
of USA. No one utility company represents a significant portion of the total accounts receivable balance. Infigen does not
asses the credit rating of the utility companies it sells electricity to, due to the limited risk each utility company poses to
the overall accounts receivable balance.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
credit-ratings assigned by international credit-rating agencies as above investment grade. The carrying amount of financial
assets recorded in the financial statements, represents the Group’s maximum exposure to credit risk.
149
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
consolidated
$’000
2009
Bank deposits
Interest receivable
Derivative – Forward FX
Trade receivables
Other current receivables
Amounts due from related parties
GST, VAT and other tax receivables
2008
Bank deposits
Interest receivable
Derivative – Interest rate swap
Derivative – Forward FX
Trade receivables
Government grants
Other receivables
GST, VAT and other tax receivables
parent entity
$’000
2009
Bank deposits
Derivative – Forward FX
Amounts due from related parties
Interest receivable
GST, VAT and other tax receivables
2008
Bank deposits
Derivative – Forward FX
Interest receivable
Amounts due from related parties
Within credit Past due but
terms not impaired
$’000
$’000
Impaired
$’000
Description
409,334
27
8,822
35,275
2,356
1,616
8,909
208,505
63
91,400
9,674
68,077
34,313
10,532
78,891
–
–
–
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
229
–
Spread geographically with large utility companies
–
–
–
–
–
–
–
– Miscellaneous receivables
–
Receivables from joint venture partners
– National and regional governments
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
2,337
–
Spread geographically with large utility companies
–
–
–
– Due from Portugal Govt.
– Due from B&B Subsidiaries
– National and regional governments
Within credit Past due but
terms not impaired
$’000
$’000
Impaired
$’000
Description
270,263
8,822
2,848
872
2
47,294
9,674
1,221
37,352
–
–
–
–
–
–
–
–
–
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
– Due from members of the consolidated group
– Due from members of the consolidated group
–
The Australian Government
– Minimum credit rating – ‘A’ grade (S&P)
– Minimum credit rating – ‘A’ grade (S&P)
– Due from members of the consolidated group
– Due from members of the consolidated group
(c) liquidity risks
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The tables below set out the Group’s and parent entity’s financial liabilities at balance date and places them into relevant
maturity groupings based on the remaining period at balance sheet date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flow.
The tables include forecast contractual repayments under the Global Facility. From 31 December 2010, these repayments
comprise net cash flows from those group companies that remain in the Global Facility. From 1 July 2010 the facility terms
provide that these net cash flows be applied to repay amounts outstanding under the Global Facility.
For interest rate swaps, the cash flows have been estimated using forward interest rates applicable at the reporting date.
150
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
consolidated
Up to
12 months
$’000
1 to 5
years
$’000
After Total contractual
cash flows
$’000
5 years
$’000
2009
Global Facility Debt
Gross finance lease
Interest rate swap payable
Forward foreign exchange payable
Forward foreign exchange (receivable)
Current payables
2008
Gross loan commitments
Gross finance lease
Interest rate swap payable
Interest rate swap (receivable)
Forward foreign exchange payable
636,133
964,031
1,676,034
75,870
6,039
53,491
60,189
23,627
68,057
38,071
(62,744)
(39,765)
84,016
Up to
12 months
$’000
–
1 to 5
years
$’000
28,069
22,434
–
–
–
57,735
143,982
98,260
(102,509)
84,016
After Total contractual
cash flows
$’000
5 years
$’000
169,332
925,891
2,404,405
3,499,628
5,550
9,541
(27,963)
123,519
22,197
16,790
32,028
7,606
(63,821)
(74,027)
133,396
59,775
33,937
(165,811)
256,915
(279,568)
296,392
17,196
–
–
–
–
Forward foreign exchange (receivable)
(133,547)
(146,021)
Current payables
Related party payable
parent entity
2009
Forward foreign exchange payable
Forward foreign exchange (receivable)
Intercompany loans payable
Intercompany loans (receivable)
Current payables
2008
Forward foreign exchange payable
Forward foreign exchange (receivable)
Intercompany loans payable
Intercompany loans (receivable)
Current payables
296,392
–
Up to
12 months
$’000
–
17,196
1 to 5
years
$’000
60,189
38,071
(62,744)
(39,765)
1,098,080
(699,348)
12,942
Up to
12 months
$’000
–
–
–
1 to 5
years
$’000
123,519
133,396
(133,547)
(146,021)
1,178,446
(1,035,849)
19,630
–
–
–
After Total contractual
cash flows
$’000
5 years
$’000
–
–
–
–
–
98,260
(102,509)
1,098,080
(699,348)
12,942
After Total contractual
cash flows
$’000
5 years
$’000
–
–
–
–
–
256,915
(279,568)
1,178,446
(1,035,849)
19,630
151
Notes to the Financial Statements
for the year ended 30 June 2009
38. fInancIal rIsK management (contInueD)
Capital Risk Management
The Group and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going
concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to securityholders,
return capital to securityholders, issue new securities or sell assets to reduce debt.
The capital structure of the Group consists of total corporate facilities as listed in Note 19, and equity, comprising issued
capital, reserves and retained earnings as listed in Notes 23, 24 and 25.
The Board of Directors review the capital structure, and as part of this review, consider the cost of capital and the risks and
rewards associated with each class of capital.
The Group has to maintain certain ratios in regard to compliance with its banking facility.
These two ratios are:
Leverage Ratio – Debt/EBITDA
Cash Flow Cover Ratio – EBITDA/Scheduled interest and principal repayments.
During the year these ratios have been complied with.
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for
financial assets held by the Group is the current bid price.
Derivative contracts classified as held for trading are fair valued by comparing the contracted rate to the current market
rate for a contract with the same remaining period to maturity.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives
and investments in unlisted subsidiaries) is determined using valuation techniques. The Group uses a variety of methods
and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or
dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated
discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest
rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts
is determined using forward exchange market rates at the reporting date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values
due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
152
Infigen Energy Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
39. Interests In JoInt Ventures
Interests in the following institutional equity partnerships in the US are accounted for in the consolidated financial
statements as joint venture partnerships and are proportionately consolidated based on Infigen’s Class B interest.
Institutional equity partnership
Related wind farms
Class B Interest held by Infigen
(30 June 2008 and 2009)
Sweetwater Wind 1 LLC
Sweetwater Wind 2 LLC
Sweetwater Wind 3 LLC
Blue Canyon Windpower LLC
Eurus Combine Hills 1 LLC
Sweetwater 1
Sweetwater 2
Sweetwater 3
Blue Canyon
Combine Hills
Sweetwater Wind 4-5 Holdings LLC1
Sweetwater 4, Sweetwater 5
JB Wind Holdings LLC1
Jersey Atlantic, Bear Creek
1 Joint control was gained over these institutional equity partnerships during the year ended 30 June 2008
Further information relating to these institutional equity partnerships is set out below:
Share of institutional equity partnerships’ assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share of institutional equity partnerships’ revenues, expenses and results
Revenues
Expenses
Profit/(loss) before tax
Share of institutional equity partnerships’ commitments and contingent liabilities
The following information is included within the information contained in Notes 29 and 30.
Commitments
Contingent liabilities
50%
50%
50%
50%
50%
53%
59%
2009
$’000
18,517
638,802
2008
$’000
15,533
562,110
657,319
577,643
11,027
481,445
492,472
164,847
2009
$’000
96,535
(97,823)
(1,288)
10,324
404,508
414,832
162,811
2008
$’000
60,765
(60,040)
725
2009
$’000
43,535
2,812
2008
$’000
37,306
184
153
Directors’ Declaration
In the opinion of the Directors of Infigen Energy Limited (‘IEL’) (formerly Babcock & Brown Wind Partners Limited):
(a) the financial statements and notes set out on pages 68 to 153 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2009 and of their
performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors of IEL:
Douglas Clemson
Director
Sydney, 7 September 2009
Miles George
Director
154
Infigen Energy Annual Report 2009
Independent Auditor’s Report
155
Independent Auditor’s Report
156
Infigen Energy Annual Report 2009
Additional Investor Information
performance rIgHts anD optIons plan (pr&o): fy09 operatIonal performance target
As outlined in the Directors’ Report on page 59, the vesting of the FY09 Tranche 2 performance rights and Tranche 2
options that have been awarded to senior executives, is subject to an Operational Performance condition. The Operational
Performance condition is established annually by the Board. At the completion of the 3 year performance period, the
Operational Performance conditions which have been set will provide a cumulative hurdle which must be achieved in order
for the Operational Performance condition to be satisfied.
The Operational Performance condition will test the ratio of EBITDA to Capital Base, with the annual target being a specified
percentage increase in the ratio over the year. The Capital Base will be measured as equity (net assets) plus net debt. Both
the EBITDA and Capital Base will be measured on a proportionately consolidated basis to reflect Infigen’s economic interest
in all investments.
As illustrated in the table below, the FY09 annual target required an increase in the ratio of EBITDA to Capital Base of 6.59%.
The increase in the ratio achieved over the period was 0.31%, resulting in an absolute shortfall of 6.28%. As the Operational
Performance condition is a cumulative hurdle, the shortfall incurred in FY09 will be carried forward to FY10.
The FY08 figures provided below are inclusive of the results of the Spanish and Portuguese operations. These operations
were sold during FY09 and hence the FY09 figures provided below exclude the FY09 results of the Spanish and
Portuguese operations.
Operational Performance Measure
EBITDA/Capital Base
Movement in ratio
Target
Achieved vs Target
Calculation inputs
EBITDA
Net Debt
Equity
Capital Base
%
%
%
%
AUD ‘000
AUD ‘000
AUD ‘000
AUD ‘000
FY08
9.19
FY09
9.22
0.31
6.59
(6.28)
348,508
198,835
2,906,531
1,243,807
884,480
912,373
3,791,011
2,156,180
The table below provides an explanation of how the inputs to the above calculations have been derived.
Notes to calculation inputs
FY08
FY09
Adj. for Economic
Interest2 & Adj.
for movement
in Equity3
FY08 Pre-
Restatements1
414,481
(125,170)
289,311
9,400
(1,900)
7,500
FY08 Adjusted
& Translated at
FY09 exchange
rates4
Adj. for
Economic Interest
FY09 & non-recurring
items5
Reported
336,959
(117,886)
219,073
(21,114)
876
(20,238)
348,508
FY08
Adjusted
423,881
(127,070)
296,811
FY09
315,845
(117,010)
198,835
3,520,225
(605,790)
2,914,435
3,130,585
1,648,339
–
1,648,339
AUD ’000
Revenue
Expenses
EBITDA
Borrowings
Cash Balance
Net Debt
(208,505)
19,206
(189,299)
(224,054)
(409,334)
3,311,720
(586,584)
2,725,136
2,906,531
1,239,005
Retained Earnings
18,898
Contributed Equity
1,014,410
–
–
Reserves
Equity
Capital Base
(64,429)
968,879
(84,399)
(84,399)
18,898
1,014,410
(148,828)
884,480
884,480
3,791,011
199,088
862,113
(148,828)
912,373
4,802
4,802
–
–
–
–
(404,532)
1,243,807
199,088
862,113
(148,828)
912,373
2,156,180
1 See Note 1a of FY09 Annual Financial Report
2 See slide 49 of FY08 Results Presentation for detailed breakdown of EBITDA adjustment; See Note 19 of FY09 Annual Financial Report for borrowings
related to Portugal Enersis Facility. The cash balance adjustment of $19,206,000 relates to Portuguese and US Minority Interests
3 FY08 Reserves have been adjusted to reflect the FY09 Reserves figure in order to mitigate inconsistencies in the Capital Base relating to movements
in foreign exchange and interest rates from FY08 to FY09
AUD/EUR: EBITDA
4 Translated at the following rates:
FY08
0.61
0.61
0.90
0.96
AUD/USD: EBITDA
Net Debt
Net Debt
FY09
0.53
0.58
0.72
0.81
5 Relates to economic interest in German wind farms and to US Minority Interest - see slides 36 & 37 of FY09 Results Presentation; and to Base Fees
– see Note 4 of FY09 Annual Financial Report
157
Additional Investor Information
gamesa frameWorK agreement
Infigen Energy Limited (IEL) entered into a Framework Agreement, dated 13 September 2005, with Babcock & Brown
(UK) Holdings Limited, a UK subsidiary of Babcock & Brown (B&B UK), pursuant to which IEL acquired certain rights and
obligations in relation to the acquisition of wind farms in Spain which corresponded to rights and obligations which B&B UK
had with Gamesa Energía SAU. The Framework Agreement with B&B (UK) expired on 31 December 2008.
plambecK frameWorK agreement
IFN entered into a Framework Agreement, dated 29 March 2006, with Plambeck Neue Energien AG (Plambeck). Under the
Framework Agreement, IFN secured the rights and obligations to acquire a portfolio of wind farms in Germany. IFN’s rights
and obligations under the Framework Agreement do not extend beyond 30 June 2009.
Important aspects of tHe us assets
llc project agreements – change of control provisions
The limited liability company agreements (each a Project LLC Agreement) of the various Project LLCs for the US Assets
provide for two levels of membership interests: Class A and Class B. The Class B Members serve as the managing members
of the company.
The managing members have control over and manage the affairs of the Project LLC, but the consent of the Class A
Members is required for certain material actions to be taken by the Project LLC (such as the incurrence of debt, sale of
material assets, mergers, acquisitions, sale of the Project LLC or other similar actions). Transfers of membership interests
are permitted subject to (a) a right of first bid procedure for the benefit of non-transferring members, (b) a prohibition
against transfers to certain disqualified transferees (such as competitors of the Project LLC), (c) prior to the Reallocation
Date, transfers of Class B interests require consent of a designated super-majority of the Class A interests, and (d) Class A
interests may be transferred after ten years if the Reallocation Date has not been reached and distributions have failed to
exceed the sum of the Class B Members’ capital contributions.
A change of control in a member of a Project LLC must comply with the foregoing transfer restrictions, except that an
event causing a change of control of a member’s ultimate parent company does not constitute a change of control. The
relevant Project LLC Agreements provide that a change purported to be made in breach of these provisions is void and
that specific performance in respect of those clauses can be sought. In addition, breach of these provisions may give rise
to a claim of damages.
bacK to bacK guarantees regarDIng coVenants In tHe proJect llc agreements
In addition, each of IEL and, in certain instances, Infigen Energy RE Limited (IERL) in its capacity as Responsible Entity of
IET (together, the Guarantors) have entered into guarantees (the Back-to-Back Guarantees) in favour of Babcock & Brown
International Pty Ltd and/or Babcock & Brown LP (the Beneficiaries).
The Back-to-Back Guarantees support downstream guarantees which have been given by the Beneficiaries to support the
obligations of the Investment LLCs which are Class B Members of Project LLCs (that own and operate wind farm projects in
the United States) in favour of the Class A Members of those Project LLCs.
bermuDa laW Issues
Incorporation: Infigen Energy (Bermuda) Limited (IEBL) is incorporated in Bermuda.
Takeovers: Unlike IEL and IET, IEBL is not subject to the sections in Chapter 6 of the Corporations Act dealing with the
acquisition of shares (including substantial holdings and takeovers). Bermuda company law does not have a takeover code
which effectively means that a takeover of IEBL will be regulated under Australian takeover law. However, Section 103 of the
Bermuda Companies Act provides that where an offer is made for shares of a company and, within four months of the offer
the holders of not less than 90% of the shares which are the subject of such offer accept, the offeror may by notice require
the non-tendering shareholders to transfer their shares on the terms of the offer. Dissenting shareholders may apply to the
court within one month of the notice, objecting to the transfer. The test is one of fairness to the body of the shareholders
and not to individuals, and the burden is on the dissentient shareholder to prove unfairness, not merely that the scheme is
open to criticism.
stapleD securItIes
Each Stapled Security is made up of one IEL share, one IET unit and one IEBL share which, under each of the Constitutions
and Bye-Laws respectively, are stapled together and cannot be traded or dealt with separately. In accordance with its
requirements in respect of listed stapled securities, ASX reserves the right to remove any or all of IEL, IEBL and IET from
the Official List if, while the stapling arrangements apply, the securities in one of these entities ceases to be stapled to the
securities in the other entities or one of these entities issues securities which are not then stapled to the relevant securities in
the other entities.
158
Infigen Energy Annual Report 2009
Additional Investor Information
IncentIVe fees
The principal fees previously payable by IFN to BBWPM, as Manager, comprised a base and incentive fee. With respect
to the incentive fee, in certain circumstances BBWPM may have been entitled to receive an incentive fee related to the
performance of IFN. This fee was paid half yearly in respect of a financial half year.
No incentive fee was payable in the financial year ended 30 June 2009.
furtHer InVestor InformatIon
Further information required by the Australian Securities Exchange and not shown elsewhere in this Report is as detailed
below. The information is current as at 30 September 2009.
number of stapleD securItIes anD HolDers
One share in each of IEL and IEBL, and one unit in IET, have been stapled together to form a single IFN stapled security.
The total number of IFN stapled securities on issue as at 30 September 2009 is 802,460,585 and the number of holders of
these stapled securities is 28,859.
substantIal securItyHolDers
The names of substantial IFN securityholders who have notified IFN in accordance with section 671B of the Corporations
Act 2001 are set out below.
Substantial IFN Securityholder
The Children’s Investment Fund (UK) LLP
Kairos Fund Limited
IFN Stapled Securities
Date of Notice
Number
29 May 2009
122,786,428
3 October 2009
73,050,000
%
15.00
9.10
VotIng rIgHts
It is generally expected that General Meetings of shareholders of IEL, shareholders of IEBL, and unitholders of IET will be
held concurrently where proposed resolutions relate to all three IFN entities. At these General Meetings of IEL, IEBL and IET
the voting rights outlined below will apply.
Voting rights in relation to General Meetings of IEL and IEBL:
• on a show of hands, each shareholder of IEL and IEBL who is present in person and each other person who is present
as a proxy, attorney or duly appointed corporate representative of a shareholder has one vote; and
• on a poll, each shareholder of IEL and IEBL who is present in person has one vote for each share they hold. Also each
person present as a proxy, attorney or duly appointed corporate representative of a shareholder, has one vote for each
share held by the shareholder that the person represents.
Voting rights in relation to General Meetings of IET:
• on a show of hands, each unitholder who is present in person and each other person who is present as a proxy,
attorney or duly appointed corporate representative of a unitholder has one vote; and
• on a poll, each unitholder who is present in person has one vote for each one dollar of the value of the units in the
Trust held by the unitholder. Also, each person present as proxy, attorney or duly appointed corporate representative
of a unitholder has one vote for each one dollar of the value of the units in the Trust held by the unitholder that the
person represents.
on-marKet buy-bacK
On 16 September 2008, Infigen announced that it intended to undertake an on-market buy-back of up to 10% of its
securities over the following 12 months. On 26 November 2008, Infigen securityholders voted in favour of a resolution
giving authorisation to Infigen to conduct an on-market buy-back of up to an additional 20% of Infigen stapled securities.
This brought the potential buy-back to 30% of Infigen’s outstanding stapled securities.
At 30 September 2009, Infigen had bought back 74,538,121 securities (8.5% of issued capital).
stapleD securItIes tHat are restrIcteD or subJect to Voluntary escroW
There are currently no IFN stapled securities which are restricted or subject to voluntary escrow.
use of casH
Throughout the 2009 financial year, IFN used the cash (and assets in a form readily convertible to cash) that it held at
28 October 2005 (the date IFN listed on the Australian Securities Exchange) in a way consistent with its business objectives,
as outlined in the financial statements and Notes.
159
Additional Investor Information
DIstrIbutIon of Ifn stapleD securItIes
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
The number of securityholders holding less than a marketable parcel of IFN stapled securities is 3,294.
tWenty largest securItyHolDers
As at 30 September 2009, the top 20 largest Infigen securityholders are as follows:
Holders
11,536
Securities
5,757,957
12,596
32,721,340
2,522
2,059
18,624,370
47,352,581
146
698,004,337
28,859
802,460,585
IFN Stapled Securities
IFN Securityholder
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited - A/C 3
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
ANZ Nominees Limited
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